Hunt snubs Scottish Tory pleas with Budget windfall tax extension
Oil and gas firm levy to fund National Insurance cut
CHANCELLOR Jeremy Hunt has risked the wrath of Scottish Tories by confirming he will extend the windfall tax on oil and gas companies – to fund a new cut in National Insurance.
Unveiling the Spring Budget yesterday, the Chancellor confirmed National Insurance would be cut by 2%, a tax reduction that will apply across the United Kingdom.
It will be funded by additional taxes on vapes and tobacco. But controversially, it will also be funded by maintaining until 2029 the windfall tax on North Sea oil and gas companies which have posted bumper profits because of the war in Ukraine.
Scottish Tory leader Douglas Ross reportedly became embroiled in a heated row with both Hunt and the Prime Minister about the policy.
Speaking in the Commons, Hunt said the Government would abolish the Energy Profits Levy “should market prices fall to their historic norm for a sustained period of time”.
But he added: “Because the increase in energy prices caused by the Ukraine war is expected to last longer, so too will the sector’s windfall profits. So I will extend the sunset on the Energy Profits Levy for an additional year to 2029 raising £1.5 billion.”
Scottish Tory MPs are up in arms over the proposals, Ross vowing to vote against the measure.
The Scottish Tory leader said: “I’m deeply disappointed by his decision to extend the windfall tax for a further year.
“The SNP and Labour have abandoned 100,000 Scottish workers by calling for the taps in the North Sea to be turned off now.
“Although the UK Government rightly oppose this reckless policy – and have granted new licences for continued production in the North Sea – the Budget announcement is a step in the wrong direction.
“As such, I will not vote for the separate legislation needed to pass the windfall tax extension and will continue to urge the Chancellor to reconsider.”
Energy minister Andrew Bowie, also the MP for West Aberdeenshire and Kincardine, said the decision was “deeply disappointing”.
Elsewhere in the Budget, the Chancellor announced that he would reform the controversial non-dom tax regime, of which Rishi Sunak’s wife Akshata Murty was until recently a beneficiary.
Claiming non-domiciled status allows wealthy people who live in Britain to say they are not fully settled in the country to avoid paying UK taxes on their income earned abroad.
In practice, this means people save money by electing as their primary domicile a lower-tax country to which they have ties.
Hunt said he would “replace the non-dom regime with a modern, simpler and fairer residency-based system”.
He added: “From April 2025, new arrivals to the UK will not be required to pay any tax on foreign income and gains for their first four years of UK residency, a more generous regime than at present and one of the most attractive offers in Europe.
“But after four years, those who continue to live in the UK will pay the same tax as other UK residents.”
He said that those who currently benefited from the non-dom regime would be given “transitional arrangements”, including a two-year period during which people will be “encouraged to bring wealth earned overseas to the UK where it can be spent and invested here”.
This will attract an extra £1bn in tax, he said.
Paul Johnson, the director of the Institute for Fiscal Studies, praised the Chancellor for “removing [the] outdated concept of ‘domicile’” and replacing it with a “residence-based system”.
Duties on alcohol will remain frozen at their current rate, dodging a 3% rise, until February 2025, Hunt said, and the 5p cut in fuel duty will remain in place and the tax frozen for a further 12 months.