MPs say windfall tax is killing North Sea oil

Labour’s extension of the windfall tax on oil and gas companies to the end of the decade ‘risks accelerating the industry’s decline and job losses’, MPs have warned.

The so-called energy profits levy was introduced by the Tories in 2022, but has since been raised to 38 per cent by Labour – taking the headline tax rate on oil and gas profits to 78 per cent – and extended to March 2030.

The punitive tax – among the highest in the world – has been blamed by the sector for job losses and a lack of investment, with no new wells drilled in the British North Sea in 2025 for the first time since 1964.

The Scottish Affairs Committee has joined the criticism in a damning report into the levy’s impact, as the backlash over Labour’s Net Zero policies, spearheaded by Energy Secretary Ed Miliband, grows.

Punitive levy: The backlash over Labour’s Net Zero policies, spearheaded by Energy Secretary Ed Miliband (pictured), is growing

Committee chairman Patricia Ferguson, a Labour MP, said the pledge to reform the levy in 2030 was a ‘positive step’.

But she added: ‘The Government could’ve gone further. Keeping the energy profits levy in place for another four years risks accelerating the industry’s decline and job losses, even though it’s well known that the UK will need oil and gas in its energy mix for decades to come as we transition to Net Zero.’

Russell Borthwick, chief executive of the Aberdeen & Grampian Chamber of Commerce, told the Mail: ‘The reality is stark. The levy leaves the UK with one of the most uncompetitive fiscal regimes in the world, despite the oil and gas price spike ending more than three years ago.

‘As a result, production is falling, investment is stalling and jobs are already being lost at scale across the UK.’

Analysis of Budget documents by the Mail last month showed the tax was raising billions of pounds less than expected. The levy was forecast to bring £26billion in the three years after its introduction in 2022, but raised just £9.7billion.