North Sea Contortions

The SNP is in a mess over oil.

For 50 years, from the late 1960s onwards, the party argued that oil was good and would make Scotland rich.

That position had the advantage of being clear.

Maximum economic extraction of North Sea resources would fire the industrial development of an independent Scotland, fund its public services, and temper its fiscal gap.

Then came the global oil price plunge of 2014 – 2016 and a partial rethink of nationalist economics.

In 2018, Andrew Wilson’s (largely dreadful) Sustainable Growth Commission report made one welcome recommendation.

Oil was too volatile a commodity on which to base the economic case for a separate Scottish state.

Future North Sea revenues should therefore be excluded from Scotland’s annual fiscal projections and all funds from the carbon economy be managed, in Wilson’s words, “solely as a bonus” – seed money for a Scottish sovereign wealth fund.

The report itself framed this shift in terms less concise but no less emphatic:

“Looking forward it is our judgement that windfalls such as those that occur from the depletion of scarce natural resources should be treated as windfalls and not depended upon for recurring annual commitments.” (Section B, page 3.)

The Sustainable Growth Commission report wasn’t advisory.

The SNP adopted its recommendations at the party’s annual conference in April 2019, which, in turn, presumably, made them policy.

In 2018, Nicola Sturgeon commended the “candour” of the report and contrasted it to the “fictions peddled by the Brexiteers.”

But the SNP didn’t stop there.

Late last year, with the global spotlight trained on Glasgow for the COP26 climate conference, Sturgeon finally accepted the logic of her own green rhetoric.

The development of the controversial Cambo oil field west of Shetland “could not pass any rigorous climate assessment” and should not go ahead, the first minister announced on 16 November, days after the summit had concluded.

In addition, Sturgeon said, “I don’t think we can go on extracting oil and gas forever and I don’t think we can continue to give the go-ahead to new oil fields.”

Again, clarity.

According to Sturgeon, after Cambo, the days of “it’s Scotland’s oil” were over: maximum economic extraction was dead and, with it, the dream of Scotland’s oil-fired economic rebirth.

But now, nine months later, the SNP’s shift away from oil and gas has stalled.

Wednesday saw the release of a fresh set of GERS figures.

As expected, GERS showed a sizeable discrepancy between what Scotland spends on services and what it raises in tax, based on current tax and spend arrangements within the UK.

Last year, Scotland’s fiscal gap was 12.6 per cent of GDP; the year before, it was 22.4 per cent of GDP.

Part of the reason Scotland’s notional deficit shrank during those 12 months is that North Sea oil and gas revenues rose, from £0.8 billion in 2020 to £3.5 billion in 2021.

That increase, as the BBC noted, reflected a global trend “driven by Russia’s invasion of Ukraine, which increased competition for supplies as countries attempted to switch away from Russian oil and gas.”

Not a huge amount to celebrate, then.

Unless, of course, you happen to be John Swinney.

After the publication of GERs, the SNP deputy first minister posted a thread on Twitter.

“GERS 21/22 shows that Scotland’s fiscal position is recovering faster than the UK’s – a huge fall in the annual deficit thanks to the largest increase in revenues on record,” he wrote.

“This is before the full impact of the rise in oil prices that we’ve seen more recently, which is likely to see Scotland’s deficit fall faster than the UK’s again next year, with oil and gas revenue set to grow to £13 billion this year.

“Indeed, GERS shows how the UK’s response to the cost crisis is being built on Scotland’s natural resources – not least with its windfall tax on the North Sea.”

What, precisely, is Swinney doing here?

He is lauding the positive impact North Sea oil and gas is having, and will have, on Scotland’s balance sheet.

He is accusing the UK government, through its windfall levy on energy companies, of using Scottish oil to arrest the slide in British living standards.

And he is, in effect, rolling back the last four years of SNP evolution on both the economics and the ethics of Scottish resource extraction.

Swinney was evasive when appeared on GMS this morning to be grilled on the GERS numbers. 

At first, he doubled down on the ‘contribution’ Scotland’s offshore energy sector made to the British economy and UK finances.

Then, when asked if future oil revenues should be spent or put into a trust, he said Scotland would have to be independent in order to make that decision and he “certainly [wanted] to make sure Scotland was independent.” 

Swinney also erroneously insisted that the debate over net-zero – the achievement of which, according to the International Energy Agency, will require winding down existing North Sea projects and instigating no new ones – was a “completely different argument” to the “public finances argument that we are pursuing today.”

None of this adds up.

To recap.

In 2018, the SNP decided that oil and gas revenues should not be included as part of Scotland’s day-to-day spending or used to cover Scotland’s fiscal shortfall.

In 2021, the party disavowed future North Sea oil and gas developments as incompatible with Scotland’s climate commitments and the survival of our natural world. 

Neither position can be reconciled with an approach that places oil at or close to the centre of Scotland’s public finances.

So where did Swinney’s radically unhelpful intervention spring from?

One theory is that the deputy first minister couldn’t resist the lure of short-term political point-scoring and media management that descends every time a new GERS report comes out.

Another is that he represents the fossil fuel wing of the SNP and is jockeying for control of the public narrative against Sturgeon and her SGP outriders.

Yet another is that the old pro-carbon instincts of Scottish nationalism were always lurking beneath the surface and have, with the slightest of prompts, just vigorously reasserted themselves.

Either way, one thing is clear.

If the SNP is even half-serious about living up to its world-beating, gold-plated, record-breaking climate targets, it must remove oil and gas money from its independence prospectus – and do so now, conclusively.

Anything less would be a fudge, a guddle, a painful, unconvincing compromise.

If that’s the look Mr Swinney was going for – well, congratulations, he got it in one.

Comments (29)

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  1. Cathie Lloyd says:

    You could make more sense if you took the context into account. Political analysis which ignores the constraining factors which limit decision making is based on purely theoretical assumptions. Governing parties operate in the real world and inevitably respond to changing circumstances. The underlying direction can be consistent while policies acknowledge when things change and the limits of power at their disposal. Otherwise the analysis is purely ideological.

    1. Derek Cameron says:

      Well said.

  2. Ray+Burnett says:

    An informed and lucid article, but who wrote it? My notification email attributes it – as it does with most postings – to ‘Bella Caledinia Editor’, but when I reach the end and scroll down to the ‘More by this Author’ link, I find it attributed to Jamie Maxwell. So which is it? And why is authorship not made clear along with the title at the head of the piece.
    I enjoy reading articles by both writers but would prefer to know the author before reading the contribution. It does make a difference to a reader to know who they are reading before engaging with the content not after. I find myself reading the piece twice – once in the ‘voice’ of Mike Small and once in that of Jamie Maxwell.
    Perhaps there is a technical reason I am not aware of but if not perhaps the revamp of the site is a good time to remove this frustrating practice?

    1. Hi Ray – its by Jamie Maxwell. It has his profile and link to his other writing at the top right of the article?

      Unfortunately the system which sends out each article has it as being sent by me. But I am the sender not the author. Sorry for the confusion.

      1. Ray+Burnett says:

        Thanks Mike, The profile and link are not at the top right on the page I click open. Just the the > link from Home to Climate aligned left then the title and opening para.
        Perhaps it is because I am mainly receiving and opening emails on my phone? Will go Ben the room and see how things appear on the desktop PC and on the laptop. No big deal, just a touch irksome.

        1. Ray+Burnett says:

          problem solved. If I click on the red hyperlink Bella Caledonia the piece comes up with Jamie’s name and pic, although below title it is still ascribed to ‘Bella Caledonia Editor’.
          However,….. if I click on the new red slash bar on the left it opens the piece with title and ascribed to the actual author. Result!!
          Am I the only saddle out there raising these things? Time to lie down

  3. Tom Ultuous says:

    So oil revenues increased from 0.8 bn to 3.5 bn? Why is that so miserly compared to the profits the likes of shell & BP are announcing? Are the UK govt downplaying the revenues (as we always suspected) or was the original “franchising” that much of a rip off? I suspect both.

    1. Mr E says:

      Presumably, the £3.5 billion is petroleum revenue tax. After that, oil company profits are subject to corporation tax. As far as corporation tax goes, Cairn Energy is the only non-miniscule oil company I can think of that is registered as a Scottish company.

  4. Paddy Farrington says:

    I think that the logic of this piece is all wrong. GERS is intended to represent Scotland’s balance sheet within the Union, based on the policy choices made by Governments at both Westminster and Holyrood, not what Scotland might aspire to with independence. It must therefore be assessed within the Union framework, which is what John Swinney was doing. This does not imply that nothing would change under independence, far from it.

  5. Gordon+G+Benton says:

    Yes; a good article that needed saying. The punters are confused, and perhaps John Swinney really needs to retract or explain the apparent difference of strategy (that is what the SNP are about; yes?).
    But the author does expose the realities of this whole oil and gas exploitation business when in apparent conflict with the present environment issue. Whilst not in any detracting from the latter concerns, surely Scotland and the World will still require oil and gas, for some decades yet; perhaps not in the present quantities, but for parts of the World to reduce poverty and hunger, improve health and well-being. The World needs roads (asphalt preferred to concrete or mud), engine lubrication, waterproofing, and a thousand other non-combustible uses, but for many areas of the Planet it still needs oil and gas for energy above all and national survival. It is mindless shooting-ourselves-in-the-foot to deny World access to these mineral sources whilst other resources have yet to be developed to a practical or indeed affordable state.
    Surely it is not beyond the wit of the stakeholders (and that includes Holyrood) of these and other presently polluting industries to sit round a table to plan for the next 50 or 100 years, not just the next election. The Sustainable Development Goals (SDGs) and its targets would still lead the agenda. (The meeting between the FM and these industry leaders last week is noted; report – ‘in progress’).

    1. “surely Scotland and the World will still require oil and gas, for some decades yet”

      No we need to transition immediately away from these very very urgently.

      The longer we leave it the worse and more dramatic the transition will have to be We should have done this thirty years ago.

      You can walk across the Loire river today.

      Wake up.

      1. John Learmonth says:

        You could walk across the Loire Valley in 1949.
        Basically your condemning the developing world to poverty and starvation just to salvage your Guardanista conscience
        Let’s go all green and keep the slave child labour in the mines of Congo busy digging up the rare earth metals which keep our ‘green’ energy going.
        Wake up!

        1. Your not aware of the problems of drought across the world John?

          The Rhine, the Loire, the Danube and the Po have all been hard hit.

          The fate of these rivers is intimately linked to Europe’s energy, food, and transportation security. And the fate of both the rivers and the daily needs of Europeans are intimately bound up with the trajectory of climate change and resource depletion, especially of water and energy.

          The Po is flowing at one-tenth its normal volume. That’s allowing seawater from the Adriatic to travel up the river and damage the rice crop that depends on the Po’s fresh water for irrigation. Up to 40 percent of Italy’s agricultural output comes from the Po valley.

          For the Loire, the major problem is heat. The river water is used to cool nuclear reactors along its course. But that water is now so warm that after absorbing heat from the reactors, the water cannot be cooled sufficiently before it is returned to the river so that it won’t harm aquatic life. As a result, reactors were forced to reduce their power output.

          These are all consequences of climate breakdown.

          The worlds poor are affected by this breakdown now, right now, by the impact of drought and catastrophic extreme weather shifts.

          I can’t believe you are ignorant of this John?

          1. 220827 says:

            It’s a growing catastrophe, right enough, Mike, but all such catastrophes culminate in what chaos theorists call ‘system rupture’ or revolution rather than in reform. Whether or not life survives that rupture, and in what forms in survives, will depend on its adaptability. Life has proven itself to be pretty resilient to catastrophic change/system rupture/revolution in the past.

        2. Alec Lomax says:

          Is that you, Lord Lawson?

      2. Mr E says:

        You are probably wearing a petroleum-based product next to you skin, right now, even if it is made of recycled plastic. And you definately are reading this on something made from petroleum-based products. etc.
        So the World will still require oil and gas, for some decades yet. Hopefully not nearly as much.

  6. Sandy Watson says:


    Looking around me right now, it seems to me that oil, at least, has a future in the manufacturing of many of the things we use every day, even if we do manage to cut out the use of oil and gas as fuel.

    1. Yes but that’s got to change … that’s the point (!)

      1. Sandy Watson says:

        OK. Just considering petrochemical-based plastics. Looking around my kitchen, there is hardly anything that isn’t made of or doesn’t contain some element that’s plastic or involve plastics in its manufacture.

        I wonder what you think the alternatives to those materials might be.

        1. 220826 says:

          Looking around my scullery, nearly everything’s been manufactured from wood, ceramics, and/or metal. And most of it’s over 40 years old; some of it’s stuff my mother can no longer use and well over 60 years old. My toolbox has tools that originally belonged to my father, and he’s been deid for nigh-on 50 years.

          1. Sandy Watson says:

            Perhaps you need to get out more often.
            What you describe is not at all typical in the world that I live in.

            And in any case, just about everything that’s been manufactured in an industrial process over the last hundred years – whether it included plastic or not – is likely only to have been made in other processes involving fossil fuels.
            So I’m not sure what point you’re making.

          2. 220827 says:

            I know, Sandy. But the point is that the world you live in isn’t necessary, only normal. We could, if we so chose, drastically reduce our dependency on fossil fuels, e.g. by re-normalising the use of non-plastic materials to make more durable, less ‘throwaway’ tools and utensils. Sure, it would be inconvenient (and less profitable) for us to consume less and recycle more, but it would be a lot less wasteful and far more sustainable use of the earth as a resource.

  7. Peter Swain says:

    Please can we stop all this talk about Scotland’s “deficit”. The devolution settlement that established the Scottish Parliament stipulated that the new Scottish Government was not allowed to borrow and had to make ends meet within the annual allowance from Westinster. Thus the Scottish Parliament was prohibited BY LAW to have a deficit, and the figures that are bandied about for the “deficit” are really Scotland’s population share of the UK’s deficit, to which Scotland has BY LAW contributed nothing. More recently the Scottish Parliament has been granted limited borrowing powers, but to nowhere near the extent that would permit a “deficit” of the size bandied about by oponents of independence. SCOTLAND DOES NOT HAVE A BUDGET DEFICIT.

    1. 220827 says:

      But would it have a deficit if its government gained independence? How would an independent Scottish government raise the revenue required to deliver the land of milk and honey it promises it would? On what security would it borrow on the international finance markets? The banks might insist on austerity as a loan condition (as they did in the case of Greece and other ‘independent’ nations around the world) and/or the most profitable exploitation of Scotland’s natural and cultural resources.

      1. Alec Lomax says:

        Let’s put our trust in Liz !

        1. Sandy Watson says:

          Hm, I don’t think I’ve seen anything anywhere from the SNP Scottish Government promising a “land of milk and honey”.
          What I’ve seen is at least the attempt at setting out a future that looks much better than being ruled from Westminster.
          Government in independent Scotland could prove to be very different in many ways.

          1. 220828 says:

            In what respects does the prospectus that the would-be independent Scottish government sets out for us look better than our supposed prospects under the current regime? According to the prophets and their readings of the portents (the drying up of the Loire, the cost of living crisis, war, and pestilence, etc.), the end of the world is nigh. How will Scottish government becoming independent of the UK save us from the impending apocalypse?

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