The UK Government has been warned not to repeat the mining job losses of the 1980s as the campaign for an independent taskforce to oversee the energy transition gathers pace.
The British Chambers of Commerce took its message to the Labour Party Conference in Liverpool yesterday as it seeks a “national conversation” about the North Sea as a “critical asset”.
You can read the BCC plan here.
Today, Aberdeen & Grampian Chamber of Commerce is making public the five point plan it submitted to the Treasury ahead of the Budget to restore confidence in the UK's oil and gas industry.
AGCC Chief Executive Russell Borthwick said the Energy Profits Levy, and recently announced plans to increase and extend it, are having "a chilling effect on the sector".
"Unless steps are taken in the Budget to address this, then the damaging consequences in terms of future investment activity, employment and the economic future of the North-east Scotland region could be severe," he said.
"The Energy Profits Levy is currently the only windfall tax on any sector, anywhere in the world. On the basis that windfall conditions no longer exist and market prices for oil and gas have returned to ordinary levels, Treasury should maintain allowances within the current oil and gas fiscal regime and work towards the swift removal of the EPL entirely."
Here's what is in the plan.
1) Remove the Energy Profits Levy by the end of 2025
AGCC said: "The Government could restore confidence in the UKCS by reinstating the original sunset clause applied to the Energy Profits Levy, removing the tax altogether after 31 December 2025. This would reflect the reality that windfall conditions no longer exist and give much-needed certainty to the sector."
2) Resist further increases to the Energy Profits Levy
AGCC said: "Failing removal of the Energy Profits Levy altogether by the end of 2025, the Government should not implement plans to increase the tax to 38% from 1 November 2024. Doing so will result in a loss in economic value of around £13 billion, compared to the economic contribution generated under the current windfall tax regime, according to modelling undertaken by OEUK."
3) Early implementation of a progressive successor regime to the Energy Profits Levy
AGCC said: "Government should work with industry to devise a new progressive tax regime for the North Sea: one where the tax rate increases as oil and gas prices rise and reduces when prices fall. This framework should operate in a predictable way which allows the sector to make investment plans for the future. This successor regime cannot wait until beyond 2030, when much damage will have been done to our domestic energy industry and its workforce. It should be pursued immediately."
4) Set a binding sunset clause for the Energy Profits Levy
AGCC said: "If Government is unwilling to pursue options 1 and 3, then it should legislate a binding sunset clause for the Energy Profits Levy of 31 March 2030 or earlier and announce a legislative timeline for implementation of the successor regime that applies to the upstream oil and gas sector beyond that date, with a headline rate of no more than 40%."
5) Capital allowances: full expensing at 78%
AGCC said: "If the Government chooses to extend and increase the Energy Profits Levy then it should not reduce the extent to which capital allowances can be considered. The principle of full expensing at the headline rate of 78% should be maintained, given the central role that the North Sea energy sector plays in delivering energy security and investing in the transition. Failure to protect this would place the sector at a comparative disadvantage to other sectors and hinder the UK’s net zero ambitions."