Oil tax amendment likely to fail: MP who proposed softening of PRT changes will miss debate

SUPPORTERS of an amendment to soften the impact of proposed changes to North Sea oil taxation have accepted that it will be thrown out by MPs tomorrow, in part because its sponsor will be out of the country.

John Watts, Conservative member of the Finance Bill standing committee that considers Budget proposals, put forward an amendment extending the transition period for winding down PRT to three years and increasing the tax relief available from pounds 200m to pounds 500m, a move that could, its supporters say, save several thousand jobs in the oil industry. However Mr Watts, and another Tory sympathetic to the amendment, Quentin Davies, will not be present when it is discussed tomorrow.

The government majority on the committee is in any event slim and a spokewoman for the Association of Service Sector Oil-Related Companies (Assoc) said: 'We would see it as extremely unlikely that the Watts amendment would be voted in.' However, Assoc is hoping that there will be enough debate to persuade the Treasury to come back with new proposals at the final report stage next month.

There are already signs that the ranks of opponents to the PRT changes have been further split, following a Treasury concession announced last week. The Chancellor's original proposal was to abolish the tax completely for new fields, to reduce it from 75 per cent to 50 per cent for existing fields and to scrap the relief that went with it immediately. This created a furore among smaller exploration companies, which said the withdrawal of relief would force them to reduce their activity.

Last Wednesday the Government said tax relief would be extended to the end of next year, with a limit of pounds 10m per company. This was designed to give most relief to small British- owned companies. Peter Elwes, chief executive of the London-based independent Hardy Oil & Gas, said that the changes 'will make a quite a big difference. We expect to be able to use the relief in full.'

Last Friday, the Offshore Contractors Council, which has 50 members involved mainly in maintenance and modification work, publicly distanced itself from Assoc, saying that the PRT changes 'will have benefit for its member companies in the medium to long term'.