Cost of living: Windfall tax 'will bring about job losses', energy industry warns

·3 min read

A windfall tax "will bring about job losses", the energy industry has warned.

Deirdre Michie, chief executive of Offshore Energies UK, which represents the offshore oil and gas industry, said their supply chain is "really worried" about the implications of a windfall tax, which was announced today.

"That will directly impact manufacturing in this country," she said.

"It will undermine our supply chain, and it will bring about job losses."

Windfall tax only equals £60 for every household - live updates

Speaking before the chancellor outlined plans for the tax, Ms Michie said "we need to wait to see what the details are", but added: "This isn't feeling good, to have this unexpected surprise on a sector that has been committed to working positively with the government on the security of energy supply and on the energy transition."

She said history shows that a windfall tax "doesn't work" because it undermines investment.

"If we don't have investment, we don't have new projects coming through, production in the sector will drop off a cliff by 2030 - at a time when we need to ensure that we have enough oil and gas to satisfy the demands that the country will still require going forward, rather than having to increase costly inputs, which also have, ironically, a higher emissions footprint," she said.

But she defended increases in profits among energy companies, saying "they come on the back of two years of significant losses by this sector", pointing to the impact of COVID-19.

"At a time when the country needs to really focus on its security of energy supply and the energy transition, we have been arguing for stability and predictability in terms of the fiscal regime that is working," she added.

"It is generating significant returns for the Treasury that they can then use to address the consumer crisis, but at the same time, can give the kind of investor confidence that's needed to keep investing in oil and gas and underpin the energy transition."

Read more: What's a windfall tax, how much do oil companies already pay, and has the UK tried it before?

A windfall tax is a one-off tax imposed by a government that targets firms that have benefited from something they were not responsible for - also known as a windfall.

In the case of energy companies, they are reaping the benefits of sky-high prices in part because demand has increased as the world emerges from the pandemic and due to supply constraints following sanctions imposed on Russia after its invasion of Ukraine.

Chancellor Rishi Sunak said oil and gas firms will pay a 25% levy on profits which would be phased out when prices return to normal - but he said companies would get 90% in tax relief for any profits they invest.

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The UK is implementing the tax and using the proceeds to help people struggling with soaring energy bills, following in the footsteps of Italy and Spain.

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