London (Parliament Politics Magazine) – The North Sea industry has cautioned the government not to strengthen its windfall tax on oil and gas profits in the autumn budget, arguing it risks losing ÂŁ12bn in tax receipts and threatening 35,000 jobs.
The industry’s trade association, Offshore Energies UK (OEUK), has given Treasury officials data analysis that occurs to show that proposed modifications to the tax regime would devastate the sector’s expected investment over the second half of this decade. The group stated it had made the analysis public to “help inform decision-making” before the chancellor’s budget in October.
What Are the Labour Party’s Goals for the Windfall Tax Revenue?
Labour came to administration with an election pledge to strengthen the windfall tax regime put in place by the previous government, understood as the energy profits levy, by increasing the headline tax rate by 3 percentage points to 78%. It has also pledged to close the “loophole” left by the earlier government that enabled oil and gas firms to decrease their taxes through investment allowances.
What Does the OEUK Analysis Reveal About Future Investments?
The OEUK analysis considers that all allowances will be scrapped, although this has not been explicitly offered by the government. The report indicates that trying to squeeze higher taxes from oil and gas profits would conversely direct to a ÂŁ12bn drop in tax receipts to the Treasury by wiping out new investments, and could provoke an overall loss in economic value of about ÂŁ13bn.
What Risks Does the Windfall Tax Pose to 35,000 Jobs?
OEUK stated this investment slowdown could put 35,000 careers at risk and may cut the forecasts for new oil and gas production volumes in the UK by two-thirds. David Whitehouse, OEUK’s chief executive, expressed the analysis showed that the government’s recommendations to go further would “trigger an accelerated reduction of domestic production, and a corresponding decrease in taxes paid, jobs supported and wider economic value generated”.
He stated: “This is a government that has made economic expansion its main priority, and yet our analysis indicates that its policy will ultimately facilitate this sector’s contribution to the UK economy.” Labour intends to use the higher taxes taken from the North Sea to support fund plans to turn the UK into a green energy “superpower” in line with its objective of making the UK’s electricity system net zero by 2030. The ambitious target is predicted to cut Great Britain’s emissions and reduce overall energy costs.