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Tuesday, December 1, 2020

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Will the end of tax breaks break the UK oil & gas industry?

Posted to On the waterfront (by on October 29, 2009

The Treasury's decision to 'snub' the oil and gas industry has lead to concerns over job losses

The UK oil and gas industry has reacted angrily to the Government’s rejection of wide-reaching cuts in corporation tax, with the opinion that the decision will swiftly lead to a loss of jobs in the sector. 

The historically-deep pockets of offshore investment and tax breaks look likely to become rather tightened after the Treasury stated that removing the supplementary charge on corporation tax would not, as the industry suggests, boost production, so is therefore unnecessary. 

This lead to vocal criticism that the Government has ‘snubbed’ the UK oil and gas industry, a rather foolhardy move given that it contributes over £150 million in taxes each year, provides around 380,000 jobs and creates 75 per cent of the country’s primary energy resources. 

Although Chancellor Alistair Darling was quick to point out that the Government was committed to supporting the industry in extracting as much UK oil and gas as possible while ensuring that taxpayers’ received a fair deal from the investment, industry representatives are fully aware that a failure to reduce the tax burden on current and potential projects will be damaging to the future of UK oil and gas production. 

Mr Mike Tholen, a spokesman from Oil and Gas UK pointed out, “Investment has declined over the last three years and will only begin to recover if significant steps are taken to ease the tax burden on UK oil and gas projects to restore their competitiveness on a worldwide stage.”

MPs from Aberdeen are keen to push the importance of the issue to their colleagues in London, with a clear message that vast numbers of oil and gas workers in their constituencies will quickly be affected by a lower rate of production. With a general election required to take place by June 2010 at the very latest and the Labour Party already a full 20 per cent lower than the Tories in most polls, these Scottish ministers are far more realistic about the impact oil and gas job losses would have on its chances of election success.