Labour defends tax raid plan despite oil output warning

ED MILIBAND has vowed to press ahead with a planned tax raid on the North Sea despite a warning that it would cause oil output to halve.

In a speech at International Energy Week, under way in London, the shadow climate secretary offered no concession on tax plans. He said the oil and gas industry could be “part of the transition” but it must move away from fossil fuel extraction towards carbon capture and hydrogen production.

Mr Miliband said: “We can use the extraordinary infrastructure of the North Sea for our future. The policy we’ve set out is to use existing oil and gas fields for their lifetime and to deliver a plan for the North Sea so it can serve us for carbon capture, hydrogen and other future [low carbon] industries.”

His comments came as a report warned North Sea output will plunge 52pc by 2030 if Labour implements its pledge to cut investment allowances.

A report sent to leaders in the offshore industry, entitled Labour’s UK tax plan risks wiping out North Sea investment, was written by energy analysts Wood Mackenzie and looks at the impacts of the party’s pledge to remove investment allowances. These let companies offset the cost of investments against profit, and so pay less tax. However, Mr Miliband has branded this a tax “loophole” and pledged to remove it.

The Wood Mackenzie report said: “UK production in 2024 is forecast to be 1.2m barrels of oil equivalent per day. Without new fields, by the end of this decade, this could fall to 630,000 barrels, a reduction of 52pc. Should these domestic projects not go ahead, the UK’S dependence on higher-emissions intensity imports will increase.”

A government spokesman said: “Labour’s approach to North Sea oil and gas would cost Britain billions, lead to 200,000 job losses and risk our national energy security.”

It came as Gordon Brown said Aberdeen could enjoy a “second renaissance” with the creation of a North Sea energy grid linking offshore wind.

In a report from his think tank, Our Scottish Future, the former Labour prime minister said: “I can see the combination of three sources of energy: wind power, carbon capture and storage and hydrogen, generating more income and employment.”