Windfall tax on oil and gas companies extended for another year despite opposition from Scottish Conservatives
In a move that has sparked controversy and concern among industry experts, the windfall tax on oil and gas firms has been extended by 12 months in Jeremy Hunt’s Budget. The tax, which imposes a 35% surcharge on profits due to high energy prices, was originally set to end in March 2028. However, Scottish Conservative leader Douglas Ross has voiced his opposition to the extension, stating that he will not support the legislation needed to pass it.
Introduced by former Chancellor Rishi Sunak in May 2022 as a means of funding assistance for households struggling with rising energy bills in the wake of Russia’s invasion of Ukraine, the Energy Profits Levy (EPL) was extended and increased to 35% by Jeremy Hunt last November. This has raised the overall tax burden faced by UK oil and gas producers to approximately 75%. In his Budget announcement, Mr. Hunt cited the prolonged increase in energy prices caused by the Ukraine conflict as justification for the extension, estimating that it will generate £1.5bn in revenue.
While Mr. Ross has expressed his disappointment with the decision to prolong the windfall tax, he has acknowledged other positive measures in the budget, such as a 2p cut in national insurance and a freeze on alcohol duty. He emphasized the need for certainty for oil and gas companies moving forward, arguing that another extension of the tax does not provide this stability.
Industry body Offshore Energies UK (OEUK) has warned that the extension could hamper investment, job creation, and growth in the sector. OEUK chief executive David Whitehouse stated that the industry is being taxed on profits that no longer exist, creating obstacles for planning investments for the energy transition and the journey to net zero emissions.
Scottish Secretary Alister Jack dismissed concerns about the impact of extending the levy, attributing the need for additional revenue to the surge in energy prices caused by global events. However, Conservative MP Andrew Bowie and the Aberdeen & Grampian Chamber of Commerce have joined Mr. Ross in expressing disappointment over the decision, emphasizing the potential negative effects on the industry.
As the debate continues, it remains to be seen how the extension of the windfall tax will affect investment, job security, and overall economic stability in the UK’s oil and gas sector. With conflicting opinions on the matter, the future implications of this controversial decision remain uncertain.