The publication of the Labour Party Manifesto document included a proposal for a windfall tax for oil companies.
The Manifesto itself included the following:
“We will introduce a windfall tax on oil companies so that the companies that knowingly damaged our climate will help cover the costs. We will provide a strategy to safeguard the people, jobs and skills that depend on the offshore oil and gas industry.”
No details of the measure were included in the manifesto. However, Labour Party representatives have indicated that the key features are as summarised below:
- The windfall tax is a one-off tax payable over a number of years.
- It is targeted at oil and gas firms it believes have paid less than their fair share of taxation compared to peers in other countries such as Norway and the Netherlands who are extracting from the North Sea region.
- The windfall tax will be used to create a “just transition fund” to help shift the UK towards a green economy “without causing mass job losses”.
- The tax would be calculated according to “an assessment of each firm’s past contribution to the climate crisis”.
- The tax has been calculated by Labour to raise £11bn.
With the OBR forecasting £1.1bn of tax revenues from the UK upstream sector in the current year, the size of this potential impost is put in perspective although we understand that the tax could be collected over a number of years. Announcements of this kind from one of the UK’s leading political parties may have a very unwelcome impact on investor sentiment.