Labour attack on North Sea ‘will cost economy £13bn’

Labour’s planned hike in North Sea oil and gas taxes will hit the economy by £13bn, according to industry analysis.

Offshore Energies UK (OEUK), which represents the sector, said most investment plans for the next five years would be scrapped if the increase went ahead, undermining the government’s aim to boost growth.

The sector is facing an increase in the tax rate from 75 percent to 78 percent and the loss of tax benefits for investments.

OEUK said that while it would provide a “very short-term” boost to the Treasury’s tax revenues, this would quickly be reversed – leaving the public purse £12 billion worse off.

That could jeopardize plans to use the unexpected tax revenues to fund green energy investments and other growth plans, it warned.

David Whitehouse, chief executive of OEUK, said: ‘This is a government that has made economic growth its top priority, but our analysis shows that its policies will ultimately reduce the contribution of this sector to the UK economy.’

The figures were released as Finance Minister Rachel Reeves prepares to present her autumn budget next month.

According to the OEUK analysis, Labour’s plans would see capital investment in the sector fall from an expected £14.1bn to just £2.3bn over the period 2025-2029. That would mean the sector’s total value added to the economy would fall to £16bn – £13bn lower than it would have been.

According to OEUK, the Treasury’s tax revenues from the North Sea would continue to rise until 2026 and then fall compared to the current scenario. This means that the Treasury would ultimately collect a cumulative £12 billion less in tax over the five-year period.

Whitehouse said: ‘For more than two years, UK oil and gas companies have paid three times as much corporation tax as any other sector. Time is running out to limit the damage and prevent escalation.’

A Treasury spokesman said: “We are committed to maintaining a constructive dialogue with the oil and gas sector to implement changes to strengthen the windfall tax.”