One of the policy areas in which the Labour Party has been particularly active in this election campaign is its stance on oil and gas exploration in the North Sea.
The party has made it clear that it will increase existing special taxes. first opened North Sea oil and gas producers in 2022 by Rishi Sunakwhen he was Chancellor, and increased the total amount of taxes from currently 75% to 78%.
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Ed Milibandthe Shadow Secretary of State for Energy Security and Net Zero, also proposes scrapping the tax relief that Mr Sunak introduced alongside the special tax to sweeten the deal, which allowed producers to deduct their investment in new production from the tax.
Mr Miliband, who has described these tax breaks as “loopholes”, argues that this would bring the tax treatment of the British North Sea into line with that of the Norwegian North Sea. He is also proposing a ban on new oil and gas exploration licences as part of what remains of his “Green Prosperity Plan‘.
With Work so far ahead in the polls, that is already effect on investments in the North Sea, with a trio of companies – Jersey Oil and Gas, Serica Energy and Neo Energy – announcing earlier this month that they had completed the planned start of production in the Buchan oil field 120 miles northeast of Aberdeen.
Attacks on industry
Serica, which has produced an average of 43,781 barrels of oil or oil equivalent per day so far this year, sought today to remind politicians of the potential consequences of their actions.
David Latin, Serica’s chairman and interim CEO, launched a furious attack on the proposals, telling shareholders: “I have been in this industry for more than 30 years and have worked all over the world.”
“Apart from the time when I was responsible for a company that had significant assets in a war zone, I have never faced a situation as challenging in terms of investment decisions and general future planning as the one currently facing the UK.”
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Latin reminded his audience that Britain consumes almost twice as much oil and gas as it produces, and said that even if the country tries to reduce its consumption of hydrocarbons, this deficit will remain, with the gap being filled by imports.
He added: “These imports worsen our national balance of payments, only take jobs and taxes abroad and typically cause higher carbon emissions from production and transport by the time they reach our shores.”
Clear up misunderstandings
Criticism of the conservative for maintaining the special taxes despite oil and gas prices returning to historically normal levels, and for the Labour Party’s proposal to increase these taxes. Mr Latin said there were a number of misconceptions about the tax system – not least the idea that the special tax was largely funded by the oil companies such as Sleeve and BP.
He continued: “As for the claim that the tax is paid by the ‘oil and gas giants’, in reality it is independent companies like Serica that are most affected. The ‘big ones’ are responsible for only about a third of UK production and the majority of their profits are made overseas and are not affected by the rising tax rates on UK production.”
“In fact, for companies like Serica, which continued to invest in their assets even during periods of low commodity prices prior to the invasion of Ukraine, the current tax system represents a further punishment for the risk capital they invested in their portfolio during the very low commodity prices of the COVID period.
“Closing loopholes in the UK oil and gas tax seems to mean different things to different people.
“Whatever that means, I want to be very clear that cutting tax relief for capital expenditure below the rate of tax payable would make investment in the vast majority of UK North Sea projects unviable. That means those projects, and the jobs and tax revenues they would create, simply wouldn’t happen.”
Trade union criticism of Labour
But criticism of the Labour Party’s policies also came from other quarters today.
UniteThe UK’s largest trade union and traditionally the Labour Party’s biggest donor, is also concerned about a ban on new oil and gas exploration licences, which could force the UK to import more gas when it still has plenty of gas at home.
Today it published an open letter calling for the ban to be reconsidered. The letter was signed by almost 200 local companies from Scottish towns that rely on the oil and gas industry. Some of these companies also took part in a demonstration with Unite members outside the Aberdeen Maritime Museum.
Sharon Graham, general secretary of the Unite union, said: “Until Labour has a concrete plan to replace jobs in the North Sea and ensure energy security, the ban on new oil and gas licences should not be implemented.”
“Labour must not allow oil and gas workers to become this generation’s coal miners. Scotland’s oil and gas communities are crying out for a secure future and that is exactly what Labour must deliver.”
While business warns that Labour’s policies will shift investment elsewhere and unions worry about the impact on jobs and communities in north-east Scotland, there are others who believe the party could go further.
Not going far enough
While Unite held its demonstration in Aberdeen, around 50 protesters from a group calling themselves Stop Polluting Politics held their own demonstration 888 kilometers further south in front of the Labour Party headquarters in Southwark, southeast London.
They claim that the party has “financial ties to polluting companies” and criticised a decision by the Rachel Reevesthe shadow chancellor, accept a campaign donation of £10,000 by Lord Donoughue, the Labour peer who was previously chairman of the Global Warming Policy Foundation, a lobby group of climate change sceptics.
They claim the donation influenced Ms Reeves’ decision in February this year to water down Miliband’s “green prosperity plan” – something Lord Donoughue himself has vehemently denied.
All this makes it clear that energy policy could become a major problem for Labour if it wins the election a week from today.
