Tax breaks for oil and gas industry

More tax breaks designed to bolster investment in North Sea oil and gas have been unveiled by George Osborne.

The Chancellor said income from older fields will be spared from paying full duty to ensure they are fully exploited.

It is the latest in a series of reliefs introduced for the industry after the coalition Government was criticised for hiking the supplementary charge on North Sea producers from 20% to 32% last year.

The new Brown Field Allowance will shield up to £500 million of income from the charge when firms are boosting production from established oil or gas fields - potentially cutting their tax bill by £160 million.

The move is expected to cost the Exchequer £100 million per year initially - but officials insist long-term tax revenues will be significantly higher.

Mr Osborne said: "Today's tax allowance is more good news for the North Sea, good news for jobs and good news for the broader economy. It will give companies the incentive to get the most out of older fields, creating jobs and delivering more revenue for taxpayers.

"This Government has signalled its absolute determination to get more investment in the North Sea, a huge national asset. Just last week, I saw the benefits at a supply chain factory creating many hundreds of jobs in the North East thanks to Government support for North Sea gas which made a major project possible."

The announcement could attract at least £2 billion of investment in the short term and is a step towards a potential 50 years of further activity in the North Sea, according to industry body Oil and Gas UK.

Scottish First Minister Alex Salmond said: "After imposing the draconian supplementary tax on Scotland's North Sea industry, threatening thousands of jobs and billions of pounds in investment, it seems that the Chancellor is finally recognising the vital importance of the oil and gas sector. This is just one of the measures I have been calling for over the last year; for the Chancellor to move to plan B for the North Sea. He needs now to move to a plan MacB for the rest of the economy.

"Oil and gas production now contributes £32 billion to the UK's balance of payments, with the supply chain adding a further £5-6 billion - more than halving the UK's trade deficit. The industry supports almost 200,000 jobs in Scotland and has generated almost £300 billion, at today's prices, in taxation revenues. More than half of the value of the North Sea's oil and gas reserves have yet to be extracted. That's 24 billion barrels with a wholesale value of £1.5 trillion."