Scrap windfall tax on oil and gas firms early, North Sea industry urges

The North Sea oil and gas industry has urged Labour to remove the windfall tax on fossil fuel firms three years earlier than planned, as the UK anticipates the highest energy bills since Russia's invasion of Ukraine. The trade body, Offshore Energies UK (OEUK), proposes the tax be replaced in 2027 rather than 2030, with a narrower levy that only applies during price spikes.

The current windfall tax, introduced in 2022, charges a 35% tax on revenue when prices exceed a set threshold. A decision on easing taxes on oil and gas producers would occur before the next anticipated winter of high energy prices due to the Iran war. Household energy bills are expected to reach a three-year high this winter, with wholesale gas reaching 207p a therm, its highest level since the crisis.

Executive of OEUK, David Whitehouse, acknowledged the difficulty in making these arguments from a consumer's perspective, but argued that the new levy would ensure companies pay high tax levels during high prices while encouraging investment. He emphasized the importance of tax for the UK economy, both in the short and long term.

The government's long-term resilience and community support are also highlighted by Whitehouse. The industry's push for tax changes comes as companies like Shell and BP have posted record profits amid the Iran war. The OEUK campaign also projects that bringing the change forward could generate up to £50bn in investment in the North Sea and £14.9bn more in tax over the next decade, although the majority of this would come from job creation rather than oil and gas company levies.

A coalition of charities, unions, and campaign groups had previously called for strengthening the windfall tax to fund the cost of living support, rather than easing it.