Onshore shale gas worth a look but not a silver bullet
The UK Government is trying to encourage onshore exploration for shale gas produced by ‘fracking’. This is a controversial issue and, at this early stage, we cannot know what amounts of shale gas may be available in the UK and how much of it is likely to be commercially producible.
Of course, Scotland is no stranger to shale hydrocarbons. The embryo BP started by ‘Paraffin’ Young has left its mark in the shape of large shale waste heaps in East Lothian. It would be a mistake to assume that gas from such sources can transform the UK energy market as it has done for North America but it is reasonable to find out its potential. To tackle climate change – and emissions pollution more generally - we need to reduce our dependency on fossil fuels. Burning gas is preferable to coal (until, at least we have commercial carbon capture) or oil but it still delivers carbon emissions and there are downsides associated with oil and gas production too. Those politicians who appear to want to abandon renewable energy underestimate the need to tackle climate change and put short term commercial consideration over long term environmental impact.
In any case promoting low carbon and more efficient energy production is already creating thousands of jobs. It would be wrong to change tack as some people argue.
SNP threat compromises financial progress
The SNP are straying into dangerous territory when they threaten to repudiate Scotland’s share of UK debt if a currency union was denied in the event of independence.
This has prompted the Treasury to reassure the markets that the UK will honour all UK government debt issued until the date of the referendum adding that an independent Scotland would be expected to pay its fair share.
The fact that the Treasury has needed to do this shows how uncertainty over the future of the UK can lead to potentially detrimental speculation. This has been aggravated by, in my view, petulant and irresponsible comments by Alex Salmond to the effect that if Scotland were to be denied a currency union then Scotland would not accept any share of the UK’s debt.
Apart from showing the behaviour of a truculent teenage who can’t get what he or she wants, it is profoundly irresponsible. It would mean a newly independent country trying to launch its own currency without an established central bank and a credit record of default on day 1. The markets would eschew the offer and Scotland would start out in deep financial crisis.
If there were to be a currency union, which is by no means certain, it would be on terms determined overwhelmingly by the rest of the UK. What kind of independence is that?
We have a currency union. It is called the United Kingdom and its currency is the Pound Sterling. Why put it at so much risk?
Budget offers case for selective tax breaks
As we approach the March budget, campaigns are afoot for different sectors to try and secure some favourable tax treatment. I took part in a debate last week on the Scotch Whisky industry who want an end to the duty escalator and a tax freeze in the budget.
This follows the ending of the beer duty escalator. It is true that the percentage increase in beer has been slightly more than whisky since the escalator was introduced but the tax on spirits is far higher and the same arguments apply. Scotch whisky is hugely successful globally but its home market is static or declining. High taxes at home are often used to justify maintaining discriminatingly high taxes and tariff barriers by foreign countries where the market is seeking to grow.
Why should our successful home grown spirits industry be penalised more than wine which is mostly imported? It has even been estimated that a cut in spirits duty will actually boost revenue to the Treasury. If nothing else that should be persuasive. At the same time fish and chip shops are looking for a level playing field in terms of VAT. When the chancellor proposed charging VAT on all takeaway foods, multiple retailers mounted a successful campaign to maintain exemption. As a result pies and snacks heated in chain shops and supermarkets are VAT exempt whereas those produced to order pay VAT. Of course it is easy to persuade consumers to back the existing rule but it could threaten the survival of some independent local suppliers.