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Budget 2015: Chancellor overhauls North Sea taxes Budget 2015: Chancellor overhauls North Sea taxes
(about 1 hour later)
Chancellor George Osborne has announced major changes to the North Sea tax regime, in response to difficulties facing the UK oil and gas sector.Chancellor George Osborne has announced major changes to the North Sea tax regime, in response to difficulties facing the UK oil and gas sector.
In his Budget statement, he said Petroleum Revenue Tax would be cut from 50% to 35% to support continued production in older fields.In his Budget statement, he said Petroleum Revenue Tax would be cut from 50% to 35% to support continued production in older fields.
The existing supplementary charge for oil companies will also be cut from 30% to 20%, backdated to January.The existing supplementary charge for oil companies will also be cut from 30% to 20%, backdated to January.
Mr Osborne said the measures were worth a combined £1.3bn.Mr Osborne said the measures were worth a combined £1.3bn.
He added that the Office for Budget Responsibility's assessment was that the steps would boost expected North Sea oil production by 15% by the end of the decade.He added that the Office for Budget Responsibility's assessment was that the steps would boost expected North Sea oil production by 15% by the end of the decade.
The government will also invest in new seismic surveys of under-explored areas of the UK Continental Shelf.The government will also invest in new seismic surveys of under-explored areas of the UK Continental Shelf.
Job lossesJob losses
The measures follow repeated calls from oil industry leaders for a reduction in the tax burden for UK North Sea operators.The measures follow repeated calls from oil industry leaders for a reduction in the tax burden for UK North Sea operators.
Mr Osborne had been widely expected to announce changes after promising to take further action to support the sector.Mr Osborne had been widely expected to announce changes after promising to take further action to support the sector.
Hundreds of job losses have been announced in recent months, with companies citing rising production costs and the plunging price of oil as reasons for the cutbacks.Hundreds of job losses have been announced in recent months, with companies citing rising production costs and the plunging price of oil as reasons for the cutbacks.
Earlier this week, leading oil industry figure Sir Ian Wood said the Budget could be the most important in the history of the North Sea oil and gas sector.Earlier this week, leading oil industry figure Sir Ian Wood said the Budget could be the most important in the history of the North Sea oil and gas sector.
He echoed calls for the chancellor to announce "really significant" action, arguing that the UK economy stood to lose a "huge amount" unless the right measures were put in place.He echoed calls for the chancellor to announce "really significant" action, arguing that the UK economy stood to lose a "huge amount" unless the right measures were put in place.
Whisky duty
Industry body Oil and Gas UK had urged Mr Osborne to implement a "double-digit reduction in the Supplementary Corporation Tax charge, plus a single simplified Investment Allowance".Industry body Oil and Gas UK had urged Mr Osborne to implement a "double-digit reduction in the Supplementary Corporation Tax charge, plus a single simplified Investment Allowance".
It said the measures were "urgently needed in order to help re-establish the competitiveness of the UK oil and gas industry".It said the measures were "urgently needed in order to help re-establish the competitiveness of the UK oil and gas industry".
On Sunday, Deputy First Minister John Swinney also renewed the Scottish government's calls for a fundamental change to oil and gas taxation. Working conditions
The UK's biggest offshore trade union, Unite, said the industry must now end what it described as an "opportunistic assault" on North Sea jobs and conditions.
Pat Rafferty, the union's Scottish secretary, said: "We are clear that economic reform of the North Sea must go hand in hand with sustaining jobs and strengthening employment and workplace health safety rights.
"What we cannot contemplate is a deregulated future for the North Sea - a race to the bottom on jobs and standards where workers will have to work longer for less.
"Our challenge to the industry is this: You have got what you asked for, so stop attacking your workers' livelihoods and working conditions."
Dan Macdonald, founder of economic think tank N-56 and a former Yes Scotland advisory board member, said the proposed overhaul of the tax regime was a much-needed contribution to boosting the oil and gas sector.
But he said: "It is a great shame however that the tax increases previously introduced by the chancellor, and the punitive tax burden it placed on the sector, had such a major impact, exacerbating the issue of global low oil prices and leading to the loss of thousands of jobs."
He also said it was disappointing that the chancellor did not act on N-56's call for government policy and decision makers responsible for oil and gas taxation and regulation to be relocated from London to Aberdeen.
Liz Cameron, chief executive of the Scottish Chambers of Commerce, said the tax cuts were "necessary" to reflect the challenges facing the oil and gas sector.
She said: "Together with a simplification of the tax allowance regime, this must be the start of a process to develop a strong and coherent fiscal plan for the North Sea that will help to ensure that Scotland and the UK continues to benefit from our natural resources in the long term."
Elsewhere in his Budget, Mr Osborne announced a 2% cut in duty on Scotch whisky and other spirits.Elsewhere in his Budget, Mr Osborne announced a 2% cut in duty on Scotch whisky and other spirits.
The Scotch Whisky Association welcomed the move, which it estimated would take 16p off the price of the average £12.90 bottle.The Scotch Whisky Association welcomed the move, which it estimated would take 16p off the price of the average £12.90 bottle.