Britain will not reduce North Sea oil production to boost prices despite a near-halving of oil-tax revenues, the Conservative government said today in presenting the annual budget to Parliament.
The announcement amounted to a rejection of appeals by the Organization of Petroleum Exporting Countries to cooperate in reducing output to drive the price of oil higher.
OPEC is meeting in Geneva to devise a strategy aimed at dealing with the sagging oil market, in which the cost of oil has dropped 50% to about $15 in the past five months. Britain is not an OPEC member.
British Chancellor of the Exchequer Nigel Lawson told the House of Commons that there will be a 7-billion-pound deficit, equivalent to $10.22 billion, in the previously announced budget for the fiscal year starting in April of 139.1 billion pounds, equivalent to $203 billion.
'Can Live With' Price Crash
He said the crash in oil prices will cut Britain's oil-tax revenues to the equivalent of $8.76 billion in 1986-87, well below the anticipated $16.8 billion.
"I can live with that," he said.
"There is no overall United Kingdom interest in keeping oil prices high," Lawson said, in effect responding to OPEC's demands to cut production.
"There is no question whatsoever--and never has been any question--of the United Kingdom cutting back its oil production in an attempt to secure a higher oil price," he said.
But Lawson acknowledged that the Conservative government could not fulfill its promises of major tax cuts. He announced that the government cut the basic income tax by only one percentage point, setting the basic rate at 29%, down from 30%. Nonetheless, it was the first cut in the basic rate of tax since 1979.