The Chancellor was given a plan to reform the windfall tax, creating 160,000 jobs and raising £10bn in taxes… and she has completely ignored it, instead opting for a ‘cliff edge end’ to the industry
The UK’s oil and gas industry faces being “taxed to death inside five years” after Rachel Reeves ignored pleas to axe the Energy Profits Levy (EPL).
The Chancellor did relax restrictions on new drilling in the North Sea by approving a “tieback” policy that allows new licences to be granted for existing fields.
But industry leaders and political critics have been pushing hard for the windfall tax of 78% to be phased out earlier than 2030, with research from Robert Gordon University in Aberdeen warning that about 1,000 jobs a month are being lost.
In a bitter blow, Rachel Reeves didn’t even mention the EPL in her Budget and instead opted for what one business figure described as a “cliff-edge end to North Sea production”.
Russell Borthwick, Chief Executive at Aberdeen & Grampian Chamber of Commerce, said: “The UK Government has accepted, through their announcement on tiebacks, that their policy towards a sustainable future for the North Sea is completely and utterly flawed, risks terminal damage to the UK’s energy security and is proving economically ruinous.
“But limited flexibility on licensing is immaterial if those companies producing the energy we need are taxed at a crippling rate of 78% until 2030. They cannot invest or survive while the EPL remains in place.”
He said the industry had put forward a case for a reformed windfall tax, delivering £50billion of investment, 160,000 jobs and more than 100 projects, as well as an extra £10bn in tax revenues over a decade.
Mr Borthwick went on: “Without so much as a mention in the Chancellor’s statement today, the UK Government has instead opted for a cliff-edge end to North Sea production and to tax the industry to death inside five years. Jobs will be lost in their thousands as a direct result of this government’s failure to act.
“As the voice of business in the North-east of Scotland, we will refocus our efforts on ensuring that this jobs and economy-wrecking tax is brought to an end as soon as possible. Aberdeen is not going down without a fight.”
‘This is another bitter blow for communities’
Scottish Conservative shadow energy secretary Douglas Lumsden MSP said the industry was in a “state of national emergency” and experiencing a “tsunami of job losses due to Labour and the SNP’s ideological war against it”.
He added: “Rachel Reeves had a golden opportunity to scrap the Energy Profits Levy when she delivered her Budget but she doubled down and ignored all the calls from across Scotland’s energy sector to axe it.
“That is another bitter blow for communities in the North East and Scotland’s economy at a time the SNP also still have a presumption against any new licences.”
Turning to the partial climbdown by Ms Reeves – and later confirmed by Ed Miliband’s Department for Energy Security and Net Zero – Mr Lumsden said oil and gas workers would not be “fooled”, adding: “It will do nothing to stop jobs haemorrhaging from the industry especially when Keir Starmer’s government have also doubled down on keeping the Energy Profits Levy in place.”
However, the “tieback” mechanism – viewed as a hollow gesture by the industry – has caused fury among environmentalists and far-left radicals such as Scottish Greens co-leader Ross Greer.
He fumed: “You wouldn’t know that we’re living through a climate emergency from this budget. Labour even used it as cover to sneak out a separate announcement that they’ll allow for even more oil and gas drilling in the North Sea.”
“When you share your news through OGV, you’re not just getting coverage – you’re getting endorsed by the energy sector’s most trusted voice.”