Change windfall tax to make £137bn by 2050, Chancellor told
Chancellor Rachel Reeves has been urged to reform the windfall tax in a move that could boost the economy by £137bn by 2050.
Ahead of the start of its conference in Aberdeen this week, trade body Offshore Energy UK (OEUK) released a report claiming replacing the energy profits levy next year with a profits-based mechanism could increase investment and output in the North Sea.
The UK government has previously said the windfall tax – which currently sits at 38 per cent – would be scrapped in 2030, or potentially earlier if oil and gas firm profits fall below a certain level.
The replacement, OEUK has said, would be triggered by “unusually high prices” and would be levied against excess profits.
According to the body’s chief executive David Whitehouse, a failure to change could result in the oil and gas sector in the UK disappearing “within years, not decades”, while the country still relies on fossil fuels for energy.
“Our paper lays bare the choices facing the Chancellor when it comes to domestic oil and gas taxation.
“We are saying reform the energy profits levy to boost national energy production, investment, unlock 23,000 jobs, and add over £137bn to communities – or keep the tax, gain short-term revenue, and risk the North Sea industry’s collapse,” he said.
“Without changes to the fiscal regime, UK oil and gas could disappear within years, not decades. That’s a risk we cannot take.
“We have a range of credible sources showing we will need between 10-15 billion barrels of oil and gas while still meeting UK net zero goals.
“UK producers are only lined up to produce about 4 billion of those, and even that target is now at risk.
“Today, 85 per cent of homes are heated by gas, and while electric vehicle uptake is growing rapidly, around 23 million vehicles on our roads still rely on petrol and diesel.
“By making the most of our homegrown oil and gas while accelerating renewables, the UK can turn one of its greatest assets – the waters around its coast – into a strong driver of economic growth. We need both oil and gas and renewable energy.
“Changing the energy profits levy would allow UK oil and gas operators to continue paying higher taxes when prices are high, while giving them the confidence to invest, knowing those taxes will adjust fairly when prices drop.”
Ahead of the autumn budget, OEUK has said the announcements need “big ideas and ambition” to “build a homegrown energy future”.
The Treasury has been contacted for comment.
By David Hughes and David Lynch, PA