North Sea tax revenue set for record £21bn

OIL and gas producers in the North Sea are to pay a record £21bn in tax next year after Jeremy Hunt announced a fresh raid on the industry’s profits.

The Chancellor will raise £20.7bn after inflicting rates of 75pc on fossil fuel companies, according to the Office for Budget Responsibility.

The Government’s tax and spending regulator believes half this money will come from the windfall tax on profits made by energy companies.

The Chancellor increased the so- called energy profits levy to 35pc from 25pc in the Autumn Statement. The Resolution Foundation think tank said this will raise the effective tax rate on North Sea oil and gas companies’ profits to 75pc. It said: “This is close to double the pre-crisis rate.” The receipts are close to the 78pc rate charged in Norway and are also equal to the highest proportion of GDP since the mid-1980s North Sea boom, according to the think

tank. Industry leaders have warned that the increase in the energy profits levy will deter investment in oil and gas.

Torsten Bell, chief executive of the Resolution Foundation, also highlighted that renewable energy firms faced even bigger disincentives to invest after Mr Hunt hit them with a new 45pc tax on excess profits, in addition to their corporation tax payments.

He said: “Renewable and nuclear electricity generators will not be able to reduce their tax bill by investing in the UK, unlike oil and gas companies, who are incentivised to bring additional North Sea oil and gas fields online; this is somewhat at odds with the Government’s aims of achieving a net-zero emissions economy and runs contrary to advice from the [independent] Climate Change Committee.”

Despite the share of renewable energy increasing eleven-fold since the start of the millennium, the OBR noted that declining North Sea gas and oil output had left the UK more dependent on other countries to meet energy needs.