Sunak fails to mention how the Conservative Party has failed Scotland over energy

Rishi Sunak in Aberdeen today at the Scottish Conservative Conference argued that the UK Government should be trusted with Scotland’s energy – oil, gas, and renewables. But he didn’t talk about how the UK has played ducks and drakes with Scotland’s natural resources. They have failed Scotland in the past – so why should Scotland trust the Conservatives with Scotland’s energy future?

Sunak was speaking in a city that has little to show for the oil boom that passed through the North East, where natural resources that took literally millions of years to make were extracted, sold and used up within the space of one human lifespan, creating unimaginable profits. Arguably the city has been left behind in stark contrast to other oil-rich cities like Oslo or Houston. For the vast majority of the last 50 years, since the oil boom started, Scotland has been under a Conservative UK government. 

Here are three ways the Conservatives have failed Scotland over energy:

1. Failure on effective tax – Norway’s revenues from oil and gas were MUCH higher than the UK’s

The Conservative Government which has been in power since 2010 has given the oil and gas industry tax breaks that don’t make sense – except to make Scotland look too poor to be independent. 

For instance, oil giant Shell produces about 120,000 barrels of oil a day equivalent in the UK, almost all from Scottish waters. Yet because of the UK tax system it made zero taxable profit in the UK from 2017 to 2022. Energy specialist David Sheppard wrote in the FT: “A windfall tax that raises a big fat doughnut from one of the UK’s largest oil and gas producers at a time of record prices is, by its very definition, imperfect…A system that taxed oil and gas production first rather than zeroing in on profits would ensure the government’s take from the exploitation of an irreplaceable natural resource was never zero”. 

Between the oil price fall in 2015 and 2021, Norway generated almost £100bn in oil and gas sector revenues compared to £5.6bn by the UK despite producing a similar amount of fossil fuels. This means that Norway’s revenues from oil and gas in this time period were 17 times higher than the UK’s. 

The government of Norway, a small independent nation with a population of 5.4 million, was 17 times better than the UK Government at generating revenues from oil and gas in that period alone. Both countries have produced roughly the same amount of oil since 1975.

The lower tax has not protected jobs. Scotland - particularly North East Scotland - lost far more jobs than Norway when the oil price fell. 

2. Failure on the windfall tax – tax breaks for hard to reach oil investment but not renewables

During the energy crisis the oil and gas companies were making huge sums. The Conservative government initially dragged its feet over imposing a windfall tax. Scots who live close to the richest energy reserves in Europe were paying some of the highest gas prices in the world.  

Finally in May 2022 in response to pressure, the UK Government imposed a windfall tax on the oil and gas industry. That has raised £6 billion to bail out the UK. Chancellor Jeremy Hunt is expected to extend this in next week’s budget. 

But the windfall tax included a “super-deduction” – which allowed companies to claw back tax when they spent money on accessing ‘hard to reach’ fossil fuel reserves – but not on investment in renewables, in a move that showed disdain for the climate emergency and poured fuel on the crisis.  

The UK government also extracted £2 billion from a windfall tax on Scotland’s renewable electricity firms last year with the Electricity Generation Levy – but has handed back only a fraction of that in terms of investment.

3. Failure on investment

Currently the US and the EU are making massive investments in the energy sector. In contrast, the UK is sleepwalking into an energy crisis. Under Margaret Thatcher, the UK privatised its national electricity grid. The only other European country to do that was Portugal in a forced fire sale. A controlling share of National Grid’s UK gas transmission was recently sold to Macquarie Infrastructure and Real Assets - sometimes known as ‘the vampire kangaroo’ because of its practice of loading infrastructure with debt and then selling it on. 

The UK grid is “weak” and nowhere near where it should be to support the transition to green energy. For some privileged people like Prime Minister Rishi Sunak, the lack of capacity can be overcome – he paid tens of thousands to upgrade the grid near his home to heat his personal swimming pool. But in Scotland, new renewable plants can’t get on the grid for decades and Scottish farmers are not even allowed to put in a few solar panels because the grid can’t take them. 

Under the Conservatives, energy will continue to be considerably more expensive than elsewhere. That will damage the attractiveness of the UK, embedding its poor growth and productivity. 

All the innovation from scientists in the world won’t get anywhere without investment. The manufacturing base that could bring jobs won’t happen without it either. Aberdeen’s ambition to be the centre of a new renewables boom is threatened by lack of support from the UK Government and massive underinvestment generally.  

The UK’s investment in the energy transition fell by 10%, from $31bn to $28bn, from 2021 to 2022, while similar investment in the US rose by about 24% to $141bn, and in Germany by 17% to $55bn. Across the EU, investment in the energy transition away from fossil fuels rose by $26bn last year, to $180bn, in the aftermath of Russia’s invasion of Ukraine.

Very little oil money has ever come back to the North East of Scotland to be invested – only paltry sums. Robert Gordon University calculated at least £17 billion was needed as a basic investment in Aberdeen for it to become a significant renewables player. Yet the UK Government has put only paltry sums back.

And despite a much vaunted move to confirm funding for the North East’s carbon capture cluster Acorn, no money has yet been forthcoming from the UK years down the line. Even if Hunt announces some funding next week, it is far short of what is required for a just transition.


It could have been so different. Economist Gavin McCrone wrote in a report to the UK government 50 years ago this week. He concluded:

“It must be concluded therefore that revenues and large balance of payments gains would indeed accrue to a Scottish Government in the event of independence provided that steps were taken either by carried interest or by taxation to secure the Government 'take'…

"Undoubtedly this would banish any anxieties the Government might have had about its budgetary position or its balance of payments. The country would tend to be in chronic surplus to a quite embarrassing degree and its currency would become the hardest in Europe with the exception perhaps of the Norwegian kroner."

The report was hushed up until Freedom of Information requests unearthed it in 2005. 

So far the UK’s investment in the North East has been pathetic. Labour was at one time promising to change all that by spending £28 billion a year on the transition to renewables – but it has U-turned on that. 

Neither the Conservatives or Labour can be trusted with Scotland’s energy future. An independent Scotland would do better.