Budget: Osborne ‘abolishes’ Petroleum Revenue Tax in £1bn North Sea rescue bid

The steps taken by Mr Osborne were largely welcomed by politicians and industry officials as new official data also emerged to show that the number of people on out-of-work benefits in Aberdeen, the UK’s oil capital, rose by 58 per cent in February on the same month last year and 6 per cent on January.

The number of people on jobseeker’s allowance plus those who claim universal credit while out of work –also increased in Aberdeenshire, as the claimant count rose by 88 per cent year-on-year last month to hit 2,285, according to Office for National Statistics data released yesterday just prior to Mr Osborne’s speech in the House of Commons.

The SNP’s deputy leader Stewart Hosie said he welcomed Mr Osborne’s oil and gas changes, which sees the existing supplementary charge for oil companies also cut from 20 per cent to 10 per cent, backdated to 1 January.

Mr Hosie said the reduction in supplementary tax and PRT were welcome but he was “slightly disappointed in the lack of strategic direction” and that there was no mention of exploration or production allowances for the industry.

Scotland’s deputy first minister John Swinney had previously written to UK chancellor George Osborne, urging him to use his Budget to help the sector by doing more to encourage further exploration.

The UK government said the Budget measures were worth £1bn.

In his budget speech, Mr Osborne said: “The oil and gas sector employs hundreds of thousands of people in Scotland and around our country.

“In my budget a year ago I made major reductions in taxes, but the oil price has continued to fall so we need to act now for the long term.

“I am today cutting in half the supplementary charge on oil and gas from 20% to 10% and I am effectively abolishing Petroleum Revenue Tax too - backing this key Scottish industry and supporting jobs right across Britain.”

Commenting on the proposals for the oil & gas industry, Derek Henderson, senior partner for Deloitte in Aberdeen, said: “Today’s oil & gas tax package demonstrates that government has been listening to the acute challenges facing the North Sea in 2016. The 10 per cent cut in the Supplementary Charge and permanent zero rating of Petroleum Revenue Tax, both effective from 1 January 2016, combined with additional help for critical infrastructure, bear this out. At a time of low oil & gas prices and challenging conditions, headline North Sea tax rates are now globally competitive, now at 40 per cent instead of the 62 per cent – 81 per cent they were 18 months ago.

“While the OBR estimates that the proposed changes will reduce the UK North Sea tax burden by £1 billion over the next five years, it is over the longer term that the benefits will be felt by the industry. The UK now needs to compete harder for its share of global investment than ever before and retaining activity and expertise during the downturn will be critical to secure the long-term future of the UK North Sea.”