Labour’s oil and gas windfall tax increase could put 35,000 jobs at risk, energy body warns

Offshore Energies UK claim the harsher levy will cost the sector around £13 billion.

By Justin Bowie

September 2 2024, 5:00 am

Labour's windfall tax could cost the energy sector up to £13 billion, it was warned.

Labour’s oil and gas windfall tax rise will cost the sector around £13 billion instead of bringing in more money, a leading energy body has warned.

Offshore Energies UK (OEUK) claim the harsher levy will result in investment in the North Sea falling from an expected £14.1 billion to just £2.3 billion between 2025 and 2029.

Their report also warns oil and gas projects being cancelled or pushed back would place 35,000 jobs at risk over the next five years.

Sir Keir Starmer controversially announced earlier this year Labour intended to up the tax on energy profits from 75% to 78% once taking power.

Hundreds of industry leaders in the north-east, including business tycoon Sir Ian Wood, warned against the move.

Prime Minister Sir Keir Starmer and Scottish Labour leader Anas Sarwar during an event in Edinburgh. Image: PA.

But Labour has defended the policy by arguing multinational companies have reaped in huge profits during the cost-of-living crisis.

The UK Government hopes the tax rise will bring in more money for the economy.

David Whitehouse, OEUK chief executive, believes it will instead have the opposite effect following the publication of new data.

He said: “The prime minister has said that the budget will be painful. This industry recognises that difficult decisions will need to be made.

“This is a government that has made economic growth its main priority and yet our analysis shows that its policy will ultimately reduce this sector’s contribution to the UK economy.

David Whitehouse, chief executive of Offshore Energies UK. Image: Kenny Elrick/DC Thomson.

“This paper shows that proposals to go further will trigger an accelerated decline of domestic production, and a corresponding reduction in taxes paid, jobs supported and wider economic value generated.”

Labour hopes to create thousands of new jobs in Scotland with the launch of GB Energy, a publicly owned firm which will be based north of the border.

The government has not revealed exactly where the company will be headquartered – but Aberdeen is a leading contender.

A Treasury spokesperson said: “We are committed to maintaining a constructive dialogue with the oil and gas sector to finalise changes to strengthen the windfall tax, ensuring a phased and responsible transition for the North Sea.

“Our plans for a new National Wealth Fund and Great British Energy will unlock investment and create thousands of new jobs in the industries of the future.”