Tax plans spell trouble in the North Sea

North Sea oil companies are "accustomed to political meddling", said The Times. But the new Government has made no bones of its desire to impose higher taxes and tougher environmental rules on producers in the forthcoming Budget – to tackle a regime that Environment Secretary Ed Miliband described before the election as having "more holes than Swiss cheese".

The next few months could prove "defining for Britain's oil and gas industry". Miliband has argued that revenue from windfall taxes could help finance Labour's much-vaunted £8bn GB Energy green investment vehicle, which will be headquartered in Scotland. But plenty of Scots are deeply concerned about a policy that threatens the local economy, said Ian McConnell in The Herald. Labour is charging into the sector "like a bull in a china shop". Ministers would "do well to exercise some caution".

On paper, the plans don't look too drastic. Labour aims to raise the windfall tax – introduced by Boris Johnson in 2022 as energy prices soared following the Ukraine invasion – from 75% to 78%, and scrap what ministers see as "unjustifiably generous" investment tax breaks. But according to industry body Offshore Energies UK, the move "will deal a £13bn blow to the economy", said John-Paul Ford Rojas on This is Money – jeopardising both UK growth and, ultimately, investment in the green economy if a "very short term" boost to tax revenues succeeds in throttling the North Sea tax goose. Around 35,000 jobs may be at risk.

Subscribe to The Week

Escape your echo chamber. Get the facts behind the news, plus analysis from multiple perspectives.

SUBSCRIBE & SAVE

Sign up for The Week's Free Newsletters

From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.

From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.

Sign up

Some firms are already retrenching, said Jasper Jolly in The Guardian: including Norwegian-owned Neo Energy, whose projects include the Buchan Horst oilfield off the Aberdeen coast, which was due to start production in 2027. Two more projects – the Rosebank and Jackdaw fields – are in doubt following Miliband's decision to not defend "against legal challenges" to their licences brought by environmentalist groups.

This is outrageous, said Matthew Lynn in The Daily Telegraph. Miliband has effectively "given Greenpeace control" over parts of our energy policy. What next? "Perhaps Greta Thunberg could be put in charge of the Bank of England." Of course, in an ideal world, "Britain could stop burning fossil fuels pronto and power the nation with windmills and sunbeams", said Alistair Osborne in The Times. But what if the Government's calculation that the UK can decarbonise electricity by 2030 turns out to be "wishful thinking", as many believe? If Keir Starmer is really serious about "enhancing our energy security", he might be well advised to "hedge his bets a bit" – and not go out of his way to kill off North Sea oil.