Energy Profits Levy: North-east Scotland

John Cooper Excerpts

Tuesday 14th October 2025 Commons Chamber

[Harriet Cross]

Exactly—I thank the hon. Member for that intervention. On that point, I will skip forward a little bit to my first question to the Minister, which is when the Treasury will publish its consultation outcome on the future fiscal regime for the North sea, and whether the Government will wait until 2030 to implement that new regime, or whether they will implement it straightaway. Investment decisions worth billions are being put on hold waiting for that answer. They need to know a month, or ideally a week—not just a vague “in due course”.

Capital investment forecasts for the North sea have fallen by 84%, from over £14 billion to £2.3 billion for the period 2025 to 2029, and Offshore Energies UK calculates that £26 billion of economic value will be lost under Labour’s EPL extension. Some 90% of OEUK’s member companies are now seeking opportunities overseas, and Aberdeen and Grampian chamber of commerce agrees, warning that the EPL is

“eroding investor confidence and driving capital to rival overseas regions.”

Shell’s finance chief has called for certainty and a “stable environment”, noting that the UK’s 78% tax rate is “larger than most” other countries and makes it difficult to have confidence in long-term investments.

Although Norway, which the Government love to use as a comparison, has a similar tax rate, the Government know that this is a false comparison, because Norway also offers full capital cost deductions. It refunds almost 72% of losses to companies and gives a 24% uplift on investment over four years. The result is that Norway attracts 3.8 times more investment than the UK into the same mature North sea basin. Norway’s North sea will see around £35 billion in exploration and production investment through to 2030; ours will see just £10 billion.

[John Cooper (Dumfries and Galloway) (Con)]

I am from the south-west of Scotland, which is as far from the north-east as one can get in Scotland. None the less, this is a huge issue for the whole country. My hon. Friend is making a point about the North sea basin being mature. We always hear that—it is mature, it is declining—but the Norwegian investment is exploiting areas of gas and oil that previously would not have been accessible. New techniques such as horizontal drilling are delivering huge benefits for the Norwegian economy; we are denying ourselves those benefits. Is that not the case?

[Harriet Cross]

It is absolutely the case—my hon. Friend is completely correct. We are forgoing so many opportunities in the North sea to secure energy for our country and safeguard the skills and jobs that we will need for the transition. There are endless opportunities that, for some reason, we are willing to leave under the North sea.

That brings me to my second question for the Minister. Does the Treasury recognise the damage that the EPL is doing to the North sea? We know that the decline in the North sea did not start with the EPL—it is a mature basin—but the EPL is accelerating that decline. Its ripple effects go far beyond the energy producers themselves. The supply chain is haemorrhaging jobs. Hunting in Aberdeenshire laid off 143 employees; Wood Group cut 200 jobs last year; Belmar Engineering entered liquidation this year, with 48 redundancies; Beam in Westhill collapsed, with 100 jobs lost; Well-Safe Solutions cut about 45 jobs; and Harbour Energy has cut 250 jobs, which is 25% of its onshore workforce. I keep coming back to the words that the Chancellor said when Harbour Energy announced its job cuts earlier this year and cited the EPL as a principal factor. She said that this was just

“a commercial decision by one company”,

but the list I have given—which is not exhaustive—is evidence that that is not the case. It shows that the Chancellor either does not understand, or does not want to understand, the impact the EPL is having.

As I am sure other Members do, I regularly visit companies in the north-east of Scotland whose order books for offshore work have completely dried up, forcing them to adapt their business models to other sectors just to keep afloat. Many of those companies do not know whether they will be here in 12 months’ time. They are not hiring, they are struggling to justify investments, and in many cases, they can do nothing more than hope for a change in Government policy. These companies are owned, grown and run by some of the most innovative and entrepreneurial people I have ever met. They are not afraid of branching out or trying new things—they have done so for their whole business careers—but they are being backed into a corner and are running out of options.

The irony is that this policy is failing on its own terms, in shrinking the very economic activity that it seeks to tax. The Office for Budget Responsibility originally forecast that the energy profits levy would raise more than £65 billion between 2023 and 2028, but the revised forecast is £21.1 billion. We are on track to miss the target by £44 billion, and revenue from the EPL fell from £4.2 billion to £2.7 billion between 2022-23 and 2024-25. His Majesty’s Revenue and Customs figures show that revenues from oil and gas production were down 27% last year.

When did the Treasury last carry out an impact assessment of the EPL’s impacts on production, jobs, economic activity and tax receipts? Have those assessments been revisited following those recent HMRC figures showing the downgraded forecast? Forecasts show that the policy could ultimately cost the Treasury £12 billion in lost revenue by 2050. We have reached the point where the level of taxation means less money. The Government are taxing the North sea so heavily that tax revenues are being lost. We cannot tax jobs that no longer exist, we cannot tax production that no longer exists and we cannot tax businesses that no longer operate in the UK.

There is something else that the Government are ignoring. From the early 2030s, the Treasury will face a £2 billion to £3 billion cost each year in decommissioning rebates, a decade earlier than expected. The premature shutdown of fields, driven by the EPL making them too unviable to continue, makes that liability ever more imminent.

The policy is also undermining our energy security at a time of global instability, suppressing domestic oil and gas production and increasing our dependence on foreign imports. We are now 42% dependent on energy imports. By 2030, it is projected that our reliance on imported gas will increase to 80%, and our liquefied natural gas imports have increased by 40% in the past year alone. Those changes are partly down to geology, but the decline is accentuated by the punitive tax regime for companies operating out of the North sea.

Estimates suggest that there could be 7.5 billion barrels of oil equivalent remaining in the North sea that could be recovered with the right investment. We could cover half our energy needs to 2050 with North sea reserves. If we drive investment away, we will leave that resource untapped, only for imports from elsewhere to cover them. That is a huge loss of economic opportunity for the north-east of Scotland and the UK as a whole.

That brings me to my final question, and I will soon conclude. Will the Treasury please commit to de-linking oil and gas pricing in the energy security investment mechanism so that both commodities are assessed on their individual market conditions? Time is running out, and that is not an exaggeration. Every month of inaction means another thousand jobs gone. Every delayed investment decision means less energy security for Britain. Every skilled worker who leaves to go overseas is one we will struggle to get back when we need them for the energy transition.

I and, more importantly, the oil and gas sector have four questions for the Minister. First, when will the consultation outcome be published? Secondly, does the Treasury recognise the damage it is inflicting? Thirdly, when was the last impact assessment carried out by the Government? Fourthly, will the Government de-link oil and gas in the energy security investment mechanism? The north-east of Scotland has powered Britain for 50 years. We have contributed hundreds of billions in tax revenues. We developed expertise that is renowned around the world. We have so much more to offer to meet the UK’s current and future energy needs, but only if we are given the chance. Scrapping the EPL is a vital part of that chance.

--- Later in debate ---

[Dan Tomlinson]

As I said just a few moments ago, 100,000 jobs are directly or indirectly linked to the work and activities in this sector, and it is vital that we support people with that transition. In the long-term, carbon capture and storage alone is expected to support 50,000 skilled jobs by 2050 as we move towards a clean energy transition. I am acutely aware—I have heard it from Opposition Members, and I am sure that I will hear it from my hon. Friends in a second—that we must get the balance right between the timing of phasing out and winding down production in the North sea, and ramping up the clean energy and good jobs that we need for the future. We have to do all we can to protect the sector.

[John Cooper]

Will the Minister give way on that point?

[Dan Tomlinson]

I will first take the intervention from my hon. Friend the Member for Edinburgh South West (Dr Arthur).

[Dan Tomlinson]

I believe the hon. Member for Moray West, Nairn and Strathspey (Graham Leadbitter) was slightly quicker in standing up than my hon. Friend.

I do understand my hon. Friend’s points. It is very important not to be cowardly in politics, which is why I will make sure that we come forward as fast as we can to set out the approach after the EPL is set to end. This Government, under the leadership of a whole range of Cabinet Ministers, is making sure that we can provide that long-term certainty, not chopping and changing when it comes to our policies on net zero.

The hon. Member for Gordon and Buchan mentioned energy security, which links to the challenge we have with energy bills. It is worth recognising the truth that, even if we extracted every single drop of oil and gas in the North sea, that would not make any material difference to people’s energy bills or the prices that people pay at the pump. Oil and gas are traded on international markets, and given the declining basin on the UK continental shelf, domestically produced oil and gas do not do anything to reduce prices. In fact, it is our reliance on oil and gas that leaves British consumers exposed to unstable fossil fuel markets.

In closing, this Government are determined to provide a balance—

[John Cooper]

rose—

[Dan Tomlinson]

Does the hon. Member really wish to intervene? [Interruption.] Go on.

[John Cooper]

I thank the Minister for giving way on that point: this is about balance. We need to find a balance in the transition of people coming out of oil and gas and moving into renewables. The difficulty is that we cannot say to these highly-skilled people that there is a great job for them in renewables but it is going to be 10 years down the line. That is no use to them at all: they have bills to pay and families to feed. The balance is out of kilter, and I am afraid that the Government are getting this wrong.

[Dan Tomlinson]

I disagree that the Government are getting this wrong. We are doing our best to try to find the right balance to support people, industry and jobs.

We will continue to provide a balanced, responsible and predictable regime for the UK oil and gas industry, which I hope will continue to drive growth, support workers and communities, protect our energy security and ensure a prosperous future for the North sea as we make our way towards net zero. Our commitment, and my commitment as a Minister, to the future of the North sea is clear, and I will continue to engage closely with the industry, workers and Members across the House on this important issue.

I again thank the hon. Member for Gordon and Buchan for securing this important discussion, and I thank Members from across the House for their contributions.

Question put and agreed to.