Main Menu

Comment: by Terry Murden

Much hand-wringing over oil, but the market will decide on jobs

TerrySo who will blink first over Scotland’s most valuable asset? The part played by oil in economic prosperity and in the public finances north and south of the border has moved seamlessly from the referendum campaign to the General Election hustings. And the blame game is in full swing.

It is a showdown between the two energy ministers north and south. Tax cuts now look inevitable, but not because Fergus Ewing in Holyrood will force his counterpart Ed Davey in Westminster to have a word with the Treasury. Tax will come down because George Osborne, the Chancellor, knows that it is sensible politics if he wants his government to be re-elected in May.

That said, Mr Osborne knows full well that following his catastrophically misguided decision to hike the main supplementary oil tax in 2011 – followed by some hasty backtracking – he cannot afford to get it so badly wrong a second time. In the years since he appears to have got the message that North Sea oil is not an industrial version of the bank of mum and dad. It is not a cash cow to be plundered for other purposes when Westminster feels it needs to top up its coffers.

Mr Ewing is in the tricky position of being part of a government whose own oil-based economic policy has been shot to pieces by the fall in the oil price. He desperately needs a stronger hand rather than rely on simply urging the UK government to cut taxes. The SNP must come up with worst and best case strategies based on low and and high oil prices. This is no different to any financial risk/reward assessment and would offer a more honest position to the electorate.

In any case, cutting taxes is not a simple solution. While Westminster says the slump in the price blows a hole in the Scottish government’s financial plan, it  also leaves a shortfall in Westminster’s books. Any tax cut introduced by Mr Osborne will need to be offset by increases in revenue from other sources.

While the energy ministers fight it out, Nicola Sturgeon, the First Minister, has been a little slow off the mark, leaving Scottish Labour in particular to accuse the Scottish Government of sitting on its hands. The announcement yesterday of a task force led by Scottish Enterprise chief executive Lena Wilson is probably the least she could do, but it ought to have been done sooner.

The question for Ms Wilson is what she can hope to achieve.  Likewise, the summit being arranged next month by Aberdeen City Council leader Jenny Laing looks like it fits in the folder marked “something must be done”. The council’s Conservative leader Ross Thomson said before Christmas that the Labour-led administration had  “no remit, no agenda, no date, no venue, no consultation, no discussion and no invitations”.

Well, we now know when it will be (Feb 2) and where (Aberdeen Exhibition and Conference Centre)  but it is doubtful that it can achieve much more than voice concern.

There were, of course, expectations that the oil price would fall, despite the bleatings of an industry that claims to have been caught out. In its defence, the fall was sharper and quicker than expected and this is having some immediate effects.

In the short to medium term, there will be some wider benefits. Mark Carney, the governor of the Bank of England, is the latest subscriber to this argument. Lower oil costs act as an effective tax relief to the consumer and businesses through lower petrol prices and the lower cost of oil-based products.

And while Ms Wilson and Ms Laing examine the negative impact on jobs they should note that many of those who will be laid off will find other jobs in industries they left in pursuit of oil’s big bucks and with companies who can now afford to pay them.

All those now wringing their hands over this issue should not resort to quick fix answers or throw public subsidies at creating jobs that will be unsustainable.

Ultimately, this is a matter of supply and demand. The oil price will dictate the flow of labour as much as it determines the level of investment. There is nothing Ms Laing, Ms Wilson or any other government-appointed official can do about that.

Share The News Tweet about this on TwitterShare on FacebookShare on Google+Email this to someoneShare on LinkedIn





Leave a Reply

Your email address will not be published. Required fields are marked as *

*