Labour Tax and SNP Policy on Oil and Gas a Threat to the Scottish Economy

10/02/2024
Photo by Julie Adams on Unsplash

As Labour and the SNP take positions on oil and gas that are hostile to the industry’s future, the prospects for the Scottish economy darken. The effect on the N E of Scotland economy in particular could be severe. New proposals from Labour to extend the windfall tax on UK oil and gas producers could have catastrophic effects on jobs and the economy, with the NE likely to be hardest hit.

The UK’s offshore energy industry has warned that 42,000 jobs and £26billion of economic value will be wiped out under Labour’s proposals. Offshore Energies UK, the leading trade body for the sector, has asked for an urgent meeting with the Labour leadership following plans revealed yesterday to extend the windfall tax further.  

Labour’s plans to “end loopholes” have led to uncertainty among energy companies that the party may remove critical allowances that enable companies to make long term investments in homegrown production. Larger oil and gas players have global options when it comes to deciding where to allocate capital and resources. At this stage of the UK Oil and Gas industry life cycle, the UK needs every advantage it can get. However,  OEUK warns that Labour’s shift in policy will likely result in no new investments being made in UK oil and gas projects with the impact being felt immediately. Labour has also said it will also raise the current 75 percent windfall tax to 78 percent until 2029. 

OEUK Chief Executive David Whitehouse said: “Labour either can’t do the maths or haven’t considered the alarming jobs impact that will be felt up and down the country. With no new investment, 42,000 jobs will go, and we could start to see the effects as early as this year. These are not faceless numbers but decent, hardworking people working across the UK to provide the energy we will need today and in the future.  

“The impact of no new investment will be felt across the whole economy – today we estimate the UK will lose £26 billion of economic value. It will undermine the very industry which can and must play a critical role in delivering a homegrown energy transition.  

“Last week I listened carefully to the Shadow Chancellor promise that Labour will work in partnership with UK businesses. We’ve always said the path to net zero is through working together between government, business, and people, ensuring no individual, community or sector is left behind – that’s not what we’ve had from Labour. The least this industry, our people, and our communities deserve is an urgent meeting with Labour leadership.” 

The North East of Scotland economy is unlikely to get support for its future from the current Scottish Government. The SNP, heavily influenced by, and indebted to its political partners, the Greens, has abandoned its support for Oil and Gas. It has retreated from its claim at the time of the referendum that Oil and Gas would be the backbone of an independent Scotland , to being openly hostile to the industry.

Late last year in response to the UK Government’s announcement to grant new licences, The First Minister, Humza Yousaf; attacked the decision saying: “This is the wrong decision. I have expressed concerns about this going ahead for some time. We don’t think the taps should be turned off tomorrow, but neither can the north-east have unlimited oil and gas extraction. ” 

On the subject of licence awards, Scottish Government Energy minister Gillian Martin, MSP for Aberdeenshire East, refused to welcome the announcement of the Rosebank licence award despite it bringing £8 billion of much needed investment to the industry. A significant portion of that investment will find its way into the NE economy and benefit her constituents. Speaking on the Holyrood Sources Podcast she would not be drawn on the matter and deflected by saying it was not a devolved matter. When pressed to welcome the news by Douglas Lumsden, Conservative MSP for N.E. Scotland, she replied “I’ve not made that decision. We’re talking about reserved policies, you’re asking a minister in the devolved government about reserved policy.” 

The news of Labour’s plans and the clear hostility shown to Oil and Gas by the Scottish Government cast dark shadows over the NE economy and indeed the Scottish economy at large. The damaging effects of a failure to support the industry in the near future may be irreversible.  75% of the UK’s energy needs are met by oil and gas. A large portion of the NE economy remains dependent on Oil and Gas. Many of the companies producing oil and gas are the same companies leading the expansion of alternative offshore energies such as wind, hydrogen and the development of carbon capture and storage. There is real concern that investment in these alternatives could also suffer as a consequence of these attacks on Oil and Gas. There is a significant fear that the consequences for the NE Scotland economy could be felt sooner rather than later. The effects of the 2015 downturn were apparent for all to see. No helping hand came to the aid of the NE economy then. There seems little prospect of a different Scottish Government approach, whether controlled by Labour as the polls would indicate or the SNP, this time around.

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