Treasury rules out oil tax concessions

Financial secretary Ruth Kelly firmly ruled out concessions during a succession of debates on the Finance Bill Committee in the Commons, insisting the tax and associated 100% capital allowances for new development would increase investment and not cost jobs.

The UK Offshore Operators Association has predicted 50,000 potential job losses resulting from lower investment caused by loss of confidence in the tax regime’s stability as a result of the levy.

But Kelly told the committee: ‘I do not believe the figures quoted by the oil industry.’

The exchanges came amidst signs of strain between the Treasury and the Department of Trade and Industry over a delay implementing Brown’s Budget pledge to scrap the royalties on older oil fields.

The chancellor gave no date for redeeming this promise and a consultative document believed to propose legislation ending royalties this year was due to have been published on Tuesday (11 June).

Instead it remained on Brown’s desk awaiting approval amidst industry fears he wants to delay implementation until next year.

Other rejected proposals put to Commons by shadow Tory chief secretary Howard Flight and Liberal Democrat shadow Treasury minister Edward Davey included allowing leasing companies access to the new 100% capital allowance so small operators who lease because they lack the resources to buy can benefit.

In addition, the committee rejected a clause requiring the Treasury to report by the year end on the effect of the tax package, the extension of the allowance to long-life assets from assets with a life of up to 25 years and qualifying investment mothballing instead of decommissioning old.

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