Chancellor Rachel Reeves has insisted maintaining the current tax regime on the North Sea is the “right” thing to do – despite concerns from the oil and gas sector that it is being taxed “to death”.
Leading figures in the industry had been pushing the Chancellor to reform the energy profits levy – also known as the windfall tax – saying it is resulting in 1,000 job losses a month from the sector.
While Ms Reeves announced a replacement for the current tax regime, which will come in from 2030, her Budget on Wednesday maintained the charge at its current level – with Scottish Finance Secretary Shona Robison saying this was “one of the most disappointing parts of the Budget”.
The Chancellor accepted that on oil and gas, her Budget statement “wasn’t everything the industry wanted”.
However she said the levy “continues to bring in substantial revenues based on the high profits these companies still continue to earn after Russia’s invasion of Ukraine”.
She told Radio Scotland’s Breakfast programme: “I do believe it is right to ask those companies to continue paying a little bit more, the same tax rate that Norway applies of 78% to profits, and use that money to fund public services in Scotland.”
Aberdeen and Grampian Chamber of Commerce had accused the Labour Chancellor of seeking to “tax the industry to death inside five years”.
Ms Robison was also critical of the UK Government’s stance, telling BBC Radio Scotland that keeping the energy profits levy means “thousands of jobs are being lost in the here and now” and warning Ms Reeves’s decision “has real world consequences”.
She added: “The UK Government accept that the current fiscal regime needs to change, and we have been pushing with the sector for a regime which is fairer, and sustainable.
“The issue though is they have said the new regime won’t come in until 2030. That is too late, because we’re going to lose thousands of jobs in the meantime and we need to have change.
“Here and now it is the energy profits levy that is losing 1,000 jobs a month. That has to change and we need the UK Government to move on that.”
Ms Reeves insisted the oil and gas sector “is going to remain an important part of the energy mix in the UK for decades to come”.
But she added that energy prices “are still elevated compared to a few years ago” and the levy “taxes the excess profits”.
The Chancellor said: “While large profits are still being earned from the exploration of oil and gas, it is right that we ask the energy companies to contribute a little bit more to be able to fund the public services that people use in Scotland and around the country.
“Yesterday in the Budget I was able to announce £150 off people’s energy bills from April next year, but that money has to come from somewhere and the profits that the energy companies are making, they also need to contribute toward reducing people’s energy bills.”
