George Osborne has said that he will introduce further tax cuts for the oil and gas industry in the upcoming budget, to help offset the fall in global oil prices.
Answering questions from MPs on the treasury select committee about the future devolution of financial powers to Scotland, the chancellor said: “I took decision in the autumn statement to reduce taxes on North Sea oil, anticipating the pressures that the fall in the oil price would have on the industry and I’m sure we’re going to have to take further steps in the budget, but we can only do because we’re a United Kingdom and we pool our risks.”
He said that the fall in oil prices had demonstrated the benefits of a United Kingdom and that independence would have left Scotland much more vulnerable to such a fall. Osborne argued that the government of an independent Scotland would have been left unable to deliver their promises and would have been forced to implement spending cuts.
The chancellor expressed support for robust independent analysis of public finances in Scotland, saying the country would need a body like the Office for Budget Responsibility, which provides independent economic forecasts and analysis of public finances, to oversee its finances once new economic powers are devolved.
He said that the governmental body currently responsible for Scotland’s economic forecasts and analysis did not have a good record, pointing to their overestimation of the oil revenue the country would gain.
Osborne’s comments come after accusations by both the Scottish government and the Labour party that the coalition has failed to act on the effects of the falling oil price.
Writing in the Press and Journal, ahead of a visit to Aberdeen with the Scottish Labour leader, Jim Murphy, the shadow chancellor, Ed Balls, said that while Osborne had said he would look at the issue of tax incentives for the oil industry, the government couldn’t afford any more delay.
He wrote: “We need to see urgent action to improve the tax incentives for North Sea oil investment. And if George Osborne fails to act then I am clear that, after the general election in May, a UK Labour government will. Because failing to act will not only risk jobs and investment now, it will also cost the UK taxpayer in the long-term as we lose revenue from oil that gets left in the ground.”
On Tuesday the Scottish energy minister, Fergus Ewing, said Labour must clearly back proposals for a reduction in tax on the oil and gas industry. He said: “Every day without action from the UK government risks further damage to the oil and gas industry. Businesses and oil workers in the North Sea do not need to wait for another review – they need action now.
“Labour must give their full support to the immediate reduction in the supplementary charge and support an exploration tax credit that would secure a strong future for the North Sea.”
