Plans for windfall tax hikes which will play well in some quarters may cause unintended damage to firms that could help power growth as experts highlight Scotland’s dependence on oil and gas activity.
With a UK general election due within months, Labour has looked to consolidate its lead in the polls by announcing plans for change that could help it capitalise on anger about high energy bills and green opposition to fossil fuel.
Shadow chancellor Rachel Reeves has proposed increasing the rate of the windfall Energy Profits Levy in a way that will mean the total tax rate payable rises to 78% from 75%. Labour has also indicated it will cut the generous investment allowance that was introduced alongside the windfall tax in 2022.
It is not clear that the allowance will be scrapped entirely. However, the prospect of a reduction combined with uncertainty about what exactly is planned has delivered a further blow to confidence in a sector that has been hit by a series of changes since 2022.
The concern is that reforms the public expected would be targeted on oil giants that have made bumper profits in recent years are hitting smaller fish much harder.
Critics say the windfall tax is having most impact on the independents that have been playing a key part in the drive to help the UK maximise the recovery of North Sea resources by investing in assets that giants are not interested in.
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Cuts in the investment allowance would make it much harder for such firms to generate the returns needed to fund spending and reward shareholders.
Industry body Offshore Energies UK has raised the prospect that Labour’s plans could cost huge numbers of jobs. Trades unions have also sounded the alarm.
Bosses at firms that have underlined the potential for independents to boost North Sea activity have made telling contributions to the debate in recent days.
Kistos Holdings chief executive........