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| Budget set to include tax cuts for North Sea oil and gas | |
| (about 11 hours later) | |
| The UK government may announce tax cuts for the North Sea oil and gas industry in its budget on Wednesday. | The UK government may announce tax cuts for the North Sea oil and gas industry in its budget on Wednesday. |
| The industry currently pays a corporation tax rate of 30% and an additional "supplementary tax" of 32%. | The industry currently pays a corporation tax rate of 30% and an additional "supplementary tax" of 32%. |
| The oil industry says that the supplementary tax rate needs to fall to 20% for the industry to be economical. | The oil industry says that the supplementary tax rate needs to fall to 20% for the industry to be economical. |
| Chief Secretary to the Treasury Danny Alexander has told the BBC that falling oil and gas prices should lead to a steeper decline in North Sea taxes. | Chief Secretary to the Treasury Danny Alexander has told the BBC that falling oil and gas prices should lead to a steeper decline in North Sea taxes. |
| "We've been very clear that the direction of travel for tax in the North Sea needs to be downwards," he told the BBC. | "We've been very clear that the direction of travel for tax in the North Sea needs to be downwards," he told the BBC. |
| "And that needs to be even stronger given the low oil price we see at the moment. | "And that needs to be even stronger given the low oil price we see at the moment. |
| "We want people to have the confidence to invest for the long term future of the North Sea. | "We want people to have the confidence to invest for the long term future of the North Sea. |
| "People will have to wait and see what we say on Wednesday [Budget day], but I hope very much that it will give the North Sea that confidence that we all want to see for one of Britain's most important industries." | "People will have to wait and see what we say on Wednesday [Budget day], but I hope very much that it will give the North Sea that confidence that we all want to see for one of Britain's most important industries." |
| $111 oil | $111 oil |
| The oil and gas industry is charged more tax than many other sectors. | The oil and gas industry is charged more tax than many other sectors. |
| Older oil and gas fields can pay as much as 80%, according to Mike Tholen, economics director at Oil and Gas UK, the main industry body. | Older oil and gas fields can pay as much as 80%, according to Mike Tholen, economics director at Oil and Gas UK, the main industry body. |
| The oil industry argues that the major tax rises the government put in place in 2011 - when the oil price averaged above $111 (£75) a barrel (it is now around $55) - should now be reversed. | The oil industry argues that the major tax rises the government put in place in 2011 - when the oil price averaged above $111 (£75) a barrel (it is now around $55) - should now be reversed. |
| That would mean bringing the supplementary tax rate down to 20%. The government has already agreed that it should be reduced from 32% to 30%. | That would mean bringing the supplementary tax rate down to 20%. The government has already agreed that it should be reduced from 32% to 30%. |
| "If we don't get the tax changes the future of the North Sea is very difficult," Mr Tholen said. | "If we don't get the tax changes the future of the North Sea is very difficult," Mr Tholen said. |
| "We are facing investment falling away at £3-£4bn a year - and without that investment, the future of the North Sea is indeed at risk." | "We are facing investment falling away at £3-£4bn a year - and without that investment, the future of the North Sea is indeed at risk." |
| Jobs | Jobs |
| One of the leading figures in the industry, Sir Ian Wood, who was commissioned by the government to undertake a review of the whole sector, also supports action. | One of the leading figures in the industry, Sir Ian Wood, who was commissioned by the government to undertake a review of the whole sector, also supports action. |
| "The danger is that we will have irreversible damage from this downturn," he said. | "The danger is that we will have irreversible damage from this downturn," he said. |
| "Irreversible damage would inevitably mean that we would lose five million barrels [of production], possibly even more. | "Irreversible damage would inevitably mean that we would lose five million barrels [of production], possibly even more. |
| "In terms of jobs we have 380,000 at the moment - if the industry does not get its head up and start investing again it could easily lose 15-20% of these jobs in the next couple of years. | "In terms of jobs we have 380,000 at the moment - if the industry does not get its head up and start investing again it could easily lose 15-20% of these jobs in the next couple of years. |
| "[It's] inevitable there will be a significant number of companies leaving the North Sea, a lot of fields would be decommissioned, we could easily lose 80,000 to 100,000 jobs over the next 2 - 3 years. | "[It's] inevitable there will be a significant number of companies leaving the North Sea, a lot of fields would be decommissioned, we could easily lose 80,000 to 100,000 jobs over the next 2 - 3 years. |
| "It would be a massive impact on the UK and Scotland's economy." | "It would be a massive impact on the UK and Scotland's economy." |
| As well as a tax cut, the government may also reveal more details about an "investment allowance", enabling companies to invest at reduced tax rates. | As well as a tax cut, the government may also reveal more details about an "investment allowance", enabling companies to invest at reduced tax rates. |
| The UK has decreased its reliance on the North Sea tax revenues since the rate rises of 2011 as a result of falling production. | The UK has decreased its reliance on the North Sea tax revenues since the rate rises of 2011 as a result of falling production. |
| In 2011-12, North Sea tax revenues totalled £10.9bn. By 2013-14, that figure had fallen to £4.7bn. | In 2011-12, North Sea tax revenues totalled £10.9bn. By 2013-14, that figure had fallen to £4.7bn. |
| The Office of Budget Responsibility has cut its estimate of tax income from the North Sea between 2020 and 2041 by a quarter. | The Office of Budget Responsibility has cut its estimate of tax income from the North Sea between 2020 and 2041 by a quarter. |