THE UK’s oil and gas industry, many of whom are based in Aberdeen, will pay £7.8 billion in taxes this year – a significant boost for the UK Treasury and roughly equal to 1% of the nation’s entire tax revenue, according to Offshore Energies UK (OEUK).
Setting out the sector’s latest response to the cost-of-living crisis caused by the global surge in energy prices and concerns over the consequences, OEUK cites predictions by the Office for Budget Responsibility (OBR), which estimates the industry will make £7.8bn in tax payments for 2022-23, equivalent to about £279 per UK household.
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This also represents a 20-fold increase on 2020-21. Back then, plummeting demand and prices saw most energy companies make multi-billion-pound losses, contributing to a UK tax take of just £400m from the UK offshore oil and gas sector.
The recent surge in global energy prices has reversed that trend. Nonetheless, the UK’s offshore operators pay a tax rate of 40% – the highest rate of any industry – making the Exchequer among the biggest beneficiaries already. Over the last 50 years the industry has paid more than £375bn in production taxes, which is equivalent to the annual salary of more than 14m newly qualified nurses.
This tax contribution comes on top of research conducted by OEUK in 2021 which found that the oil and gas industry contributes £18.2bn Gross Value Added (GVA) to the economy of North East Scotland, providing jobs for 64,000 people across the region. Across the whole of Scotland, the sector creates a total of 71,500 jobs and generates £19.4bn in GVA for Scotland – the equivalent to around 12% of Scotland’s GDP.
Deirdre Michie, OEUK’s chief executive, said: “We are deeply concerned about the difficult circumstances facing UK consumers and our industry is committed to supporting the nation now and building a low-carbon future.”
“We are proud that we are able to help by contributing a predicted £7.8 billion in UK taxes this year alone. Those payments, equivalent to £279 per home, can help the government soften the pressure for households. This year is not a one-off. Between 2021 and 2026-27 the OBR predicts our industry will pay around £23 billion in UK tax.”
“This also shows the wider value of our industry to the country. Many European countries are facing energy shortages and the risk of energy rationing. The UK’s offshore resources, oil, gas and offshore wind, are helping protect us from similar crises. They boost our energy security as well as the Exchequer.”
“Our industry and its supply chains also support 195,000 workers – whose skills are going to be essential in building the low-carbon and renewable energy systems that will enable the UK to reach net zero.”
“These are huge long-term investments with many risks, especially around swings in the prices of gas and oil. The downturn in 2020/21, for example, saw many of our members incurring significant losses.”
“That is why our industry puts a premium on stability and predictability in the ways it is taxed and regulated. Tax increases make it more expensive to borrow money for big projects – and that can make them unviable. It’s why periods of fiscal stability are associated with increased investment, whereas sudden tax increases are often followed by decreased investment.”
“Energy security should now be seen as part of national security. We look forward to supporting the UK on its path to a more secure and lower-carbon future – and to the government’s continuing support for our industry.”
