Pressure is mounting on Rishi Sunak, chancellor, to levy a one-off windfall tax on UK offshore oil and gas operators, simply weeks after the boss of BP mentioned excessive commodity costs had turned his firm into “a cash machine”.
Labour, the Liberal Democrats and some Tory MPs need Sunak to levy a tax on the income of North Sea operators to alleviate hovering home power payments, arguing the sector can simply face up to the hit.
Rachel Reeves, shadow chancellor, mentioned a windfall tax would partly fund a Labour plan to minimize power prices for all customers by about £200 this yr, with an additional £400 taken off the payments of greater than 9m poorer households.
The business has claimed a one-off windfall tax on UK offshore oil and gas operators would trigger “irreparable damage” to the sector and depart customers much more uncovered to world shortages.
But politicians at Westminster are eyeing the operators as a possible supply of cash to alleviate the price of dwelling disaster, not least as a result of business leaders have prompt their firms are awash with money.
In November, Bernard Looney, BP chief govt, mentioned hovering world commodity costs had made his firm a “cash machine”, because it bolstered its share buyback programme, thanks to a pointy rise in quarterly income.
“When the market is strong, when oil prices are strong and when gas prices are strong, this is literally a cash machine,” he instructed the Financial Times.
Meanwhile, Serica Energy, the North Sea firm liable for 5 per cent of UK gas manufacturing, mentioned in September it was anticipating to make “very significant returns” to shareholders, thanks to report excessive costs.
Despite that, Oil and Gas UK, the offshore business physique, claimed firms would grow to be more and more reluctant to make long-term investments in the event that they have been threatened with windfall taxes at any time when costs rose.
Mike Tholen, sustainability director at OGUK, mentioned that requires a windfall tax have been “in no one’s interest” and that the Treasury was already seeing “significantly higher returns” from North Sea power firms.
“Over the next two years, the Treasury expects an additional £3bn in tax revenue from this industry — with a predicted direct tax take of almost £5bn. The upstream oil and gas industry already pays almost double the rate of corporation tax that other sectors pay,” Tholen mentioned.
He added that, by taxing firms extra, the federal government additionally risked holding up funding into inexperienced power infrastructure within the UK.
Despite power firms’ UK tax contribution, North Sea operators nonetheless profit from one of the vital beneficial tax regimes in contrast with different oil and gas-producing areas around the globe.
Under Labour’s plan, North Sea power producers could be pressured to pay £1.2bn to mitigate family payments by way of a year-long enhance to their company tax of 10 proportion factors.
Labour would additionally scrap VAT on gas payments as a part of a drive to comprise power costs; a cap on family payments is in April anticipated to rise from £1,277 for a median family to virtually £2,000, pushed by excessive wholesale gas costs.
Sir Ed Davey, Lib Dem chief, who additionally backs the windfall tax, mentioned: “It can’t be right that a few energy fat cats are raking it in from record gas prices while millions of people can’t even afford to heat their homes.” Chris Skidmore, a former Tory power minister, has additionally endorsed the thought.
Sunak will maintain a mini-Budget in March however the Treasury has been cautious previously of one-off taxes, which may have the impact of considerably decreasing funding and provide within the yr they’re carried out — placing additional upward stress on costs.
There is a concern in authorities circles that an offshore windfall levy would additionally largely hit oil slightly than gas producers, forcing up gas costs. But Sunak has additionally mentioned he’s contemplating a spread of choices to assist folks with their home power payments.