A LEADING think tank has backed Nicola Sturgeon’s proposal for an oil fund to help Scotland switch to a greener economy.

Business for Scotland (BfS) “warmly welcomed” the First Minister’s announcement that at least £1 billion should be set aside to support a “just transition” for areas where the oil and gas industry is a major employer.

The fund would be ringfenced from £8.5bn in revenues raised by the oil and gas sector over the next five years, based on forecasts from the Office for Budget Responsibility (OBR). The money would be channelled to areas such as the north east, Falkirk and Shetland to aid the “transition to new low or no carbon industries”.

BfS founder and chief executive Gordon MacIntyre-Kemp hailed the move in a post on the think tank’s website.

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He wrote: “For more than six years, Business for Scotland (BfS) has been making the case via our website, articles, reports and directly to the Government for a sovereign oil fund to invest in maximising Scotland’s massive renewable energy potential.

“Therefore, BfS warmly welcomes the SNP’s pledge to create a Net-Zero fund that aims to generate at least £1bn to invest in the North East’s economy.

“Ring-fencing future oil and gas tax revenues in the fund will boost the transition to a net-zero economy in the North East of Scotland, where the local economy has been driven by oil and gas production. This will be a key policy for Scotland’s sustainable energy future and for long term prosperity in the region.”

However, MacIntyre-Kemp also urged Holyrood to challenge Westminster on oil taxation. He pointed out that the £1bn target represented just 10% of the projected revenues and that Westminster-set Petroleum Revenues Tax had dropped from 50% to 0% between 2015 and 2016. And last year, both BP and Shell profits exceeded expectations.

He added: “Both The Scottish and Westminster governments must concede that now is the time to start phasing oil taxation back in and then to ring-fence all of that additional tax revenue to invest in making Scotland and, in particular, the north east the world leader in renewable energy.”