Windfall tax ‘bad economics’

A WINDFALL tax on oil and gas firms would be ‘very bad long-term economics’ because it would damage investment in renewables, a minister has warned.

Scotland Office minister Lord Malcolm Offord said there would be a negative impact if the Chancellor went ahead with a new tax which would hit North Sea businesses.

Rishi Sunak has refused to rule out a windfall tax as he prepares to announce new measures to tackle the cost of living crisis. Asked about calls for a windfall tax on the BBC’s The Sunday Show yesterday, Lord Offord said: ‘Yes, it kind of seems like a nice easy solution doesn’t it?

‘It might be good shortterm politics but I would put it to you it’s very bad long-term economics.

‘What we have done here in this country is sign up in Glasgow at Cop26 to net zero by 2050 and right now 75 per cent of our energy needs come from hydrocarbons, so we have to flip that round to being 75 per cent renewables and 25 per cent hydrocarbons. The only way we will get there is that we have the hydrocarbons companies investing their profits into renewables.’

He said he ‘would far rather persuade and cajole and bully, if need be’ companies to reinvest profits into a long-term energy strategy than give them a windfall tax now.

Lord Offord added: ‘BP and Shell together have committed to putting £ 0billion of those profits into the North Sea to get us to net zero. Now if we slapped a £20billion windfall tax on them, all they will do is reduce their investment in renewables by £20billion.’

Business Secretary Kwasi Kwarteng also said yesterday he was against an oil and gas windfall tax.

‘Reduce their investment’