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Last Updated: Sunday, 19 March 2006, 11:44 GMT
Scotland: Oil matters
Christine Macleod
The Politics Show Scotland

Oil Rig workers

In Budget week, the SNP will publish a bill at Westminster aimed at transferring control of North Sea Oil to Holyrood.

Critics will claim this represents a lowering of their sights from Independence.

But the SNP argue that Gordon Brown's tax regime - and his recent windfall tax in particular - is punitive and is about to close down any future exploration.

They say that Scotland cannot wait for an independent government.

The SNP have been campaigning to take home 'Scotland's oil' for over thirty years. Back then it was to fund independence.

But this time their legislation proposes it funds devolution.

Their Treasury spokesman at Westminster, Stewart Hosie says "the Scottish Parliament would control everything in relation to oil and gas, installation, exploration rights and the tax revenues which accrue from the profits made on Scottish oil and Scottish gas".

So, "It's Scotland's Oil" seems to have become "It's Holyrood's oil".

Is it just the same old nationalist argument or is there a bigger economic argument this time?

The revenues Holyrood could expect to line its purse next year alone are estimated at 12bn.

And according to the SNP, this could rise to as much as 300m within 20 - 50 years. And that is just based on "known" reserves.

But critics dismiss the proposal as a non starter. Peter Wood is an Economic Consultant based at Tribal in Edinburgh.

He says the Treasury would never allow Scotland to keep oil revenues that would increase by 50% the money the Scottish Executive currently has to spend.

They see it as an unfair increase in the Scottish Executive's share of the UK national funding cake and use the Westminster calculator that decides Scotland's fair share of it - the Block Grant - to get it back.

"They would claw back all of the revenues, so we would be no better off."

Labour MP for Glasgow South, Tom Harris agrees.

He says that Scotland's public services have been better funded under this Labour government than any other before it.

He ridicules the notion that Scotland's electorate would buy the idea that it needs this extra money.

But Professor Alex Kemp does not rule the idea out of hand. Professor Kemp is an oil expert at Aberdeen University.

He particularly welcomes the SNP's plans to incentivise oil operators to invest in more oil exploration.

At the moment the DTI estimate there are up to 45bn barrels of oil left in the North Sea.

But the problem is that much of it is in a large number of small fields that are technically difficult to access and therefore more costly to develop.

And it seems there are fewer oil companies now interested in investing in them, following the Chancellor's recent hike in the supplementary tax.

The SNP would use 10% of the 2bn the Chancellor raises from this tax to create incentives aimed at preventing oil companies from fleeing to cheaper waters.

One way in which they would hope to maximise interest in oil recovery in the North Sea, would be to provide research and development funding through tax credits.

But the question is, does the prospect of N. Sea oil revenue give the SNP argument renewed weight, or is there any point in a bill which may in the end, bring no extra cash to Holyrood?

Politics Show

Tune into the Politics Show Scotland, on BBC One on Sunday 26 March 2006 at 12.30pm.

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