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UK Energy Minister lays out specifics of Scotland’s inability to fund North Sea decommissioning

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In a fringe session at the ongoing Conservative Party conference, Michael Fallon, UK Energy Minister, spelled out the scale of the commitment the UK Government has made to the oil and gas industry to ease the cost of decommissioning over-age infrastructure in the North Sea.

We have been talking for over a month on an agreement we knew to have been reached between the UK Government and the industry on this matter – but it was only yesterday than mention of it was publicly made in the Minister’s speech.

As we have said, it was his own knowledge of this UK agreement that forced Alex Salmond to reassure the industry during a visit to Aberdeen some weeks ago, that the government of an independent Scotland ‘would help them out’ with decommissioning costs.

The First Minister had no choice but to match the UK deal since not to have done so would have alarmed an industry on which so much of the SNP’s pitch for independence has been – wrongly – based.

We now know just how serious this situation is.

Mr Fallon revealed that the UK deal has given the industry £20 billion in tax reliefs over a 30 year period to offset the costs of decommissioning.

He said, correctly, that an independent Scotland could not afford to fund such a tax regime. We could not.

On the current spending promises made – the retention of universal benefits, free higher education, bringing the Royal Mail into public ownership, £1bn a year in foreign aid, pension arrangements to match the UKs… ceding this volume of tax revenue over this period to the oil and gas sector would leave Scotland unable to fund these commitments.

We have already shown that, with no tax relief at all on the average optimistic tax revenues from this industry, almost all of that revenue would be taken up in meeting our welfare costs. That calculation, moreover, did not include the social protection costs of pensions.

Then there is the servicing of interest on Scotland’s share of the national debt, variously estimated as between £140Bn and £183 Bn.

The response of the Scottish Government to the specifics of the tax relief situation made known by the Energy Minister has been limited to what is becoming the universal get-out claim of ‘scaremongering’.

We’ve done the sums as an entirely independent exercise  – and published them – and this is no scaremongering. It is bald fact.

Mr Fallon threw a second figure into the equation. At the moment, the UK Government pays half a billion pounds a year toward Scotland’s renewable energy. The Minister described this as ’40% of the total UK funding for just 10% of the population’, pointing out that Scotland could not afford such support at such a level.

We obviously cannot hope to fund the spending promises in this prospectus on the small and unreliable revenues we will get from taxes on oil production.


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