Smash and grab budget takes Scotland's resources without giving back
The UK Chancellor has delivered a devastating budget that will do little to boost Scotland’s economy. She pushed up the tax take on the oil and gas sector to new heights. This will threaten both future investment and the thousands of jobs that depend on oil in Scotland. But, despite all the talk of a ‘just transition’, Scotland has missed out yet again on funding for carbon capture and there was no mention of Grangemouth, Scotland’s only oil refinery which is set to close next year.
This budget does nothing to address the fact that Scots pay the highest energy prices in the EU while providing cheap electricity for the UK. The UK government is finding the money to build a new energy superhighway to extract renewable power from Scotland. Scotland won’t benefit from that in the way it would as an independent country.Â
Reeves mentioned a deal to buy green hydrogen from 11 schemes including two in Scotland, at Cromarty and in East Renfrewshire. This is to be welcomed - the East Renfrewshire scheme was already awarded funding by the previous government. But it falls well short of the investment required to create a just transition, particularly in the UK’s energy centre of Aberdeen. An independent Scotland could invest in a green hydrogen pipeline to Germany which would boost the economy by £1billion a year.Â
The much-promised GB Energy did not even get a mention. Just days ago, it was revealed that the chair will not be moving to Aberdeen and will remain in England instead. Juergen Maier will continue to stay in Manchester even though headquartering this business in Scotland was Labour’s main election promise to Scotland.
And Rachel Reeves said nothing about restoring the winter fuel payments for pensioners - their sudden withdrawal has left thousands of low-income Scottish elderly people facing a painfully cold winter. A marginal adjustment of the pension credit threshold will still leave many struggling to choose between heating and eating - and Scotland’s pensioners have the highest rate of fuel poverty in the UK.
And Labour did not remove the two-child benefit cap which is pushing many families into poverty and puts agonising pressure on parents. This will disappoint many Scots who believed Labour would end this cruel regulation which discriminates against children in larger families.Â
There will be some more money coming to Scotland in consequence of the rise in NHS funding - but it is unlikely to be enough to restore Scotland’s capital spending budget which has now fallen to below a population share. Scotland has also lost out on EU funds for infrastructure - which Westminster promised to match but does not do so, leaving a huge shortfall on what Scotland received before Brexit. Reeves did briefly mention Brexit - which Scots did not vote for and which is damaging the economic prospects of the country in ways that are getting worse over time not better - but she did not pledge to restore Scotland’s lost funding.Â
1 - Carbon capture investment funding for England - but not Scotland
A stranger walking through the city of Aberdeen might be surprised to hear that it has been a global oil capital for half a century. Unlike similar hubs in other parts of the world, there is little to show for it. The Labour Chancellor added insult to injury today by finding billions to invest in carbon capture in two sites in England - but nothing for the Acorn project in Peterhead.
Rachel Reeves is handing £22bn over 25 years to two major carbon capture and storage (CCS) clusters; one in Teesside in north east England, and a second in north-west England and north Wales. Many expected that when ‘funding confirmation’ was given to the Acorn carbon capture cluster with great fanfare last year, some actual investment would follow – but it has not. It is just one more example of how the UK Government has used Scotland’s natural resources – raiding them to fund the Treasury’s coffers and giving as little as possible back.
The news comes just days after it was revealed that the chair of GB Energy firm will not be moving to Aberdeen and will remain in England instead. Juergen Maier will continue to stay in Manchester even though headquartering this business in Scotland was Labour’s main election promise to Scotland.
2 - Just transition funding does not include Grangemouth
Scotland produces 97% of UK oil and is the 2nd biggest oil producer in Europe, after Norway. Yet, from 2025, Scotland will need to import all its oil goods. Scotland will soon be the only major oil-producing country in the world with no oil refinery. Grangemouth is set to close next year with the loss of 3,000 jobs.Â
Somehow the two companies that own it, known as Petroineos, are making a massive loss, while the five oil refineries in England and Wales all turn a profit. Oil exec John Bell said the UK government should have used subsidies to ensure that North Sea oil was refined in Scotland. That would maintain the industrial potential of the Firth of Forth in the medium term. Others want to see Grangemouth producing sustainable aviation fuel (the Scottish government has no say over energy regulation).Â
Brian Leishman, the Labour MP for the Grangemouth area, demanded that Reeves use some of the new investment potential freed up by the fiscal rule changes to secure the plant’s future. But Leishman’s pleas apparently fell on deaf ears as there was nothing in the budget for Grangemouth and there are apparently no plans for the UK government to save the centre, with all the impact it will have on jobs and on the wider area, where there are many other businesses that used the products it created.Â
3 - Infrastructure money for England but not Scotland
There will be some money coming to Scotland as a result of the increased funding for the NHS. But the Scottish Government is getting less funding than ever before for infrastructure, Its capital budget has been cut by 9.6% – about £600m after being adjusted for inflation – while another 3% cut is on its way this year. It cannot borrow money and it has also lost out on EU funds.Â
At the time of Brexit the UK promised to equal the EU funding but they have spent only a fraction of what was available before, and the UK also reserves the right to spend the money on its own priorities and account for it as it sees fit - for example HS2 is counted as an infrastructure spend on behalf of Wales.
Several significant infrastructure projects were named in the budget - in England. But Reeves forgot to mention that one of the first acts of the Labour government was to axe £800m funding for the creation of an exascale supercomputer at the University of Edinburgh The UK’s first next-generation supercomputer – 50 times faster than any of the existing machines – was to be hosted at the university, able to perform 1 billion billion calculations each second. Losing this potential may have a knock-on effect on the international standing and the technological resources of Scotland’s premier international university, in the world top 30 in the global QS rankings.Â
Conclusion
The promise to Scotland was that voting out the Conservatives would help deliver for Scotland. But the Labour Chancellor’s budget was firmly focused on England. She whacked the oil industry for more money. But when it comes to the just transition there was money for carbon capture schemes in England but not in the UK’s oil capital of the north-east. There was no mention of the closure of Grangemouth, Scotland’s only oil refinery. And nothing was done to address the situation faced by Scots who live in an energy-rich country yet pay the highest energy bills. Many of Scotland’s pensioners still face a harsh winter having lost their winter fuel allowance.