Rachel Reeves should scrap the North Sea windfall tax now

Rachel Reeves should scrap the North Sea windfall tax now Nils Pratley The UK should optimise North Sea oil and gas production while it transfers to renewables and nuclear developments T he chancellor’s failure to reform or remove the energy profits levy – AKA the North Sea windfall tax – in her spring forecast was a case of “political expediency and more to do with putting one byelection result before the economic needs of the country”. Who said that? Some Tory or Reform politician being opportunist as war in Iran puts the UK’s energy import dependency in the spotlight? Actually, no, it was the general secretary of the GMB union, Gary Smith, on Wednesday, demonstrating once again that views on the North Sea oil and gas do not fit neatly into a left-right divide. He has been making the principled case for an orderly transition in energy for ages, warning that decarbonising via deindustrialising costs jobs and will end up pushing voters rightwards. As it happens, one suspects Rachel Reeves’ silence on the EPL in her statement – despite heavy Westminster rumours that something was in the offing – was probably also motivated by war in Iran and spikes in the prices of oil and gas. It is harder, politically speaking, to reform a windfall tax if there is a chance that windfall conditions are returning. But Reeves knows this issue is not going away. The question of what volumes the UK should extract from the North Sea during an age of energy transition is now at the centre of the energy debate. It’s no use parroting, as Labour frontbenchers tend to do, that “more North Sea oil and gas won’t take a penny off bills”. That statement is true but misses multiple points: the case for a rethink on North Sea policy is about jobs, skills, the competitiveness of UK industry, revenues for the Treasury and security of supply. Nobody pretends the production dial would go back to the 1990s if Labour loosened the windfall regime to incentivise more “tieback” developments in the North Sea...