Financial Times: Oil industry braced for new tax in pre-Budget report: “The likelihood of Mr Brown taking such action intensified in the autumn after Shell reported a 68 per cent increase in third-quarter profits and BP a 27 per cent rise on the back of surging oil prices. Together, the companies reported third-quarter returns of close to £6bn.”: Monday 5 December 2005
By James Blitz and Chris Giles
Gordon Brown will on Monday unveil a pre-Budget report that aims to boost the level of affordable housing across the UK as part of Labour’s manifesto bid to create a million more homeowners.
But although the chancellor will use the PBR to announce a string of measures to assist poorer families, there are strong expectations he will do so by imposing a new tax on oil companies, which have enjoyed a big jump in profits in 2005.
In his spring Budget, Mr Brown levied an additional £1bn on the North Sea oil industry, channelling the cash into measures to assist pensioners and the poorest groups in society.
The oil industry has expressed growing anxiety in recent weeks that Mr Brown will make a similar move today.
Malcolm Webb, chief executive of the UK Offshore Operators Association, said a tax hit could drive resources to the Gulf of Mexico, Africa and the Caspian.
“The country would pay dearly in the long-term for what would be, at best, a short-term gain,” he said.
The likelihood of Mr Brown taking such action intensified in the autumn after Shell reported a 68 per cent increase in third-quarter profits and BP a 27 per cent rise on the back of surging oil prices. Together, the companies reported third-quarter returns of close to £6bn.
Mr Brown is set to come under strong pressure to defend his position on the public finances as he prepares almost to halve his forecast for UK economic growth – originally put at 3-3.5 per cent – for 2005.
He intends to put up a staunch defence of his growth forecast, arguing that a big revision to the pattern of economic growth in 2004 forced his hand.
But he is likely to have to concede that he will not hit his borrowing forecast for the fifth year running as tax revenues are again falling short and public expenditure is unlikely to come in below his plans.
The PBR is certain to bolster Mr Brown’s following among Labour MPs by spelling out a string of measures to help poorer families.
On housing, Mr Brown is set to announce an increase in shared equity schemes, which help families buying a first property.
He will announce that HBOS and the Nationwide are to enter into shared equity schemes with the government. Britain’s four biggest home builders – Lovell, Barratt, Bellway and Redrow – will enter into such schemes with families.
On tax credits, the chancellor will spend money bailing out his flagship credits scheme for low income families.
At present, families’ incomes can rise by £2,500 a year before HM Revenue and Customs tries to claw back any overpayment. That figure will be raised, reducing at a stroke the number of families in debt to HMRC.
On council tax, Mr Brown is expected to announce that better-than-expected funding for local authorities will help to keep the levy down. In return, local authorities will be ordered to keep any increases in council tax bills for 2006-07 at less than 5 per cent.
Monday’s PBR comes the day before the almost-certain election of David Cameron as the new Conservative leader.
Mr Brown aims to portray Labour as getting on with tackling the UK’s long-term economic problems while the Tories are distracted by “rebranding” their image under a new leader.
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