Scottish Lib Dems call for oil and gas support

Wednesday 26 August 2015

A promient Scottish Member of Parliament (SMP) has called for the oil industry to be given tax breaks in a bid to help it secure a long-term future in the UK.

Willie Rennie, the leader of the Scottish Liberal Democrats, has made the suggestions as part of a push to establish the party’s liberal and centrist credentials following its poor performance in the recent General Election. Scotland was a particular weak spot, with eight Westminster MPs losing their seats. Labour also performed badly in the region thanks to the rise of the Scottish National Party (SNP).

Mr Rennie said: “The broad shoulders of the United Kingdom means we can be flexible to provide a taxation regime that incentivises industry investment. We can do that without a dramatic impact on the funding of our schools, hospitals, universities and other public services.

"We know the UK introduced tax allowances in the last autumn statement and delivered further changes in the spring budget. The UK government must continue to work in partnership with Oil and Gas UK and the new, unified regulator to provide a stable, financial regime for the sector to maximise the opportunities.”

The revenue from the North Sea oil fields, along with deposits of natural gas, is a major source of income for Scotland. This revenue stream became particularly high-profile during the recent referendum on Scottish independence, when the SNP was accused of inflating the money generated from oil as part of its Yes campaign, only to cut the projected figures when a No vote was returned.

A recent downturn in the area, dubbed the “North Sea decline”, is believed to have the potential to destroy 15,000 of the 200,000 Scottish jobs in the oil industry. Many contractors have been keen to fill these gaps, but further slowdowns make this unlikely.

However, the SNP, which controls the Scottish Parliament at Holyrood, has also pressed for more support when it comes to the oil and gas industries.

In March 2015, the Scottish energy minister Fergus Ewing called on George Osborne to include a range of measures in his Budget to support the industries. These included a 62.5 per cent investment allowance and an exploration tax credit. However, these were rejected by the then-deputy secretary to the Treasury Danny Alexander, who held the seat of Inverness, Nairn, Badenoch and Strathspey for the Liberal Democrats until the General Election this year.

Labour has also pushed for greater support, with their energy spokesman Lewis Macdonald recommending a full assessment of the impact of falling oil prices on the Scottish economy, as well as the creation of a so-called “resilience fund” that would help insulate the country from the turbulence of global oil prices.

While it seems that there is considerable demand from opposition politicians for more support to be provided to the oil and gas industries, it is still uncertain how the sector will be supported in the coming months and years, particularly given the continued low price of oil.

By Victoria McDonnell

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