Oil and gas companies lash out at Labour’s new windfall tax plans

LONDON — More than 40,000 jobs in the U.K. energy sector could be lost because of Labour’s new oil and gas windfall tax plans, an industry group is warning.

In a scathing attack on the U.K. opposition party's proposals, David Whitehouse, chief executive of Offshore Energies UK (OEUK) said the party “either can’t do the maths or haven’t considered the alarming jobs impact” of their tax plans.

Labour — on course for government on current polling — set out new pledges for a “proper windfall tax” on oil and gas companies on Thursday, saying that the proposals would raise £10.8 billion over five years, to be spent on green investment.

The announcement was made alongside a drastic cut in Labour’s overall spending plans, which saw a long-standing target of reaching £28 billion in annual green investment finally ditched following weeks of speculation.  

To help pay for its new pledge of a £23.7 billion uplift in green spending over five years, the party said it would increase the rate of the government’s existing windfall tax from 75 to 78 percent and would extend the levy by a year, to 2029.

But oil and gas companies are particularly concerned by plans to close what Shadow Chancellor Rachel Reeves called “loopholes” in the existing windfall tax. Industry figures are concerned that this means Labour would scrap an “investment allowance” which currently allows oil and gas producers to get 91p in tax relief for every £1 they invest in U.K. operations.

OEUK said scrapping the tax relief measures would likely result in no new investments being made into the U.K.’s oil and gas industry and estimated that the plans could imperil thousands of jobs and cost the U.K. £26 billion in “economic value.”

“With no new investment, 42,000 jobs will go, and we could start to see the effects as early as this year,” said Whitehouse. “These are not faceless numbers but decent, hard-working people working across the U.K. to provide the energy we will need today and in the future.”

The industry group — formerly known as Oil and Gas UK — is demanding an “urgent” meeting with Labour to clarify the party's plans.

A Labour spokesperson said Friday evening that the party's plans would "create good jobs in all parts of the country" and that the opposition represented the "party of business and stability for their investments"

“We have been consistent that a proper windfall tax means raising the rate of the windfall tax to match the rate in Norway, abolishing the investment allowances inside the windfall tax, and that these changes account for the vast majority we would raise from a windfall tax," the spokesperson added. "Our windfall tax will only apply while there are windfall profits being made. This is fair and proportionate."

'Stunned'

Other industry groups also voiced concerns. Robin Allan, chair of the Association of British Independent Exploration Companies (BRINDEX) said Labour’s plans were “an attack on the oil and gas sector and its 200,000 workers.”

A third industry figure, granted anonymity to speak frankly, said companies had been “stunned” by Labour's plans on Thursday and felt “betrayed” after the party had made efforts to forge better relations with fossil fuel companies.

However, the investment allowance tax break has drawn criticism from others. Former Conservative Cabinet minister Alok Sharma has questioned whether it is consistent with the government’s commitments at the COP28 climate summit to phase-out subsidies for oil and gas.

OEUK and the government insist the tax relief is not a subsidy.

This story was updated with further reporting.