Chancellor Rachel Reeves has confirmed the Energy Profits Levy will remain until 2030, rejecting industry calls for urgent reform and triggering fresh warnings over jobs, investment and UK energy security.
In her Budget statement, Reeves announced £26 billion in tax rises, including an extended freeze on income tax thresholds. The Office for Budget Responsibility says this will take the UK tax burden to a record 38% of GDP.
The EPL - first introduced in 2022 - keeps North Sea operators at a 78% headline tax rate. From 2030, it will be replaced by a new Oil and Gas Price Mechanism.
The UK Government will now allow extraction of oil and gas near existing fields - following the advice of Prof John Underhill from University of Aberdeen - as it looks to expand North Sea production without issuing new licences.
Under the scheme, new 'transitional energy certificates' will be made available, which will allow producers to drill in areas 'adjacent' to current fields, provided there is no exploration undertaken and the move would be required to ensure the existing field is viable.
However, industry leaders have been left fearing the worst, warning that while the EPL remains in place, investment will collapse.
Russell Borthwick, Chief Executive, Aberdeen & Grampian Chamber of Commerce, said: 'The UK Government has accepted, through their announcement on tiebacks, that their policy towards a sustainable future for the North Sea is completely and utterly flawed, risks terminal damage to the UK’s energy security and is proving economically ruinous.
'But limited flexibility on licensing is immaterial if those companies producing the energy we need are taxed at a crippling rate of 78 per cent until 2030. They cannot invest or survive while the EPL remains in place.
'The industry put forward a case for a reformed EPL that would have delivered more than 100 projects, £50 billion of investment and protected around 160,000 jobs. Crucially, it would have also delivered an additional £10 billion in tax revenues over the next decade.
'Without so much as a mention in the Chancellor’s statement, the UK Government has instead opted for a cliff-edge end to North Sea production and to tax the industry to death inside five years. Jobs will be lost in their thousands as a direct result of this government’s failure to act.
'As the voice of business in the North-east of Scotland, we will refocus our efforts on ensuring that this jobs and economy-wrecking tax is brought to an end as soon as possible. Aberdeen is not going down without a fight.'
David Whitehouse, CEO of Offshore Energies UK, said: 'Today, the government turned down £50 billion of investment for the UK and the chance to protect the jobs and industries that keep this country running. Instead, they’ve chosen a path that will see 1,000 jobs continue to be lost every month, more energy imports and a contagion across supply chains and our industrial heartlands.
'This is not over. We will keep pressing for change – this industry’s people, their communities and the value of this strategic national asset are too important to dismiss. The Government was warned of the dangers of inaction - they must now own the consequences and reconsider.
'The future of North Sea energy depends on investment, which won’t come without urgent reform of the windfall tax. If the levy stays in place beyond 2026, projects will stall and jobs will vanish, no matter how pragmatic licensing policy becomes. Fixing this outdated tax is the key to unlocking billions in investment across the UK’s entire energy mix.
'Waiting four years for reform of this tax is too late. The North Sea continues to be one of the least competitive places for our industry in the world. We put forward a pragmatic plan: a reformed, permanent windfall tax in exchange for billions in UK investment, more tax paid, and jobs sustained. Government said no.'
The Chancellor defended her EPL decision on BBC Radio Scotland this morning insisting that a 78% tax rate is 'fair'.
Source: Aberdeen and Grampian Chamber of Commerce
