Industry warns windfall tax would backfire

A windfall tax on oil and gas producers would put investment and jobs at risk, the industry’s trade body warned ministers.

Boris Johnson has come under pressure to introduce a one-off levy on firms which have benefited from globally high oil and gas prices and use the revenue to fund measures to ease the cost-of-living crisis on households struggling with rising bills.

But Offshore Energies UK (OEUK) highlighted the £7.8 billion in taxes the industry is already expected to pay as a result of the boom and stressed the need for “stability and predictability” in the fiscal regime.

In a letter to Business Secretary Kwasi Kwarteng, OEUK’s chief executive Deirdre Michie said: “The offshore oil and gas industry and its supply chain work to longterm investment cycles with multiple and complex risks, that result in projects having to be worked for many years before a commitment can be made.”

A “stable and predictable regime” had historically resulted in increased investment and activity, leading in turn to a growth in tax revenue.

“When ‘windfall taxes’ have been used in the past, data demonstrates that investment has fallen away.”

The £7.8bn in tax payments for 2022-23, predicted by the Office for Budget Responsibility, are equivalent to about £279 per UK household.

The letter from OEUK appears aimed at spelling out to the Government that there would be an impact from a new tax.

Ms Michie said: “Tax increases make it more expensive to borrow money for big projects – and that can make them unviable.”