GEORGE Osborne is today under intense pressure from business chiefs to reverse in full his controversial tax-grab on the embattled North Sea oil and gas industry by returning the tax rate on industry profits back to where it was in 2011.

 

The so-called supplementary charge was ramped up from 20 per cent to 32 per cent by the Chancellor in that year's Budget, sparking an outcry from the sector and political opponents. In December, in the Autumn Statement, Mr Osborne reduced it but by just two per cent.

Given the plight of the industry in light of the plunge in the oil price with companies shedding jobs and reducing investment, the Treasury chief has been called on from several quarters, including by First Minister Nicola Sturgeon and Sir Ian Wood, the North Sea's foremost expert, to implement a hefty tax cut in his March 18 Commons statement.

In recent comments, the Chancellor has left no-one in any doubt that a reduction is on the way in what will be his last set-piece appearance before MPs ahead of the General Election.

But today in its Budget submission, the Confederation of British Industry demands a dramatic move, calling on Mr Osborne to "reduce the burden on North Sea oil producers by fully reversing the 2011 increase in the supplementary charge back to 20 per cent".

"This would make the UK's headline tax rates on oil and gas the lowest in the North Sea, alongside The Netherlands," it says.

John Cridland, the CBI Director-General, said: "With the sharp fall in oil prices our North Sea oil producers are really hurting with investment in oil fields and highly skilled jobs taking a hit.

"Reducing the tax burden they face at this challenging time could help protect jobs and secure the long-term health of a vital UK sector."

Last month, a survey of North Sea firms by industry body Oil & Gas UK painted a grim picture.

The industry body found that last year the sector spent £5.3 billion more than it received from oil and gas sales; the worst result since the 1970s.

The tax-take for the UK Government fell by 40 per cent to £2.8bn; the lowest level in more than 20 years.

Annual investment in projects like bringing new fields into production is set to fall from a record £14.8bn last year to just £2.5bn in 2018.

Oil & Gas UK also warned that a number of projects that had been approved might yet be cancelled.

Elsewhere in its submission, the CBI called for:

*simplification of the tax system;

*incentives to encourage research and development

*making permanent at £250,000 the Annual Investment Allowance to boost capital spending in plant and machinery and

*extending childcare to one and two-year-olds.

"Although the economic recovery is well-rooted and bearing fruit, we still need a Budget that locks in the successes from this Parliament and spends funds wisely on those areas which will keep growth on track," said Mr Cridland.

This, he explained, was a good opportunity for the Chancellor before the election to support growth and investment well beyond May 7, providing stability, certainty and simplicity for the UK's "Mittelstand" - Britain's equivalent to smaller firms in Germany and regarded as the "backbone" of the British economy.

"So the Chancellor must reward growing, ambitious firms with the tools to get on with the job of rebalancing the economy and lift productivity," Mr Cridland said.

"There has been good progress on this front from the Government and the Chancellor can now take further action to boost investment and innovation.

"If recent tax receipts have provided a bit more breathing space in public finances, the Chancellor may also want to make progress on bolder reforms, including steps to boost the provision of universal childcare."

He noted there was now a growing pattern of re-shoring production from overseas countries back to the UK, which could be helped by a "super-charged tax credit".