UK must end windfall tax on energy sooner, says Scotland’s energy secretary

Scotland’s energy secretary has called for a faster end to the energy profits levy, warning the long-term damage to the sector will be outweighed by the short-term gain to the Treasury. 

Gillian Martin, who was speaking at a Holyrood/OEUK fringe at the SNP’s conference in Aberdeen, said the levy “feels a little bit like a tax on the north east”.

She aired her doubts the UK Government would move to lift the levy because it was “bringing in too much money”.

But she said the “consequences are far bigger” because it is stopping investment and the creation of jobs across Scotland.

OEUK CEO Dave Whitehouse echoed the call, saying it was “fundamental” that the levy was lifted in the UK Budget at the end of November.

The energy profits levy was introduced by the Conservative government at a time when company profits were spiking in the wake of Russia’s invasion of Ukraine. 

It was increased and extended when Labour came to power last year, and is now set to come to an end in March 2030.

The UK Government has been consulting on a new tax regime for the energy sector to replace the levy.

However, many in the industry have called for it to be replaced sooner than the government’s current timeframe.

Martin said “withdrawal or an early end date” would be a “game-changer” in Scotland’s transition to net zero because it would improve investor confidence. 

She accused the UK Government of “short-termism” because it was putting the gains for the Treasury against of the “long-term consequences of losing the revenue [and] missing the opportunities associated with the energy transition”.

She added: “This short-term gain the Treasury are getting from the EPL is a mistake. It’s going to have long-term consequences if they don’t withdraw it.”

Whitehouse agreed the EPL needed to be reformed sooner rather than later, highlighting it is bringing in less money that originally estimated while at the same time costing jobs and therefore reducing the take from income tax.

He said: “The tax isn’t working. Let’s replace it with something that is permanent, that’s long-term, that’s fair, that actually divies investment. We need that. It is fundamental to Scotland that that happens on 26 November.”

Whitehouse went on to warn that energy prices “are not going to come down” any time soon, adding that the UK was now paying for two decades of underinvestment in the offshore sector.

Labour promised to lower energy bills by £300 during its general election campaign, but bills have increased during its time in office.

The energy price cap rose at the start of this month to £1,755 for the average dual-fuel household. This is lower than the peak of the energy crisis but still well above what they were before Russia invaded Ukraine.

On the wider transition to the net zero economy, Martin said she would be “damned” if the job losses in the energy sector were equal to those witnessed during the deindustrialisation of the 80s.

But she called for a “more sense and coordination” from the UK Government on energy, warning that without changes, “by the time we have got our act together, [jobs] will be gone”.