Things Getting Heated Regarding North Sea Taxes


Automobile owners should be following the situation regarding Chancellor George Osborne and the gas companies. The two parties have been feuding for six weeks and the situation recently escalated. All indicators reveal that things are likely to get very uncomfortable before summer ends.

In his March budget, the chancellor imposed a £2 billion windfall tax for North Sea profits by gas companies. According to Shell, this tax increase will cost it an additional £600 million. BP and Chevron are also complaining and industry representatives are lobbying the press and ministers.

On Sunday, Centrica, the owner of British Gas, announced that it will be shutting down the largest gas field in Britain for regular maintenance but production may not be restarted.

Centra declared that the increase in tax for North Sea profits may not make it economical to reopen its Morecambe Bay field. The company estimates that its South Morecambe field, which is older, faces an 81p tax for every pound it generates in profit.

This is just the beginning of the problems, as gas and oil industry representatives will provide the energy select committee with evidence on Wednesday and additional offshore explorers may shut down their facilities.

Rolling out a 20 percent gas industry tax increase should not take place overnight. Mr. Osborne himself protested such a move by Gordon Brown in 2007, due to its short-term focus that deterred private investment. Though taxing energy companies is a politically acceptable way to raise revenue, it appears hypocritical based on his former opinion.

The government may now be regretting its decision to appoint Centrica head Sam Laidlaw to a Whitehall non-executive directorship. Though Mr. Osborne does not have a strong case regarding the North Sea tax, gas companies still must pay their tax bills.

If those with car loans and car finance decided not to pay for their vehicle fuel due to the cost, there would be ramifications. This rule applies to the current situation.