Delivering his last budget speech before the general election, the chancellor also pledged new investments and financial incentives for manufacturing, science and the so-called Northern Powerhouse.
Osborne reminded parliament of field allowances that have led to £15bn of capital investment in North Sea fields last year, and the Office of Budget Responsibility estimate that today’s measures will boost North Sea oil production by 15 per cent by the end of the decade.
Osborne said: “The fall in the oil price poses a pressing danger to the future of our North Sea industry – unless we take bold and immediate action.
“First, I am introducing from the start of next month a single, simple and generous tax allowance to stimulate investment at all stages of the industry.
“Second, the government will invest in new seismic surveys in under-explored areas of the UK Continental Shelf.
“Third, from next year, the Petroleum Revenue Tax will be cut from 50 per cent to 35 per cent to support continued production in older fields.
“Fourth, I am with immediate effect cutting the Supplementary Charge from 30 per cent to 20 per cent, and backdating it to the beginning of January.
“It amounts to £1.3bn of support for the industry.”
Oil & Gas UK estimate that near term gains from today’s measures could encourage an additional £4bn of capital investment, enabling the development of 500 million barrels of oil equivalent, which at today’s prices are worth £20bn.
Welcoming today’s budget, Malcolm Webb, Oil & Gas UK’s chief executive, said: “These measures send exactly the right signal to investors. They properly reflect the needs of this maturing oil and gas province and will allow the UK to compete internationally for investment.
“We also welcome the government’s support for exploration announced today. With exploration drilling having collapsed to levels last seen in the 1970s, the announcement of £20m for the newly formed Oil and Gas Authority to commission seismic and other surveys on the UK continental shelf (UKCS) is a very positive step.
“Along with substantial industry efforts to address its high cost base and the regulatory changes now in train to provide more robust stewardship, the foresight shown by the chancellor in introducing these measures, will, we believe pay real long-term dividends for the UK economy.”
Budget In brief
- £100m investment in driverless technology
- £60m investment in the new Energy Research Accelerator and confirmation of the new national energy catapult in Birmingham
- £7bn of transport investment in the South West
- £140m invested in world class research across the UK into the infrastructure and cities of the future
- £600m to clear new spectrum bands for further auction
- Greater Manchester to keep up to 100 per cent of the additional growth in local business rates
- Financial support for postgraduates, with new support for PhDs and research-based masters degrees
- Negotiations to commence on the Swansea Bay Tidal Lagoon
- Partial implementation of compensation for energy intensive plants by the autumn this year
- Abolition of National Insurance for employing under 21s, extending to young apprentices in April
- Increase UKTI’s resources to double the support for British exporters to China.
- Low-emission company cars to have tax raised more slowly while increasing other rates by three per cent in 2019-20.
- Annual Investment Allowance to be revised in the Autumn Statement
- 20 per cent corporation tax from April
Further measures announced today include £100m of investment in driverless technology, £7bn for transport investment in the South West, plus £140m invested in research across the UK into the infrastructure and cities of the future.
Osborne also confirmed that negotiations are to commence with the Swansea Bay Tidal Lagoon and that the West Midlands is to host the new national energy catapult in Birmingham, and receive £60m for Energy Research Accelerator (ERA).
According to project partner Warwick University, ERA will be a hub designed to build on the expertise of six midlands universities, the British Geological Survey and the surrounding industrial base to “deliver a step change in energy research and development, securing the UK’s leadership position in the sector.”
Once operational, ERA is expected to create new technologies that can be deployed in the Midland’s manufacturing sectors including automotive, aerospace, energy and rail, creating new products for the domestic and export markets.
Warwick’s vice-chancellor Professor Sir Nigel Thrift, Warwick’s vice-chancellor Professor said: ‘The global energy storage market will rise to $50bn by 2020 and much of the rise will be in transportation to $21bn. Automotive is well on its way to displacing consumer electronics as the biggest user of energy storage.
“The Energy Research Accelerator initiative will play a crucial role bringing together researchers and industry to meet that challenge. It will enable the University of Warwick to create a National Low Carbon Mobility Centre, serving the automotive, commercial and off road, marine and rail sectors by the development of enabling technologies in energy storage and energy machines, drives and systems.”
Click here to access Osbornes speech.
Reaction round up
Manufacturing
“The chancellor gets three cheers from manufacturers for the measures he’s included to boost exporters. His decision to bring forward compensation for industries facing vast and uncompetitive energy costs, such as steel makers, is a huge vote of confidence for them and for manufacturing more widely. In addition he has committed to a stable and competitive tax regime, which we wholeheartedly support.”
Terry Scuoler, chief executive of EEF
Education
“Major investment in scientific infrastructure is very welcome and necessary, but to be most effective it must go hand-in-hand with funding for the scientists conducting the research and their project costs. It may not make for great headlines in the short-term, but ensuring that there is sufficient funding for the ideas and people that make British science great will be essential for our future scientific, economic, and national success.”
Naomi Weir, Campaign for Science and Engineering acting director
Infrastructure
“This budget was never going to set pulses racing, however, we can take some comfort from plans to invest in regeneration and transport projects in London. But it was not just about the world’s global capital, there was also a £7bn cash injection for airfields, rail and better roads in the south west and 20 new housing zones across the UK.
“Plans for a tidal lagoon in Swansea Bay shows the government is committed to investing in cleaner energy with a steady move away from fossil fuels. If Swansea is successful, then with potentially more tidal projects coming on stream in the future, 10 per cent of the UK’s electricity needs could be met.”
Jon White, UK managing director, Turner & Townsend
Driverless cars
“We are delighted by the chancellor’s announcement, and welcome this opportunity for the UK to consolidate its position as the world-leading place to trial and demonstrate driverless technologies.”
Steve Yianni, Transport Systems Catapult CEO
Support for exporters
“Boosting the UK’s export performance is a national priority and the chancellor is right to keep the pressure on by providing additional resources to support exporters in overseas markets. This is another step in a longer journey to meet the government’s £1trillion export ambitions and help cement a more balanced economic recovery.”
Paul Raynes, director of policy at EEF
Skills
“The biggest challenge we and many other businesses face is recruiting quality, skilled staff. Two years ago we had 20 staff and now we have 30 employees and are looking to increase this to 40. However, there are not enough skilled engineers in the UK and now 15 per cent of our workforce is made up of people from other countries. The government should relax immigration laws to make it easier to hire the right staff from outside of the EU irrespective of election pressures.”
Ben Halford, chief executive, Surface Generation
Greater freedoms for Research Institutes
“If the reality lives up to the promise, this move should help to put research institutes in a better position to attract and crucially, retain talent, invest in cutting edge technology and re-invest commercial income.”
Paul Foot, partner and patent attorney, Withers & Rogers
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