The Aberdeen & Grampian Chamber of Commerce asserts that the North-east should not serve as a “cash cow” for the Treasury and is urging Chancellor Jeremy Hunt to abandon the levy in the upcoming Spring Budget. They argue that scrapping the tax would unlock up to £200 billion in private capital earmarked for offshore energy projects.

EY’s Regional Economic Forecast points to challenges in the oil & gas sector, heavily impacting Aberdeen’s economy due to the long-term decline in North Sea oil production and the continued presence of the windfall tax as a barrier to investment.

The windfall tax, introduced by Rishi Sunak and extended by Jeremy Hunt, directs 75p of every £1 profit from the UK energy sector to the Treasury. Despite energy prices normalising after the Russia-Ukraine conflict, the tax remains unchanged, contributing to a decline in investor confidence in the North Sea.

Since the energy price spike, the UK oil and gas industry has paid over £21.5bn in tax. In January 2022, oil prices were $86 per barrel, and the sector paid £427 million in tax; fast forward to January 2024, with lower oil prices at $80 (around £63), and the industry is now paying over £1bn per month in tax, including £587m in corporation tax alone.

As a consequence, companies such as Harbour Energy, Apache, and Petroineos have already shed over 1,000 jobs, and concerns are mounting that more job losses may follow if the tax policy remains unchanged.

Ryan Crighton, policy director at Aberdeen & Grampian Chamber of Commerce, emphasises the urgent need for the windfall tax to be scrapped, stating that it is unacceptable for Aberdeen to pay the price for economic challenges it did not create.

He said: “The North Sea is being used as a cash cow to plug financial holes created by the financial mismanagement of others – and Aberdeen is clearly paying the price. Businesses in the North-east are watching through their fingers as politicians of all parties fall over themselves to make things worse.

“After years of stagnation, the UK economy desperately needs investment to grow. North Sea firms are standing by ready to invest £200billion – but they need the right conditions. Jeremy Hunt has the chance to put that right on Wednesday.”

He advocates for a strategic shift in long-term energy policy and proposes the establishment of an independent body, akin to the Bank of England, to guide the sector’s development and insulate it from political policy shocks.

He added: “If nothing changes, and we get five more years of the same muddled policy, discretionary capital will continue to move overseas, the transition will stall, and a world class supply chain built up over decades will go. We can – and must – do better.”