Opinion: UK Government must support oil industry with Budget

Finance Secretary Derek Mackay
Finance Secretary Derek Mackay

As an industry which remains vitally important to the Scottish, and UK, economy, the Scottish Government has long been a vocal champion of North Sea oil and gas.

Companies operating within this innovative and dynamic sector have generated around £330 billion in tax revenues for the UK Exchequer and the oil and gas supply chain exports to more than 100 countries.

Too often however, oil and gas success has been despite UK Government policy rather than because of it. Short term financial fixation has often been allowed to trump the long-term needs of the industry, government, and public interest.  The UK Government has continued to make the wrong fiscal decisions which have not supported or fostered industry potential – as was clearly demonstrated by their decision to increase the Supplementary Charge in 2011 without consultation and as one of 16 different tax changes in the previous decade.

In contrast, the Scottish Government has maintained a consistent approach in our calls for fiscal change that would support the sector and help grow the economy and our Programme for Government reinforces that commitment, clearly stating that harnessing the resources of the North Sea will be vital to the Scottish economy for decades to come.

The UK Government could demonstrate its commitment to the sector – and to the jobs and communities it supports – at their Autumn Budget by delivering on its promise to reform decommissioning tax relief, a move long called for by the Scottish Government and industry.

The current regime creates an uneven playing field and acts as a barrier to ensuring that the right assets are in the right hands. By delivering on their pledge, the UK Government could remove barriers to late-life asset transfers and encourage new entrants into the basin, considering further support for exploration – the future lifeblood of the industry.

The current tax system should not act as a barrier for potential new investors looking to take on a mature late-life field. While there has been a welcome pick up in the number of deals this year, these have happened despite issues facing those involved. Ensuring there are minimal barriers to late-life asset transfers will help encourage further fresh investment into the basin, along with innovative approaches to maximising economic recovery.

The UK Government must also prioritise, develop and implement a Sector Deal for oil and gas and for our part, the Scottish Government has offered its support. It is particularly important however that any deal is mindful of devolved and reserved responsibilities.

With the right conditions and support, there is the potential to unlock a further £290 billion of value for the UK economy through increased revenues from sustainable oil and gas production and increased supply chain turnover from doubling the UK’s international market share.

The Scottish Government remains committed to working in partnership with industry and we stand ready to provide the stability, support and incentives required for it to continue to be successful and deliver benefits to Scotland for many more years and decades to come.

Derek Mackay, Cabinet Secretary for Finance