RISHI Sunak will jet to Aberdeen today to declare he wants more oil and gas from the North Sea – but his Chancellor might be about to deal the sector another heavy tax blow.
Writing in the Press & Journal ahead of his appearance at the Scottish Conservative conference, the Prime Minister said he wants to increase domestic production from the UKCS.
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However, industry leaders have hit out at reports that Chancellor Jeremy Hunt is considering extending the life of the windfall tax during next week’s Spring Budget.
According to a report from Energy Voice, the Chancellor is considering extending the levy, due to expire in March 2028, by another year.
The same report said the move is “low down the list of potential measures under consideration” – so it may not happen – and the Treasury didn’t respond to a request for comment.
Maintaining the energy levy for an extra year would increase the tax take in 2028-2029, the crucial fifth year of the OBR’s forecast horizon during which Hunt’s own fiscal rules state that the national debt must be falling.
However, Mr Sunak told the P&J: “Putin’s illegal invasion of Ukraine, and the soaring energy prices that followed, brought home the crucial importance of energy security to our national security.
“Scotland is at the heart of that, with North Sea energy helping to power our homes and drive our economy. I don’t want our young children to grow up to be dependent on foreign dictators for energy.
“I want more offshore wind, I want more nuclear power and, while we transition to more green energy, I want more oil and gas that comes from home – relying instead on imported liquified gas comes with up to four times the carbon emissions.”
Russell Borthwick, Chief Executive at Aberdeen & Grampian Chamber of Commerce, said the “confused” interventions underlined why there needs to be a seismic shift in how energy policy is drawn-up in the UK.
“The energy industry needs stability and confidence to invest — only under those conditions can we ensure a properly managed and successful transition to net zero,” he said.
“This confusing position from the Conservatives does not help. One the one hand we have the Prime Minister saying ‘I want more oil and gas’, and on the other we have Treasury officials briefing that they might increase the windfall tax next week.
“Earlier this week I wrote to the Chancellor calling for the removal of the Energy Profits Levy altogether. A ‘windfall tax’ may have been justified while windfall profits were being made. However, profitability has since returned to normal levels and it is high time we lifted this supertax which is already costing jobs and holding back investment just at the time we should be crowding it in to support carbon capture, offshore wind and other clean energy technologies. Maybe he’s not reading his mail.
“All of this underlines exactly why we need a new body, independent of government, setting long term strategy and fiscal policy for what energy we need today and how we move in the best way to a cleaner energy system. Like the Bank of England – which has maintaining monetary and fiscal stability as its central mission – this should be charged with developing recommendations which could command cross-party consensus and insulate the sector from political policy shocks in the future. Aberdeen and Grampian Chamber of Commerce has been calling for this since last year and have since been joined by a growing number of other powerful industry voices.
“Right now, we are at risk of the North Sea oil and gas industry being wound down through rhetoric, rather than strategic policy. If this continues unchecked, it will be as chaotic as it will be economically damaging. Discretionary capital will continue to move overseas, the transition will stall, jobs lost in their thousands and a world class supply chain built up over decades – much of it in the North-east of Scotland – will go.”
