Scotland’s Deputy First Minister, John Swinney, has called on the UK government to act quickly to reduce the rate of tax for the oil and gas industry as part of a raft of measures to help the industry.
Mr Swinney has penned a letter to the Chancellor George Osborne in which he said that without urgent intervention there was a risk that low cost of oil could lead to the early decommissioning of North Sea assets and further job losses.
In the letter he calls for the creation of an internationally competitive tax regime for the North Sea.
Mr Swinney outlined four key measures that the UK government need to introduce to improve the fiscal regime and provide support for the long-term future of the industry:
A substantial reduction in the headline rate of tax, with the primary objective of creating an internationally competitive tax regime in the North Sea
Removal of fiscal barriers for exploration and enhanced oil recovery (EOR)
Fiscal reforms to improve access to decommissioning tax relief and encourage late life asset transfers. This will reduce costs and help prevent premature cessation of production
Urgent consideration of additional non-fiscal support, such as government loan guarantees, to sustain investment in the sector
Mr Swinney said: “The North Sea oil and gas industry is facing substantial challenges. The industry, unions, and the Oil and Gas Authority have all raised concerns about the loss of highly skilled workers, and confidence levels are now at their lowest since records began in 2009.
“The Scottish Government will continue to do all it can to support the sector. It is clear, however, that the UK Government must take urgent action to reduce the headline rate of tax at the March Budget. The fiscal regime must not be a barrier to investment and activity in the North Sea.”
“I believe there is also a real risk that the low oil price could lead to critical infrastructure being decommissioned early. That is why I have called on the Chancellor to use his March Budget to improve access to decommissioning tax relief and encourage late life asset transfers. ”
“The UK Government must also consider all options available to facilitate new investment in the sector, including the potential for additional non-fiscal support, such as government loan guarantees.”