Chancellor George Osborne addressing the House of Commons as he presents the Budget

Industry warns oil firm tax will cause cutbacks including job losses

A windfall tax on North Sea oil firm profits will effect operations and cause cutbacks, including job losses, the industry says.

But the £2 billion charge - which will fund a 1p per litre drop in fuel duty announced in yesterday's Budget - would not be passed on at the petrol pump, it said, after Chancellor George Osborne warned he was watching “like a hawk”.

Oil and Gas UK chief executive Malcolm Webb said the windfall tax was a “direct squeeze” on the industry - which operated in a global market - but would not lead to higher pump prices. “It won't affect the consumer at the pump at all,” he told the BBC Radio 4 Today programme.

There would however be a “depressant” effect on operations, he said – 45 per cent of which involved gas not oil - apparently at odds with the Chancellor's efforts to stimulate economic recovery.

“It is going to have a depressant effect in our basin, we are going to lose jobs, we are going to lose production. That means we will be importing more oil and gas over time too.

“Here was an industry that was going to be very positive for recovery - it won't be anywhere near as positive now,” he said.

Osborne said the Government would 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”.

“I'm not pretending that this is going to transform the situation overnight for families who are feeling the squeeze, but it helps,” he told ITV's Daybreak.

Osborne insisted it was “economically smart” to increase the levy and redistribute money in the system “into the hands of families”.

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