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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 losses | Job 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. |
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". |
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. |