UK Prime Minister David Cameron has reinforced the government’s support for the North Sea 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 (22 January). The consultation has been fast-tracked at the request of industry.
The allowance, 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 simplify the existing regime of field allowances and provide certainty for companies to help ensure they maximize the remaining opportunities in the North Sea.
The new allowance is likely to reduce the effective take rate to 45-50% for companies investing in the future of the North Sea.
Speaking in Edinburgh today, Oil & Gas UK chief executive Malcolm Webb said: “We are encouraged to note that work on the Investment Allowance announced in the Autumn Statement is progressing. However a reduction in the headline rate of tax is also essential to really improve the international competitiveness of the UKCS. Given the maturity of this basin, I’m afraid there will be no second chances.”
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.
Priti Patel, Exchequer Secretary to the Treasury, said: "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."
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