Brown to lay out plan for “economic revolution” in Scotland

Gordon Brown will today lay out a plan to create an “economic revolution” in Scotland.

Brown, who has been MP for 33 years, will be stepping down in May. His proposals will be relayed in one of his last biggest speeches before he brings his parliamentary career to a close.

Brown will say that as oil fields’ output continues to fall, so do the revenue generated and the jobs on offers. He will explain that instead of “writing off” North Sea oil, there should be a rescue plan, which would include a “​reserve to maintain and upgrade essential infrastructure and to provide last-resort debt finance for companies who want to keep fields open.” (You can read further comments he will make on this below).

The former PM, will also say that a foundation of this “economic revolution” would be to create 100,000 new jobs; to begin reversing the rise in low-paid, insecure jobs following the decline in the manual industrial sector. These jobs would be based around “medical, information and environmental technologies”. Brown will say:

“Scotland punches well above its weight in the UK research and development network, from cancer research to wave power and wind power.

“And if we are to continue to lead in the financial services sector we need niche products in ethical finance, backed by a new cross-university Scottish school of finance.”

Brown’s comments on North Sea oil:

 “For 30 years oil has averaged around 17 per cent of the Scottish economy. But our best estimate is that production will fall from a peak of 4.3 million barrels per day in 1999 to 1.3 million barrels per day in 2018.

“Oil revenues will fall from a peak this century of £12billion to last year’s £6.5billion to an estimated £1-2billion this year and perhaps only £1-2 billion in the year the SNP sought independence, 2016-2017. If only £1billion, that figure is barely enough to pay the pensions bill of 10 per cent of our pensioners and not enough to pay even one month of the annual NHS bill in Scotland.

“The current problem is not only cyclical – it is not just the fall in oil prices and the loss of jobs as fields become non-commercial. The problems we have today are instead, as the Wood Report and subsequent speeches by Sir Ian Wood and oil reports have told us, structural and ​enduring.

“Over 50 years​, until last year, 42 billion barrels of oil and gas have been produced. Anything between 12 and 24  billion barrels of oil and gas remain, so between two thirds and three quarters of the oil has been extracted. But what marks out the current state of play is that while the old fields such as Brent are near exhaustion and their closure is inevitable, there are many fields which could be avoidably left behind, undeveloped and valueless.

“So we will see an already diminishing-numbers set of fields further reduced ​by being shut down with a huge cost in returning to them if they are abandoned. We need to find a way to maintain operations and to ensure that the resources which do exist, especially in small and marginal fields, can be developed when prices rise again.

“The tax regime has always been controversial. I know this as a former Chancellor and tax reductions are now necessary in the Budget. But a tax reduction for a loss-making operation is little help in the short term.

” This is not a normal downturn where we can automatically expect a full recovery when prices rise. ​ One Budget initiative would be to recognise the tipping point we are at – the structural damage that could be done if fields are summarily abandoned – and create a North Sea ​reserve to maintain and upgrade essential infrastructure and to provide last-resort debt finance for companies who want to keep fields open.

“This could not be a subsidy. Money would, in fact, go not to the operators but would finance the work necessary to keep fields operational.

“I suggest we help where help is really needed: a partnership to keep fields in existence by sharing production costs.

“It can be done in three ways. First, as co-investors in public-private partnerships, second, through loans and third, with advance purchase agreements.

“These all depend on a shared effort from the operators to invest their own money.

“In the most extreme cases, to avoid the field being mothballed in its entirety, the government could go into partnership for a take-over of the field. If it is temporarily abandoned, the government should act to ensure that sometime in the future it is possible to come back and exploit the oil.

“Ultimately ​the proposal is to make the most of our oil reserves, rather than to ignore them or to downplay their contribution in the future, particularly given the volatility of the world oil market and the strong prospect that prices could rise again.

​”It is wrong  to write off the North Sea, which could be producing oil for 40 years to come but ​we have to be realistic in that, if Sir Ian is right, we ARE reaching a tipping point and never again will the North Sea form as big a share of our economy as in the past.”