The Labour Party announced on 8 February that they are dropping their pledge to spend £28bn per year on “green investment”.
As part of the briefings around this announcement, the following comments on the windfall tax were reported in the Press.
Labour will introduce a proper windfall tax on the excess profits of oil and gas companies, o we can invest in the clean power we need to cut bills for families.
Labour will fix the holes in the Energy Profits Levy by:
- Increasing the rate to 78%, the same rate of tax as in Norway.
- Ending the loopholes in the levy that funnel billions back to oil and gas giants.
- Extend the sunset clause in the windfall tax until the end of the next parliament, provided there continue to be windfall profits.
Together, these changes would raise £10.8bn over the next five years from 2024-25 to help fund the Green Prosperity Plan.
This amount is based on current OBR forecasts. The amount raised will depend on outturn oil and gas prices and production levels, as well as the level of investment and the amount offset against taxation.
Of course, there is no guarantee that these measures will be introduced if Labour are elected this year.
The 78% rate is not new, but interestingly Labour has in the past said that the tax will be “backdated”, but this pledge was not part of the briefing.