What Starmer didn't say at the Scottish Labour conference
Should Scotland trust Westminster with energy policy?
Keir Starmer delivered a strong speech at Labour’s Scottish Conference at the weekend. On a stage bare of Union Jacks - in stark contrast to the UK conference - he begged independence supporters to lend their vote to Labour, conjuring up an image of how they would feel the day after the election if the Conservatives had won by a narrow margin.
But he didn’t mention Labour’s decision to drop its pledge to spend £28 billion a year on the transition to renewables. That is devastating. That was the minimum needed to make real progress. The UK is nowhere near ready for the electricity-hungry future that is coming. Its privatised national grid is creaking - new renewable plants can’t get on the grid for decades, farmers in Scotland are not even allowed to put in a few solar panels because the grid can’t take them. 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.
The US has sent a tsunami of money crashing into the Green New Deal - much of it focused at supporting American jobs. That is now boosting growth. The EU is doing the same. In a Labour-run UK, the lights probably won’t go out - but energy will continue to be considerably more expensive than elsewhere. That will damage the attractiveness of the UK and bed in its poor growth and productivity.
You can forget the idea that Labour’s much touted GB Energy is any kind of substitute - it’s a seed money vehicle for public-private partnerships with a relatively small budget.
At the same time as walking away from its commitment to invest in a green new deal for the UK, Labour has announced a new windfall tax on the oil and gas sector - this is causing huge anger with estimates of many job losses. The Press and Journal was criticised last week for a front page showing Labour leaders dressed as characters from the TV series (filmed in the north of Scotland) with the headline ‘Traitors’.
That anger is understandable. Anyone who visits Aberdeen will wonder what happened to the oil boom that crashed through Scotland’s North East. There is nothing to show for it - in fact less than nothing as the city has been impoverished by it. You won’t feel that walking the streets of Oslo in Norway or Houston in Texas.
Fossil fuels that took literally millions of years to make have been extracted from the North Sea and burned, with the carbon thrown back into the atmosphere, in the space of one human lifespan. This reverse alchemy has generated unimaginable sums in profit. Where did they go?
Westminster has managed the oil on behalf of Scotland. It has not done that well. Labour was in power at the start of the oil boom and they briefly considered starting a sovereign wealth fund - but decided against it.
Since then, the UK government has chosen to tax oil and gas in a unique and eccentric way, allowing the industry breaks that often don’t make sense. 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 for five years, 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 5.4 million population, 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 - Norway now has about a thousand trillion dollars in its sovereign wealth fund which is being used to turn it into a world leader in renewable energy.
So Labour’s idea of massively increasing the tax on the oil and gas economy of the North East might make sense - if they still planned to make a huge investment in the green transition. But instead, this double flip comes after many visits to the North East where Labour leaders looked people in the eye and said they wanted a just transition. That just transition - with a focus on retraining and replacing jobs in the North East - won’t happen without much, much more money. It would take billions for Scotland to be able to take advantage of its potential as a renewables powerhouse. It is already falling behind - the supply chains are mostly outside Scotland. Holyrood can’t do anything much about that - it has a budget that is commensurate with providing day-to-day services. It can’t borrow and it can’t tax or regulate energy firms or the national grid.
That - ‘just-let-Westminster-get-on-with-it model’ - is now being replicated in green energy. This year, the UK government is taking billions from Scotland’s renewable energy producers in the Electrical Generation Levy - but very little of that money will come back in the form of investment. The UK government hasn’t even got it together to support pumped storage hydro yet.
To add insult to injury much of what Labour is committing to spend on energy out of its Scottish energy taxes will be used to plug huge financial holes in the insanely expensive nuclear power programme down south. That will produce power calculated to be at least three times more expensive than wind or solar - and a dangerous legacy of waste. The nuclear lobby keeps pushing the canard that this is needed “when the wind doesn’t blow” - pumped storage hydro is how Norway solves that problem (and offshore wind is constant).
So where does this leave Scotland? Disappointed. Many Scots will likely answer Starmer’s call to lend their votes to Labour this time. But by dropping its Green New Deal, the UK Labour Party is effectively saying that, in order to be electable in England, they have had to sacrifice Scotland’s energy future.
And that’s not to mention other policies abandoned - Labour are not going to abolish the House of Sick Jokes - sorry ‘Lords’ any more; they are offering nothing meaningful on Brexit, they won’t abolish the two-child benefit cap despite the impact on child poverty. On immigration, when the Safety of Rwanda Bill - which instructs British Courts that they must view Rwanda as a safe country whatever the evidence says - Labour didn’t even vote against it. They abstained.
So Scots who support independence may end up voting Labour at the coming general election - but they will do so with a heavy fucking heart.
Labour are watering everything down to get elected. Should they get elected lets hope they change their course.
Isn't the "with energy policy" unnnecessarily restrictive? Labour has always used the Scottish electorate in the same way the defence policy has viewed Scottish youth. As my my late father used to comment" "There'll always be an England as long as Scotland fights". There'll always be a Labour - as long as Scotland votes.....