Osborne, Laffer & the Cost of Black Gold Populism

As you’d expect, Brother Hoskin offers a fair summary of George Osborne’s difficulties with fuel duty. Osborne, backed it should be said by Danny Alexander, decided to pay for his fuel policies by levying additional taxes on North Sea oil production. How’s that worked out? Entirely predictably: North Sea Oil production fell by 18% last year* – the biggest fall ever. By some estimates, this cost the Treasury more than £2bn in lost oil revenues and thus, probably, rather more cash than Osborne planned to raise from his increased taxes on oil and gas.

Moreover, there was just half as much new exploration in 2011 as there was in 2010 as companies scampered away from Osborne’s penalising new taxes. According to Malcolm Webb, CEO of Oil & Gas UK:

It is becoming very clear that in order to stand still – let alone make progress in this basin – you have to keep running faster all the time.