§ I come now to North sea tax. The development of the North sea is a notable achievement of private enterprise and the result of a huge co-operative effort involving hundreds of companies and thousands of people. We want this to continue into the future, despite changes in oilfield economics. Tax is not the only factor in sustaining North sea potential. Steps taken by the industry to cut costs and the future level of oil prices will be at least as important. But the tax structure must adapt as well.
§ I am therefore proposing a substantially more favourable regime to assist the companies as they move on to develop new fields, and, in order to help finance new activity, a package of relief on current fields. The industry will benefit from these changes by more than £800 million over the next four years, starting with £115 million in 1983–84.
§ To encourage further exploration and appraisal, I propose immediate relief against petroleum revenue tax for expenditure incurred after today in searching for oil and appraising discovered reserves.
§ For future fields I propose two important new incentives. First, the oil allowance, which is the quantity of oil production exempted from PRT, will be doubled for such fields. Secondly, my right hon. Friend the Secretary of State for Energy will be taking steps to abolish royalties for these fields. The changes will apply to future fields where development consent has been given on or after 1 April 1982, with the exception of the relatively more profitable southern basin and onshore fields. I am ready to discuss with the industry whether there is a need to extend these incentives to the southern basin fields. If I were to be persuaded of the need, any extension would be backdated to development consents issued after today.
§ Most existing fields make good profits, but to improve current cash flow I have decided progressively to phase out advance petroleum revenue tax. As a start, the 20 per cent. rate will be reduced to 15 per cent. from 1 July, and APRT will disappear completely by the end of 1986.
§ An Inland Revenue press release will give further details, and also describe other proposed changes in oil taxation. They include, following the consultative document published last May, proposals on PRT reliefs for expenditure on shared assets such as pipelines, and for charging related receipts. The proposals will give significant additional relief on expenditure and will exempt tariffs on 500,000 tonnes of oil a year from each field using a pipeline. This will encourage the shared use of these assets.
§ I believe that my proposals will provide the industry with the right fiscal incentives for the further successful development of the country's North sea resources.