Budget garners mixed response in Scotland but oil help welcome

16 Mar 16

The Budget received the traditional mixed reception in Scotland, though with a broad welcome for the help given to the struggling North Sea oil & gas sector.

George Osborne announced that the supplementary charge on oil company profits would be halved to 10%, and Petroleum Revenue Tax effectively abolished. But he had no headline measures to encourage oil exploration. Scottish secretary David Mundell said the package was worth £1bn.

“The action on oil is good and the [duty freeze] on whisky is good,” Scottish National Party deputy leader Stewart Hosie said. 

“But the big picture is the most mind-boggling failure of the chancellor on all his big targets.”

Osborne’s statement came as MSPs in Edinburgh gave their approval to the Scotland Bill, ensuring that today’s Budget is the last time a UK chancellor will set income tax for Scotland. As of April 2017, it will be for the Scottish Parliament to determine Scottish rates and bands of the tax.

An early challenge for whoever forms the next Scottish government after May’s Holyrood election will therefore be to decide whether to match Osborne’s changes when Edinburgh takes control of Scottish income tax. 

Though much of the Budget concerned devolved matters, Osborne announced the start of talks on a city deal for Edinburgh, funding for community activities around Helensburgh and the Faslane nuclear base from Libor fine proceeds, and a continuing freeze on whisky duty. The Scotland Office calculates the new money coming North via the Barnett Formula at £658m over the next four years.

Scottish pre-Budget lobbying had focused on the plight of the offshore industries, where the collapse in oil prices has seen thousands of job losses and predictions of up to 23,000 redundancies over the next five years. Official unemployment figures, published this morning, showed the Scottish jobless total up by 16,000 in December, while the UK total fell by 28,000.  

Deirdre Michie, chief executive of Oil & Gas UK, called the oil support package “a good step forward” and said it would help reassure the international industry that the North Sea was operating within a competitive fiscal framework. 

“It will send out a positive message to the industry that the Government is listening, that it does understand the issues we are having to face, and that it wants to do something about it,” she said.

Hosie welcomed the support for the oil industry, but regretted the lack of strategic support from the chancellor to encourage North Sea investment and exploration. 

That view was echoed by a former Aberdeenshire Liberal Democrat MP and Scottish leader, Sir Malcolm Bruce, who also suggested that Osborne could have scrapped the supplementary charge entirely, since it is a tax on profits, currently minimal in the sector.

Ian Murray, Labour’s shadow Scottish secretary, welcomed the whisky duty freeze and the help for the oil industry, but said Labour had wanted the UK Government to take over oil wells facing premature abandonment because of the plunge in prices.

“What we don’t welcome is [Osborne] balancing the Budget on the backs of the poor,” Murray said.

That view was echoed by Grahame Smith, General Secretary of the Scottish TUC, who said: “The chancellor is catastrophically wrong to increase spending cuts in an already slowing economy. Once again, it is society’s most vulnerable citizens who will suffer the most.”

Following the chancellor’s example, Scottish Conservative Leader Ruth Davidson insisted that the oil support would not have been affordable had Scotland voted in the 2014 referendum to become independent eight days from now: “We'd be just a week away from starting life staring into a financial abyss,” she said.

“The broad shoulders of the wider UK [have] acted to help support this vital industry.”

Scottish Greens co-convener Patrick Harvie said the statement showed Scotland’s economic over-dependence on oil. “The chancellor has chosen to focus on his obsession to reduce public debt – a goal which he has failed to reach – despite the problem of household debt being so much more of a problem, and one which new savings schemes can do nothing to solve,” he said.

  • Keith Aitken
    Keith Aitken

    covers Scottish affairs for Public Finance from Edinburgh. He was formerly economics editor and chief leader writer on The Scotsman and now has a busy freelance career as a writer, broadcaster and event chair.

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