What has been Scotland’s biggest public finances scandal in the era of devolution? I suppose the top of the head answer would be the “two Ferguson ferries” with well over half a billion in excess costs, when all the bills are totted up.
The crazed Deposit Return Scheme must be worth a few hundred million, even before you get to Biffa’s current £166 million compensation claim. I remember when this slow motion car-crash had hardly begun, Fergus Ewing telling me it would make the ferries look like small change.
Others can add to the list but my own nominee is rarely heard of because it is about money foregone for the public purse rather than squandered out of scarce resources, making it harder to pin down. I refer to the sale of ScotWind leases – or, more precisely, options to develop very large offshore windfarms. This has just become the subject of a report, Rethinking ScotWind by the think-tank Future Economy Scotland which attempts to quantify the gargantuan scale of potential losses and lessons to be learned. These are tasks to which no Holyrood committee, far less the Parliament, has yet addressed itself despite the mind-boggling sums involved.
The story started when Crown Estate Scotland – which, since being devolved, functions as a branch of the Scottish Government – invited bids capped at £10,000 per square kilometre of seabed for 20 offshore sites. If this had been proceeded with as intended, the maximum income to the Scottish Government would have been £77.5 million. Providentially, the Crown Estate in England and Wales, which has a much more independent existence from government, proceeded with its own leasing programme without any cap on bids.
The proceeds were so vastly greater than the Scottish ambition that even the Scottish Government was obliged to think again, or at least hire consultants to do so on their behalf. The botched face-saver of a compromise was that the cap remained but was raised to £100,000 per square kilometre. In 2022, this brought in £775 million which went straight into Scottish Government coffers – ten times more than originally aspired to but still hugely short of what the approach taken by the Crown Estate in England and Wales would have yielded.
The Crown Estate in England and Wales raised more money than their Scottish equivalent, according to the report (Image: PA)
In the words of the Rethinking ScotWind report, the £879 million raised south of the border (in a single year) “still exceeded that of ScotWind, despite representing a quarter of the capacity.”
But much worse was to follow. “Crucially”, says the report, “these option fees (in England and Wales) will be paid annually until companies get the final planning permission, which could take up to ten years. As such, while ScotWind secured a total of £755m in one-off option fees for around 30GW of capacity, the Round 4 leasing in England and Wales has the potential to raise over £8 billion for 8GW – around a quarter of ScotWind capacity. On a per MW basis, this means that the option fees raised would be more than 40 times higher than that raised from ScotWind”.
As the report acknowledges, the “40 times” is unlikely to materialise as not all the options will run for the full ten years. But 30 times, 20 times, ten times? In each case, the comparative losses to Scotland run into billions of pounds – which should translate into vital infrastructure to support the energy transition, far more money for public services or a combination of both. Yet nobody at Holyrood has wanted to know.
For those allergic to comparisons with anything “south of the border”, the report also looks at what happened across the Atlantic: “On a per MW basis (and accounting for exchange rate differences) the New York Bight auction raised between 19 and 23 times more option fees than ScotWind.” So, yet again, is everyone out of step but our Jock – or has it really been a monumental episode of fiscal incompetence?
The Scottish Government’s defence is that, in return for cheaper options to develop, the successful bidders made higher commitments to the domestic supply chain. The first unscientific answer to that is that there is precious little sign of it. The second, in the words of the report, is: “These are aspirational targets that developers aim to achieve, contingent on market conditions, infrastructure development and policy support”.
For the avoidance of doubt, it adds: ”Incentives placed on developers to use Scottish supply chains were relatively weak… Moreover, financial penalties associated with falling short of supply chain commitments were very small and unlikely to shift corporate behaviour”. So all our lost billions have actually purchased is a pig in a very leaky poke.
And who are the developers who have shopped in our bargain basement? According to the report: “Only four out of the 31 parent companies that own ScotWind developers are headquartered in the UK …. More than three quarters of ScotWind capacity is owned by parent companies headquartered outside the UK”. The world’s biggest asset manager, BlackRock, is a top ten shareholder in 14 out of 20 ScotWind projects.
Read more
- ScotWind scandal: Analysis of Scotland’s lost energy wealth
- Read the full Future Economy Report here
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The charge that ScotWind licence have been flogged off at a fraction of their value to developers feeds into the growing perception that the whole rush towards offshore wind and the vast infrastructure required to support it is more a haphazard exercise in rampant commercial opportunism than a “just transition” based on some great national consensus.
Why can nobody point to an overall plan which shows how all the pieces of this speculative jigsaw are meant to fit together over the next few years? Why, as the report suggests, was a public stake not taken in each ScotWind option? Why has there been absolutely no commitment at this late juncture to enshrine rights to community benefits instead of leaving each place to fight David v Goliath battles with multinational developers?
What is truly alarming is that the claims made in Rethinking ScotWind about the scale of what Scotland has foregone have never been subjected to forensic examination at Holyrood. What more important matters do MSPs have to discuss?
As far as the Scottish Government is concerned, there is no interest in learning lessons because that would involve scrutiny of what has happened so far. It is impossible to have the scale of development that the ScotWind licences are supposed to underpin without having some economic benefits which will include long overdue investments into a domestic supply chain. All very welcome if it happens but everything seems to be the wrong way round. The gold rush has been triggered without the consequences having been planned for and the goldmines have been sold off on the cheap. Yet still there is no joined up plan and certainly no trace of accountability, for there never is.
Brian Wilson is a former Labour Party politician. He was MP for Cunninghame North from 1987 until 2005 and served as a Minister of State from 1997 to 2003
