When is a subsidy not a subsidy?
May 2, 2012
Bishop Hill in Energy: oil, Tax

Left Foot Forward has an article by a trades unionist bemoaning Shell's decision to pull the plug on its North Sea wind projects.

Firstly, with a 16% surge in three months profits to £4.5bn, why do companies like this need the coalition’s £3 billlion subsidy for oil and gas exploration off the Shetlands?

Secondly, is the company’s finance director right to criticise the ‘vast amount of public subsidies going into renewables’ when the government already subsidises fossil fuels by £3.63bn a year, mostly in the form of VAT breaks?

This is quite extraordinarily silly, even by Left Foot Forward standards. The chancellor is trying to encourage oil companies to open new oil fields as quickly as possible, because then they will make even more profit and pay even more tax. The incentives for exploration off Shetland are more to do with the Chancellor's needs than those of the oil companies.

Moreover, the "£3 billion subsidy" is in fact nothing of the sort. As well as paying corporation tax, oil companies have to pay the Supplementary Charge, an extra whack of taxation charged simply because they are an oil company. The Shetland "field allowance" reduces the profits subject to this extra tax for new fields in that area. So what Left Foot Forward calls a "subsidy" is in fact a partial levelling of the playing field with other parts of the energy sector and indeed with other industry sectors.

I've observed from time to time the remarkable number of occasions on which an argument put forward by a left-wing political activist involves an abuse of the English language. This is yet another of those occasions.

Finally, I should also point out that the £3.63 billion of VAT breaks are of course also available to the renewables sector, because VAT is charged on electricity regardless of source.

From beginning to end, the Left Foot Forward article is a demand for special treatment disguised by misleading language and misleading figures. Why do people think they can get away with this kind of thing?

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