Economic Report 2019

3.4 Fiscal Contribution As well as the wider contribution to the economy, the industry is a significant source of revenue for the UK Exchequer. More than £350 billion (in 2018 money) has been paid in direct production taxes over the last 50 years, with more still to come. Although the UKCS is a mature basin, it still contributed £1.2 billion in each of the financial years 2017–18 and 2018–19, and the Office for Budget Responsibility (OBR) forecasts that net production tax payments by industry will amount to more than £8.5 billion over the next five years.

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Figure 5: UK Oil and Gas Industry Direct Fiscal Contribution

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Other Direct Taxes Ring-Fenced Corporation Tax/Supplementary Charge

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Petroleum Revenue Tax Forecast Tax Revenue

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24

19

5

14

9

6

4 Tax Payments (£Billion - 2018 Money)

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1968-69

1970-71

1972-73

1974-75

1976-77

1978-79

1980-81

1982-83

1984-85

1986-87

1988-89

1990-91

1992-93

1994-95

1996-97

1998-99

2000-01

2002-03

2004-05

2006-07

2008-09

2010-11

2012-13

2014-15

2016-17

2018-19

2020-21 Source: OBR

2022-23

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The continued stability and predictability of the fiscal regime are core components of the competitiveness and attractiveness of the UK as an investment proposition in this global industry. HM Treasury’s continued support through its Driving investment: a plan to reform the oil and gas fiscal regime 3 has been fundamental to restoring and building investor confidence. Recognising the increasing maturity of the basin, the changes to the fiscal regime will help ensure the UK oil and gas industry remains a vital economic asset in the years to come. This is an industry with a long investment cycle, and it is crucial that this stability continues throughout governmental and political change. Industry is committed to the tripartite arrangement with government and regulators and would like to see this constructive work continue to further improve the UK’s competitive advantage. Fiscal stability is also important to the investment plans of supply chain companies operating in the UK. A more attractive landscape for E&P companies enables supply chain companies to invest in new capacity, resources and research and development (R&D) with greater certainty, due to higher confidence that they will secure the required return on their investment. Building this capacity will also help to ensure a sustainable cost base for all areas of industry is maintained.

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3 https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/382785/PU1721_ Driving_investment_-_a_plan_to_reform_the_oil_and_gas_fiscal_regime.pdf

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