A forecast £1 billion tax revenue from North Sea oil in the current financial year would make a serious dent in Scotland’s budget deficit if “natural justice” were applied, according to one of the industry’s most outspoken figures.
Professor Alex Russell, chair of the Oil Industry Finance Association, was speaking after Oil and Gas UK, the industry trade body, revealed the figure in new projections which took into account the rise in the price of Brent crude, higher production and lower costs.
“If natural justice were being applied, that £1bn should all go to Scotland,” said Russell.
“If Holyrood had control over the North Sea Assets lying in Scotland’s water, then the bulk of that money would go to Scotland.
“It would be some compensation for the huge job losses the North Sea industry has suffered – we’re now down to 300,000 from about 450,000 North Sea oil-related jobs and last year there was a drop of around 65,000 jobs.
“That has an incredible knock-on effect on Scotland to generate income tax itself through the industry, and that is galling in a way because of Holyrood accepting the Smith Commission’s recommendations on devolution.”
Russell said the Scottish economy had suffered badly from the loss of offshore jobs, and it was unsatisfactory that when profits were earned from Scotland’s share of the North Sea it went to Westminster.
“It makes no sense whatsoever. It should make a nation determined to have control of its own resources.
“We have devolution and we don’t have devolution – we don’t have real power transferred to Scotland, we’ve simply got what they deemed to think ‘you’ll get by on that and good luck to you’.”
Russell said it was good to see the oil industry being able to increase production at the same time as reducing costs but added: “Why on earth didn’t they do that in the golden days when you had rich pickings and there could have been colossal tax receipts going, I would hope, to Holyrood.
“There has to be some type of investigation on the mismanagement of Scotland’s oil resources over the years. I think that’s a root cause of inability of the UK to generate anything like the same revenue from its oil resources in the North Sea compared to that of Norway.
“The Norwegians got their act together – the UK and, in particular, Scotland didn’t. Scotland has been far too supine in its attitude to Westminster and I’d expect more from Holyrood than we’re currently getting.”
The SNP, meanwhile, said the £1bn tax revenues should be reinvested in Scotland’s economy and in futureproofing the sector to maximise jobs. It said successive Westminster governments had previously failed to invest sufficiently in the industry.
Failure to reinvest to protect jobs, maximise return in the long-term and grow Scotland’s economy would heighten calls for Holyrood to be given full powers over the oil and gas industry, including revenues.
Aberdeenshire East MSP, Gillian Martin, said the cash should not go straight to the Treasury: “The oil and gas industry needs continued support from the UK government in order to protect against future downturns – and the industry should see a return on the revenue it is generating through appropriate levels of reinvestment in the sector, to protect jobs across Scotland.
“Better still, they could devolve full control over the oil and gas industry, including revenues, to Scotland – and allow the Scottish Government to take the action needed to maximise jobs and return from our energy sector,” she added.