Industry officials believe the Budget is the right time to bring forward any further North Sea oil tax changes, George Osborne has claimed amid calls for urgent action.
The Chancellor gave assurances in the Commons that the Government will do everything to support the North Sea oil and gas industry while it attempts to cope with falls in the oil price.
But Labour and the SNP warned Mr Osborne against waiting for the Budget on March 18 to announce further help for the industry.
Shadow Treasury minister Cathy Jamieson told the Tory front-bencher: “Industry and economic experts say that thousands of jobs in the North Sea oil sector are at risk, yet both the UK and
Scottish governments seem to be passing the buck rather than taking the urgent action that’s needed.
“So can I press you today and ask you if you will give a commitment to immediately bring forward tax measures to support the industry, as we have called for, rather than delaying for another seven weeks until the Budget?”
Mr Osborne replied: “We have, as I say, already cut the supplementary charge – I announced that in the Autumn Statement and it came into effect at the beginning of this year.
“We’ve launched a consultation on an investment allowance. We meet regularly with the industry, indeed we met with them last week – they think the Budget is of course the appropriate time to make further announcements, if there are further announcements on the North Sea oil tax regime.
“But you have my assurance, the industry has my assurance that we will do everything we can to support the North Sea oil and gas industry during this difficult time.
“Of course they’re impacted by the fall in the oil price. We want to make sure we get the maximum amount of oil and the record investment that we’ve seen over the last year is sustained.”
SNP Treasury spokesman Stewart Hosie earlier said the “softening” in the oil price highlighted underlying problems.
He told Mr Osborne: “The oil industry has told us the softening in the oil price has highlighted the underlying problem in the North Sea, which is the high cost of doing business there – driven by up to 81% tax on production.
“So can I ask you, instead of waiting to the Budget, to take urgent action on investment allowances and a cut to the supplementary charge?”
The Chancellor replied: “(Danny Alexander, Chief Secretary to the Treasury) and I recognise the pressure on the North Sea producers. We want to make sure we continue to extract the maximum amount of oil out of the North Sea basin.
“That is why we’ve cut oil taxes at the Autumn Statement, published a consultation on the investment allowance and made it clear that further action may be required at the Budget.
“Can I just, however, draw to the House’s attention that what you call the softening of the oil price would have done a disastrous damage to the finances of an independent Scotland.
“Their projections for their oil revenue were out by almost three-fold. It is a reminder of the strengths of the United Kingdom that we can bear pressures like the falling or rising oil price across the UK.”
Mr Osborne said further action would be required this year to ensure “this brilliant industry has a brilliant future”.
Labour’s Dame Anne Begg (Aberdeen South) had told Mr Osborne: “While the Government can’t control the world oil price, the Government can do things that might drive down the cost in the industry.
“Because if the oil price remains low and perhaps drops further to the level where it costs more to take the oil out of the North Sea than it is, then that’s not just bad for the economy of Aberdeen and the north east of Scotland, that’s bad for the economy of the UK.”
Mr Osborne said he agreed with Dame Anne, adding: “We’ve got to work out how we protect the industry as best we can from a rapid fall in the world oil price.
“We’ve got to make sure the brilliant skills and jobs and investment that has taken place in the north east of Scotland continues. That’s why we, in the sense, anticipated this was going to be a challenge by launching the consultation in the Autumn Statement, making immediate cuts to the tax regime and we’ve got to do further things over the coming year because we’re absolutely determined this brilliant industry has a brilliant future.”
Conservative John Baron (Basildon and Billericay) asked for a North Sea sovereign wealth fund to be created to benefit the UK.
He asked Mr Osborne: “Given the financial short-termism of the previous government, in welcoming your comments about a shale gas fund, when you are Chancellor after the next general election would you consider expanding the concept to create a North Sea sovereign wealth fund for the benefit of the country as a whole?”
Mr Osborne replied: “Our challenge is to eliminate the deficit and to get our debt falling and sovereign wealth funds are built up by countries that run consistent budget surpluses, which is exactly what we need to do in the United Kingdom.
“What I would like to see in particular with the shale gas industry is that some of the revenues that come from the shale gas industry are used to support local communities. I think that will be a real boost to communities across the country, particularly in the north of England.”
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