The Treasury has moved to quell a heated dispute with the North Sea oil and gas industry by committing to maintain investment reliefs on low-carbon projects. This decision aims to safeguard jobs and mitigate the impact of the expanded energy windfall tax. Last month, Chancellor Rachel Reeves announced plans to increase the levy on energy industry profits as part of her strategy to address a £22 billion “hole” in public finances, which Labour attributed to the previous Conservative government.
However, this announcement raised concerns among energy bosses and unions representing North Sea workers, who cautioned that the changes could jeopardise jobs and investment in the UK, particularly in Scotland, where Labour regained numerous seats in Keir Starmer’s general election landslide. In an effort to allay industry concerns, Treasury Minister James Murray held talks in Aberdeen, the UK’s oil capital, on Monday.
Speaking to the Guardian, Murray emphasised the government’s commitment to protecting jobs and investment in Scotland. He confirmed that the Treasury would preserve the generous 80 percent decarbonisation investment allowance for the industry, despite broader measures to raise billions of pounds from energy firms. Murray stated, “We are absolutely committed to managing the energy transition in a way that protects jobs and investment. We want to make sure the energy transition, which is vitally important to make UK energy secure, and to bring down the cost of energy bills, is done in a way that protects jobs and investment.”
The Treasury previously announced that the energy profits levy, initially introduced by the Conservatives in 2022, would be extended by a year until 31 March 2030. The levy rate will increase from 35 percent to 38 percent on energy industry profits, in addition to the 40 percent headline tax rate. The 29 percent investment allowance will also be eliminated.
Following a meeting with Murray and executives from companies such as BP and Shell, David Whitehouse, chief executive of Offshore Energies UK, the industry lobby group, warned that thousands of jobs and billions of pounds in economic value were at risk. Peter Welsh, from the GMB trade union, expressed hope that the government would listen to workers and their industries, emphasising that change should be implemented with them rather than imposed upon them.
Prior to the general election, Labour outlined plans to raise approximately £6 billion by expanding the energy windfall tax, intending to use the revenue to support the establishment of Great British Energy, a state-owned clean power company headquartered in Scotland. While Murray refrained from specifying whether the latest changes would generate more revenue than anticipated, he indicated that tax increases could play a significant role in Reeves’ plans. Further details are expected to be revealed in the 30 October budget.
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