A proposal to extend the “sunset clause” in the current Energy Profits Levy, introduced by Rishi Sunak as chancellor, by two years beyond 2025 is under consideration by Chancellor Jeremy Hunt ahead of the medium-term fiscal statement on the 31 October 2022. [1] 

But environment think tank Green Alliance urges the government to go further by increasing the levy by 13 per cent – to 78 per cent – to match Norway’s tax rate on North Sea oil and gas firms. In addition, the investment allowance for new oil and gas investment should be scrapped.  

According to new analysis, matching Norway’s tax rate would raise an additional £6.6 billion per year until 2027, making up 17 per cent of the £40 billion fiscal hole, or equivalent to annual spending on policing and fire services. [2] 

The 28 largest oil and gas companies already made $100 billion in combined profits in the first three months of 2022 alone. [3] In the second quarter of 2022, UK firm BP made its biggest quarterly profit in 14 years, tripling normal profits to $8.5 billion over three months. Shell also made a record profit of $11.5 billion over the same period. [4] 

Jeremy Hunt has said that he is not opposed to windfall taxes “in principle” and that “nothing is off the table”. 

Heather Plumpton, policy analyst at Green Alliance, said:
“Why should oil and gas companies pay less to drill in British waters than they do across the North Sea in Norway? This is a question of whether the government considers the profit margins of fossil fuel companies more important than balancing the books. 

“When there’s a black hole in the public finances and people are struggling with the cost of living, it’s not right that the fossil fuel industry isn’t paying a fair rate of tax”.   

NOTES TO EDITORS: 

Green Alliance
Green Alliance is a charity and independent think tank, focused on ambitious leadership for the environment. With a track record of over 40 years, Green Alliance has worked with the most influential leaders from the NGO, business, academic and political communities. Our work generates new thinking and dialogue, and has increased political action and support for environmental solutions in the UK. 

[1] The Financial Times, Jeremy Hunt lines up raid on bank profits to help fill £40bn UK fiscal hole, October 2022: https://www.ft.com/content/147e9952-33db-4ce8-9a12-96065641860e 

[2] Green Alliance, analysis of potential revenue raised by extending the Energy Profits Levy to 2027 and raising the overall tax rate from 65 per cent to 78 per cent. Analysis assumes annual pre-tax profits of £51 billion, in line with leaked Treasury briefing published in Bloomberg, are sustained to 2027.   

[3] The Guardian, Largest oil and gas producers made close to $100 bn in first quarter of 2022, May 2022: https://www.theguardian.com/business/2022/may/13/oil-gas-producers-first-quarter-2022-profits 

[4] The Guardian, Big oil’s quarterly profits hit £50bn as UK braces for even higher energy bills, August 2022: https://www.theguardian.com/business/2022/aug/02/big-oil-profits-energy-bills-windfall-tax