Exclusive, 14 September 2014
Massive £1 billion tax breaks given to big oil companies in the North Sea every year should be diverted to renewable energy and improving social services under independence, says a new report from the Scottish Green Party.
The party has made the first estimate of all the UK government’s subsidies provided to oil and gas corporations to encourage development. A complex web of allowances and tax relief rewards them with at least £1.15bn annually, it reckons, equivalent to £190 for every Scot.
This sum of money could be used to employ 25,000 extra teachers or 28,000 extra nurses, or to fund 25 hours a week of free childcare for every three and four year old in Scotland, the party points out. Instead of fuelling private company profits, it could be invested in publically-owned wind and solar schemes.
In a bid to radically alter the terms of the conventional oil arguments, the Scottish Green Party is also publishing a second report today urging that oil companies be taken into public ownership, as in Norway. Oil extraction should also be slowed down to help minimise disruption to the world’s climate, the report says.
According to the Green MSP, Patrick Harvie, the huge public subsidy given to multinational oil companies had been overlooked until now. “Now that figure's out in the open we should consider the logic of continuing such massive tax breaks,” he said.
“Big oil companies are already throwing their weight around as the vote nears, and an independent Scotland should be prepared to stand up to that. If Scotland remains part of the UK we will struggle to assert control - with a Yes we can build a genuinely sustainable economy.”
The Scottish Green Party’s detailed calculations suggest that the annual tax breaks of more than £1bn come from a series of allowances on small, brown and shallow oil and gas fields as well as on petroleum revenue tax, plus tax relief on decommissioning old rigs. Between 2014 and 2017, it puts the total tax benefits for oil companies at £4.6bn.
“People will be genuinely shocked to find out how much public money subsidises the oil industry,” said Dr Richard Dixon, director of Friends of the Earth Scotland. “However we vote on Thursday we need to start channeling these billions into Scotland’s renewable future instead of boosting the profits of the fossil fuel industry.”
In all the referendum debate about oil the point that it can’t all be burnt had been lost, he argued. “However many years of oil are left in the North Sea, much of it will have to stay there or be used to make plastics, rather than releasing the carbon it contains,” he said.
The second Green report, ‘Energy Independence’, argues for emulating Norway by taking North Sea oil companies into part-public ownership to increase public revenues. “Preventing the corporate capture of a new Scotland's energy and finance policies is essential,” it says.
Its author, oil expert Mika Minio-Paluello, pointed out that the UK gets a worse oil deal than Uganda, Egypt and Congo. “For 30 years, the North Sea has been subjugated to corporate profit,” he said. “Another Scotland becomes possible when oil is taxed properly and harnessed for a rapid and just transition to renewables.
The Scottish government, however, reiterated its belief that fiscal incentives for the oil industry would help maximise economic recovery in the North Sea. “It is in Scotland’s interests to develop an oil and tax regime that balances revenues and incentives for continued development and exploration,” said a government spokeswoman.
“There are up to 24 billion barrels of recoverable oil and gas remaining in the North Sea with a potential wholesale value of up to £1.5 trillion. This means that more than half the value of North Sea oil is still to be extracted, which affords Scotland greater choices and chances to strengthen its diverse economy.”
The offshore oil and gas industry insisted that, unlike other energy sectors, it didn’t receive direct government subsidies. It pointed out that it was the UK’s largest industrial investor, and had paid over £300bn in production taxes to the UK Exchequer to date.
“Oil and gas provides some 70 per cent of the UK’s total primary energy,” said a spokeswoman for Oil & Gas UK. “Our industry will remain hugely important for the country for many years to come, not only though it’s economic contribution and through providing a secure energy supply, but by supporting the employment of some 450,000 people throughout the UK.”