‘Switching off North Sea is insanity’: Labour urged to scrap windfall tax

The windfall tax on North Sea oil and gas operators has left Britain with ‘one of the least competitive fiscal regimes’ in the world, ministers have been warned.

Calling for the new tax system planned for 2030 to be brought forward to April this year, campaigners urged the government to ‘end policies that are accelerating job losses, weakening energy security and increasing emissions’.

And in a letter to MPs in Westminster and members of the Scottish Parliament, they demanded ‘immediate steps to restore competitiveness and confidence’ in the UK North Sea.

The letter was organised by the Aberdeen & Grampian Chamber of Commerce and backed by industry leaders, union bosses and green campaigners.

Sources said the wide range of voices ‘highlighted growing cross-spectrum concerns that currency policy is driving industrial decline’.

Gloom: No new wells were drilled in the British North Sea in 2025 for the first time since 1964

It comes after the Tony Blair Institute last week called for Ed Miliband’s green energy strategy to be replaced with a drive for cheaper power.

In a damning report, it argued that Labour was risking Britain’s place in the world by pursuing an expensive strategy of maximising wind and solar energy.

It said that ministers should ditch the windfall tax on oil and gas, drop the ban on North Sea exploration and focus on reducing prices.

The windfall tax, or 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.

The levy has also been 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.

A new ‘oil and gas price mechanism’ that will see headline tax rates fall from 78pc to the prior level of 40 per cent is due to replace it – but not until 2030.

Caution: Russell Borthwick, boss of Aberdeen and Grampian

Russell Borthwick, chief executive at Aberdeen & Grampian Chamber of Commerce, said: ‘The North Sea is not being phased down through a managed transition – it is being forced into decline by policy decisions that are driving investment away.

‘We need politicians of all parties to recognise that a just transition requires protecting skilled jobs, maintaining domestic energy production, and supporting the supply chain while we scale up renewables.

‘If we switch off the North Sea faster than we switch on alternatives, we don’t reduce demand – we simply import more energy, export jobs, and increase emissions.’

His comments were echoed by Anas Sarwar, the Scottish Labour leader who last week called for Sir Keir Starmer to stand down as Prime Minister.

‘There are existing fields which can yield hundreds of billions of value for our economy, supporting growth and delivering revenues to support our public services,’ he said.

More than 7,000 companies and business leaders have now signed up to a campaign calling on the UK Government fast-track its new North Sea fiscal regime and avert tens of thousands of ‘avoidable’ job losses.

Critics also argue that the increased reliance on imports is undermining the UK’s net zero ambitions, as imported oil and gas is typically more carbon-intensive than domestic production.

Backing the Chamber of Commerce’s calls, GMB general secretary Gary Smith said: ‘Just switching off investment in the North Sea is absolute madness. 

‘It’s bad for national security, it’s bad for jobs and the truth is it’s catastrophic for the environment because we are importing oil and gas, which is far more carbon intensive than producing it ourselves.’

A chorus of condemnation

‘Just switching off investment in the North Sea is absolute madness. It’s bad for national security, it’s bad for jobs and the truth is it’s catastrophic for the environment because we are importing oil and gas, which is far more carbon intensive than producing it ourselves.’ Gary Smith, GMB General Secretary

‘The reality is that the UK and Scottish governments are failing to protect thousands of jobs. Government policy is also accelerating these huge losses without any credible jobs plan in place.’ Sharon Graham, Unite General Secretary

‘Our North Sea is in decline, let’s protect it during the transition and optimise our use of the resources that are left. We should scrap the windfall tax and protect the industry and its workers – we need to avoid the destruction of the industry or we will see a repeat of what happened to our coal miners.’ Dale Vince, founder of Ecotricity and former Just Stop Oil donor

‘When we’re shipping LNG, liquefied natural gas, around the world, it is a lot dirtier than using locally produced gas. So if we’re going to produce gas then I’ve got no problem in using local stuff.’ Greg Jackson, chief executive of Octopus Energy

‘There are existing fields which can yield hundreds of billions of value for our economy, supporting growth and delivering revenues to support our public services.’ Anas Sarwar, Scottish Labour Leader

‘Oil and gas is our foundation. This isn’t about oil and gas or renewables; it’s about oil and gas and renewables.’ Juergen Maier, chairman of Great British Energy