North Sea Oil and Gas

Oral Answers to Questions — Treasury – in the House of Commons at 11:30 am on 10th March 2015.

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Photo of Robert Smith Robert Smith Liberal Democrat, West Aberdeenshire and Kincardine 11:30 am, 10th March 2015

What steps he is taking to support jobs in the north-east of Scotland by maximising the economic recovery of North sea oil and gas. [R]

Photo of Danny Alexander Danny Alexander The Chief Secretary to the Treasury

The Government have made significant progress on supporting the North sea oil and gas sector, including the announcements I made in December about an investment allowance and other changes, although I recognise that there are very serious ongoing problems at the moment.

Photo of Robert Smith Robert Smith Liberal Democrat, West Aberdeenshire and Kincardine

I thank the Chief Secretary to the Treasury for recognising the problems in the North sea. Does he also recognise that the job losses that have been announced predate the fall in the oil price, and that it is crucial that in the Budget we see long-term structural change for the maturity of the province?

Photo of Danny Alexander Danny Alexander The Chief Secretary to the Treasury

I wholeheartedly agree with my hon. Friend. I have had a number of meetings with Oil & Gas UK and representatives of the oil industry. Having set out in December the fact that the tax regime for the North sea is going to be on a declining path, recognising precisely the issues that he mentions, we have set a clear direction of travel, and the Chancellor will set out our decisions in the Budget next Wednesday. Let me reassure my hon. Friend that this Government take incredibly seriously the need to make sure that we have a fiscal regime that supports maximum economic recovery of the resources of North sea oil and gas.

Photo of Stewart Hosie Stewart Hosie SNP Chief Whip, SNP Deputy Leader, Shadow SNP Spokesperson (Treasury), Deputy Leader, Scottish National Party

The Chief Secretary knows that the fundamental issue is the cost of doing business in the North sea basin. The up to 81% marginal tax rate on production is something that the Government could do something about. Given that this Chief Secretary boasted that putting up the supplementary charge was his decision, will he now apologise for that and make sure that the charge begins to be reduced in the Budget next week?

Photo of Danny Alexander Danny Alexander The Chief Secretary to the Treasury

In fact, we made sure that the supplementary charge began to be reduced in the autumn statement in December, so the hon. Gentleman should catch up on his facts. The fact remains that the measures we are taking to support the industry—through the Wood review, the establishment of the Oil and Gas Authority, and decommissioning deeds and field allowances —have already created an environment that has seen very substantial investment in the North sea in the past few years. The point that my hon. Friend Sir Robert Smith made is right. Making sure that we have a climate for long-term investment is precisely what we are trying to do, and the hon. Gentleman will have to wait for the Budget for our decisions.

Photo of Anne Begg Anne Begg Chair, Work and Pensions Committee

What are the Government doing to encourage the offshore sector to co-operate and to have common standards as a better way of reducing costs in the supply chain than laying off the very people we will need when, I hope, things in the North sea begin to pick up again?

Photo of Danny Alexander Danny Alexander The Chief Secretary to the Treasury

The hon. Lady makes an important point about co-operation in the industry. It is precisely such co-operation that has led the Wood review to recommend and the Government to create the Oil and Gas Authority. We find that particularly in respect of the sensible and low-cost use of infrastructure in the North sea, where greater co-operation between fields and so on will help to reduce costs. That is one of the early challenges that Andy Samuel is getting to grips with at the Oil and Gas Authority, and I think he has the support of the whole House in doing so.