Scotland is ‘the loser’ from UK Government’s raid on oil and gas

UK Chancellor Jeremy Hunt said the oil and gas industry were the losers from the last budget. But he didn’t go far enough – he should have admitted that Scotland is the loser. Scotland’s economic future is at stake. Failing to manage the transition from oil and gas to renewables effectively would mean a massive loss of jobs and prosperity. 

If the UK Government continues on this path, Scotland will see an unjust transition, where large numbers of jobs and skills are lost and Scotland loses its place in the race to become a renewables powerhouse. 

This is vital to Scotland’s future – yet Scotland has no say. These decisions are being taken by a government Scotland did not vote for. The Scottish Government has no power over how the energy sector is taxed and regulated and whether any of the money taken out is replaced in terms of investment. 

The UK Government is taking – but it is not giving back through investment

The UK’s tax raid on the sector in the budget – the fourth in two years – was not matched by any investment in the just transition. “The UK is simply not investing enough,” Professor Paul de Leeuw, director of the Energy Transition Unit at Robert Gordon University said this week.

De Leeuw said that Scotland was missing the pace on transition: “I am worried. We are simply not investing enough. Investment drives activity and it drives people and jobs. It is happening elsewhere – with the Inflation Reduction Act in the US and the Green Deal in Europe, but not here in the UK.”

A failed transition means a grim future for Scotland

De Leeuw said that one in 30 jobs in Scotland and one in five in the North East are either in the energy sector or supporting it. The oil and gas industry is still by far the biggest employer. He explained that if we get the transition wrong, Scotland will lose jobs, skills and investment. A report by RGU said that if the transition fails, Scotland faces a grim future, with up to 100,000 jobs at risk.

If things do not change soon in terms of the massive investment gap between Scotland’s North East and other energy hubs, many of these jobs will start to be lost by the start of the next decade. With them will go the skills and capacity that would be needed to take advantage of Scotland’s huge potential in renewable power. The transition is about managing the progress from one kind of energy mix to the next. 

De Leeuw was critical of the UK Government’s extension of the windfall tax to 2029. “Oil and gas prices are back at the level they were before Russia invaded Ukraine. This is the fourth tax change in two years. The windfall tax has been extended by seven years – so that is not a windfall tax, that is a normal tax. If you combine these things, investors start looking around and saying – there are better places to invest our money.” He said a long term strategy and fiscal stability were key to a just transition.

No money for Acorn carbon capture is one example of UK’s failure

Despite the fact that North East is a major hub in the oil and gas industry, its plan for carbon capture has not yet been given any funds and lags behind similar projects in England. Many in the sector expected that when ‘funding confirmation’ was given to the Acorn carbon capture cluster with a great fanfare last July, some actual investment would follow – but it has not. It is just one more example of how the UK Government has used Scotland’s natural resources – raiding them to fund the Treasury’s coffers and giving as little as possible back.

New chapter in a long story of failure

The UK Government has consistently failed to manage Scotland’s resources in Scotland’s interests. In the period between the oil price fall in 2015 and 2021, Norway generated almost £100bn in oil and gas sector revenues compared to £5.6bn by the UK, despite producing a similar amount of fossil fuels. This means that Norway’s revenues from oil and gas in this time period were 17 times higher than the UK’s. 

The government of Norway – a small independent nation with a population of 5.4 million – was 17 times better than the UK Government at generating revenues from oil and gas in that period alone. Both countries have produced roughly the same amount of oil since 1975.The lower tax has not protected jobs. Scotland and the North East lost far more jobs than Norway when the oil price fell. 

Manage Scotland’s resources in Scotland’s interests

The UK Government has shown a lack of commitment to the future of Scotland as a renewable  energy powerhouse and to the just transition. While other countries are following through on their promise of investment, the UK has actually dropped the amount it is spending on the energy transition by 10 percent. That is extraordinary.

The UK has ramped up the amount it is taking out of Scotland’s energy sector without investing anything like what is required for a just transition. Why should they? The UK Government does not care about Scotland’s future prosperity. They want cash now to fund tax cuts – no matter if it leads to job losses in the North East and across Scotland in the next few years. 

Scots have had enough of seeing their resources squandered to fund the political priorities of another country. Only an independent Scotland will be able to manage Scotland’s resources in Scotland’s interest.