A backdated tax cut? Am I dreaming? The Budget was good news indeed.
Proclaiming eternal life for the UKCS was always above the Chancellor’s pay grade, but George Osborne’s headlines certainly help.
The devil will be in the detail, and no doubt there will be some surprises (and I’m not talking of a winter fuel allowance for 4×4 drivers).
Beyond his party’s faithful, for George Osborne the question is has he given enough to get your cross at May’s General Election?
Before we declare a National George Osborne Day, let’s see how it pans out. Like an Easter Egg, this budget is definitely chocolate on the outside.
But what’s inside? If it is just a thin shell the feel good factor won’t last past Easter Monday.
Confectionary fans are with me on this one. The real gift will be if it is enough to persuade the operators to make discretionary investment in the UK in these LOPE (Low Oil Price Environment) times. Without that there is an argument that UK PLC should have kept the taxes and reinvested them direct.
From a risk management perspective it won’t just be the lawyers who ask how long the tax breaks will last. Will they just inversely track the oil price – evaporating as the oil price goes up?
Particularly with a general election on the horizon, how far will this global industry trust the UK government? Building confidence in the UKCS needs to be a long term game. Maybe not eternal, but definitely long term. And don’t mention that new tax on diverted profits whilst I’m celebrating.
One of my greater career challenges has been asking a developing country for a 25 year tax agreement. Its Deputy Prime Minister was hospitable enough, but the outcome was ultimately more Thorntons than Fabergé. At least in the UK, if you were fortunate enough to get a project tax agreement, you shouldn’t need to ask for a “waiver of sovereign immunity”.
Such waivers are often needed to permit the enforcement of contractual claims against state assets abroad – notwithstanding “regime changes”…or general elections. Arresting a warship or inhibiting an embassy are not easy options.
However, if the alternative is making an unauthorised withdrawal from the equivalent of the Bank of England you will appreciate having the choice. Whilst the UK isn’t perfect, at least contracts with our government can be enforced.
Save for the heavenly, stability is always relative and investing in the UK’s looking relatively good to me at present, assuming this latest LOPE won’t last too long and we can get our costs down.
As the Spring Sun rises over the UKCS we can wish a Happy Easter to George Osborne, and its back to work to make sure of our own.
Peter Murray is a partner at Scottish law firm Ledingham Chalmers where he specialises in UK corporate law and international projects.
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