Spring Budget 2024: Douglas Ross leads Scottish Tory anger over windfall tax extension as Alister Jack says it won't impact jobs

The Chancellor delivered the Spring Budget on Wednesday, but created a headache for the Scottish Tories.

Douglas Ross has led the Scottish Tories in a furious response to an extension of the windfall tax on oil and gas profits, as Conservative MPs from north of the Border vowed to defy the UK government by voting against the policy.

The 35 per cent surcharge on profits due to high energy prices had been scheduled to end in March 2028, only for Chancellor Jeremy Hunt used Wednesday’s Spring Budget to announce the tax would run for another year.

The decision was a hammer blow for the Scottish Tories, who had repeatedly attacked the Labour party over their own plans for an extension. Multiple Scottish Tory MPs told The Scotsman they would vote against the policy, while those with government roles are now on resignation watch.

Delivering his statement in the Commons, Mr Hunt said: “Because the increase in energy prices caused by the Ukraine war is expected to last longer, so too will the sector’s windfall profits. So I will extend the sunset on the energy profits levy for an additional year to 2029, raising £1.5 billion.”

Overall the Treasury said spending decisions in the Budget would see the Scottish Government receive an additional £295 million in 2024/25, with Scottish Secretary Alister Jack saying this cash would be “in addition to the largest block grant since devolution began”.

Challenging ministers at Holyrood, Mr Jack said: “There can be no excuses for not providing excellent public services in Scotland.”

But Scotland’s finance secretary Shona Robison accused the Chancellor of a “betrayal of public services”, after he unveiled a Budget that included another 2p cut to national insurance.

Douglas Ross has said he will not vote for legislation to extend the windfall tax

“When more support is desperately needed for public services and infrastructure, for greater cost-of-living measures, and for money to aid our efforts to reduce carbon emissions, Scotland has been badly let down by the UK Government,” she said.

The extension of the windfall tax prompted a backlash from both the Scottish Tories and the energy industry, with Mr Ross saying he had been left is “deeply disappointed” as he publicly announced he would vote against the measure.

Mr Ross, who also serves as an MP for Moray, had reportedly been involved in a "heated" discussion with Prime Minister Rishi Sunak at a pre-budget drinks reception for Tory MPs in Westminster.

Mr Ross said in the wake of the Budget statement: “While I accept the Chancellor had some tough decisions to make, I’m deeply disappointed by his decision to extend the windfall tax for a further year. The SNP and Labour have abandoned 100,000 Scottish workers by calling for the taps in the North Sea to be turned off now.

Chancellor of the Exchequer Jeremy Hunt leaves 11 Downing Street ahead of the Spring Budget

“Although the UK government rightly oppose this reckless policy – and have granted new licences for continued production in the North Sea – the Budget announcement is a step in the wrong direction. As such, I will not vote for the separate legislation needed to pass the windfall tax extension and will continue to urge the Chancellor to reconsider.”

The Scotsman understands Mr Ross is not expected to face any internal disciplinary action over his stance.

His fury was shared by government minister Andrew Bowie, who labelled the extension “deeply disappointing”.

Mr Bowie, a minister in the Department for Energy and Net Zero and the MP for West Aberdeenshire and Kincardine, said he would now be working with Mr Ross on a response. He is now believed to be on resignation watch, with fellow Scottish Tory John Lamont also holding a government position. If either were to vote against the extension, they would be forced to resign.

Labour's shadow minister for energy security, Alan Whitehead, has now written to Mr Bowie asking if he will resign over disagreeing "with a key part of the budget".

Business leaders in the north-east of Scotland warned of the impact of extending the windfall tax could have, claiming the move was “bad for jobs, bad for investment, bad for energy security and bad for the energy transition”.

Ryan Crighton, the policy director at Aberdeen & Grampian Chamber of Commerce, said: “This is the fourth Tory tax raid on the North Sea in two years and heaps more uncertainty on a sector which needs stability to survive.”

Offshore Energies UK (OEUK) called the decision a risk to jobs, investment and economic growth. David Whitehouse, chief executive of OEUK, said: “We are extremely disappointed that the government continues to ignore clear evidence that we need investment in offshore energy production to grow the economy and achieve net zero.

“We have identified £200 billion of investment in oil and gas and the UK’s wider energy transition awaiting the green light, which will not happen with such globally uncompetitive taxation in place. Thousands of jobs and billions of pounds in national revenue are at risk because of the destabilising impact of these tax decisions.

“A homegrown energy transition will simply not move forward unless business confidence for long term investment in the UK is restored.”

Speaking in a briefing with journalists after the Budget statement, Mr Jack claimed “governments have to take tough decisions”.

He said: "The EPL has been extended for a year, it has been sunsetted. The point is, the Chancellor has to show figures to the OBR [Office for Budget Responsibility] and figures that don’t frighten the markets, and what he’s doing with his plans. I still believe that with the huge profits energy companies will have made following [Vladimir] Putin’s illegal invasion of Ukraine, it is right that some of the money comes back to the Treasury to be able to help people with the challenges they face and support people in their cost of living.

"The profits levy being extended for another year, I do not believe this will have an impact on jobs. That’s already priced in and I don’t see that having an impact.

“I still stand by the fact we are the one party that supports the oil and gas industry. The Labour party and the SNP keep shifting their position on it, but we and I have been consistent on it.”

Mr Jack added: “We will need oil and gas, even in 2050. We need to stand by these industries and we are the people issuing the licences.”

Mr Hunt insisted he “understands there are local concerns”. He said: “We’ll be engaging with the oil and gas industry to talk about those concerns. Given that high energy prices following the invasion of Ukraine have lasted much longer than anyone predicted at the time, I think it’s fair that the oil and gas industry should make an additional contribution to the amount of money that we have been having to spend on cost-of-living support.”

As well as the 2p cut to National Insurance, Mr Hunt also used the Budget to announce a freeze on both fuel and alcohol duty.

The Chancellor said the 2p reduction in national insurance for employees and the self-employed would reduce levels of personal taxation to an almost 50-year low. But the UK is still on course to have an overall tax burden which is rising “near to a post-war high”, the budget watchdog said.

The Institute for Fiscal Studies claimed the overall Budget measures would require £20 billion of cuts a year by 2028, creating a huge headache for the next government.

The Scottish Trades Union Congress accused the Chancellor of “cutting public spending and cutting taxes that mainly benefit the rich”, with general secretary Roz Foyer warning this would lead to the “further destruction of our public services”.

She said: “The richest quarter of workers benefit 14 times more than the poorest quarter from the National Insurance cut.”

Citizens Advice Scotland said there was a “complete absence of the kind of support those on lower incomes need” in the Chancellor’s statement.

The charity’s social justice spokesperson Emma Jackson said: “This Budget failed to meet the scale of the challenge of the cost-of-living crisis, and the legacy of debt and destitution it will leave.”