North Sea oil

Matthew Lynn has written a very good article in this week's The Business about how GB is the only person this year to lose revenue from oil. In his 05 pre-Budget report, he doubled the supplementary charge on oil companies operating in the North Sea to 20%, reckoning that it would give him another £1.4bn p.a. to spend. He was warned at the time by Michael Webb, CEO of the UK Offshore Operators Association that this would result in companies cutting back on production. This was correct. Tax revenues from North Sea oil were £3bn less than the Treasury forecast. It pays the highest tax rate of any sector in the UK economy: 50% on new developments and 75% on old ones. Rigs, kit and workers are in short supply globally so the oil companies are not prepared to work in an unprofitable area of the world. So much for the SNP's plan to scoop up all the oil revenues. Or perhaps its cunning plan is to offer the oil companies substantial tax cuts to renew production?