Business leaders and industry experts have called on the Chancellor to cut taxes further and bring in fresh concessions to help revive the fortunes of the North Sea sector.
Aberdeen & Grampian Chamber of Commerce said tax reform was vital to lengthen the lifespan of the industry, which has come under intense pressure from the slump in oil prices and rising costs, leading to thousands of job losses.
In a letter to George Osborne, the Chamber urges the Treasury to take definitive action in Wednesday’s Budget and follow through on previous promises. It proposes a permanent reduction in the headline rate of tax, achieved by reducing the supplementary charge and petroleum revenue tax immediately by a minimum of 10 percentage points.
Chamber bosses also point to the severe impact that the low oil price is having across all sectors of the North-east economy, with a 15 per cent decrease in hotel occupancy rates and housing sales down by 14 per cent in the past 12 months.
James Bream, research and policy director at the Chamber, said: “We are a frontier basin, we believe we have the world’s best supply chain and the government must ensure we have the world’s most competitive tax regime.
“Change may not have an immediate impact but will be a signal of support and demonstrate an effort to increase investor confidence.
“The alternative is to do nothing which will have an equal and opposite impact on that confidence.”
The plea came as oil and gas experts at legal firm Pinsent Masons called for a comprehensive package of concessions to be unveiled by the Chancellor amid “unprecedented volatility in global oil prices”.
Measures including a reduction of corporation tax to bring the North Sea in line with wider UK industry have been mooted to ease the pressure on businesses grappling with a continued low oil price.
Osborne is under mounting pressure to unveil additional fiscal measures after the move to cut petroleum revenue tax, reduce the supplementary charge and launch a £20 million seismic survey fund during last year’s Budget were seen by many as inadequate. However, the Chancellor has already warned of deeper cuts to public spending amid a weakening of the economy.
Head of energy at Pinsent Masons, Bob Ruddiman, said: “Leaving aside the fact that many in the industry thought this package was woefully inadequate when crude was $60 a barrel, we are now in $30 a barrel territory.
“Without further concessions the UK faces a flight of capital, skills and technology which will not return. There is also a risk that the UK misses the opportunity to incentivise investment, and in so doing give rise to a golden era for export of UK technology and knowhow.
“That would be a loss not just to the UK economy and Exchequer, but to the world’s oil producing regions.”