Labour: Windfall tax has ‘gaping hole’
THE Chancellor’s windfall tax on oil and gas profits has a “great, big, costly, gaping hole” in the middle of it because of investment tax breaks, shadow chancellor Rachel Reeves has said.
Ms Reeves told the Commons that the decision to introduce the levy was a “welcome U-turn” but accused Rishi Sunak of creating a “tax giveaway for oil and gas producers that undermines it”.
It comes as one of the UK’s biggest gas producers said it will be able to offset a “large element” of the new windfall tax that the Government has imposed on North Sea explorers.
Serica Energy said it is planning to spend about £60 million on two projects in 2022, which will help it save on its tax bill.
The Government said last month that it would add an extra 25% tax to what is already paid by oil and gas producers in the North Sea, but ministers are also allowing companies like Serica to reduce their tax bill by 91.25p for every £1 they invest in the UK.
Treasury minister Lucy Frazer defended the policy, saying Mr Sunak had “taken this decision carefully, considering the circumstances”, and did not just make the policy “on the basis of ideology”.
Raising the urgent question in the lower chamber, Ms Reeves said the decision to introduce the levy was a “welcome U-turn”.
She added: “The same time as this handbrake turn, he (Rishi Sunak) created a tax giveaway for oil and gas producers that undermines it.
“Just this morning, in a statement to shareholders, the head of Serica Energy said these measures would ‘offset a large element of the energy profits levy’.
“All in all, we calculate that a third or more of any revenue from a new levy might be handed straight back in tax breaks.
“This cashback policy is typical of the sleight of hand we have come to expect from this Conservative government.”
Ms Reeves called on the Government to say how much the tax breaks would cost, and added: “Rather than simply admitting that a windfall tax was the right idea all along, the Chancellor has introduced one with a great, big, costly, gaping hole in the middle of it.”
Ms Frazer said: “She (Rachel Reeves) will remember when this policy was announced that we said we had estimated it would be raising £5 billion to support the package of measures that we had put forward as she said, and we are today talking about the cost of living, to support those people with the cost of living.”
Green MP Caroline Lucas (Brighton, Pavilion) told MPs: “Just six short months ago, the UK hosted Cop26 and still remains its president, not that you would know that from this appalling policy from this Government.
“The Glasgow Climate Pact, which the UK signed, committed to phasing out inefficient fossil fuel subsidies.
“So, can she explain on what possible grounds handing an 80% tax break to the dirty, dangerous and outdated energy of the past could possibly be considered efficient, especially when the new fossil fuel production will do nothing to help with energy security or affordability since they will simply be sold at global prices on international markets?
“How is that climate leadership?”