Scottish business quakes as SNP nears deal with Greens

Oil and salmon industries fear they could be sacrificial lambs in pact between two parties

Source Daily Telegraph 28/05/21

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The head of Glasgow’s Chamber of Commerce did not hold back when he warned of a crisis in trust between businesses and the Scottish Government.

“At times it seems like the Government is lecturing the business community on fair work, the green economy, as if the business community are a bunch of naughty schoolchildren who need to be brought to heel,” Stuart Patrick told The Herald in December.  

“Fundamentally, the challenges of fair work and the green economy are largely going to be resolved by innovation in the private sector.”

That outburst was triggered by Covid restrictions - but it is symptomatic of an uneasy relationship with the corporate which veers from mistrust of the SNP's left-wing agenda to outright disgust that it is seemingly willing to put independence ahead of any economic considerations.

Now, the mettle of Scottish firms is about to be tested further. Ms Sturgeon confirmed on Wednesday night that she is in talks with the Scottish Greens about a possible deal to support her minority government and secure a second referendum.

It could result in the far-left Greens ascending to ministerial office for the first time and holding significant sway over the SNP. If that is the price of support for a second independence referendum, few north of the border doubt that it will be paid.

For many businesses, this is an unnerving prospect. Greens have helped the SNP get their budget through for years, and in many areas - such as care services - they are aligned. But on some industries core to the Scottish identity, the Greens’ policies pose a major challenge.  

For the beleaguered oil and gas industry, the threat is existential. More than 270,000 jobs are supported by fossil fuel production around the UK, many of them centred on Aberdeen where house prices move with the oil price. 

Oil firms are already under pressure from the UK Government’s push to slash carbon emissions, with operators having to spend heavily to electrify their platforms or invest in new, cleaner products.

The Scottish Greens do not just want an end to new oil exploration licences, a prospect veering closer to the mainstream with an International Energy Agency report last week backing the idea. They also want to revoke undeveloped licences, meaning companies planning to exploit new fields in the North Sea which are already on their books would find these assets worthless.

Tax breaks for the industry should also go, the Greens say. In a debate before the May elections, Patrick Harvie, co-leader of the party, indicated that ending North Sea exploration within 10 years was the price of their involvement in an SNP coalition.

Meanwhile, co-leader Lorna Slater suggested the industry could be killed off within "two or five years" in a video unearthed by the Telegraph which was filmed late last year.

In reality, their influence is limited as energy policy is reserved to the UK. Moreover, oil revenues are an important part of the case for independence. But the party's more radical view could nonetheless make a difference in power.  

“The industry is wary of what this could mean for them, particularly given that the SNP may be likely to listen a little bit harder,” says an oil industry source. 

Trade body Oil and Gas UK is in conciliatory mode, saying it looks forward to meeting with the Greens to work cooperatively on ways to tackle the climate crisis and welcomes the fact the party recognises the need for a fair and managed energy transition.

Compromise hard to come by

However, the Greens are not in favour of many policies which the industry wants to adopt to prolong its shelf life.

Their manifesto is opposed to public investment in carbon capture and opposed to hydrogen produced from fossil fuels. Both carbon capture and hydrogen (whether from fossil fuels with carbon capture or from electrolysis) are seen by many others, including the UK Government, as key to securing a cleaner and relatively prosperous future for the North Sea. 

The SNP supports carbon capture, and the industry is hoping it stays that way. “It is a well established technology,” says a spokesman for the Carbon Capture and Storage Association, adding projects proposed in the UK do not exist to maximise oil recovery. 

The approach to the future of the North Sea could be a key point of tension, says Graeme Roy, professor at the University of Glasgow.

“It is not just about oil revenues, it is the tens of thousands of jobs that are created there which tend to be high quality, highly paid jobs which raise a lot of income tax," he says.

“These are the types of companies that you want to have, so if you are going to close down or scale back oil and gas, how do you keep that economic footprint, and repurpose it to do something else? That is easier said than done.”

Salmon farmers are also feeling worried. Scotland exported 619m tonnes of salmon in 2019 to 54 markets, including 221m to France. The seven major Scottish producers employ more than 2,300 people. 

The Scottish Greens want a moratorium on salmon farm expansion and an end to open-cage farming. Their manifesto warns of concerns over the farming’s environmental impact and of a growing “animal welfare disaster” - something the industry pushes back on. 

“The salmon farming sector is understandably concerned by a coalition government in Scotland involving the Green Party,” says a spokesman for the Scottish Salmon Producers Organisation. 

“Their manifesto commitments seek to potentially prejudice the sector’s future and the thousands of people who work in it.”

Finding a solution

Scottish Greens also have big ambition on housing, in policies likely to garner public support. They want to build 130,000 homes by 2032, 70pc of which should be for social rent. 

But Matt Kilcoyne, deputy director of the Adam Smith Institute, warns that the reality might not match this ambition. 

“If they do not have enough houses, adding a whole series of extra hurdles to the private sector market is unlikely to then end up with more houses,” he said. 

“Scotland’s housing crisis is more acute than in most parts of the United Kingdom. After 14 years of SNP rule and a few years of the Greens cropping up, we’ve ended up with nearly a third of young people’s incomes going on rent.”

Confronted by opposition Conservatives about her potential alliance with Greens at First Ministers’ Questions yesterday, Ms Sturgeon pushed back on the accusation that it risked harming relationships with business. 

“I think most people across the country, and most responsible businesses that I speak to and have interaction with, know that, yes, it is important to support a strong, vibrant, sustainable economy,” she said.  

"But it is also vital - in fact, it is a moral imperative - to do that in a way that meets our obligations to the planet and delivers our climate change targets.” 

The future of her Government, support from the Greens or none, may well depend on getting that balance right. 

A Scottish Greens spokesman says: “The Scottish Greens do not talk about turning off the tap of North Sea oil. But what we do need to recognise is that the transition needs to start now. And that means no more exploration for new oil fields.

“But this is not relevant to these talks because the exploration of new oil licences is reserved to Westminster, so is not a Scottish government power anyway."

Scottish businesses may not feel entirely reassured by those comments. And at least in some quarters, their mistrust of the SNP is unlikely to go away.