AN INDEPENDENT Scotland could fail to cash in on the full economic potential of the North Sea, Danny Alexander has warned, as the UK Government today launches a review of its oil tax regime.
The Chief Secretary to the Treasury claimed the larger UK was better placed to support the oil industry as it invests heavily to extract the North Sea's remaining reserves.
Loading article content
His comments added further fuel to a simmering row with First Minister Alex Salmond over oil revenues, who this weekend accused successive UK governments of "neglecting" the industry.
The UK Government will today call on the oil and gas industry to give its views on the future of the tax regime.
The move was promised during the Budget in March with a view to ensuring companies continue to explore and invest in the North Sea as reserves become increasingly difficult and expensive to extract.
Mr Alexander said: "This review offers the opportunity to put the fiscal regime on the best footing to ensure that the economic potential of the North Sea can be maximised for the UK and Scotland. The broad and diverse UK tax base means we are able to support the industry through, for example, certainty over decommissioning tax relief.
"A separate Scotland is unlikely to be able to provide the same level of support and risks missing out on the economic potential the North Sea has to offer."
Last year Mr Salmond sought to reassure the industry after the Scottish Government published a report, Maximising the Return from Oil and Gas in an Independent Scotland, which stressed there were no plans to increase the overall tax burden on producers.
The First Minister also pledged that an independent Scotland would take on the UK Government's £20 billion pledge to help with the cost of decommissioning obsolete oil rigs.
The cost of cleaning up the North Sea is an estimated £36.7bn, at current prices, between now and 2050. The cost to the UK Government, in tax breaks, would be £20bn.
Mr Alexander and Mr Salmond clashed last week over long-term forecasts for tax revenues from North Sea oil.
The row came after the independent Office for Budget Responsibility downgraded its forecasts by a quarter, predicting that between now and 2040/41 the North Sea would yield £61.6bn in tax revenues, down from £82.2bn a year ago.
Over the next five years, the OBR forecasts oil revenues of £15.8bn, less than half the £34.3bn predicted by the Scottish Government.
Mr Alexander last week accused Mr Salmond of painting a "fantastical picture of a separate Scotland's public finances".
But in a reply released yesterday, the First Minister rejected the OBR's figures. He added: "In an independent Scotland our oil and gas industry will be properly supported, and not neglected and undermined as it has been by successive Westminster governments."
He accused the UK Government of imposing a "deeply damaging tax grab" on the oil industry in 2011 and said a series of 16 tax changes in the past decade had created uncertainty for firms.
Meanwhile, a senior economist with the Institute of Fiscal Studies said an independent Scotland would have to raise taxes or cut spending if it failed to deliver sustained growth to offset the long-term decline in oil revenues.
David Phillips also warned voters could not assume, as the Scottish Government envisages, that a rise in productivity, jobs and immigration would deliver an extra £5bn in tax revenues by 2030 if the country leaves the UK.
He said: "It is much easier to say things would be better if the economy grows quickly than it is to develop and implement policies that would actually bring this about."
Around 24 billion barrels of oil are still to be recovered from the North Sea, according to industry body Oil and Gas UK. The North Sea attracted record investment of £14.4bn last year, despite growing competition from other countries.