British government defends tax raid on North Sea oil sector

24th March 2011, Comments 0 comments

British finance minister George Osborne on Thursday defended his tax raid on North Sea oil companies and warned them not to pass on the hike in the form of higher fuel prices.

Chancellor of the Exchequer Osborne spoke one day after he lifted the tax rate on oil companies in his second annual budget to finance lower petrol duty for motorists, who have been hit by the soaring cost of oil.

Osborne cut one pence per litre on fuel duty and paid for the measure with the North Sea oil tax hike that will raise about £2 billion ($3.3 billion, 2.3 billion euros) for the state coffers.

The tax rate has risen from 20 percent to 32 percent -- but the increase will be scaled back if global oil prices slide underneath $75 per barrel.

"We will be watching like a hawk to make sure that motorists get the benefit of the budget changes and make sure that there's no funny business," the chancellor told the Daybreak television programme on the ITV channel.

Questioned about whether he could prevent the tax increase being passed on in the form of higher fuel prices, he replied: "I'm not in control of the world's oil price unfortunately. What I am in control of are the taxes that go onto oil in Britain, in other words the duty that gets levied at the petrol station."

The chancellor added: "I'm not pretending that this is going to transform the situation overnight for families who are feeling the squeeze, but it helps."

Separately, Malcolm Webb, boss of industry body Oil and Gas UK, denied that companies would pass on the increase to motorists.

"Oil is an internationally traded commodity. This is a direct squeeze on the incomes of the oil companies. It won't affect the consumer at the pump at all," he told BBC Radio.

Osborne, delivering his second annual budget on Wednesday, had said that the coalition government had "put fuel into the tank of the British economy".

However, he was also forced to tear up his optimistic forecasts for growth. The British economy is now expected to expand by 1.7 percent this year, down from the previous forecast of 2.1 percent.

© 2011 AFP

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