Is George Osborne right about the North Sea tax?

Labour argues that the windfall tax could be passed to customers – but this is not an effective line

George Osborne has said that the new windfall tax on oil companies will not be immediately passed on to motorists in higher fuel prices.

The Chancellor announced a £2bn levy on North Sea oil producers in yesterday's Budget to pay for a cut in fuel duty.

Labour's attack line was that there was nothing to stop oil companies from increasing prices and passing on the tax. The shadow chief secretary to the Treasury, Angela Eagle, made this case on Newsnight last night, while Ed Balls also criticised the move, asking on Radio 5 Live: "Will this immediately be passed back to customers?"

On Newsnight with Eagle last night, Danny Alexander argued that this would not be the case because petrol stations buy their oil on the global oil market, which is unaffected by the firms in the North Sea.

This morning on the Today programme, Osborne reiterated this point:

We've got an international oil market. The petrol that you put in your car doesn't just come from the North Sea, it comes from the Middle East, Russia and so on.

How confident can they be? Over at PoliticsHome, Paul Waugh has dug out the source of this information – a regulatory impact assessment carried out in 2006, the last time there was a tax rise on North Sea oil. This document says:

Oil companies are price-takers, facing a globally determined market price for their output, and so will absorb all costs. They will be unable to pass any costs on to consumers, and the impact will be distributed proportionately across producers with no adverse effects on competition.

It looks like Osborne is safe on this one, with another Labour line of attack stymied (ensuring that the banks would not benefit from the cut in corporation tax was another skilful move).

However, this certainly does not mean that the policy is watertight. Both Balls and Ed Miliband have pointed out that the penny cut in fuel duty is meaningless, given that the VAT hike in January already added 3p to the cost of petrol.

Waugh also notes that punters were complainin this morningg that petrol stations put prices up yesterday morning before taking a penny off last night. Osborne said he would be watching retailers "like a hawk" to stop any "funny business". He better get watching.

Samira Shackle is a freelance journalist, who tweets @samirashackle. She was formerly a staff writer for the New Statesman.

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Why Ukip might not be dead just yet

Nigel Farage's party might have a second act in it. 

Remember Ukip? Their former leader Nigel Farage is carving out a living as a radio shock jock and part-time film critic. The party is currently midway through a leadership election to replace Paul Nuttall, who quit his post following their disastrous showing at the general election.

They are already facing increasing financial pressure thanks to the loss of short money and, now they no longer have any MPs, their parliamentary office in Westminster, too. There may be bigger blows to come. In March 2019, their 24 MEPs will all lose their posts when Britain leaves the European Union, denying another source of funding. In May 2021, if Ukip’s disastrous showing in the general election is echoed in the Welsh Assembly, the last significant group of full-time Ukip politicians will lose their seats.

To make matters worse, the party could be badly split if Anne-Marie Waters, the founder of Sharia Watch, is elected leader, as many of the party’s MEPs have vowed to quit if she wins or is appointed deputy leader by the expected winner, Peter Whittle.

Yet when you talk to Ukip officials or politicians, they aren’t despairing, yet. 

Because paradoxically, they agree with Remainers: Theresa May’s Brexit deal will disappoint. Any deal including a "divorce bill" – which any deal will include – will fall short of May's rhetoric at the start of negotiations. "People are willing to have a little turbulence," says one senior figure about any economic fallout, "but not if you tell them you haven't. We saw that with Brown and the end of boom and bust. That'll be where the government is in March 2019."

They believe if Ukip can survive as a going concern until March 2019, then they will be well-placed for a revival. 

Stephen Bush is special correspondent at the New Statesman. His daily briefing, Morning Call, provides a quick and essential guide to domestic and global politics.