A few ill-thought out ideas from opposite ends of the political spectrum.
From the BBC:
[Gordon Brown] suggested a number of measures that he claimed could help the industry, including;
* A North Sea reserve to maintain and upgrade essential infrastructure and to provide "last-resort" debt finance for companies who want to keep fields open.
* UK government co-investment through public-private partnerships.
* Government loans.
* Advance purchase agreements.
Yup, nationalise it and subsidise it; he doesn't appear to have mentioned tax cuts.
And from City AM:
Deep tax cuts are the way to go. Nothing less than a double digit cut or the elimination of the supplementary charge will achieve the necessary level of impact. The Basin needs help now, or much of it could disappear if the oil price stays at these levels for a number of years...
Rather reassuringly, the article also tells us that extraction costs are £18.50 ($28.50) per barrel, only half the current oil price, so there's still plenty to play for. Most of his special pleading is hokum, but here's the interesting bit:
And if policymakers want to be really radical, there is always the option of introducing production sharing contracts for North Sea exploration.
The UK is out of step with many other oil producing countries, where these arrangements are a standard alternative to our tax and royalty system. In essence, these contracts between governments and extraction companies guarantee a minimum and maximum return on capital, giving companies more financial certainty and governments more tax revenues.
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In outline, the original 1970s system for North Sea oil taxation was quite Georgist. Capital expenditure was allowed as incurred, none of this capital allowance nonsense, which minimised downside risk) but the corporation tax rate was very high. Norway and The Netherlands have stuck with this, quite successfully.
So oil companies ended up with a fair return on capital and the government kept most of the 'rent' or the 'free gift of nature' i.e. the excess of market price over extraction costs.
Interestingly, both Brown and the vested interest guy are stumbling in the right i.e. Georgist, direction, which is to abandon all current taxes on North Sea oil producers and for the government to enter into fixed-price agreements with them to purchase oil for (say) $40 a barrel.
This gives the oil companies incentives (the price would be set by however much they bid at a reverse auction) and certainty; and the government gets the freebie. It also gets the upside and the downside of oil price fluctuations, but as oil revenues are only a very small part of UK tax revenues, that scarcely matters.
Whether the government would get more or less 'tax' under such a system is neither here nor there, it would be getting the right amount of tax and that is what matters.
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