Chancellor Rachel Reeves is weighing plans to scrap the windfall tax on North Sea oil and gas producers in a bid to boost investment and revive economic growth.
The energy profits levy (EPL), introduced in 2022 under Rishi Sunak amid soaring global energy prices, currently imposes an effective tax rate of 78 per cent on North Sea operators. The Treasury is now considering whether to end the levy early, over growing fears it is stifling capital investment and threatening the UK’s domestic energy output.
Sources close to the discussions said officials have been consulting with major North Sea operators to gauge how much they would reinvest if the tax were removed. The move would mark a dramatic shift for the Labour government, which had previously supported extending the levy but now faces mounting pressure to prioritise growth.
Industry body Offshore Energies UK (OEUK) has warned that the sector is shedding 1,000 jobs a month as a direct consequence of the levy, with investment and production both falling faster than expected. The group has urged the Chancellor to replace the tax with a more stable, long-term fiscal framework, arguing that uncertainty over the levy is driving companies to shift their investment abroad.
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