AGCC: ‘Economically illiterate’ windfall tax could drive up costs

A windfall tax on North Sea oil and gas firms would be “economically illiterate” and could “perversely” drive up the domestic costs of energy, MPs have been told.

In a letter to six northeast MPs ahead of a vote in Westminster today, the Aberdeen and Grampian Chamber of Commerce (AGCC) also argued that the industry is already on track to pay “sufficient incremental tax revenues” that would “fund the support for consumers that some opposition parties have called for”.

AGCC policy director Ryan Crighton sent the letter after it emerged Labour aimed to force a vote on a so-called windfall tax in the House of Commons.

Shadow net-zero minister Ed Miliband has said Labour will put forth an amendment today which would see a tax on oil and gas profits added to measures outlined in the Queen’s Speech.

Analysis by the Labour Party has claimed the move could raise around £2 billion, based on updated forecasts by the Office for Budget Responsibility (OBR).

Mr Crighton argued that North Sea firms were already forecast to fork out £8.1bn for 2022-23, and may yet pay closer to £10bn.

This would be a £7.2bn increase on 2020, driven by the rising price of oil and gas – which has in turn fuelled calls for energy firms to pay a windfall to allay the impact on consumers.

“It is our view that this short-term, economically illiterate move will achieve little apart from making the North Sea – already one of the world’s most mature basins – less attractive to investors,” he said.

“This would place jobs, tax revenues and our domestic energy security at risk, and also limit ability and appetite to invest in the lowcarbon research and development we so desperately need.

“BP chief executive, Bernard Looney, has said that a windfall tax ‘would challenge investment’ in home-grown energy.

“The view of the industry is clear – a windfall tax will divert investment, which, perversely, has potential to drive up energy bills in the long term.”

Ed Miliband.