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The Prime Minister David Cameron reinforced the government’s support for the UK’s oil and gas industry at a meeting with industry representatives, hosted jointly with Treasury ministers Danny Alexander and Priti Patel.
Chief Secretary to the Treasury Danny Alexander and the Exchequer Secretary to the Treasury Priti Patel announced the launch of an investment allowance consultation today. This consultation has been fast-tracked at the request of industry.
The allowance, which was first announced in Autumn Statement, is a single, basin-wide capital expenditure linked investment allowance, designed to reward investment at all stages in the industry lifecycle. It will hugely simplify the existing regime of field allowances and provide certainty for companies to help ensure they maximise the remaining opportunities in the North Sea.
The launch of this consultation demonstrates the government’s commitment to the industry and sends a clear signal that the UK is open for business. The new allowance is likely to reduce the effective take rate to 45-50% for companies investing in the future of the North Sea.
The consultation will seek views from industry on how the allowance can best support investment in North Sea oil and gas projects.
Danny Alexander, Chief Secretary to the Treasury, said:
These are difficult times for Scotland’s oil and gas industry, which is why I announced an ambitious package to support this hugely valuable sector at last month’s Autumn Statement. And it’s why I am meeting industry representatives here today, to see how we can support them further, and announcing today that we are fast-tracking consultation on an investment allowance, which industry has told us will incentivise investment opportunities in new and existing fields across the North Sea. We will take action on oil and gas to help the industry at Budget.
Oil prices are inherently volatile, that is why it is important that we take a long term view on the issue: supporting the industry through encouraging investment and protecting the UK’s public finances through a sustainable tax regime, while ensuring that the 375,000 livelihoods that depend on the UK’s oil industry are protected for many years to come.
The industry – and its workers – have ridden many storms, and with the continued support of the government and the Oil and Gas Authority we are confident that it will emerge from this one with renewed vigour. This kind of support is only possible because we can draw on the combined strength and resources of the United Kingdom.
Priti Patel, Exchequer Secretary to the Treasury, said:
Today the government is once again demonstrating its long term commitment to supporting this important sector that provides jobs and economic benefits across the UK.
At Autumn Statement, the government recognised the need to lower the tax burden on the North Sea, demonstrated in the cut in supplementary charge which came into effect on 1 January.
Today’s fast-tracked consultation launch shows that we are committed to bringing these reforms into place as a matter of priority. We expect to build on this action at Budget and will take a final decision on the investment allowance then.
The government will publish a summary of responses to this consultation later in the year. Legislation will be brought forward in an appropriate Finance Bill.
The consultation will last for 4.5 weeks and is the result of very effective work between industry and HMT.
The UK oil and gas sector has been one of the country’s greatest industrial success stories. It remains the largest industrial investor, provides just over half of the UK’s primary energy needs and supports hundreds of thousands of jobs.
The government is committed to ensuring the UK remains an attractive place to invest throughout a downturn in oil prices and as the nature of the basin changes. It is currently implementing the recommendations contained with Sir Ian Wood’s review of the regulatory system, including the establishment of a new regulator, the Oil and Gas Authority.