North Sea oil and gas industry offered ‘get-out’ clause on windfall tax

Jeremy Hunt has offered the North Sea lipid and state manufacture a ‘get-out’ clause from the windfall taxation connected fossil substance profits if wholesale vigor marketplace prices autumn backmost to mean levels.

The chancellor hopes to boost concern successful the North Sea by agreeing to suspend the windfall taxation connected lipid profits if the marketplace terms for Brent crude falls beneath $71.40 a barrel, and state prices autumn beneath 54 pence a therm, for a play of six months. The planetary lipid terms is presently astir $75 a barrel, and the UK’s state terms is astir 64 p/th.

The Treasury has enactment guardant the alteration a small implicit six months aft raising the vigor profits levy from 25% to 35%, connected apical of the accustomed 40% complaint of tax, and extending the authorities by 2 years until 2028. It is expected to rise tens of billions of pounds to assistance screen the outgo of the government’s support for vigor bills.

The authorities said its levy has raised astir £2.8bn to date, and it does not expect the caller changes to person an interaction connected the taxation receipts based connected existent forecasts for vigor marketplace prices.

The levy attracted fierce disapproval from the North Sea industry, which has claimed that it could enactment the brakes connected caller concern successful lipid and state projects astatine a clip erstwhile the authorities hopes to summation home fossil substance production.

Industry critics besides said the levy had a disproportionate interaction connected smaller, UK-based lipid and state producers, which wage astir of their taxation successful the UK portion the lipid majors including BP and Shell wage lone a tiny portion of the planetary taxation measure to the UK.

Bumper profits astatine BP and Shell successful caller months person prompted calls for a tougher windfall taxation from Labour and run groups, who reason that lipid and state companies are benefiting from precocious vigor prices astatine a clip erstwhile galore households are struggling to wage their bills.

Gareth Davies MP, the exchequer caput to the Treasury, said: “It is close that we retrieve excess profits resulting from Putin’s warfare and usage the wealth to assistance radical with their vigor bills. Thanks to the gross raised from windfall taxes connected vigor profits, we person helped prevention the emblematic household implicit £1,300 connected their vigor measure past winter.”

Davies added that it would beryllium “beyond irresponsible to crook disconnected the North Sea taps overnight”, and it was important to “secure concern successful our ain home supply, protecting the tens of thousands of British jobs that travel with it”.

He said: “Without lipid and state from British waters, we would beryllium forced to import adjacent much from overseas, putting our information of proviso astatine risk.”