Oil & Gas

North Sea decommissioning bill would soar after independence, warns Osborne

George Osborne

The UK Government will suggest today that the bill for cleaning up the North Sea in coming decades would rise from £300 to £3,800 per person if Scotland votes to become independent.

The claim over decommissioning North Sea assets will be made in the coalition’s latest analysis paper on the implications of a “yes” vote in next year’s referendum.

Chancellor George Osborne will reiterate the message in a speech at the Offshore Europe conference in Aberdeen today, arguing that an independent Scotland would be unable to maximise the value and volume of the remaining North Sea oil and gas.

Scottish Finance Secretary John Swinney reacted angrily to the claims last night, branding it “breathtaking hypocrisy” from the architect of the 2011 tax raid which almost wiped out new North Sea investment at a stroke.

Last year, Mr Osborne moved to repair the damage by announcing plans to legally guarantee decommissioning tax rates for offshore firms for years to come, freeing up capital held back by nervy investors, and paving the way for record levels of investment.

Cleaning up North Sea fields and assets is expected to cost about £35billion over coming decades, with Mr Osborne’s tax break pledge likely to cost the UK Government about £20billion over the period.

The Scottish Government said in July it would take on the guarantee if the nation voted to got it alone next year. The fifth analysis paper from the coalition at Westminster suggests that the £20billion equates to about £300 per head in the UK, but would require almost £3,800 per person in an independent Scotland.

It will also highlight falling forecasts for future oil revenues would leave Scotland with a £4billion budget black hole by 2016-17 – equal to a third of the nation’s health spending or half its education bill.

Mr Swinney said: “The rank hypocrisy of George Osborne is breathtaking – it was his decision in 2011 to place a hugely-damaging £2billion tax raid on oil companies that put investment on hold.

“His credibility in the north-east is in tatters and people will not take kindly to a Tory chancellor coming north yet again to talk Scotland down.”

He added: “North Sea oil is a bonus, not the basis for Scotland’s economy and with up to 24 billion barrels of oil left worth an estimated £1.5trillion it will continue to contribute to the wealth of Scotland for a long time to come.”

First Minister Alex Salmond joined the attack on Mr Osborne and branded it “another ‘project fear’ scare tactic.”

The coalition analysis will also say that there would be two “fundamental fiscal consequences” if Scotland became an independent country. Firstly, Scotland would need to rely on a narrower and more volatile tax base to fund spending on public services.

Secondly, independence would result in the break-up of the UK tax system.

A separate tax system would need to be implemented in Scotland with potential implications for business, individuals and both governments, it will say.

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