Raising tax on North Sea oil and gas profits could “kill the goose that lays the golden egg” and threaten the transition to net zero, an MP has warned.
The SNP’s Dave Doogan claimed the Finance Bill was “a further and final attack on North Sea oil and gas, on Scotland’s natural endowment”.
Harriet Cross, Conservative MP for Gordon and Buchan, said the Government risks baking in the energy profits levy (EPL) to the tax system as a permanent feature, “creating long-term uncertainty that will drive investment away from north-east Scotland”.
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The Conservative government introduced the levy in May 2022, a time-limited windfall tax, which is currently set at a rate of 35% and due to end in March 2029.
If MPs agree the Finance Bill, which they backed at its second reading on Wednesday by 332 votes to 176, majority 156, the levy would rise to 38% and continue until 2030.
The draft legislation will undergo further scrutiny at a later date.
Mr Doogan told the Commons: “The UK has drawn billions – hundreds of billions – of pounds from the North Sea over the course of my lifetime, the last 50 years, and it’s almost as though they’re addicted to it, so much so they’re going to kill the goose that lays the golden egg.
“They’re hiking taxes, eroding allowances and driving investment from the North Sea in the businesses that are precisely the ones that we need to drive the transition to net zero in the places that we need them.
“What other state would attack one of their own industries in this way? It’s beggars belief and it will come home to roost in spades.
“It will not shift the dial towards the net-zero future that we’re trying to get to one bit.
“The oil and gas that is being displaced from the Scottish sector by this Government’s ineptitude will be replaced by oil and gas from other jurisdictions, where the tax will be paid and where doubtless human rights are very much worse.”
Ms Cross said: “What other industry in the UK would be expected to deliver something as fundamental as our heating, our lighting or our transport fuels, indeed energy to make sure the NHS can operate or schools can run, while also being taxed to such an extent that this Government is driving away investment in a sector so crucial to our national security?
“What is particularly concerning with the EPL is the impact on homegrown energy businesses. These are not global multinationals that are often used as examples of the energy giants who make massive profits, companies which can and do buffer the impacts of EPL by increasing their overseas investments and reducing their investments in the North Sea.
“Instead, this policy hits hardest the companies that have emerged and grown out of north-east Scotland, employing local people, supporting local supply chains and helping our local economies.”
The MP, whose constituency lies north of Aberdeen, later added: “This Labour Government is turning what should be and what was a windfall tax into a permanent feature of our tax system, creating long-term uncertainty that will drive investment away from north-east Scotland.”
Treasury minister Tulip Siddiq told MPs: “We recognise that oil and gas will continue to have a role in the energy mix during the transition. We need to drive public and private investment towards cleaner energy.
“The money that’s raised by these changes will help contribute towards this public investment while the sector continues to benefit from £84.25 relief for every £100 of private investment, and to reflect our commitment to facilitating cleaner homegrown energy, the Government has confirmed that the sector will continue to benefit from a decarbonisation investment allowance at similar value of relief as it received prior to November energy profits levy rate increases.”
