UK Labour Party Eyes Upstream Tax
The Labour Party election manifesto has provoked a hostile response from upstream lobby group Oil & Gas UK (OGUK). Without putting any numbers on it, party leader Jeremy Corbyn said, if elected on December 12, a Labour government would impose 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." He also, unsurprisingly, promised a "permanent ban" on fracking.
Responding, OGUK CEO Deirdre Michie said November 21 that oil and gas production supports over 270,000 highly skilled jobs and delivers £24 ($30.5)bn of value to the UK economy. She added that the UK independent body Committee on Climate Change "confirms that oil and gas will remain an important part of the UK’s energy mix for decades to come. Any increase in tax rates affecting our UK activities will drive investors away and damage the competitiveness of the UK’s offshore oil and gas industry. This tax has the potential to affect security of energy supply for the UK and increase our reliance on imports, effectively passing the buck for production emissions to other countries. Neither do imports sustain UK jobs or the supply chain companies whose expertise we need to enable the energy transition.”
Michie also reminded her readers that the offshore had already taken steps towards a net zero carbon future, with its plan, ‘Roadmap 2035.' "Our industry’s expertise and investment is needed as part of the solution. We look forward to working with the next government, whoever wins, and will play our part with others in society.”
The UK upstream has settled down into a stable regulatory regime, as the succession of Conservative or Conservative-led governments has aimed to maximise the economic recovery of the UK continental shelf's oil and gas resources. This has included introducing transferable tax history and decommissioning deeds to facilitate deal-making and so "putting the right assets in the right hands."
Nationalisation of key infrastructure is also planned by the Labour party: "We will bring rail, mail, water and energy into public ownership to end the great privatisation rip-off and save you money on your fares and bills." And Labour will also "change the criteria a company must meet to be listed on the London Stock Exchange so that any company that fails to contribute to tackling the climate and environmental emergency is delisted."
Passing the buck for carbon emissions – "an accounting trick" – to other countries is something Corbyn wants to prevent recurring. "A thriving steel industry," supported through public procurement, will be key to the success of the UK's green industrial revolution. A Labour government will limit industrial energy prices, exempt new capital from business rates, invest in R&D and build three steel recycling plants.
The European Union is also planning a carbon tax to make consumers pay for the carbon that has been emitted during the making and transporting of goods to the EU. Whether or not the UK will be part of the EU when that tax is rolled out is still uncertain, but Conservative prime minister Boris Johnson called an election on December 12 hoping to secure a big enough majority to push his "oven-ready" Brexit deal through parliament in the next few months.