Experts brand plans by Government to ease windfall tax on energy profits if prices drop as ‘to little too late’ to save North Sea oil and gas sector
- The levy imposes an effective 75 per cent corporate tax rate on North Sea firms
Business leaders and analysts yesterday branded plans by the Government to ease its windfall tax on energy profits if prices drop as ‘too little, too late’ to save the beleaguered North Sea oil and gas sector.
The tax – officially the Energy Profits Levy – was introduced last year by Rishi Sunak when he was chancellor after global energy prices spiked. It imposed a 25 per cent tax on profits, raised to 35 per cent by Mr Hunt after he took over at No11.
The levy imposes an effective 75 per cent corporate tax rate on North Sea firms. To date, it has raised £2.8billion, much of which used to fund energy support schemes for those facing crippling bills.
Yesterday the Government said the levy would remain until March 2028 despite protests it has decimated investment.
Harbour Energy, the North Sea’s largest producer, has said it is axing 350 jobs after the tax ‘all but wiped out’ its profits.
The tax – officially the Energy Profits Levy – was introduced last year by Rishi Sunak when he was chancellor
But Gareth Davies, Exchequer Secretary to the Treasury, said the levy would end early if the average price of oil and natural gas dropped below $71.40 per barrel and 54p per therm (unit of energy) respectively for six months.
The last time oil prices reached those levels was in December 2021. Gas briefly slipped below 54p per therm earlier this month but has not been consistently lower since the first half of 2021.
David Whitehouse, head of trade body Offshore Energies UK, said removing the levy if prices fell was ‘a step in the right direction’ but more needed to be done to restore confidence to the industry.
Andy Mayer, of the Institute of Economic Affairs, warned the tax would ‘continue to make Britain less competitive’, adding: ‘While any relief of windfall taxes is welcome, this is too little, too late.’
Despite the criticisms, Chancellor Jeremy Hunt warned things could be even worse under Labour, saying the Opposition’s plans to ban new North Sea drilling from 2050 would be ‘self-destructive’ for Britain.
He added: ‘I cannot think of a more self-destructive policy. It would make Britain’s energy supplies even more vulnerable to the world’s tyrants, and be the end to thousands of British jobs.’
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