Caroline Lucas on BBC Question Time tonight

[clv101]

Upstream taxation: The UK Continental Shelf Tax Regime

Ring Fence Corporation Tax
With some important modifications (e.g. relating to capital allowances and losses), this is the standard corporation tax applicable to all companies, with the addition of a "ring fence" and 100% first year allowances for almost all capital expenditure. The ring fence prevents taxable profits from oil and gas extraction in the UK and UKCS being reduced by losses from other activities or by excessive interest payments by treating ring fenced activities as a separate trade. The current rate of corporation tax is 30%.

Supplementary Charge
This is an additional charge of 20% (10% prior to 1 January 2006) on a company's ring fence profits excluding finance costs. The supplementary charge was introduced from 17 April 2002.

Petroleum Revenue Tax (PRT)
This is a special tax on oil and gas production from the UK and UKCS. It is a field based tax charged on profits arising from individual oil fields. The current rate of PRT is 50%. PRT was abolished for all fields given development consent on or after on 16 March 1993. PRT is deductible as an expense against corporation tax and the supplementary charge.

[Totally_Baffled]

I thought big oil did get big tax breaks....?

Isnt the NS one of the lowest tax regimes in the world.....?

Nope; it's one of the highest.

Have you got a link to a league table for this? I would be interested how it compares to other producing regions?

The other thing of course to take into account, most of the world isnt accessible to big oil (only to NOC's) - so on that basis you could argue the NS tax regime is actually low!

[Totally_Baffled]

Going back to your question - although companies dont get specific tax breaks when not doing so well, there are examples of companies bailed out by the government or receive subsidies.

Examples that come to mind are banks (Northern Rock was bailed out), yet banks were subject to a windfall tax back in 2005?

Indeed many of the old utility companies received a hit from windfall tax, but I suspect they too would be bailed out if necessary in harder times.

I also think that many car manafacturers have been subsidised in the past?

And then there is the whole agricultural industry which has received gazillions in subsidies.

So I guess its all subjective, swings and roundabouts, and a matter of opinion?

What is your view Keepz?

[kenneal - lagger]

And then there is the whole agricultural industry which has received gazillions in subsidies.

That was only so that you could have artificially low food prices. Instead of paying for your food in the shop you paid in your taxes. Why? I don't know, ask an economist.

[Keepz]

Going back to your question - although companies dont get specific tax breaks when not doing so well, there are examples of companies bailed out by the government or receive subsidies.

Examples that come to mind are banks (Northern Rock was bailed out), yet banks were subject to a windfall tax back in 2005?

Indeed many of the old utility companies received a hit from windfall tax, but I suspect they too would be bailed out if necessary in harder times.

I also think that many car manafacturers have been subsidised in the past?

And then there is the whole agricultural industry which has received gazillions in subsidies.

So I guess its all subjective, swings and roundabouts, and a matter of opinion?

What is your view Keepz?

I object both to rewarding failure and to punishing success; and also to politicians thinking they know better than markets what is the "right" or "acceptable" price, or profit, or quality level for this or that industrial sector, individual business, good, service, job etc; and also to politicians who think they know better than I do, how I want my money spent.

[Adam1]

I object both to rewarding failure and to punishing success; and also to politicians thinking they know better than markets what is the "right" or "acceptable" price, or profit, or quality level for this or that industrial sector, individual business, good, service, job etc; and also to politicians who think they know better than I do, how I want my money spent.

Down on your feet everyone. Show respect to the market-god.

[Keepz]

Down on your feet everyone. Show respect to the market-god.

You can approve of market forces or not as you wish (hey, I'm as liberal and tolerant as anybody else ) but, like the laws of physics, they exist and you are far better off working with than against them, far less ignoring them, to achieve policy objectives.

[Totally_Baffled]

Keepz.

Believe it or not , I favour more free market principles, but however do you concede there are many examples of where the free market doesnt work so well?

Even the economics text books use phrases like "market failures" or "negative externalities" or "demerit" goods.

For example - a free market would not provide national defence, an NHS or street lighting? TThe only way to acheive this is tax and spend?

Examples of negative externalities is pollution. Without the punitive landfill taxes of the EU I suspect our recycling drive in the UK would never of got started (UK domestic waste has a recycling rate of over 30% now from 5% in the mid 90's)

As for demerit goods, the free market WOULD provide plenty of narcotics, but I am sure you wouldnt want your corner shop flogging cocaine or heroin to kids?

So like everything , there is a comprimise between a totally free market and a command economy. The answer is somewhere in the middle.

For me, the free market FAILS THE ENERGY INDUSTRY miserably because of the long lead times, and short termism.

Therefore there needs to be intervention by the state to encourage large companies like big oil to diversify into long term renewable projects in the light of FF depletion.

Otherwise surely we will arrive at a crisis way way before the free market can provide/implement the next best solution.

Just my 2 pence worth.

[Totally_Baffled]

Keepz.

Believe it or not , I favour more free market principles, but however do you concede there are many examples of where the free market doesnt work so well?

Even the economics text books use phrases like "market failures" or "negative externalities" or "demerit" goods.

For example - a free market would not provide national defence, an NHS or street lighting? TThe only way to acheive this is tax and spend?

Examples of negative externalities is pollution. Without the punitive landfill taxes of the EU I suspect our recycling drive in the UK would never of got started (UK domestic waste has a recycling rate of over 30% now from 5% in the mid 90's)

As for demerit goods, the free market WOULD provide plenty of narcotics, but I am sure you wouldnt want your corner shop flogging cocaine or heroin to kids?

So like everything , there is a comprimise between a totally free market and a command economy. The answer is somewhere in the middle.

For me, the free market FAILS THE ENERGY INDUSTRY miserably because of the long lead times, and short termism.

Therefore there needs to be intervention by the state to encourage large companies like big oil to diversify into long term renewable projects in the light of FF depletion.

Otherwise surely we will arrive at a crisis way way before the free market can provide/implement the next best solution.

Just my 2 pence worth.

[Totally_Baffled]

Keepz.

Believe it or not , I favour more free market principles, but however do you concede there are many examples of where the free market doesnt work so well?

Even the economics text books use phrases like "market failures" or "negative externalities" or "demerit" goods.

For example - a free market would not provide national defence, an NHS or street lighting? TThe only way to acheive this is tax and spend?

Examples of negative externalities is pollution. Without the punitive landfill taxes of the EU I suspect our recycling drive in the UK would never of got started (UK domestic waste has a recycling rate of over 30% now from 5% in the mid 90's)

As for demerit goods, the free market WOULD provide plenty of narcotics, but I am sure you wouldnt want your corner shop flogging cocaine or heroin to kids?

So like everything , there is a comprimise between a totally free market and a command economy. The answer is somewhere in the middle.

For me, the free market FAILS THE ENERGY INDUSTRY miserably because of the long lead times, and short termism.

Therefore there needs to be intervention by the state to encourage large companies like big oil to diversify into long term renewable projects in the light of FF depletion.

Otherwise surely we will arrive at a crisis way way before the free market can provide/implement the next best solution.

Just my 2 pence worth.

[Andy Hunt]

Great post TB. Heard you the first time though!!!

I too recognise the power of the free market, however I think there is some fairly woolly thinking being peddled by supposed free-market advocates around the place.

Market rule number 1: you can only sell what you can produce.
Rule number 2: if the cost of your raw materials goes up, it will make you less competitive. Cost inflation is the enemy of the free market.
Rule number 3: if your raw materials are unavailable, you are out of business.

So as the price of fossil fuels rises inexorably as they run out, so will the cost of construction of anything which uses fossil fuels as its construction energy source or raw material. Including nuclear and all renewables (except those made using renewable energy of course). This makes ALL energy infrastructure projects less competitive (renewables might have a slight edge) and threatens the free market in energy, and all markets which depend on energy, i.e. all markets, i.e. the world economy.

So subsidy actually works out cheaper than the costs of not thinking ahead. And actually serves to protect the free market (and thus the world economy) against price inflation.

It's either subsidy or the only technology we'll be able to muster is making a wood stove out of an old gas canister and a hacksaw. And THAT also goes for nuclear.

[Adam1]

Great post TB. Heard you the first time though!!!

I too recognise the power of the free market, however I think there is some fairly woolly thinking being peddled by supposed free-market advocates around the place.

Market rule number 1: you can only sell what you can produce.
Rule number 2: if the cost of your raw materials goes up, it will make you less competitive. Cost inflation is the enemy of the free market.
Rule number 3: if your raw materials are unavailable, you are out of business.

So as the price of fossil fuels rises inexorably as they run out, so will the cost of construction of anything which uses fossil fuels as its construction energy source or raw material. Including nuclear and all renewables (except those made using renewable energy of course). This makes ALL energy infrastructure projects less competitive (renewables might have a slight edge) and threatens the free market in energy, and all markets which depend on energy, i.e. all markets, i.e. the world economy.

So subsidy actually works out cheaper than the costs of not thinking ahead. And actually serves to protect the free market (and thus the world economy) against price inflation.

It's either subsidy or the only technology we'll be able to muster is making a wood stove out of an old gas canister and a hacksaw. And THAT also goes for nuclear.

Exactly.

You can approve of market forces or not as you wish (hey, I'm as liberal and tolerant as anybody else Laughing ) but, like the laws of physics, they exist and you are far better off working with than against them, far less ignoring them, to achieve policy objectives.

I couldn't resist a dig.

The market is a tool that we can and should where it's beneficial use. I just think our government, since 1979, has lost sight of that: blinded by their laissez-faire ideology.

BTW - I think there is something wrong with the site, causing postings to appear multiple times.

[Totally_Baffled]

BTW - I think there is something wrong with the site, causing postings to appear multiple times.

I think that might of been my fault, a bit trigger happy on the submit button

[RenewableCandy]

It's either subsidy or the only technology we'll be able to muster is making a wood stove out of an old gas canister and a hacksaw. And THAT also goes for nuclear.

I am going to take that as a challenge and make a nuclear reactor out of an old gas cannister, a fag-lighter-insides and a spot of glowing stuff my in-laws found while digging the spuds at their dacha.

Back to the free market. Sometimes it works, sometimes it doesn't.

There is no Demand for food in the Sudan

[/quote]