LABOUR have been accused of a “virtue signalling exercise” in increasing the windfall tax on oil and gas profits.
Reeves confirmed in a late-afternoon policy document on Monday that the Energy Profits Levy (EPL) would be hiked up to 38% - taking the headline tax rate to 78% - as well as being extended for a further year until March 2030.
The Chancellor added some “unjustifiably generous” investment allowances oil and gas firms receive would also be removed.
The “footnote” announcement came without warning after Reeves had made her fiscal statement in the Commons and it has been met with widespread backlash.
Russell Borthwick, chief executive of the Aberdeen and Grampian Chamber of Commerce, has said given that companies such as Tesco have also benefitted from enormous profits on the back of the current geopolitical situation, the announcement from Labour appears to be “virtue signalling”.
He told The National: “It’s quite remarkable to reflect that last year, Celtic Football Club made more profit than Harvard Energy – who are the largest producer of oil and gas in the North Sea.
“Tesco, on the back of huge food inflation because of the international geopolitical situation, made as much profit as Harvard Energy in eight days.
“There are huge profits being made by lots of sectors so all we can arrive at is that this is simply a virtue signalling exercise which says ‘oil and gas is bad and it needs to go’.
“The problem with that is it doesn’t reflect the fact there is lots of talk about where oil and gas comes from but no talk about the fact we need it.
“In 2003, the UK was a net exporter of gas. Today, we import 55% of our gas because the North Sea has been declining naturally anyway. What we’re now saying is don’t overaccelerate that decline because the outcome of that – according to more knowledgeable advisers than me – is that this direction of travel will see the UK by 2030 import 80% of its gas requirement.
“Even the Climate Change Committee says in 2050 when we have a net zero scenario that we will still consume oil and gas, we have to. So why on earth would we want to import 80% of it?”
Borthwick (below) added the fact that the announcement came in a policy document after the main statement felt “disrespectful to a world class industry” and the North Sea is facing “economic ruin” on the back of the decision.
He added: “We’re facing the destruction of industry on a scale not seen in over 30 years.”
It comes after Labour said in their manifesto that they would not issue any new licences for oil and gas exploration in the North Sea.
Russell also put out a warning that if Labour continues with this attitude towards the industry, the UK could go the same way as New Zealand.
The New Zealand government said last month it will introduce legislation to remove a ban on offshore petroleum exploration amid blackout fears.
Yet Energy Secretary Ed Miliband has repeatedly pledged to halt new drilling despite warnings it will put supplies at risk.
“New Zealand about five or six years ago went down almost an identical path,” said Borthwick.
“What we’re seeing today in New Zealand is limitations in energy, domestic energy bills going through the roof, and the government reversing its ban and begging companies to restart domestic gas supplies.
“So for the people that are saying we’re scaremongering […] what we’re saying is here is a first world nation on the other side of the world that for all of the right reasons tried to do something about oil and gas domestic production but it simply led to blackouts and a need to reverse that policy. Why will that be any different in the UK?”
The EPL is the tax on the extraordinary profits of oil and gas companies operating in the UK and the UK Continental Shelf and was introduced in May 2022. It was increased by Jeremy Hunt in January last year who also announced it would remain in place until 2029.
Aberdeen Central MSP Kevin Stewart has insisted the Chancellor’s latest move will severely damage the oil and gas industry and he has written a letter inviting her to the north east city to speak with workers “whose jobs are being put at risk” by the hike.
The SNP’s Westminster leader Stephen Flynn has also written to Reeves inviting her and Energy Secretary Ed Miliband to Aberdeen to explain “why they believe they are right and the energy industry experts are wrong” on job losses.
He said: “Labour’s decision to treat Scotland’s world class energy sector as little more than a cash cow could be catastrophic for industry, the energy transition and for the local economy of Aberdeen. “We were promised that there would be no cliff edge approach to the energy transition yet this feels a lot like it - if you don’t have investment you don’t have jobs, in the real world outside of Westminster it really is that simple. “Labour look as if they have created a worst of all worlds scenario where you starve industry of investment, lose the jobs of those who can deliver net zero, put at risk energy security, don’t bring down bills, impact the economy of Aberdeen - whilst at the same time fail to invest the money required to truly capitalise on the energy transition. “I’ve invited Rachel Reeves and Ed Miliband to Aberdeen to explain why they are right, and energy industry experts are wrong, and I look forward to them taking up that invitation in early course.”
