Scotland’s finance minister has been warned against raiding a windfall gained through sale of renewables licenses and has been urged to reinvest it in the energy transition.
Professor Mairi Spowage, director of the Fraser of Allander Institute said plans to allocate the funds raised through sale ScotWind licencing fees to fill a budget black hole had “angered many people”.
Instead, the cash should be used for a “wealth fund to invest in our energy future” not “drawn upon to cover day to day expenses”, she told an audience in Aberdeen.
© Supplied by Michal Wachucik/ OEUThe ScotWind licencing round delivered a £700 million boost in revenues to the public purse with a number of smaller, subsequent rounds bringing the pot up to £750m. Further, once the 19 planned sites set to produce 30GW of power to the UK grid are in place, the government can expect “billions more in rental revenues”.
The net zero secretary at the time, Michael Matheson, insisted the Scottish Government would “invest from these monies to help tackle the twin climate and biodiversity crises”.
In September, Finance Secretary Shona Robison caused consternation when she announced plans to raid the fund for £460m in order to balance the books, unless enough cash was forthcoming through the UK budget to fund Scottish Government pledges on public sector pay increases.
The intervention by Spowage comes as Scotland’s finance minister prepares to present her statement of the government’s tax and spending plans in Holyrood today.
It is thought the Scottish Government could unveil a plan to establish a new wind energy hub in Aberdeen to help streamline the planning process for offshore projects.
Robison has described the 2025/26 budget as the toughest since the creation of the Scottish Parliament in 1999.
However the UK government has said it is providing the largest funding package in the history of devolution.
The so-called block grant allocated to Scotland in the UK budget is estimated at around £47.7 billion – an increase of £3.4bn.
But Spowage’s FoAI has estimated much of this extra funding has already been allocated, including to fund £750m for public sector pay deals.
The Scottish Government has also pledged to offer a new winter fuel payment for pensioners, which the UK government had cancelled.
Speaking at the Offshore Energies UK business breakfast in Aberdeen on Tuesday, Spowage said: “Obviously, much of the fiscal issues that have been on the mind of your industry, or some people in your industry will be on on corporation tax and the energy profits levy, which is not in the control of the Scottish Government.
“But what I’ll definitely have my eye on is what decision will the Scottish Government make about the use of ScotWind funds.
“This is a big issue that I’m sure has, to be honest, angered many people – how the Scottish Government in September proposed drawn down yet more of this one off windfall money to cover day to day expenses
“Given decisions that they have made over various things which are very understandable, but they do have to manage within their largely fixed budget.
“The use of this money for day to day stuff like pay, rather than what it should be for, which is to invest in infrastructure to support the energy transition, whether it’s ports or in production with the UK Government on grid connection.
“Whatever it is, it certainly should be part of a wealth fund to invest in our energy future, not money should be drawn upon to cover day to day expenses.”
She added it would depend on what Finance Secretary Shona Robison confirms has come to Scotland a from the UK budget and how this is allocated.
Otherwise, ScotWind funds could potentially be seen as a pot to dip into for general spending.
“Potentially, this will be an ongoing feature of the use of this fund, whereas I think once it is very clearly set aside as a investment fund for our energy transition.”
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