While Mr Brown promised the tax would be partly offset by higher allowances on new investment and the eventual abolition of royalty payments, oil industry executives argued they would hit jobs in depleted fields because production costs in aging reservoirs are higher than elsewhere in the world.
Mr Brown said, to mitigate the rise, Britain would raise first-year capital allowances to 100 per cent from 25% and set a date to end royalties on North Sea oil. He repeated past assurances that the government would do nothing to jeopardise the industry’s health.
“North Sea oil is vital to Britain,” Mr Brown said. “My aim is to deliver a tax regimen which promotes long-term investment while giving a fair return to the people.”
UK government receipts from oil and gas production peaked at £12.2 billion in the year to March 1985. According to government statistics, it reaped just £2.6 billion pounds in the year to March 2001.
