Plans by the UK’s Labour Government to increase the Energy Profits Levy (EPL) would eventually have a detrimental impact on Britain’s economy, claims trade body OEUK.
Offshore Energies UK said on Monday that while its research showed that the “expected tax take from UK oil and gas producers would increase in the very short term, ultimately it would result in a £12bn ($15.7bn) loss in receipts compared to the current regime”.
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The body, which represents UK offshore energy providers, argued the fall “is due to a rapid decline in production due to under investment over this decade. The analysis confirms the impact would be felt widely across the economy.”
OEUK said the analysis, which it claims has already been shown to the government, indicates the policy will “undermine the UK offshore energy sector’s ability to support the government’s overarching goal of driving economic growth”.
In early July, the trade group revealed it was “concerned” about the new government’s offshore windfall tax and ongoing licensing plans.
In a statement at the time, the body claimed that “many of the industry’s skilled people and investors remain deeply concerned about Labour proposals for a further windfall tax on homegrown oil and gas production and to end new oil and gas licences in UK waters”.
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By GlobalDataIn its election manifesto, Labour said it will increase by three percentage points a windfall tax on energy producers first imposed in 2022. The current 35% tax, which will run until 2029, brings the total tax burden on producers to 75%.
In its manifesto, Labour also mentioned a Green Prosperity Plan that will be funded in part by a time-limited windfall tax on the oil and gas giants making record profits, with the rest of the funding coming from responsible borrowing to invest within Labour’s fiscal rules.
More than 200,000 jobs across the country are currently supported by domestic oil and gas production, wind, hydrogen and carbon capture technologies, said the group.
Approximately 35,000 jobs are at risk between 2025 and 2029 due to projects not going ahead, it added.
David Whitehouse, chief executive officer, OEUK, said: “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.”
Speaking via a published statement, he added that 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 the Government to work with the sector at pace.”
A US media outlet cited a Treasury spokesperson as saying that the UK “is 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”.
In mid-July, a spokesperson for the Department for Energy Security and Net Zero labelled a claim that the government would place an immediate ban on new North Sea oil and gas exploration a “complete fabrication”.
They continued: “As previously stated, we will not issue new licences to explore new fields. We will also not revoke existing oil and gas licences and will manage existing fields for the entirety of their lifespan” while working “with the North Sea Transition Authority to ensure a fair and balanced transition in the North Sea”.
