The boss of Britain’s top business organisation has urged Labour to rethink its plan for a fresh tax raid on North Sea oil and gas producers.
Rain Newton-Smith, chief executive of the Confederation of British Industry (CBI), said the policy could have a ‘chilling’ impact on investment decisions – and she would seek talks with ministers.
Meanwhile, David Latin, chairman of North Sea producer Serica Energy, said he feared Labour’s plan could kill off the ‘golden goose’ of the North Sea.
The comments came as business leaders digested the impact of the party’s landslide election victory – with the City so far largely untroubled by the change of government after a prolonged charm offensive by Keir Starmer and Chancellor Rachel Reeves.
It barely caused a ripple for the FTSE 100, which inched down 0.5 per cent, or 37.33 points, to 8203.93, though the more domestically-focused FTSE 250 rallied by 0.9 per cent, or 176.31 points, to 20786.65.
Agenda: Rain Newton-Smith said scrapping North Sea tax breaks was an ‘area of concern’
Newton-Smith urged Labour to ‘hit the ground running’ with planning reform and improvements to the power grid she said were needed ‘to get the economy firing on all cylinders’.
But there have already been stirrings of disquiet over some of the party’s policies – including on the tax status of non-dom residents and workers’ rights – as well as fears that Reeves may hike capital gains tax in a bid to balance the books.
North Sea production companies have already been hit with a windfall tax under the Tory government which means they pay a rate of 75 per cent on profits until 2029. But that blow has been softened by a tax break for companies making investments.
Labour wants to hike the tax rate to 78 per cent and scrap the tax break. It also plans to issue no more licences for oil and gas exploration. Some analysts fear that as many as 100,000 jobs could be lost.
Newton-Smith told the Mail that scrapping North Sea tax breaks was an ‘area of concern’ given the need for oil and gas companies to invest in the switch to renewable power generation.
‘The Labour Party need to listen to business to make sure that any changes around capital allowances don’t have a chilling effect on investment in renewable energy, energy efficiency and carbon intensity of extraction.’
The windfall tax has already wiped out most profits for producers last year and saw some scale back investments and cut hundreds of jobs.
Serica’s Latin said that without clarity, investment and taxes from the sector would fall rapidly. He added: ‘There’s this misunderstanding which is that somehow we’re a golden goose and we’ll just keep laying eggs. But if you don’t feed the goose with investment dollars, it’ll keel over and there’ll be no more eggs.’
