Budget: Oil and gas revenue forecasts decrease by £2.7bn

Oil and gas revenue projections have been revised downwards by 37 per cent since last year's autumn statement, it emerged yesterday.

The Chancellor announce the creation of an expert panel to consider how taxation can be used to help the North Sea oil sector. Picture: PA
The Chancellor announce the creation of an expert panel to consider how taxation can be used to help the North Sea oil sector. Picture: PA

The latest forecasts published yesterday as Chancellor Philip Hammond unveiled his budget predicted that the UK Treasury will receive £4.6 billion between 2017-18 and 2021-22.

The figure produced by the Office for Budget Responsibility (OBR) marks a £2.7bn decrease on the £7.3bn forecast in November’s autumn statement.

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The downward revision comes despite oil price estimates being revised upwards by the OBR.

The SNP’s opponents last night pointed out that the latest figures were far below the £11.8bn forecast for 2017-18 by the party ahead of the 2014 referendum.

Both the Conservatives and Labour said the falling forecasts harmed the SNP’s case for Scottish independence.

The troubling state of the North Sea industry saw the Chancellor announce the creation of an expert panel to consider how taxation can be used to help the sector.

The UK government also plans to publish a discussion paper on how to support the industry, which has been hit hard by the slump in oil prices.

The expert panel will be set up to look at how the tax system can assist sales of oil and gas fields in the North Sea, helping to keep them productive for longer.

Reacting to the OBR figures, Scottish Conservative finance spokesman Murdo Fraser said: “These are troubling figures which only serve to reinforce the current fragility of Scotland’s oil and gas sector – and shows why the support announced by the UK government today is so necessary.

“It also throws the SNP’s deception on oil prior to the independence referendum into stark relief. The SNP knew their oil forecasts were based on fantasy figures but they tried to fool people anyway. Their oil con has now been exposed for the tissue of lies it was.

“The head of Nicola Sturgeon’s Growth Commission, Andrew Wilson, has admitted this week that oil receipts were part of their spending plans, and not a bonus. Nicola Sturgeon and John Swinney have gone into hiding over this scandal.

“They must now admit they were wrong, and spell out how they would fill Scotland’s £15bn deficit in the event we voted for independence.”

Earlier this week Mr Wilson, a former SNP MSP and Royal Bank of Scotland economist, suggested making North Sea revenues central to the economic arguments for independence ahead of the 2014 referendum had been a mistake.

Mr Wilson said oil revenues had formed the “basis” of a separate Scotland’s finances rather than being an additional windfall as Alex Salmond repeatedly claimed. He said any future campaign would have to balance optimism and realism in remarks that were interpreted as a criticism of Mr Salmond’s approach.

Labour’s Jackie Baillie claimed the SNP’s economic case for independence “now lies in tatters”.

She said: “The official projections for oil and gas revenues have been revised downwards yet again. Scottish Labour warned time and again during the independence referendum campaign about the SNP’s rose-tinted fantasy of an independent Scotland’s finances. Time and again we were told we were talking Scotland down.

“But now the facts are clear. With a £15bn deficit, the cost of independence to our valued public services would be even more brutal. Scottish Labour will never support independence. We believe together we’re stronger.”

The Chancellor’s expert panel on oil was described as a “small step in the right direction” by trade union Unite’s Scottish Secretary Pat Rafferty. He said it was vital that workers were included in its discussions.

Shadow Scottish Secretary Dave Anderson said: “It was speculated before the Budget that there may have been some tax relief for the industry but we have now heard that the Chancellor has taken the inadequate step of launching a consultation in the form of a formal discussion paper.

“Time and time again, the Tory government has hidden from the problems facing the oil and gas industry and kicked it into the long grass to be dealt with at a later date.”

Finance Secretary Derek Mackay said the UK government needed to do more to support the oil industry.

“We have repeatedly called on the UK government to take action to support the oil and gas sector,” Mr Mackay said.

“While welcome, today’s announcement on a ‘discussion paper’ is long overdue and is not the urgent action that the industry needs.

“The Scottish Government will continue to do everything it can to boost the economy, tackle inequality and provide high quality public services.”