In its response to the Chancellor’s spending statement, the Oil and Gas UK onshore trade association has hinted further tax-breaks may be required from the UK Treasury to ‘boost confidence and investment’ in the North Sea.
Mike Tholen, Economics Director, Oil & Gas UK, commented: “Since the last Budget, the oil price has declined further, and we must continue to do as much as we can to help boost confidence and encourage investment in the UK Continental Shelf.
“If the oil price continues to be lower for longer, there is little doubt that – alongside industry’s own concerted effort to improve its efficiency – we will need to work with Treasury on additional measures, including revisiting the current headline tax rate – consistent with the government’s commitment to the sector’s tax rate falling over time.
“There is still much to play for in the UK’s North Sea – in terms of both barrels of oil and gas for the country, highly skilled jobs, and the security that comes with an indigenous energy supply.
“The Office for Budget Responsibility (OBR) figures referenced in the Chancellor’s speech – noting a dramatic decline of 94% in tax receipts – underscore the severity of the challenge ahead for the sector, but fail to take into account the indirect contribution this industry makes as a major employer, innovator and exporter of goods and services at home and abroad. “
Meanwhile, Oil & Gas UK will seek clarity from the Government on its plans for a levy on all employers with a pay bill in excess of £3 million which could disproportionately impact oil and gas businesses, where costs are already under pressure, on two levels.
Firstly, the levy is being applied on a payroll basis, so as an industry that supports highly skilled and highly paid jobs it will be disproportionately hit at a time of cost pressure.
Secondly, many oil and gas companies could face paying two statutory levies if they already pay the statutory levy to a training board. “
Tholen added: “It is not yet known how businesses based in Scotland will be able to claim back for apprentice training, nor the proportion of training costs than can be recouped, so we will seek more information from Scottish Ministers.”