Labour firm on windfall tax despite criticism

◆ Party believes in its plans for a green transition amid warning the move does too much, too quickly

Labour is being criticised over its plans for a windfall tax, but there is no expectation the party will change its stance.

A new energy profits levy for oil and gas production was introduced in 2022 after global prices shot up in the wake of Russia’s invasion of Ukraine. Labour has promised to extend this to 2029, with the energy profits levy rising from 75 to 78 per cent.

The opposition has been fierce, with trade body Offshore Energies UK warning as many as 42,000 jobs could be put at risk by the policy. The SNP and Tories have also been critical, warning the move does too much, too quickly.

For their part, Labour believes the policy is popular, and the criticism comes from opposition parties struggling with their own response, or from companies who still make a profit paying more tax. In 2022, Yougov found 64 per of voters supported a windfall tax, while last year climate organisation Green New Deal Rising found 60 per cent of the public think Labour should increase taxes or end subsidies for fossil fuel companies.

First Minister Humza Yousaf used a key speech in Aberdeen yesterday to criticise the tax rate as “aggressive”, despite saying he agreed with a windfall tax in principle. The SNP position is the increase is too high, but also that Scotland should have a say on how the funds are spent.

Earlier this year, Mr Yousaf referenced Norway as an inspiration for industrial strategy, but now is questioning a tax rate used in Norway. Stephen Flynn, the SNP Westminster leader, has also previously called for an “evidence-based approach”. SNP figures stress the argument is about how to protect jobs while also working towards net zero.

For business, there are concerns Labour’s strategy will see mass job losses, arguing the confidence of energy producers to invest in the UK has come under “consistent challenge” in recent years. however, Labour figures insist the plans are fair and don’t shut off oil and gas for decades to come. The party said this would raise £10.8 billion over five years to help pay for its green spending plans, and would create many more jobs by investing in clean energy.

Party figures told The Scotsman they don’t see the plans as a cliff-edge, but rather part of a managed transition, though clearly energy companies are yet to be convinced.

The party has work to do in convincing energy companies, and after abandoning the £28 billion Green investment plan, can’t risk another U-turn.