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Hunt told to axe windfall tax as price and profits fall

petrol prices
Industry leaders say tax should not apply if prices fall (pic: Terry Murden)

Offshore energy producers will tell the Chancellor in Edinburgh on Friday that his windfall taxes should be scrapped when the price and profits fall.

Oil and gas producers will insist that the windfall tax should only apply to windfall profits.

So if prices and profits decline the tax – officially the energy profits levy – should be scrapped. Trade body Offshore Energies UK says this view is widely shared across the industry and it comes as the price of oil fell on Wednesday to $77.17, its lowest level this year and almost half its peak when Russia invaded Ukraine.

Oil and gas leaders will meet Jeremy Hunt together with a team of ministers and officials from the Treasury and the Department for Business, Industry and Industrial Strategy at a resumed meeting of the Fiscal Forum.

Offshore Energies will restate the industry’s warning that the windfall tax risks causing a rapid reduction in investment and jobs – and in the UK’s production of oil and gas.

They will warn that the 75% tax rate imposed on the industry is already deterring investment – as shown by TotalEnergies’ recent decision to cut UK investment by 25% – about £100 million. 

The forum’s aim is to find ways to support the UK’s energy security and economy by maximising the output of oil and gas from the UK’s surrounding waters – meaning the North Sea, Irish Sea and Atlantic waters north of Scotland.  

OEUK will warn that, without investment, UK gas production could halve by 2030 – leaving the UK highly dependent on imports. Last year the UK produced about 38% of the gas it consumed.

Deirdre Michie, OEUK’s chief executive, said: “We are very concerned about the impacts of this tax on our industry and on the UK’s energy security. We want to make Jeremy Hunt, the Chancellor, aware of those impacts and work with the government to minimise the damage it is doing.

“At the moment our members produce nearly 40% of the nation’s gas. We can only maintain that kind of output by constant investment.”

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