Gordon Brown fended off attacks from the oil industry yesterday about his £2bn-a-year raid on North Sea profits and mounted a staunch defence of his handling of the economy. He denied claims by oil producers that the new tax, announced in the pre-Budget report, would do permanent damage to UK oil and gas reserves.
Malcolm Webb, chief executive of the UK Offshore Operators Association, said he was "staggered" that the Chancellor had increased corporation tax on the oil industry to 50 per cent. He said the move would take £6.5bn out of the industry over three years and warned that it would "cost this country heavily in terms of jobs, inward investment, balance of trade, security of supply and ultimate tax revenues. It can only have a depressant effect on investment in UK oil and gas."
Mr Brown told the BBC during a round of interviews about Monday's pre-Budget report that he had used the increase in oil company taxation to fund the freezing of petrol duty and pay for extra help for pensioners.
Dismissing the claims of the oil industry, he said: "You would expect that to be said, of course, by the pressure group. The fact is that over the last two years, the oil price has moved from an average of $25 to $55. That has meant that the oil producers have had a huge increase in the profits that are available to them.
"The balance has to be struck between the consumers who pay for fuel and heating and the producers. In striking that balance, I think I have done it in a fair way, so we can freeze fuel prices this year, we can give pensioners a winter fuel allowance each year of the coming parliament, we can bring in new incentives for energy efficiency and for environmentally efficient fuel.
"All of these things have been possible, including an insulation and central heating programme for all pensioner households. I think that is the right way to do it, when people are facing higher energy costs."
Mr Brown insisted that the economy remained "in good shape" despite being forced to halve his growth forecasts in the pre-Budget report.
He said: "We have had a global challenge and a domestic challenge, one that we did not anticipate hitting the economy simultaneously. I think at the end of the year with inflation lower than it is in other countries where it used to get out of control in Britain, where interest rates have managed to come down when they have gone up in other countries, we are actually in a better position for the future."
Private pension and investment companies also expressed anger that Mr Brown had cancelled plans to allow people to claim tax relief on second homes, fine wines and other valuables bought as pension investments, known as the Self-Invested Personal Pensions (Sipps) scheme.
Chris Huhne, the Liberal Democrat treasury spokesman, said Mr Brown had wasted thousands of hours of taxpayers' time by failing to act earlier. He said: "Now we have a perfectly executed 180-degree U-turn taking on board everything that we said. The change is better late than never, but it betrays a negligent attitude among treasury ministers to a problem that was staring them in the face."Reuse content