§ I have spoken of the oil duties: I now turn to the oilfields. The development of the North Sea has been a story of success, which is almost entirely due to the skill and enterprise displayed, and risks accepted, by the private sector. As a nation, we must never forget the great debt that we owe to those on the oil rigs and elsewhere, who have been responsible for exploration and development. It is important for them as well as for the British people that the rewards should be fairly shared.
§ Last year, in the light of the massive increase in oil prices which had occurred in earlier years, we changed the structure of North Sea tax, to make it more responsive to changes in price. At the same time tax revenue from the North Sea was brought forward, with an increase in the total level of taxation. I also invited the industry to suggest better ways of raising the revenue that we needed. I am grateful to it and others who have commented for their careful and considered response.
§ As I have mentioned, the current fall in oil prices reduces the revenue that the Exchequer receives. I recognise that it reduces the revenues of the oil companies as well—but it also reduces the tax that they have to pay.
§ Detailed study has convinced me that, subject to some marginal adjustment, the total tax burden is not such as to discourage exploration or development. Nor is it so high as to deprive the oil industry of a reasonable, and often attractive, yield. In these circumstances, I cannot reduce the overall tax burden to the extent that the industry would have wished. But I do agree with it on the need for some change of structure. I see, in particular, the advantage of profit-related taxes in relation to additional investment in existing fields. The supplementary petroleum duty will therefore be abolished with effect from the end of this calendar year.
§ I propose at the same time that the rate of petroleum revenue tax should be increased from 70 to 75 per cent. and that arrangements should be introduced for advancing PRT payments. Advance payments of PRT, although computed in the same way as SPD, will not be a separate tax, but simply an acceleration of the existing tax. They will thus differ fundamentally from SPD in being fully set off without limit against ordinary PRT liabilities when these arise. This structural change is one which representatives of the industry have proposed. As from mid-1983 there will also be a monthly instalment system of payment of PRT in order to secure a smoother public sector cash flow.
§ These changes will not affect the revenue yield of rather over £6 billion in the coming year. But in 1983–84 there will be a net cost, after allowing for the saving in interest due to the new system of instalment payments, of some £70 million.
§ I have spoken earlier about current uncertainties in relation to oil prices and the future yield of tax from the North Sea. But I am aware of the concern felt by the industry about the number of changes in the regime there have been in recent years. For this reason, my hope is that the new tax structure that I have proposed will provide a more secure and stable regime for the future, permitting development to go ahead uninhibited by major fiscal uncertainties.
§ I propose a number of other minor changes, partly in response to the views put forward by the industry. And I propose that regional development grants paid in respect 746 of expenditure incurred after Budget day should be taken into account for the purposes of PRT and ring fence corporation tax. We shall also need to legislate next year to deal with certain special problems affecting PRT expenditure reliefs, pipeline tariffs, and other non-oil receipts. These will be the subject of a consultation document which will be issued shortly.
§ These fiscal measures, combined with the decisions that we have already announced on the abolition of the State's sole right to buy gas, and on the creation of the new private sector oil company, will provide a sound basis for another decade of successful enterprise in the North Sea.
§ I turn now from the energy industry to its industrial customers, to whose problems we have given a great deal of attention in recent years.