The fall in the oil price these last few months has been a big help for anyone who drives a car and pays an energy bill. But I know that for the north-east that boon has come at a price. Last year, Sir Ian Wood, Aberdeen’s most successful businessman, left us in no doubt about the dangers facing the oil and gas industry in the north-east. It meant that, when I was preparing my Budget over the winter weeks, I knew full well that the country could not afford to sit idly by and watch one of our great British industries find itself in even deeper peril.
The UK Chancellor has announced a raft of measures worth £1.3billion to help boost North Sea oil and gas industry. George Osborne said there would be the introduction of a "single, simple and generous" tax allowance for the industry from next month, with the Government also investing in new seismic surveys in under explored areas of the UKCS (UK Continental Shelf). The OBR (Office for Budget Responsibility) assessing that it will boost North Sea production by 15% by the end of the decade.
George Osborne is widely expected to offer a fillip for the oil and gas sector in this week’s budget although the impact of so-called “rabbits out of the hat” is expected to be fiscally neutral. In the last budget ahead of the UK general election, Mr Osborne is set to announce a range of support measures, including a new investment allowance to spur North Sea production. Some sources have suggested he could also slash the headline tax rate to less than 50%, partially reversing the effects of the 2011 tax grab when the supplementary charge was ramped up from 20% to 32%. It is thought the chancellor has “wriggle” room in the UK’s tight finances due to low oil prices and low inflation. Mr Osborne is also likely bring in a “Google tax” in the budget on Wednesday, a charge on profits deemed to have been artificially funnelled overseas which could rake in £250million to £300million a year.
Urgent reform of the oil and gas tax regime is essential to encourage exploration and ensure the North Sea is competitive for investors, Deputy First Minister John Swinney said.
An international oil boss has claimed that the North Sea can no longer compete with the rest of the world – because of George Osborne’s tax regime.