Osborne’s great North Sea blunder

 
Allister Heath
IT is now clear that George Osborne’s biggest error in his Budget was his savage raid on North Sea oil and gas firms. The additional tax on the sector was hiked from 20 to 32 per cent. Some fields, which pay petroleum revenue tax as well as corporation tax, face a marginal tax rate of 81 per cent. Unsurprisingly, several important firms are reconsidering whether it is worth the hassle developing new fields, while others may even quit the UK entirely, cutting jobs and reducing GDP growth. Osborne made two errors. The first was to make no distinction between oil and gas, hammering both – yet the point was supposedly to use the proceeds to cut the tax on petrol. What have gas firms go to do with this? The second was to misunderstand how companies operate: sure, they are still making profits from the North Sea, despite the tax, thanks to high energy prices – but that misses the point. Companies need to maximise returns on capital invested, and it now makes more sense for them to operate fields in lower taxed jurisdictions where post-tax returns are higher. What a bizarre blunder.

OBAMA’S PR WOES
It had started so well: a brilliant, breathtaking military operation deep into Pakistan, culminating in the swift execution of Osama bin Laden, and the seizure of much useful intelligence material, dealing global terrorism its greatest blow in years. Since that moment of triumph, it has been downhill all the way for Barack Obama’s administration, however. The story of bin Laden’s last moments has kept on changing, with the White House eventually admitting that most of the key details originally briefed have turned out to be wrong. Other parts of the story have also changed repeatedly – and last night, after numerous contradictory signals and hints, Obama announced that he would not, after all, be releasing a picture of bin Laden.

This is a mistake: granted, the pictures would be gruesome but the administration’s refusal to publish them or to provide any corroborating evidence of bin Laden’s death and burial is fuelling support for various ridiculous and even deranged conspiracy theories. Depressingly, this is especially the case in many Asian and Middle Eastern countries, but also in the UK and the West. Some images have emerged: photographs acquired by Reuters and taken about an hour after the assault on Abbottabad show three dead men lying in pools of blood, but no weapons – and obviously no bin Laden, as he had already been removed by US special forces.

Sometimes, public relations blunders can turn operational triumphs into real disasters. It won’t be that bad this time around: Bin Laden is clearly dead and Obama’s poll ratings have surged in the US. But the White House is bizarrely gauche and flat-footed when it comes to handling global opinion, making the kinds of blunders that even the Bush administration would have avoided. Unless it sharpens up fast, its behaviour during the past few days will soon become a case study into how not to do PR.

VOTE NO TO AV TODAY
IF you haven’t voted yet in today’s referendum on changing the voting system, it still isn’t too late. The complex, costly and eccentric system on offer is worse than the one we currently have. So take a trip to the voting booths, which are open until 10pm tonight – and vote No to AV.

allister.heath@cityam.com

Follow me on Twitter: @allisterheath