EXPERTS have increased pressure on the Chancellor to cut taxes for the oil industry amid fears of more North Sea job losses.

 

Sir Ian Wood, who last year led a Coalition government review into the future of the North Sea, has warned that "irreversible damage" could be done unless ministers take emergency action immediately.

He has predicted that the current crisis could cost tens of thousands of jobs.

His comments came as EnQuest, the largest independent UK producer in the sector, is reported to be cutting positions, spending and pay in the wake of the fall in the oil price.

But there were also forecasts, from Ernst & Young, that the plunging oil price could boost Britain's overall economic growth.

David Cameron's government has faced pressure to in recent weeks as oil tumbled to less than $50 a barrel.

Ministers have suggested that they could give the industry an extra tax break, a move welcomed by experts.

But they have also insisted that any such move would have to wait until the Budget in March.

Sir Ian warned that companies were already planning "shutdowns" and working how to redeploy staff.

He wants UK ministers to cut the supplementary tax on oil profits by at least ten points within the next three weeks.

The businessman insisted that the measure had to be taken before the March Budget to be effective.

And he called on ministers to commit to the policy over the long-term in order to give the industry enough confidence to invest in the North Sea.

He said: "The benefit of introducing a significant tax reduction now would only work if you make it clear we will maintain this tax regime into the medium-term future."

Other experts backed his call.

Professor Paul Stevens, from the Chatham House think tank and a former professor of petroleum policy and economics at Dundee University, said: "Unless there is a dramatic change in the fiscal system for the UK, it is going to be very serious for North Sea oil production...Whatever the Chancellor does, he has to do it before the budget."

Professor Alex Kemp, of Aberdeen University, said: "A tax reduction and a cost reduction could make more new projects viable and end up increasing employment."

Last week BP announced that hundreds of jobs are to be lost in its North Sea operations.

That announcement was closely followed by another from the oil giant Schlumberger that it was shedding 9,000 jobs worldwide.

The company refused to be drawn on reports that 100 of those jobs would be in Scotland.

The Coalition Government points out that it cuts taxes for the North Sea only three weeks ago, at the start of this year.

The Chancellor George Osborne has tried to reassure the industry by saying that although he did not want to pre-empt his Budget "I can see that it may well involve further reducing the burden of tax on investment in the North Sea."

The SNP says that action on supporting the industry will be a priority for its MPs elected in May.

First Minister Nicola Sturgeon has launched a taskforce on the issue and has called on the UK Government to bring forward immediate tax cuts.

But at the same time, an influential report said the UK economy was on course for a major growth spurt this year as lower oil prices provide a "shot in the spending arm" of consumers.

The EY ITEM Club's winter forecast predicts that GDP will grow by 2.9 per cent in 2015, up by 0.5 per cent compared with its previous estimate in October.