Salmond promises stable tax regime for North Sea oil and gas

23 Jul 13
An independent Scotland would guarantee North Sea oil and gas producers a stable fiscal regime, free from Westminster-style ‘tax grabs’, First Minister Alex Salmond said today.

By Keith Aitken in Edinburgh | 23 July 2013

An independent Scotland would guarantee North Sea oil and gas producers a stable fiscal regime, free from Westminster-style ‘tax grabs’, First Minister Alex Salmond said today.

Launching a Scottish Government paper, Maximising the return from oil & gas in an independent Scotland, Salmond said that his government had no plans to increase the overall tax burden on the industry, would guarantee continued tax relief on decommissioning installations, and would formally consult the industry before making any changes to its fiscal regime.

UK Chancellor George Osborne’s surprise £2bn levy on North Sea production in his 2011 Budget was bitterly resented in the industry, and jeopardised several major investment projects.  Salmond promised: ‘Stability and predictability will underpin the taxation and regulatory regime for oil and gas production in an independent Scotland.’

The paper also confirms plans to create a Norwegian-style an oil fund, worth up to £30bn over a generation, to set revenues aside for future public investment, and says the fund would be established ‘when the fiscal conditions allow’.  Pressed on timing in a BBC radio interview, Salmond said he expected the fund to be running within five years of independence.

Ministers will appoint an expert commission next month to work on the detail of implementing the fiscal plans, and today’s paper follows ‘extensive’ discussion with industry experts.

It takes a much rosier view of North Sea prospects than recent figures from the UK government’s Office for Budget Responsibility, which predicted a downturn in both production and revenues, and foresaw oil and gas revenues contributing just 0.03% of GDP by 2040.

The Scottish Government’s estimates, based on industry figures, put remaining oil and gas reserves at 24 billion barrels, worth £1.5 trillion on currently projected prices. That view was yesterday broadly endorsed by Aberdeen University’s Professor Alex Kemp, the UK’s best known oil economist, whose modelling puts output over the next 30 years at 16 billion barrels, against the OBR’s 10 billion.

This follows a recent admission by former Labour chancellor Lord Healey that the UK government of the 1970s deliberately under-estimated North Sea prospects to counter the Scottish Nationalists.

The paper says that almost all the remaining oil and more than half the gas lies beneath what would be Scottish territorial waters. It estimates that oil revenues would lift per capita tax receipts in an independent Scotland to £1,700 above the UK level,

‘Oil and gas revenues would offer a premium advantage for an independent Scotland, a tremendous bonus to boost any diverse modern economy,’ Salmond said.

“With more than half the total wholesale value of oil and gas reserves still to be extracted, record levels of field investment, and companies’ future plans worth around £100bn, the sector in Scotland will continue to thrive for decades to come,’ he added.

‘With Westminster having squandered the opportunities of the first half, it’s up to us to make a better job of the second half.’

But Glasgow University’s Centre for Public Policy for Regions, a persistent critic of Scottish National Party economic policies, issued a sceptical briefing note in response to the paper’s upbeat outlook. It argued that Salmond would need all the offshore revenues to pay for his public spending plans, and that the robust oil prices envisaged in the paper could disadvantage other Scottish industries.


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