£1.3 Billion Package To Boost Oil Sector
Chancellor George Osborne has announced a £1.3 billion package of support for the oil and gas industry in his final Budget before the general election.
Chancellor George Osborne has announced a £1.3 billion package of support for the oil and gas industry in his final Budget before the general election.
Among the measures he set out is a cut in the supplementary charge on oil industry companies' profits from 30% to 20%, backdated to January.
The move effectively reverses the hike in the 2011 Budget when oil prices were much higher.
Mr Osborne said the UK Government will cut petroleum revenue tax from 50% to 35% next year, introduce a ''simple and generous'' tax allowance to stimulate investment in the North Sea from the start of April and boost offshore exploration by investing £20 million in new seismic surveys of the UK continental shelf.
The package is expected to result in more than £4 billion of additional investment over the next five years and increase production by 15% by the end of the decade.
It goes without saying an independent Scotland would never have been able to afford such a package of support,'' Mr Osborne said.
The North Sea has been hammered by the plunging price of oil, with hundreds of job cuts announced in recent months and fears a drop in investment could lead to the accelerated decommissioning of oil fields.
Danny Alexander, Chief Secretary to the Treasury, said: The major package of investment in our oil and gas sector, including a new investment allowance, a 10% cut in the supplementary charge and a 15% cut in petroleum revenue tax, shows that the UK Government is determined to safeguard the future of this vital national asset and keep our economy on the road to recovery.''
Scottish Conservative leader Ruth Davidson said: The Chancellor has listened to the oil industry and come good on the pledge we made to help.
These tax breaks will aid investment and ensure a secure future for the North Sea.
Today's announcement won't be a cure for all of the North Sea's ills, but it's a strong start.
This is yet more proof that the North Sea is best served within the strength of the UK, which can deliver assistance a separate Scotland simply would not have been able to.''
Derek Leith, head of oil and gas taxation at Ernst and Young, said the package was positive news'' for the industry, with the reduction of petroleum revenue tax likely to boost more mature North Sea fields that have been taxed at a marginal rate of 81% despite falling production and rising costs.
He said: The UKCS (UK Continental Shelf) is a mature oil basin and, to remain capable of attracting international investment, it must have a very competitive tax regime.
The Government has taken a significant step towards creating such a regime today and industry will hope that further change will be forthcoming in the months ahead as industry, HMT and the new Oil and Gas Authority work together to ensure the longevity of a vital sector of the UK economy.''
The UK's biggest offshore trade union, Unite, said the industry must now end what it described as an opportunistic assault'' on North Sea jobs and conditions.
Unite's Scottish secretary Pat Rafferty said: We are clear that economic reform of the North Sea must go hand in hand with sustaining jobs and strengthening employment and workplace health safety rights.
What we cannot contemplate is a deregulated future for the North Sea - a race to the bottom on jobs and standards where workers will have to work longer for less.
Our challenge to the industry is this: You have got what you asked for, so stop attacking your workers' livelihoods and working conditions.
With their morale at rock bottom, the workforce needs this confirmed immediately.''