Thursday 21 November 2019 7:12 pm

Oil industry reacts to Labour's new £11bn tax pledge

A controversial Labour pledge to raise up to £11bn from a new levy on oil and gas companies to help retrain 37,000 workers in the industry to “make the transition to a clean economy” has met with fierce criticism from industry bodies.

Jeremy Corbyn revealed the tax at the launch of the Labour manifesto in Birmingham earlier today.

Read more: General election 2019: City urges rethink over Labour’s hostile manifesto

The Labour leader said: “A Labour government will ensure the big oil and gas corporations that profit from heating up our planet will shoulder the burden and pay their fair share through a Just Transition Tax.”

Responding to the manifesto pledge, Deirdre Michie, chief executive of Oil and Gas UK, warned that the plan could have dramatic consequences:

“The Labour manifesto talks about a windfall tax on oil and gas companies, but does not give numbers.

“Our industry supports over 270,000 highly skilled, well-paid jobs the length and breadth of the UK and delivers £24 billion of value to the UK economy. Any increase in tax rates affecting our UK activities will drive investors away and damage the competitiveness of the UK’s offshore oil and gas industry.

“This tax has the potential to affect security of energy supply for the UK and increase our reliance on imports, effectively passing the buck for production emissions to other countries. Neither do imports sustain UK jobs or the supply chain companies whose expertise we need to enable the energy transition.   

“We are an industry in action and were have been one of the first to step forward in response to the Government target of net zero with a clear plan, to reduce our own emissions and help to develop the technology essential to enable the UK to achieve net zero. Our industry’s expertise and investment is needed as part of the solution.

“We look forward to working with the next government, whoever wins, and will play our part with others in society.”

Ken Cronin, chief executive of UK Onshore Oil and Gas, echoed Michie’s concerns:

“The current rate of corporation tax for the oil and gas industry is substantially higher than other sectors.

“Any further taxation will only impact the ability to invest and create jobs at a time when the committee on climate change have indicated a need for oil and gas under their net zero scenario.

“We are already seeing an exodus of economic benefits to places like Qatar and Russia as we increasingly import the oil and gas we need from elsewhere.

“Labour’s pledge will only add to that exodus, simultaneously damaging the UK’s environmental credentials further by encouraging the transport of this essential oil and gas vast distances across oceans and continents at the expense of our carbon emissions.

“The evidence is there: homegrown domestic oil and gas is best for both our economy and environment.”

Read more: Labour’s “self-destructive” manifesto will drive billions away from UK business, business groups warn

Michael Burns, oil and gas partner at law firm Ashurst, told the Telegraph:

“This would be a huge challenge for the UK oil and gas industry, and an increase in tax is at odds with the strategy of encouraging more investment in the North Sea that is currently being implemented by the Oil and Gas Authority.”