The move has been taken to pay for a reduction in petrol and diesel costs for motorists in response to a recent rise in oil prices globally.

The government will also abolish the fuel duty escalator and replace it with a fair fuel stabilizer and lower tax on gasoline pump prices by one penny a liter.

Osborne said that the supplementary charge levied on oil and gas production will increase to 32% and will be scaled back to 20%, if the oil price falls in future.

UK’s offshore oil and gas industry has warned that the tax increase will deter investment in the North Sea and raise dependence on imports.

The new tax rates will result in an estimated £2bn ($3.2bn) in additional tax revenue from oil and gas production, according to BBC.