There was more bad news for George – “I forgot to mend the roof when the sun was shining” – Osborne today as North Sea tax receipts plummeted.
North Sea oil and gas have been the backbone of the UK economy for the last three decades. But production peaked in 1999; and despite a small increase last year, production today is only a third of peak output. One consequence has been the gradual decline in the taxes that flow into the UK Treasury. Just four years ago, the Treasury received £11bn in taxes from the North Sea. In 2014/15 this slumped to £2bn. In 2015/16 it has fallen to just £35m as a result of government tax rebates designed to keep what remains of the North Sea energy industry in production.
Coming on the back of a slump in UK manufacturing, an increase in unemployment, a record current account deficit and rising government borrowing, the loss of the North Sea cash-cow will make for grim reading in the Osborne household.
As the North Sea energy industry collapses, the UK becomes increasingly dependent upon oil and gas imports… imports that are expected to spike in price next year. This amounts to a double-whammy for the Chancellor, as businesses are forced to spend more on energy; further reducing the amount of tax available to the government.