“I’m right aren’t I that the £10billion tax grab (announced a year back) hasn’t been reversed?,” asked Energy columnist Dick Winchester in an email received a couple of hours after chancellor George Osbourne delivered his 2012 UK budget speech.
“So despite these new tax breaks the industry is still worse off than it was (a year ago),” he quipped.
My reply was that, in effect, the 12% hike in Supplementary Corporation Tax announced in the 2011 budget and swiftly imposed by the Treasury, had in effect been watered down but that the attempted tax grab had back-fired on the department.
I replied too that the industry appeared to be worse off than 12 months ago, despite the raft of allowances just announced and which take effect immediately, and the fact that steps are being taken to sort out the long-running decommissioning problem, though there will be no implementation until 2013 … thus another year will drag by.
Of course I welcome the package of field allowances just announced, and particularly what amounts to restoration of the West of Shetland concessions made by the last Labour government but which were in effect neutralised and worse by last year’s tax hike.
Naturally, the one thing that Osbourne did not do was acknowledge last year’s screw-up which, as we have come to understand, was hastily and incompetently crafted at the last moment on the back of the proverbial fag packet by Treasury first secretary Danny Alexander as a sop to motorists.
An apology would of course have been a step too far for the mighty Treasury and its leadership.
But at least the North Sea will be able to pick itself up, dust itself off and resume at least some of the business rendered pointless by the 2011 budget. And Oil & Gas UK quite rightly acknowledged this.
However, the North Sea was betrayed by Messrs Osbourne, Alexander and Treasury mandarins last year and, while a measure of trust appears to have been restored, this incredibly important, strategic industry will surely remain very wary indeed of the UK political machine.
I guess it was good news for the energy supply chain, given the reduction in Corporation Tax and planned introduction of various measures designed to incentivise business.
There was even mention of further concessions to enable more research and development, though the very notion of really heavyweight R&D by the UK North Sea industry is in any case something of a joke, especially when compared with Norway or Brazil especially.
The lack of specific Norwegian style incentives to encourage a concerted and cohesive exploration campaign remain to be addressed too. However, I rather think this will remain a pipedream for the UK industry.
So, in summary, the industry has been tossed quite a large crust by Treasury, but it could have and should have done more.