Tom Gordon

Scottish Political Editor

JOHN Swinney last night urged the Chancellor to help Scotland's faltering oil industry with a "fundamental change" to a permanent low tax regime in this week's Budget.

The Finance Secretary called on George Osborne to reverse the 12% hike in tax he imposed in 2011 as part of a fiscal system that was "simpler, more transparent and fit for purpose".

In a letter to Osborne, Swinney also pressed for an investment allowance and an exploration tax credit to help maintain production in the North Sea.

Osborne, who presents his last budget before the general election on Wednesday, has already signalled he will help an oil industry shocked by halving of oil prices and job losses.

However Swinney said recent efforts were not enough.

In his letter, Swinney said the recent 2% cut in the supplementary charge levied on oil firm profits from 32% to 30% was "insufficient".

He said there should be an "immediate" return to the 20% charged before Osborne imposed a shock 12% hike in 2011.

The Finance Secretary also called for called for full consultation with the industry and Scottish Government before major changes to the North Sea fiscal regime in future.

He said the industry had "vast potential" but admitted the recent fall in oil prices and the mature state of the North Sea fields "present a number of challenges for the sector".

He wrote: "For the Budget to provide a credible response to the challenges facing the industry, it must firstly correct the damage done by the unexpected increase in the supplementary charge at the 2011 Budget.

"The underlying problem is that successive UK governments have placed too much emphasis on maximising the short-term tax take from the industry.

"This has negatively impacted on business confidence, and undermines the industry's need for a stable long term fiscal environment on which to base their investment decisions.

"The Budget must therefore deliver a permanent shift to a more competitive and predictable tax regime, which will allow investors to shift their focus away from fiscal risk and towards the significant investment opportunities that remain in the North Sea."

Meanwhile Labour yesterday claimed SNP plans for full fiscal autonomy - Scotland raising all its own tax income - would take £2bn a year out the health budget.

Drawing on figures from the Scottish Parliament's independent Information Centre, the party said Scotland would face £6.5bn in cuts it relied on Scotland only taxes, instead of being supported through the UK-wide Barnett Formula.

That implied a £2bn cut in the NHS budget from £12bn next year to £10bn, Labour said.

Last week's annual Government Expenditure and Revenue in Scotland (GERS) figures showed Scotland contributes £400 more per head in taxes than the rest of the UK, but receives £1200 more in spending, a net advantage of £800 per person.

Scottish leader Jim Murphy said: "Under the SNP's plans we would lose this Barnett bonus, which would devastate our NHS."

Nicola Sturgeon last week dismissed such warnings by saying there was no prospect of full fiscal autonomy by 2015-16.