The existing supplementary charge for oil companies will also be cut from 30 per cent to 20 per cent, backdated to January, he said.

The move brings the headline rates for oil and gas fields down from 62 per cent to 50 per cent and 81 per cent to 67.5 per cent for the older fields that are subject to PRT.

Mr Osborne said the measures were worth a combined £1.3bn and were designed to support continued production in older fields.

Doyen of the industry, Sir Ian Wood, said delivery of the hoped-for reversal of the 2011 supplementary tax increase, as well as the further tax cut for older oil fields, plus a promised “simple and generous” tax allowance, would mean projected North Sea job losses can now be “very significantly less than would have occurred under the previous fiscal regime”.

Prior to yesterday’s pre-election Budget announcement, some had predicted as many as 80,000 North Sea job losses and earlier this week Sir Ian said the Budget could be the most important in the history of the North Sea oil and gas sector.

Reacting to Mr Osborne’s tax cuts, Sir Ian (pictured) said he now expected those losses to now be in the region of 5,000 to 10,000.

The Chancellor said that the Office for Budget Responsibility had endorsed his new tax regime and by their assessment it was expected to boost North Sea oil production by 15 per cent by the end of the decade.

The government will also invest in new seismic surveys of under-explored areas of the UK Continental Shelf.

Against a backdrop of maturing oil fields, high production costs, an extremely complex tax regime and low oil prices, the eyes of the oil and gas sector were firmly on the Chancellor to stimulate investment and halt decline.

Alan McCrae, PwC’s head of energy tax, said: “George Osborne has responded to the gauntlet thrown down by industry and the new regulator.

“Offering a 62.5 per cent uplift in CAPEX, the much-trailed Investment Allowance will be another shot in the arm for the industry, encouraging North Sea investment and replacing numerous complex allowances that had previously existed.

“These measures should hold the wolves from the door for now, but if oil prices deteriorate or remain low for longer than firms can bear, then something more radical may need to be done if investment and jobs are to be protected.

“Nevertheless, it’s crucial that these measures aren’t seen as a tax break for oil companies, which will still face a tax rate, in some cases, of more than three times that of other sectors. This simply recognises the changing profile of the UK basin and, in the longer term, will help ensure the best return for the UK taxpayer.”

Welcoming the introduction of an industry tax allowance, Derek Henderson, senior partner in Deloitte’s Aberdeen office, added: “When added to the overall rate reductions announced, the introduction of an Investment Allowance is another positive move which will simplify the complex patchwork of existing field allowances and should improve the economics of many marginal fields. Despite the difficult oil price environment, hopefully this is enough to stimulate additional investment. The Government’s own estimates indicate the proposed changes will reduce the tax burden by £1.3 billion over the next five years and this is expected to generate over £4 billion of investment.

“For a number of reasons, including in no small part the low oil price, the capital budgets of the oil and gas industry’s global players have been cut significantly. The UK now needs to compete harder for its share of investment than ever before and the next year will be pivotal for the long-term future of the North Sea.”