Chancellor urged to use Autumn Statement to scrap windfall tax

22/11/2023

JEREMY Hunt is being urged to boost North Sea production by scrapping the windfall tax in his Autumn Statement today.

All eyes will be on the House of Commons this afternoon as the Chancellor unveils what is being billed as the biggest business tax cut in half a century.

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Aberdeen & Grampian Chamber of Commerce and the British Chambers of Commerce have jointly called for government to unlock investment and protect jobs in the oil and gas sector by scrapping or dramatically reforming the Energy Profits Levy.

Mr Hunt is expected to put boosting economic growth at the heart of his statement with a series of measures designed to encourage investment.

The Chancellor will permanently extend “full expensing”, which allows companies to claim back up to 25p for every pound invested and which had been due to end in March 2026.

Mr Hunt will celebrate the move as the biggest business tax cut in modern history, a claim based on analysis of a Treasury database dating back to 1970.

He is also expected to announce measures that will speed up access to the National Grid, although no details have been previewed.

Meanwhile, the Treasury is closely guarding which personal tax cuts would be unveiled in the statement. National Insurance is expected to be cut, in what would be a boost to 28 million people, with income tax reductions also being explored.

According to a briefing in the Telegraph, the Chancellor will say: “In today’s Autumn Statement for growth, the Conservatives will reject big government, high spending and high tax because we know that leads to less growth, not more.

“Instead, we will back British business with 110 growth measures to remove planning red tape, speed up access to the National Grid, support entrepreneurs raising capital, get behind our fastest-growing industries, unlock foreign direct investment, boost productivity, reform welfare, level up opportunity to every corner of the country and cut business taxes.”

There has been no news yet on whether Mr Hunt will adjust North Sea taxation, having seen the sector generate more than £20billion in tax receipts over the past year.

The heavy tax burden has resulted in more than 500 job losses in the North-east of Scotland, as well as a the collapse of a number of deals.

Aberdeen & Grampian Chamber of Commerce and the British Chambers of Commerce want to see reform.

Ryan Crighton, Policy Director at AGCC, said: “We welcome the UK Government’s recent commitment to continued oil and gas production in the North Sea to enhance our domestic energy security.

“However, there is compelling evidence that the Energy Profits Levy (EPL) is having a detrimental impact on investment in the UK Coastal Shelf, (UKCS) and thus undermining the government’s policy goals. Our recent Energy Transition Survey highlighted that confidence in the UK sector is at a record low, and clearly deviating from other basins.

“There is clear evidence from those in the energy sector that discretionary capital is moving elsewhere due to the severity and duration of the tax. The experience of operators also suggests that under traditional reserve-based lending mechanisms, the UKCS has become ‘uninvestible’ for many. 

“The introduction of a price floor, though welcome, has not made a practical difference to the investment environment, because the average price has been set at $71.40 per barrel for oil, a level which is unlikely to be triggered. The 20-year average figure used to set the current price floor is not inflation adjusted. If it was, the 20-year average would be $94 per barrel. 

“We urge the UK Government to remove the Energy Profits Levy to secure the investment required in the energy sector to enhance our energy security today, and to help fund the new technologies of tomorrow. 

“If the EPL is to remain until 2028, as per current government policy, then two policy changes are recommended. First, the investment allowance attached to the EPL must be retained and widened to include low carbon related activities that will help accelerate the energy transition. Second, the trigger price for the levy to fall away needs to be adjusted for inflation.”

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