Labour will ‘risk 35,000 jobs’ with oil and gas windfall tax hike

Labour will raise less money from the North Sea and put 35,000 jobs at risk if it hikes windfall tax rates for oil and gas developers, an industry lobby group has claimed.
The new government has signalled that it will increase the levy first imposed by Boris Johnson in 2022 as energy prices soared after President Putin’s full-scale invasion of Ukraine.
Ministers are talking about putting up the headline tax rate on upstream oil and gas activities from 75 per cent to 78 per cent on November 1 — and scrapping what they see as “unjustifiably generous” allowances. Before the election Ed Miliband, now the energy secretary, said the current regime had “more holes than Swiss cheese”.
He has argued that revenue from “proper windfall taxes” could go to help create its much-mooted £8 billion Scottish-headquartered GB Energy. But Offshore Energies UK, which represents North Sea producers, says the proposed rate rise would do more harm than good.
The lobby, in modelling it says it has shown to Treasury officials, has calculated that the higher tax would initially generate more revenue. But in the long term, it argued in a paper, the increased levy — and a proposal to scrap allowances — would raise less money because developers would cut investment.
Specifically, OEUK predicted that firms would cut capital investment on the UK continental shelf from £14.1 billion to £2.3 billion over 2025-29. This would strip £13 billion in value from the industry, jeopardise 35,000 jobs and put at risk the UK’s journey to sustainable net zero as the country comes to depend on foreign oil and gas, it argues.
David Whitehouse, OEUK’s chief executive, said: “The prime minister has said that the budget will be painful. This industry recognises that difficult decisions will need to be made. This is a government that has made economic growth its main priority and yet our analysis shows that its policy will ultimately reduce this sector’s contribution to the UK economy. “This paper shows that proposals to go further will trigger an accelerated decline of domestic production, and a corresponding reduction in taxes paid, jobs supported and wider economic value generated. With an industrial strategy built in partnership with government, the UK can leverage the strengths of its offshore energy industry, put home-grown innovation and technology at the heart of its net-zero ambitions and ensure the UK is globally attractive for energy investment. “For more than two years UK oil and gas operators have paid three times the rate of corporation tax of any other sector in the economy. Time is running out to mitigate damage that has already been done and to avoid further escalation. The prime minister promised to manage the North Sea in a manner that does not jeopardise jobs. We now need an honest conversation on how we can do this and need government to work with the sector at pace.”
Before the general election, major developers delayed a decision on the Buchan field in the North Sea because of uncertainty over the scale of the windfall tax under Labour. The UK government intends to keep lucrative allowances for oil and gas companies which invest in clean energy.
A spokesman for the Treasury said: “We are committed to maintaining a constructive dialogue with the oil and gas sector to finalise changes to strengthen the windfall tax, ensuring a phased and responsible transition for the North Sea. Our plans for a new National Wealth Fund and Great British Energy will unlock investment and create thousands of new jobs in the industries of the future.”
The windfall tax is officially called the Energy Profit Levy or EPL. It currently stands at 35 per cent and is set to rise to 38 per cent. This is on top of a standard tax of 40 per cent. Apart from increasing the EPL, Labour ministers intend to extend its operation for 12 months beyond its currently envisaged term, to March 2030.