Andy Burnham urged to honour Labour's windfall tax vow as oil prices drop as Iran tension eases
Chancellor Rachel Reeves had claimed she was poised to reform the energy profits levy before Donal Trump ramped up his conflict with Iran
Business leaders in Aberdeen have called on Andy Burnham to honour Labour’s vow to reform the controversial windfall tax after oil prices returned to the level seen before the Iran conflict escalated.
Mr Burnham, who is widely expected to become the next prime minister in the coming weeks, is facing pressure from fossil fuel bosses and business chiefs in the North East to rethink the UK government’s stance on oil and gas.
Alongside a manifesto commitment to end new North Sea exploration licences, the UK Labour government has also continued the energy profits levy, introduced by the Conservatives, with a reform not due to be implemented until 2030.
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In March, Chancellor Rachel Reeves told North Sea operators that she wanted to end the levy in 2027 – three years earlier than planned – and replace it with the permanent oil and gas price mechanism, a step called for by industry leaders.
But plans to announce the move were put on hold after Donald Trump launched strikes on Iran, triggering a sharp rise in oil prices amid fears of disruption to supplies through the Strait of Hormuz.
At the time, a Treasury source reportedly argued that “the Chancellor was clear with industry that she wants the energy profits levy to come to an end”.
The insider added: “She has made that promise and she stands by it.
“Indeed, it was a commitment she wanted to make this week. But the crisis in the Middle East has had real-time consequences on oil and gas prices and it is right that we respond to this.”
Those concerns around oil and gas prices have now eased. Brent crude has fallen to $71.80 a barrel – its lowest level since the conflict began and back around the level seen before hostilities erupted.
Russell Borthwick, chief executive of Aberdeen and Grampian Chamber of Commerce, has now urged the likely incoming prime minister, Mr Burnham, to honour the Chancellor’s promise to industry - and unlock additional funding for his priorities in government.
He said: "The Chancellor made a clear commitment in March that the energy profits levy would end early when market conditions allowed.
“The spike in oil prices caused by the conflict with Iran understandably delayed that announcement, but those prices have now returned to pre-war levels.
"The incoming prime minister should turn that promise into action and create a win-win for industry and his spending plans.
“The oil and gas price mechanism was co-designed with industry and would unlock £17.5 billion of near-term investment that the economy desperately needs. It would safeguard thousands of highly skilled jobs, protect Britain's sovereign industrial base and restore the confidence needed to invest in both energy security and the transition."
He added: "Crucially, replacing the windfall tax with the oil and gas price mechanism would deliver a permanent windfall for the public finances by unlocking investment rather than deterring it.
“That would generate billions of pounds in additional tax revenues over the years ahead. With ministers looking for ways to fund public spending and plug the reported £15bn defence funding gap, this is a credible, pro-growth solution that strengthens the public finances without asking working people to pay higher taxes."
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The appeal comes amid claims by the Scottish Conservatives that Scotland is counting the cost of two years of a “disastrous” Labour government.
Speaking on the second anniversary of Keir Starmer’s general election victory, the Scottish Conservatives have claimed that Labour’s stance on oil and gas has harmed the trust of voters.
The party’s deputy leader, Rachael Hamilton, also pointed to the rise in National Insurance employer contribution, cuts to winter fuel payments and the Peter Mandelson scandal over the last 24 months.
Ms Hamilton has argued that replacing Sir Keir with Mr Burnham would make no difference to voters unless and until the new PM drops Labour’s opposition to oil and gas drilling and welfare spending plans.
She said: “Ordinary Scots are counting the cost of two years of disastrous Labour government.
“Voters put their trust in Keir Starmer and Rachel Reeves, but it’s been chaos, broken promises and U-turns ever since.
“Labour’s National Insurance hike and war on oil and gas is costing thousands of jobs every month, their family farm tax has wrought havoc in rural areas and they betrayed pensioners with their cuts to winter fuel payments.”
She added: “Starmer is a dud Prime Minister with appalling judgment – as his appointment of Peter Mandelson as US ambassador demonstrated – but the real problem is the Labour party, not its leader.
“Things won’t improve for the country unless Andy Burnham stands up to Labour backbenchers by reining in out-of-control welfare spending and ditching Ed Miliband’s net zero madness, which is destroying livelihoods and our energy security.
“Scots are suffering a double whammy because, with the SNP at Holyrood, we have two left-wing, anti-oil-and-gas governments that continually raise taxes to fund a spiralling benefits bill.”
On Monday, in his first keynote policy speech since returning to Westminster, Mr Burnham did not give any indication of whether he will change tact in relation to energy policy or oil and gas.
During the Makerfield by-election campaign in May, he told the BBC that he has “not completely made a view on the North Sea issue”.
But he added: “I am listening to what people are saying about it.”
Writing for The Scotsman on Tuesday, Mr Burnham said that in Scotland, “the opportunity is renewables”, adding that “it is hydrogen and carbon capture”. But he did not mention North Sea oil and gas.
Mr Burnham has been approached for comment.
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