Politicians and oil industry bosses have reacted with fury after the UK coalition government hiked up taxes on the North Sea oil and gas sector in order to secure over £10 billion for the UK Treasury over the next five years.
The plans, announced in Wednesday’s budget, will pay for a planned 1p reduction in the price of petrol as motorists struggle with the ever increasing costs of fuel.
However experts have suggested that the Scottish economy will suffer if the North Sea suddenly becomes a much less attractive place for investment and that the move could see a recession hit the North East of Scotland.
Ian Bell, director of Aberdeen based engineering consultant firm Optimus, said: “Every chief executive operating assets in the North Sea is going to put on hold any non-sanctioned project until they can establish how this will impact their profitability. The growth in North Sea jobs that was being predicted before today seems a bit premature. I’d go as far as to predict the chancellor has just brought the recession to Aberdeen. Thanks for nothing George.”
Callum Wilson, a tax partner with Johnston Carmichael, said the coalition announcement was a smash-and-grab raid on the oil and gas industry.
“This will lead to major uncertainty in an important Scottish industry that was just coming out of the doldrums.”
The plans have caused outrage North of the border and there are claims that Scotland will suffer in terms of jobs if investment in the oil and gas sector is cut.
Mark Hanafin, managing director of Centrica Energy said the tax hike “could have a chilling impact on future investment in the North Sea”.
The tax move is expected to generate an extra £2 billion for the UK treasury next year and is on top of the £1 billion already expected due to the increase in oil prices. The 1p planned drop in the price of a litre of petrol follows a sustained increase that has seen the price rise by 25p in twelve months.
The SNP responded by describing the budget as a lesson for Scotland, Finance Secretary John Swinney said: “The reduction in fuel duty has been paid for by the buoyant North Sea oil revenue that we are contributing to the UK treasury and I think people have got to see that that’s a major lesson and opportunity for Scotland to take control of her own finances.”
SNP leader Alex Salmond echoed the words of his party colleague and claimed that Scottish resources had underpinned the budget.
Mr Salmond said: “This chancellor would have had nowhere to turn, without Scottish resources he wouldn’t have a budget.”
Labour’s Iain Gray claimed the moves would do nothing for growth and also expressed concerns that the Scottish oil and gas sector could suffer.
He said: “You have to be careful about not damaging investment prospects in the oil industry.”
The raid on North Sea resources follows comments last week by UK energy Minister Charles Hendry who pledged that the Westminster government will do all it can in order to “get every last drop” of oil and gas out of the North Sea.