The head of Britain’s largest business body has called on Labour to reconsider its plan for a new tax attack on North Sea oil and gas producers.
Rain Newton-Smith, chief executive of the Confederation of British Industry (CBI), said the policy could have a “chilling” impact on investment decisions and she would seek talks with ministers.
Meanwhile, David Latin, chairman of North Sea producer Serica Energy, feared Labour’s plan could kill the “goose that lays the golden eggs” in the North Sea.
The comments came as business leaders were still coming to terms with the impact of the party’s landslide election victory. The City has so far been largely unaffected by the change of government after a prolonged charm offensive by Keir Starmer and Chancellor Rachel Reeves.
It caused little shock to the FTSE 100, which fell 0.5 percent or 37.33 points to 8203.93, although the more domestically oriented FTSE 250 rose 0.9 percent or 176.31 points to 20786.65.
Agenda: Rain Newton-Smith said scrapping North Sea tax breaks was a ‘concern’
Newton-Smith urged Labour to “get to work straight away” on planning reforms and improvements to the electricity grid, saying these were needed “to get the economy running at full speed”.
However, there has already been unrest over a number of the party’s policies, including non-resident tax status and workers’ rights, and fears that Reeves will raise capital gains tax in a bid to balance the finances.
Companies producing in the North Sea have already been hit by a windfall tax under the Conservative government, meaning they will have to pay a 75 percent rate on profits until 2029. However, that blow has been softened by a tax break for companies that invest.
Labour wants to raise the tax rate to 78 percent and abolish tax relief. It also wants to stop issuing permits for oil and gas extraction. Some analysts fear that as many as 100,000 jobs could be lost.
Newton-Smith told the Mail that the removal of tax breaks for the North Sea was a “concern” given the need for oil and gas companies to invest in the transition to renewable energy generation.
‘The Labour Party must listen to business to ensure that any changes to investment tax credits do not have a chilling effect on investment in renewables, energy efficiency and the carbon intensity of extraction.’
The windfall tax has already wiped out most of the profits of producers last year, while some have cut back on investments and hundreds of jobs have been lost.
Serica’s Latin said that without clarity, the sector’s investment and taxes would quickly decline. He added: ‘There is a misunderstanding that somehow we are a goose that lays golden eggs and that we just keep laying eggs. But if you don’t feed the goose with investment dollars, it will collapse and there will be no more eggs.’