CHANCELLOR Philip Hammond has been urged not to use Scotland “as a cash-cow” by hiking taxes on the recovering North Sea oil industry in order to raise billions of pounds in revenue.
The price of a barrel of oil has now hit more than $70 on the back of increased demand as the economy grows globally; in 2016 it fell to below $30.
In 2011, George Osborne, the Chancellor in the Lib-Con Coalition Government, caused an outcry when he slapped a surprise windfall tax on offshore drilling profits, raising the rate from 20 per cent to 32 per cent.
The following year, he performed something of a U-turn by introducing a tax break for oil companies to stem a major decline in exploration and production which hit jobs and investment.
After decades of oil tax bringing in billions to the Exchequer, the fall-off meant revenue was effectively zero.
By 2016 as serious questions were raised over the industry’s future, Mr Osborne went further and significantly reduced the tax rate on profits to boost investment as oil prices continued to plummet.
According to analysis by the Financial Times based on UK Oil and Gas Authority production forecasts, if the Government raised £10 for every barrel of oil produced, as it did in 2010 when prices were similar to this year’s, the Treasury would bring in more than £6 billion in tax revenue.
Given Mr Hammond, amid the uncertainty of Brexit, is facing a number of future spending commitments, not least the one to boost the NHS south of the border by £20bn by 2023, then hiking taxes on the North Sea oil industry might seem attractive.
However, Kirsty Blackman, the SNP’s economy spokeswoman at Westminster, called on the Chancellor to rule out a North Sea tax hike.
In a letter to Mr Hammond, the Aberdeen MP pointed out how the oil industry reported that production efficiency rose for the fifth consecutive year, reaching 74 per cent in 2017; that the sector was reporting a stronger and sustained performance over the past two years.
“Using Scotland once again as a cash-cow, just as the sector is strengthening, risks its ability to invest and extract the North Sea’s full potential upon which so many jobs and our wider economy depend,” declared Ms Blackman.
“That is why it is vital that the Chancellor provides urgent reassurances that the UK Government will not seek to use the Autumn Budget to undermine the North Sea’s recovery with tax rises,” she added.
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