Scottish politicians accused George Osborne of using North Sea resources to “fuel his Budget”, saying the chancellor had given too little in return for his unexpected £2 billion ($3.2 billion) tax raid on the oil and gas industry.
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Chancellor of the Exchequer George Osborne holds Disraeli's original budget box as he leaves 11 Downing Street for Parliament.
“With record North Sea revenues of £13.4 billion this coming [fiscal] year – over £4 billion more than expected and double last year’s figure – it is abundantly clear that Scottish resources are bankrolling the chancellor’s Budget and the UK Treasury,” said John Swinney, Scotland’s finance secretary and a member of the Scottish Nationalist party.
Iain Gray, Scottish Labour leader, said: “There is a real concern that this measure will jeopardize jobs in the north-east. It seems this policy was rushed through at the last minute without proper consideration of how it will work in practice.”
Opinion polls suggest that Mr Gray’s party will oust the minority SNP government in elections on May 5.
Joining the chorus, industry executives warned that the tax increase threatened tens of thousands of jobs, with several companies reassessing proposed development projects.
“You’re talking about 15,000 to 20,000 jobs per £1 billion of capital investment per year,” said Mike Tholen, economics director at Oil and Gas UK, the industry association.
While planned investments of £22 billion will probably go ahead over the next few years, “there is another £50 billion on top of that, that people are now reconsidering”, said Mr Tholen.
According to Oil and Gas UK, North Sea investment rose from £5 billion in 2009 to £8 billion last year and could be maintained at this level over the next five years if all developments under consideration come to fruition.
Derek Leith, an oil and gas partner at Ernst & Young, said such confidence would have been undermined by the tax increase, even though the long lead times of such projects meant developments would not immediately come to a halt.
However, he forecast that some deals to sell fields that were close to completion might have to be renegotiated as a result of the tax increase.
Mr Leith said some mature oil fields, such as Brent and Forties, would face a marginal tax rate as high as 81 percent.
“Many companies will be frantically reappraising their plans for capital investment in the coming days,” he said.