James is right to draw attention to the problems arising from the coalition’s decision to hike taxes on oil companies. Perhps halting the fuel duty escalator was worth it but there are always costs associated with this kind of populism. Oil companies, like the banks, are friendless enterprises and so easy targets for tub-thumping or magpie politicians.
Nevertheless, some North Sea oil fields now face marginal rates of 81% while less-maure fields will be taxed at 62%. No wonder Statoil and other companies are reconsidering planned investments in the North Sea. Osborne should understand why. In 2007 he visited Aberdeen and said:
“The Treasury don’t seem to understand that the UK continental shelf [the North Sea oil and gas region] is a mature resource competing for investment in a fiercely competitive global market.
“They don’t recognise that investment in the North Sea cannot be taken for granted when there are potentially more profitable opportunities in West Africa, Mexico or Brazil. No wonder business can’t invest with confidence.
“We should aim to establish a tax regime that will stay in place for the rest of the life of North Sea oil and gas.”
Quite so. But that was then and this is now and government changes everything. So much so, in fact, that Osborne claimed yesterday that high oil prices meant high taxes would have no impact on investment at all, a notion the Press and Journal correctly deems an "astonishing forecast".
And what on earth was Osborne doing telling MPs that
“This oil and gas is not theirs, it is ours as a nation. When the price goes up substantially we are entitled as a Parliament and a Government to ask if we are getting our fair share of that.”
Well maybe it is "the people’s oil" George but it’s not going anywhere without the oil companies is it? Does a "fair share" mean a majority share? It seems it does. This does not seem an especially equitable situation, not least since the state bears none of the risk and benefits hugely anyway and to the tune of £9bn last year in tax, to say nothing of the more than 400,000 jobs said to be associated with the oil industry.
Still, slapping extra taxes on oil companies and denying the banks the benefits of a cut in corporation tax cut might, in a more rational media environment, put an end to the notion that the coalition is concerned with helping major companies at the expense of the poor, plain people of Britain. Not so and this government is, at least sometimes, as keen on politically palatable populism as the last one.
For that matter, it’s a shame that oil revenues – a happy bonus, really – have consistently been used as patches for existing running costs and rarely, if ever, been salted away for the future.Tags: Britain, Oil, Osborne, Scotland, Tax, Treasury