The North Sea is facing "economic ruin" after the Chancellor pressed ahead with further tax rises for the UK's oil and gas sector, despite warnings of huge job losses.
Rachel Reeves increased the Energy Profits Levy (EPL), taking the headline tax rate to 78% and confirmed the tax was to be extended by a further year until March 2030. Ms Reeves also scrapped what she said were"unjustifiably generous" investment allowances.
Further details are expected at the Chancellor's first budget on October 30, but the decision has already received widespread backlash from business leaders across the sector, labelling it "reckless and wrong".
The changes will be implemented on November 1, 2024.
'We’re facing the destruction of industry on a scale not seen in over thirty years'
The Labour Party had promised the changes to the EPL in their manifesto, though were routinely warned by industry, academics and unions that should they be implemented, it could cost up to 100,000 jobs in the sector.
Responding to the statement, Russell Borthwick, chief executive of Aberdeen & Grampian Chamber of Commerce, said Ms Reeves is pushing the North Sea "dangerously close to 'game over' territory".
He said: "This decision is reckless, wrong and economically ruinous for the North Sea and ignores the explicit warnings of industry, investors, academics and unions.
“The Chancellor should be on the next flight to Aberdeen and meet with the companies who will be pulling investment from the UK and the workers who will be extremely worried for their future.
“The new government is pushing the North Sea dangerously close to ‘game over’ territory and this will, in turn, put our energy transition and security at risk.
“Instead of seeing the energy sector as the solution to challenges in the UK’s public finances, the Chancellor has taken the wrongheaded decision to tax the industry into oblivion. The consequence of that will be £20billion lost in revenues to the Treasury, greater reliance upon imported oil and gas – worse for the planet and the economy – and tens of thousands of jobs across the UK placed in jeopardy.
“Confidence in the UKCS is already at rock bottom. Unless the UK government rolls back from this position on the Energy Profits Levy then we’re facing the destruction of industry on a scale not seen in over thirty years.”
Opposition reaction
Unsurprisingly, opposition parties, including the Conservatives and the SNP, have come out swinging following the announcement.
The SNP's Westminster leader and MP for Aberdeen South, Stephen Flynn, said he has "grave concerns" about the impacts of this "political choice" on the North-east.
Meanwhile, former energy minister Andrew Bowie, MP for West Aberdeenshire and Kincardine, called the statement a "kick in the teeth" for the North-east.
He said: "Tens of thousands of Scots, whose jobs are now hanging in the balance, will wonder what they have done to Labour to justify this supertax on North Sea oil and gas.
"To label the careful balance involved in driving net zero, while keeping the lights on, as ‘unjustifiably generous’, is a kick in the teeth for the North-east.
"Labour have decided on harsh and unfounded sanctions for the industry, and will have to bear the responsibility of what happens from now on."