GEORGE Osborne has said he is working on an emergency tax cut to try to reverse a decline in investments in the North Sea oil industry.
The Chancellor said that “more action” was needed to help the sector after the price of oil slumped from $114 a barrel in June to $49.95.
First Minister Nicola Sturgeon denied at Holyrood last week that the fall had shown Scotland was more secure within the UK, after civil servants estimated that the slump left an £18.6bn black hole in the SNP’s tax projections for independence.
However, as tensions grow over potential job losses and closures of uneconomic fields, the Scottish Government called on the UK Treasury to “act and deliver” over tax cuts for the sector.
Mr Osborne suggested that lower taxes on North Sea firms could be included in the Budget on 18 March as part of a package of emergency aid for explorers and producers.
He said: “I don’t want to pre-empt the Budget but I can see that it may well involve further reducing the burden of tax on investment in the North Sea.”
Industry executives have demanded an urgent rescue package to prevent a full-blown crisis in the sector, which has seen a dramatic decline in production.
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Production last year averaged 1.2 million barrels a day – a 75 per cent drop from the 1999 high in the North Sea, according to industry figures.
However, North Sea companies say that one of the biggest challenges facing the sector is the tax take, which can run to 80 per cent for oil fields, although the basic levy is 60 per cent.
Mr Osborne is understood to be considering scrapping a supplementary corporation tax charge introduced in 2002 by then chancellor Gordon Brown.
In his autumn statement, Mr Osborne reduced the charge’s basic rate by 2 per cent but has faced pressure from the industry to make further tax cuts.
Mr Osborne signalled that the crisis facing the industry would force the Treasury to look at a package of new measures to protect investment in the North Sea and simplify the tax regime.
He said: “We have a record amount of investment in the North Sea. A lot of these investments take a long-term view but there’s no doubt the dramatic fall in the oil price has raised questions about future investment in the North Sea.”
Scotland’s energy minister Fergus Ewing last night issued an appeal to the Treasury to overhaul the tax regime for oil exploration, which he said was now at “historically low levels” in the North Sea.
Mr Ewing, speaking ahead of a trip to London to promote Scotland’s energy sector, said: “Instead of talking, it is time for the UK government to act and deliver a tax cut for the oil and gas industry. The Tories have promised much and delivered little for the North Sea.”
However, Scottish Labour suggested the SNP government had failed to show any leadership during the crisis facing the oil industry. The shadow energy minister Lewis Macdonald said: “If the George Osborne announcement means that there’s a sense of urgency then it’s welcome.
“However, we need the same sense of urgency from Nicola Sturgeon and her ministers in addressing the impact of falling prices on the economy of the North-East of Scotland and jobs in the sector.”
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