The oil and gas industry has welcomed the new UK government as it looks ahead to a “transformational” sector deal and braces for tax changes for thousands of contractors.
Last night’s general election saw the Conservatives take a sweeping majority after the party pledged a sector deal to support the industry through the energy transition and help safeguard its 100,000 Scottish jobs.
Oil and Gas UK chief executive Deirdre Michie welcomed the new MPs, saying she looks forward to working with the government “to ensure a safe and competitive industry which realises a successful future through the energy transition and a Sector Deal”.
She added: “As we go into the new year our priority will be to ensure and reinforce recognition of the positive role our industry is playing in helping to achieve net zero emissions alongside providing a major economic contribution and a big part of our energy security.”
In May, the UK Government, then led by Theresa May, “sidestepped” calls from the Scottish Affairs Committee to deliver a sector deal.
Proposal’s for a sector deal submitted by the oil industry in 2018 contained an estimated cost of £176 million but “had the potential” to deliver £110 billion for the UK economy between now and 2035, with Scotland being the main beneficiary.
However, the government’s response was that the industry had already received “unprecedented support” with a number of projects, such as the National Decommissioning Centre near Aberdeen, already up and running without a formal deal.
More detail on how the new deal will manifest itself is expected in coming months.
Professor Alex Kemp, petroleum economist at Aberdeen University, said the new Westminster government needed to make a “clear statement” on energy policy, as does Holyrood.
He added: “There are lots of targets like net zero emissions by 2050, but it’s not clear how we’re going to achieve them.
“There is a lack of energy policy and discussions about how to achieve those targets.
“That also applies to the Scottish Government. They did have an energy strategy document but there needs to be more thinking and discussion on policy instruments and how we might get to net zero and what the costs will be of electrifying cars and houses.
“Policy needs greater attention.”
Thousands of workers across the industry are also bracing for the impact of changes to off-payroll working rules, known as IR35.
The measure, in place from April, is expected to generate £2.9billion by 2024 for the Treasury by stopping employees from “disguising” themselves as freelance contractors in order to pay less tax.
On the campaign trail, Chancellor Sajid Javid said it would “make sense” to include IR35 in a review of support for the self-employed, however commentators are unconvinced this will lead to a change of course for the policy after the Treasury reaffirmed last month it was “committed” to putting it in place.
Brian Rudkin, head of employer services at accountancy firm Johnson Carmichael said he “firmly believed” the rules will come into effect as planned on April 6.
He added: “The Government has invested too much resource into this already to pull out at the last minute and certainly HMRC is showing no signs of pulling back their activities on IR35 at the moment.
“Their ‘review’ may come later, i.e. after Brexit is done, which may be much broader than just IR35 but looking at the whole gig economy again in line with their ‘Good Work Plan’.”
Anyone in breach of the rules will be liable to their fees being deducted so that they pay the same level of taxes as normal employees.
Matt Fryer, group compliance director at Brookson Legal, said any review is “unlikely” to result in the policy being abandoned, adding that businesses “would be foolish to halt their preparations”.