Tory MPs have warned that Jeremy Hunt’s windfall tax on oil and gas companies must be reduced in order to prevent the sector from collapsing.
According to the Chancellor, his so-called energy gains tax is “too blunt an instrument” in its present form and risks “destroying” North Sea output entirely.
It comes as firms engaged in North Sea oil and gas development have warned that the sheer volume of taxes now constitutes a “existential threat” to their sector, making investment “unviable.”
Mr Hunt raised the windfall tax on North Sea oil and gas firms from 25% to 35% and announced that it will be in place until 2028 rather than 2025, adding £19.4 billion to the current bill.
MPs think that until a “sensible” minimum price is agreed upon, energy companies would be “crippled” by greater taxes, even if their earnings declined.
Bob Seely, MP, expressed worry over the security of oil and gas supplies in the next decade, stating, “We need that supply.”
Separately, the Association of British Independent Exploration Firms has issued a warning to the Chancellor that the windfall tax on energy companies constitutes a “existential threat” to the sector.
The association’s head, Robin Allan, wrote to Mr Hunt, warning that taxing his members at 75% would destroy the business “and with it, those jobs and our nation’s energy security.”
A Treasury source claimed there are “no plans” to create a floor-price to go along with the windfall tax on energy corporations, adding, “We extended it to 2028 because we don’t believe gas prices will return to pre-Covid levels in that time.”
Following the increased levies revealed in the Autumn Statement, Shell is now evaluating plans to invest £25 billion in the UK’s energy grid.