UK oil profits are largely an illusion

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In theory, it would be all too easy for the Chancellor to postpone the 2p increase in fuel duty. This year, the Institute for Fiscal Studies revealed, the Treasury will receive a windfall of about


In his Budget in March, the Chancellor’s estimates for revenues from the North Sea were based on the consensus view that the average price of oil over the next year would be $83.80 a barrel. Since then the price has touched $135, and independent observers forecast that the average price of oil over 2008-09 will be $103 a barrel. Tax revenues should increase commensurately in the UK’s petrol-economy.

But Britain is not Saudi Arabia, and the North Sea oil tax windfall is largely illusory. Every reduction of 1 per cent in the national income pushes public borrowing higher by some