Scottish Conservatives are in open revolt against the chancellor after he announced plans to extend the windfall tax on North Sea oil and gas giants for an extra year.
Despite securing a 2p cut in national insurance which will apply across the UK, there was deep anger fury within the party last night about a U-turn on backing offshore industries, a vital component of the Scottish economy.
In his budget speech in the Commons, Jeremy Hunt, the chancellor, extended the length of time that the energy profits levy would be in place by a year to 2029, although he retained “generous” investment allowances.
Douglas Ross, the Scottish Tory leader, has said he will not vote for the windfall tax plans in a significant rebellion against the budget.
Another senior figure, Andrew Bowie, a minister in the UK department for energy security and net zero, was on resignation watch after learning of the announcement.
However he later said he had spoken with the chancellor and the government had to “get on and deliver”.
David Duguid, who represents Banff & Buchan, said he too was disappointed, but has secured talks with the Treasury around increasing the price floor at which the tax would fall away. He has also persuaded the government to introduce legislation in the Finance Bill for the EPL price floor.
A Scottish Tory source told The Times that Hunt and Sunak had “shafted” their MPs, following a conference in Aberdeen “with an entire message around how we are the only party supporting oil and gas”. The source added: “Four days later — windfall! They are mad.”
Responding to yesterday’s Budget statement from Chancellor Jeremy Hunt, Ryan Crighton, policy director at Aberdeen & Grampian Chamber of Commerce, said: “This is the fourth Tory tax raid on the North Sea in two years and heaps more uncertainty on a sector which needs stability to survive.
“Not only is Jeremy Hunt losing the support of industry, he is also losing the support of his North-east parliamentarians who understand that the windfall tax is bad for jobs, bad for investment, bad for energy security and bad for the energy transition.
“We need investment in new North Sea oil and gas fields to maintain jobs and offset declining production. Without that investment, production could halve by 2030, which places thousands – perhaps tens of thousands – of jobs at risk.
“We are already seeing investors walking away from deals – with some showing open dissent towards the UK – and if that gathers pace, then the 1,000 jobs we have already lost to the windfall tax could be a drop in the ocean compared to what is to come.
“The energy transition requires a very tricky balance to be struck. We need to manage what will be the final phase of exploration and production in the North Sea and at the same time also need to unlock over one trillion pounds in investment to develop and build out the low carbon technologies of the future.
“The same workforce and supply chain are required to deliver both – but if we wind down oil and gas production before jobs are available at scale in renewables, then we lose the world class expertise built up over 50 years and Aberdeen will pay the price."
David Whitehouse, CEO Offshore Energies UK said: “We are extremely disappointed that the government continues to ignore clear evidence that we need investment in offshore energy production to grow the economy and achieve net zero.
“We have identified £200 billion of investment in oil and gas and the UK’s wider energy transition awaiting the green light which will not happen with such globally uncompetitive taxation in place. Thousands of jobs and billions of pounds in national revenue are at risk because of the destabilising impact of these tax decisions.
“A homegrown energy transition will simply not move forward unless business confidence for long term investment in the UK is restored.”