Energy industry leaders have warned that a new tax on North Sea oil and gas profits, proposed by Chancellor John Healey, would cause lasting damage to Britain’s sector. The warning comes as the government considers extending the existing windfall levy, which currently taxes profits at 78% and was previously extended by former Chancellor Rachel Reeves from 2028 to 2030. Under a more punitive regime, the levy could be increased and extended beyond 2030, according to a report in The Telegraph.
Russell Borthwick, chief executive of the Aberdeen Chamber of Commerce, which represents companies including BP and Shell, stated that “another tax raid would cripple an industry that Britain cannot afford to lose.”
In a letter to the Chancellor, Mr Borthwick warned that “the stakes could hardly be higher for the struggling offshore sector”, noting that “highly skilled jobs are already being lost, investment is leaving the country, and businesses with decades of expertise in the North Sea are facing difficult decisions about their future.” He urged the Chancellor “to immediately quash speculation of a tax raid, which he said risks doing lasting damage.”
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Enrique Cornejo, policy director at Offshore Energies UK, also cautioned against piling more pressure on the industry. Mr Cornejo said “any further changes to the fiscal regime would severely undermine investor confidence and energy security, accelerate job losses, and create a damaging cliff edge for domestic production.”
The possible windfall tax on oil and gas comes alongside a potential levy on banks, as the Chancellor seeks to raise billions for public spending in his first Budget. Such taxes would target inflated profits generated from the Iran war, which has driven up oil and gas prices and increased borrowing costs.
The plans emerge amid ongoing licensing battles for the Jackdaw gas field in the North Sea and the Rosebank field west of Shetland, which together could boost UK gas production by nearly 10%. The decision to approve these projects will be made by Energy Secretary Miatta Fahnbulleh, who succeeded Ed Miliband after Andy Burnham came to power. The new Prime Minister has promised a pragmatic approach to new drilling in the North Sea.
