Hunt’s tax on oil giants may ‘destroy industry’

High levy is ‘too blunt an instrument’ and could threaten our nation’s energy security, say Tories

JEREMY HUNT’S windfall tax on oil and gas giants must be watered down to avoid industry collapse, Tory MPs have warned.

The Chancellor has been told that his so-called energy profits levy is “too blunt an instrument” risks “destroying”

North Sea production. It comes amid warnings from firms involved in oil and gas exploration that the sheer level of taxation now poses an “existential threat” to their industry and will lead to investment becoming “unviable”.

Mr Hunt and Rishi Sunak, the Prime Minister, have faced criticism that the Autumn Statement did not have enough measures to spur economic growth.

Mr Hunt increased the windfall tax on North Sea oil and gas producers from 25 per cent to 35 per cent, while also announcing it would be in place until 2028 rather than 2025, adding £19.4 billion to the existing bill.

MPs believe that unless a “sensible” floor price is agreed, energy firms will be “crippled” with higher taxes even when their profits fall.

Discussions are underway among rebel MPs about drafting an amendment to the finance bill – which is expected to be returned to parliament this week – to address this point.

Some backbenchers have written to the Chancellor to express their concern about the windfall tax, while others have made their disquiet clear to the Chief Whip. Sir John Redwood MP said that the windfall tax is “excessive” and will “damage the industry” as he urged ministers to “see sense”.

“We need to get as much oil and gas out of the North Sea as possible,” he said. “I don’t believe it is a windfall tax if it doesn’t stop when profits fall – it is just another tax on business, another tax on a business that is temporarily generating a lot of income but in the past has had heavy losses.”

Craig Mackinlay MP, chair of Net Zero Scrutiny Group, added: “We want more domestically derived energy. You do not get more domestically derived energy by taxing it more.

“While some of the supersize companies can accept they have had it pretty good for a while, what if those good times don’t last? What happens if you have a more modest, normal profit? Are we going to still tax at 75 per cent? It is too blunt an instrument.”

Bob Seely, the MP for the Isle of Wight, said he is concerned about the security of oil and gas supply over the next decade, explaining: “We need that supply. There is no question about that.

“If we get this wrong and North Sea production collapses, a series of very bad things happen.

“For sure, we need to get tax from the industry, but we need to do so without destroying it.”

Separately, the Association of British Independent Exploration Companies has warned the Chancellor that the windfall tax on energy companies poses “existential threat” to the industry. Robin Allan, the association’s chairman, wrote to Mr Hunt arguing that taxing his members at 75 per cent will wipe out the industry “and with it, those jobs and our nation’s energy security”.

In the letter Mr Allan went on to say that “UK Upstream companies can no longer shoulder this extreme openended tax burden”.

A Treasury spokesman said: “The Energy Profits Levy strikes a balance between funding cost of living support while encouraging investment in order to bolster the UK’s energy security and is expected to raise just over £40billion in total over the next six years.”