Industry leaders have hit out at reported plans from Chancellor Jeremy Hunt to extend the life of the windfall tax during next week’s Spring Budget.
According to a report from Bloomberg, the Chancellor is considering extending the levy, due to expire in March 2028.
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. That would give him a bit of extra breathing space to ease other taxes.
Energy transition ‘undermined by rumours of fiscal change’
It comes as Labour has proposed extending the tax, and going further by removing investment allowances and hiking the overall rate if it wins power.
David Whitehouse, chief executive officer of trade body Offshore Energies UK (OEUK), said: “Ongoing investment in the North Sea in the UK’s oil and gas resources will play a vital role in supporting energy security and building the energy transition for decades to come.
“This risks being undermined by rumours of further fiscal change. Energy prices are trending down. Now is not the time for further tax increases.
© Supplied by OEUK“Oil and gas prices have fallen back in line with where they were before the invasion of Ukraine, and the energy price cap on domestic energy bills also the lowest it has been in two years.”
Last week the Aberdeen and Grampian Chamber of Commerce (AGCC) led a group of businesses in writing to Jeremy Hunt calling for an end to the “supertax”.
Industry ‘fed up’
CEO Russell Borthwick said: “The energy industry is getting fed up of uncertainty heaped upon uncertainty coming from all sides of the political divide. It needs stability and confidence to invest — only under those conditions can we ensure a properly managed and successful transition to net zero.
He added that the North Sea risks being “wound down through rhetoric”.
© Supplied by Michal Wachucik“On top of learning of Labour’s plans, jungle drums around a Treasury extension to the windfall tax are deeply unhelpful and underline 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 guard against damaging economic shocks in the future.”
Spring Budget windfall tax plans
Both OEUK and AGCC have called for a new body to oversee the UK’s industrial strategy.
“Like the Bank of England – which has maintaining monetary and fiscal stability as its central mission – the new body 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.
“If we get this wrong, discretionary capital will continue to move overseas, the transition will stall, and a world class supply chain built up over decades- much of it in the North-east of Scotland- will go. We can – and must – do better.”
Recommended for you
