Labour Calls for Windfall Tax on North Sea Oil and Gas

Labour Calls for Windfall Tax on North Sea Oil and Gas
The UK Labour party has called for a 'windfall tax' on North Sea oil and gas.

The UK Labour party has called for a “windfall tax” on North Sea oil and gas “to stop energy bills rising over the next year”.

In a statement posted on its website, Labour outlined that it would use a one-off windfall tax on producers to support measures to mitigate an expected price rise.

Industry body Oil & Gas UK (OGUK) has warned that a one-off windfall tax on the UK’s offshore oil and gas operators would cause “irreparable damage” to the industry and leave consumers even more exposed to global shortages.

The organization outlined that price increases were a global problem and showed the importance of protecting the UK industry rather than penalizing it. OGUK also argued that such taxes would drive investment down and said the UK’s oil and gas production would plummet, forcing it to import far more of its energy.

“We want to stop bills going up,” Rachel Reeves MP, Labour’s Shadow Chancellor of the Exchequer, said in a Labour party statement.

“That’s why Labour would give families security by taking fully funded measures to save most households around GBP 200 ($272.26) or more, targeting extra support on top of that for the squeezed middle, pensioners, and lowest earners,” Reeves added in the statement.

“Labour’s plan to keep energy bills lower in future would see us accelerate home-grown renewables and new nuclear, retrofit 19 million homes to save households an average of GBP 400 ($544.52) a year on their bills, and reform our broken energy system to stop energy companies playing fast and loose with the rules,” Reeves continued.

Jenny Stanning, OGUK’s external relations director, said, “this idea is offering consumers false hope – and the risk of real long-term damage to UK Plc”.

“In the short term the Treasury is already gaining from these price rises. It will get an additional GBP 3.5 billion ($4.76 billion) taxes in the two years from last April – making a total of more than GBP 5 billion ($6.8 billion). We already pay up to 40 percent corporation tax – roughly double any other sector,” Stanning added in the statement.

“In the longer-term a windfall tax would also be the worst thing for consumers because it would damage competitiveness, and discourage energy companies from investing in the UK … That would reduce our energy security and make us even more dependent on imports from places like Russia and the Middle East,” Stanning went on to say.

The OGUK representative also noted that many of the companies that might be affected by a windfall tax are also investing heavily in low-carbon and renewable energy.

“For them, a windfall tax could reduce the amounts they could invest,” Stanning said.

The UK Conservative party is currently in charge of the UK government with 361 MPs in the House of Commons, which has a total of 650 seats. The Labour party has 198 MPs.

OGUK describes itself as the leading representative body for the UK offshore oil and gas industry. The not for profit organization was established back in April 2007.

To contact the author, email andreas.exarheas@rigzone.com


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