North Sea Firms Warn: Windfall Tax Threatens 35,000 Jobs and £12bn in Tax Revenue
The North Sea industry is raising alarms over the government’s proposed windfall tax on oil and gas profits. It cautions that it could jeopardize 35,000 jobs and cost the Treasury £12bn in lost tax receipts. As the autumn budget approaches, industry leaders are urging the government to reconsider the tax hike, warning of severe consequences for the sector.
Offshore Energies UK (OEUK), the industry’s trade association, has presented data to the Treasury that paints a grim picture of the proposed changes. According to OEUK, the new tax regime could drastically reduce investment in the North Sea over the next decade, leading to a significant decline in oil and gas production. This, in turn, would reduce the sector’s contribution to the UK economy, directly opposing the government’s goal of fostering economic growth.
The Labour Party, which came to power with a pledge to toughen the windfall tax, aims to increase the tax rate from 75% to 78% and close investment loopholes. However, OEUK argues that eliminating these allowances would wipe out new investments, ultimately reducing the overall tax revenue by £12bn.
David Whitehouse, CEO of OEUK, emphasized that the government’s current approach could trigger a sharp decline in domestic production, with far-reaching effects on jobs, tax revenue, and the broader economy. He stressed that the government’s priority of economic growth is at odds with the potential outcome of these tax changes.
Labour’s intention behind the tax increase is to fund the transition to a green energy future, aiming to make the UK’s electricity system net zero by 2030. While this ambition aligns with reducing emissions and lowering energy costs in the long run, it raises concerns about the immediate impact on the oil and gas industry and the economy.
UK Steel has drawn attention to the high energy costs faced by Britain’s steel industry, which are significantly higher than their European counterparts. This disparity is primarily due to the UK’s heavy reliance on gas for energy. To address this issue, UK Steel urges the government to step in and make energy costs more manageable. They suggest shifting policy costs from electricity bills to gas bills to help reduce expenses for steelmakers.
In response, a Treasury spokesperson has highlighted that the government is actively engaging with the oil and gas sector to ensure a smooth transition in tax policies. The spokesperson emphasized the government’s dedication to a gradual and balanced approach. Additionally, the Treasury is working on establishing a new national wealth fund and the Great British Energy initiative. These plans encourage investment and create new job opportunities in emerging sectors.
As the autumn budget approaches, discussions about the windfall tax and its impact on the North Sea industry are heating up. Stakeholders call on the government to carefully consider the long-term economic effects of these tax changes.
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