Axe windfall tax to save North Sea oil: Reeves urged to act ahead of crunch talks with industry bosses

Rachel Reeves is being urged to scrap the windfall tax on North Sea oil ahead of a crunch meeting with energy chiefs today.

Donald Trump called for the UK to ‘open up the North Sea’ and restart drilling ‘immediately’ to boost production in response to soaring oil and gas prices triggered by the US-led war with Iran.

Brent crude surged another 8 per cent yesterday to more than $85 a barrel for the first time since July 2024. Analysts warned it could hit $100 if the war in the Middle East escalates.

The rise in gas prices has been even sharper, shooting up by 45 per cent following big gains on Monday when QatarEnergy, one of the world’s biggest exporters, stopped production after its terminals were hit by Iran.

UK gas prices have now doubled to 165p a therm since the US and Israel began a wave of assaults on Iran over the weekend, prompting fears of another energy-price shock similar to the one that followed Russia’s invasion of Ukraine four years ago. 

Higher gas prices feed into higher household bills, manufacturing costs and inflation that lowers living standards and makes British industry less competitive.

Labour is being urged to ease the pressure on North Sea operators by lowering taxes and issuing drilling licences to boost energy production at home. 

The Chancellor came under fire yesterday from across the political spectrum for not axing the windfall tax on oil and gas companies in her Spring Statement. 

Both the Conservatives and the SNP want her to end the Energy Profits Levy – which Labour expanded when it won the last general election as part of its controversial Net Zero drive to decarbonise the economy.

The levy taxes oil and gas companies at a headline rate of 78 per cent and is due to run until 2030 – unless wholesale energy prices fall sharply.

Industry bodies have warned the tax is costing the North Sea oil and gas sector jobs, harming the economy and putting national energy security at risk.

David Bucknall, boss of Ineos Energy, has warned that the UK is taxing the North Sea ‘to death’. And David Whitehouse, chief executive of Offshore Energy UK, said: ‘The future of North Sea energy depends on investment, which won’t come without urgent reform of the windfall tax.’

The Conservatives said Labour missed an opportunity to ‘reset the dial’ in the North Sea, while Scottish Finance Secretary Shona Robison urged Reeves to ‘remove the tax grab’. 

She added: ‘When Reeves meets North Sea industry leaders, she must announce an end to this tax on Scotland’s energy to prevent further loss of jobs and investment.’ 

And urging the UK to ramp up oil and gas production, President Trump told The Sun newspaper: ‘Your energy prices are through the roof.’

In its latest verdict on the public finances, the Office for Budget Responsibility, the official forecaster, assumes oil will fall below the $74.21-a-barrel level that would trigger an early end to the windfall tax. It also sees wholesale gas prices falling to the 57p a therm EPL threshold in 2028.

The windfall tax is expected to rake in £2.7billion this year, falling to £0.3billion in 2030-31, according to the OBR.