The SNP oil policy is not realistic - or honest

It is hard to feel the new SNP policy on oil and gas is entirely honest, based on what the party agreed at its conference over the weekend.

There are two elements to the motions passed at the weekend. The first is more straightforward – the Scottish Government's continual calls to cut tax on oil and gas corporations and to support the development of new oil fields to extend the amount oil and gas extracted from Scottish waters has long stood at odds with party policy.

This has now been tenuously aligned. Clearly not confident that an explicit low tax, 'drill baby drill' stance would pass, the party instead couched the wording in terms of 'protecting jobs'. But it is more than clear enough what the intention of this policy is.

This is a major U-turn that moves the party into a position much closer to the Conservatives and Reform than any other party in UK politics. This is a telling reality; by rejecting an assumption against new oil and gas (an amendment proposed by the SNP Trade Union Group but without leadership support and voted down by the conference), the SNP is now at the very right of the political spectrum in Britain on oil.

Conscious of this uncomfortable reality the SNP added calls for the UK Government to set up an 'oil fund' to be invested in Scotland. This is talked of as if it has something to do with the Norwegian oil fund, but is completely different in almost every way.

The Norwegian fund was established nearly 40 years ago based on the public ownership of oil and gas during its peak years. The Scottish fund (if it were to exist) would consist of a few years of tax revenue from privately owned oil on a limited number of oil developments in an oil field in rapid decline. There is no meaningful comparator.

So what scale might this new fund achieve? The oil and gas companies in their bid to be given licenses claim something like £3.8 billion would be raised over the next decade in tax. To indicate the scale difference, that represents about 1.7 per cent of annual Scottish GDP or less than five per cent of the annual budget of the Scottish Government.

By comparison, Norway's oil fund is 450 per cent of Norway's GDP. But then of course you have to subtract the tax raised over this period from the public budget as the tax the SNP wants to go into the oil fund would otherwise have gone into general taxation and will therefore now be lost.

So how does Scotland gain from this proposal? Simply put, the SNP wants a policy shift from Scotland getting its per capita share of oil revenues to getting all oil revenues. This is quite hard to justify, but unless that position was reached the sums going into an oil fund would be negligible.

And since there is a strong case to be made that the harm resulting from burning all this new oil and gas will be felt in the developing south, a position which sees only Scotland gaining financially from this development is not a moral stance.

But this is all based on the sales pitch of the oil and gas companies. This is the same kind of pitch which promised tens of thousands of jobs and a wealth fund from the ScotWind licensing process, but once the corporations got the licenses they wanted they did not deliver the jobs, the Scottish Government took no action and the disastrously low sums raised from the sale of licenses which was supposed to form a 'generation wealth fund' have been or will be spent patching up the Scottish budget.

What the oil and gas companies do not do is include the lifetime tax breaks this development will bring, and since estimates are based on maintaining the current high oil and gas prices globally, there is extremely good reason to be sceptical. The cost of developing an oil field is very largely tax exempt and this offsets large amounts of other profits.

To put that another way, the taxpayer effectively stumps up very significant proportions of the cost of developing the oil field. The same happens at the other end; it is the oil and gas companies which must decommission their oil rigs but the tax breaks are so substantial that realistically the public pays for a lot of that too.

The total tax liability for taxpayers for current decomissioning costs is estimated to be as high as £50 billion, or more than ten times the industry projections of revenues over the next decade. If we then assume that oil and gas prices return to somewhere near their long term average over the next decade, the financial picture changes significantly.

In that scenario and accounting for tax breaks, the development of Rosebank will be net-negative in tax. In other words, over the lifetime of the fields the UK taxpayer would pay the oil companies £250 million to pump this oil.

The SNP can pass motions to bridge the gap between the pro-environment views of most of its members and the pro-oil views of its leadership but it cannot deliver the promises it has made in the process. All this does is add to the corrosive nature of contemporary politics and sets up more government failure ahead.

The SNP must be grilled on the reality of these policies every bit as much as Reform or the Tories.