Brown North Sea Speech

Gordon Brown has pledged to outline a radical plan to spark an 'economic revolution' in Scotland.

In his final major speech, before stepping down as a Fife MP, he'll address an audience in Glasgow tonight.

He'll set out plans to invest in a North Sea rescue plan and create 100, 000 new jobs to help end youth unemployment.

Mr Brown will say: "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."

One of the key foundations of Brown's "economic revolution" is his plan to create 100,000 new quality jobs and launch a major home-building programme.

Brown will say: "In 10 years' time, manufacturing, once 40% of  the Scottish economy, will harbour just 7% of Scottish jobs. That is one job in every 14.

"The traditional manual industrial sector will continue to decline with 50,000 fewer jobs. At the same time service jobs are projected to rise by 50,000 but the rewards in lower-paid, less-secure, often zero-hours contract jobs will be poor compensation for losing skilled, secure, reasonably-paying work.

"We must aim to create high-quality, well-paying, hi-tech, secure jobs based around medical, information and environmental technologies and I will set out a plan to do so. This is the era of fast-moving change which creates massive insecurity and a demand from people that we shelter, insulate and protect them from alienating and all-pervasive change.

"We must use our undoubted scientific genius to create new products, new businesses and new jobs. 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."