UK Chancellor of the Exchequer Philip Hammond pledges to stick to the oil and gas industry tax cuts announced by his predecessor George Osborne in March.
UK Chancellor of the Exchequer Philip Hammond pledged Wednesday to stick to the oil and gas industry tax cuts announced by his predecessor George Osborne in March.
“My priority as Chancellor is to ensure that Britain remains the number one destination for business, creating the investment, the jobs and the prosperity to protect our long-term future,” Hammond said in his autumn statement.
“I know how much business values certainty and stability and so I confirm today that we will stick to the business tax roadmap that we set out in March…We will deliver the commitments we have made to the oil and gas sector,” he added.
The previous Chancellor of the Exchequer, George Osborne, announced significant tax cuts to help “one of the most important and valued industries” in the country in his Budget speech on March 16. The measures included halving the Supplementary Charge on oil and gas from 20 percent to 10 percent, and the effective scrapping of Petroleum Revenue Tax. The ex-Chancellor also revealed that the tax cuts would be backdated to be effective from Jan. 1.
“The oil and gas industry employs hundreds of thousands of people in Scotland and around our country. In my Budget a year ago I made major reductions to their taxes but the oil price has continued to fall so we need to act now for the long term,” Osborne said in March.
An opinion poll on Rigzone.com in March outlined that the majority of voters were undecided on whether or not the tax cuts for the industry were sufficient. Thirty-three percent believed that they were not and the remaining 27 percent believed they were.
Following Hammond’s statement, certain sections of the oil and gas sector outlined that more could have been done to help the industry.
"It's pleasing to see that the government has reaffirmed its commitment to the driving investment fiscal strategy, but in terms of concrete reforms only a simplification of the PRT reporting requirements has been announced, which falls short of the reforms needed to really drive further investment in the North Sea,” Michael Burns, oil and gas partner at law firm Ashurst, said in a statement to Rigzone.
“In particular, the Chancellor has not delivered the changes to the decommissioning tax relief and investment allowance regimes that industry had suggested,” he added.
At the start of November energy industry trade body Oil & Gas UK said that it had written to the Chancellor, asking him to use his statement to help boost investor confidence in North Sea exploration and production.
Oil & Gas UK, which asked for a number of commitments to be made as part of the Chancellor’s statement, welcomed the Chancellor’s pledge to maintain tax cuts in the industry but warned that the sector is still in urgent need of new investment.
“We are pleased to hear the Chancellor re-commit to HM Treasury’s driving investment plan today. This sends a strong signal to investors that the government recognizes that the UK oil and gas tax regime needs to be predictable and internationally competitive,” Deirdre Michie, Oil & Gas UK chief executive, said.
“We will continue to work with Treasury on the important issue of decommissioning tax relief, key to stimulating investment and activity for the supply chain which we hope to see resolved by the 2017 Budget. The sector is still in urgent need of fresh investment and we need government to keep working with us to ensure a competitive business environment,” Michie added.
Scottish National Party energy spokesperson and Aberdeen MP (member of parliament) Callum McCaig said Wednesday’s autumn statement proved that the UK government is happy to use the North Sea as a ‘cash cow’ only to abandon the oil and gas sector in difficult times.
“There has been no new support for the oil and gas sector in this autumn statement. The Tories have been using the North Sea – and the North-east of Scotland’s economy – as a cash cow for decades and we are getting precious little in return,” McCaig said.
“Philip Hammond has failed to move on loan guarantees, failed to encourage exploration and a failed to deal with decommissioning; risking the future of the industry and the many jobs it provides,” he added.
“We all know that without greater investment and activity we risk losing vital capacity and skills in the supply chain that will support production and ensure we realize the total value from maximizing economic recovery from the North Sea,” McCaig continued.
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