Lack of clarity surrounds North Sea oil grab

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by Jamie Maxwell

The political fallout from the Chancellor’s budget day grab for an additional £2bn a year share of North Sea oil profits continues to spread.

Most of the hostile reaction so far has been directed at Treasury Secretary Danny Alexander, who has been widely reported as bragging around Westminster that the tax raid was his idea.

The SNP has already branded the grab as Alexander‘s ‘political epitaph’.

More worrying for Alexander is the venom behind some of the criticism directed at him from his fellow Scottish Liberal Democrat MPs, notably Malcolm Bruce who has accused him of being ‘economically illiterate’ for promoting a move that could cost thousands of jobs in Scotland.  Bruce’s scorn will cut all the more sharply because he represents a constituency – Gordon – at the heart of the oil industry and speaks with the authority of a former editor of the Aberdeen Petroleum Press.

Another Lib Dem critic, Sir Robert Smith, MP for West Aberdeenshire, is the joint vice chair of the UK Offshore Oil and Gas Industry Group.

As reported in the Guardian on Friday, Alexander is now denying reports that he was the originator of the idea while continuing to insist in the face of expert opinion that the levy will have no discernable effect on investment and employment.

Following his attendance alongside Chris Huhne at a ministerial meeting with oil companies, attention may now switch to Alexander’s Scottish Lib Dem colleague Michael Moore, Secretary of State for Scotland.

The Scotland Secretary’s remit is to promote Scotland’s interest in the UK Government.

Before yesterday Moore’s only public role had been to defend the decision post facto citing the 50 per cent increase in North Sea oil revenues since 2009.  Repeated attempts this week by Newsnet to get the Scotland office to confirm that the Scotland Secretary had been consulted by Treasury Ministers were consistently rebuffed.  The Office’s chief press officer would say only that it would be reasonable to assume that as a cabinet member Moore would have been involved in discussions at some level.

This lack of clarity conflicts with an announcement posted on the Scotland Secretary’s official website that “devolution links” had improved following the nomination by every Whitehall department of a minister “responsible for ensuring that devolution issues are taken into account when the UK Government makes a decision”.  The Minister nominated by the Treasury was Danny Alexander.

The Scotland Office’s reluctance to confirm that a formal consultation took place reinforces other circumstantial evidence.  Had the Scotland Office been consulted it would have been obliged to seek expert advice.  But neither the Scotland Office nor the Treasury has challenged the complaints of the oil and gas industry’s representative bodies that they were kept completely in the dark, while the Scottish Government – which under the devolution settlement shares responsibility for the North Sea oil industry with the UK government – was evidently ignored.

The embarrassing fact for the champions of the Union is that despite frequently repeated promises by Whitehall to respect the roles and views of the devolved administrations, London’s default mode remains indifference to any ‘peripheral’ interests.  By reserving all major tax powers for Westminster the Calman based Scotland Bill proposals simply entrench that indifference.

If the Treasury’s oil grab lights a slow burning fuse under the Unionists’ preferred constitutional option for Scotland, its implications for the Scottish Liberal Democrats are more immediate.  It represents an abject failure by Scotland’s two sole Cabinet members, in the opening week of a Scottish general election, either to recognise and challenge a threat to a major Scottish economic interest or to use the bargaining power they claim they won as part of the Coalition agreement to extract a proportionate compensation for Scotland.

A firm guarantee that the proposed Green Investment Bank would be based in Scotland with power to raise its own finances could be one step toward such compensation.

The release to the Scottish Government of the £200m Fossil Fuel Fund to help Scotland’s renewables industry could be another.

Anything less is likely to be seen by Scottish opinion as adding insult to injury.