The UK oil and gas industry has played a significant role in our country’s history. Alongside its critical role in our energy supply, it has contributed over £400 billion in production taxes since the late 1960s and created thousands of jobs, especially in the North-East of Scotland.
The sector is expected to contribute a further £19 billion in tax receipts between now and 2030, supporting the public finances and the UK’s clean energy transition. This transition will bring significant economic opportunities for businesses and workers whilst helping to protect consumers from future price shocks.
After a period of several changes to the fiscal regime, I recognise the importance of providing the oil and gas sector with long-term certainty on taxation. That is why this government is committed to ending the Energy Profits Levy (EPL) on 31 March 2030, or earlier if the Energy Security Investment Mechanism is triggered. Once the EPL ceases, it is the government’s intention to implement a new mechanism that gives investors certainty about how the fiscal regime will respond to any future oil and gas price shocks.
The government is clear that it is right that when oil and gas prices are unusually high, the sector should make an additional contribution to the public finances. I am pleased to see many in the sector agree with this principle but note there are a range of views on the appropriate approach. That is why this consultation seeks views on how to design a new mechanism which will balance the needs of the sector, investors, and the Exchequer at times of unusually high prices.
This new mechanism will be predictable and sustainable, and we will ensure that it minimises distortions on investment decisions when prices are not unusually high. This will support continued investment in our domestic oil and gas production throughout the transition.
Over the past six months, I have had constructive and open discussions with operators and supply chain companies operating in the UK oil and gas sector. I would like to thank the sector for its constructive approach to these discussions with both me and HM Treasury officials. I look forward to further close working with the sector and other stakeholders to develop the best possible price mechanism for the future.
James Murray MP
Exchequer Secretary to the Treasury