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Windfall tax on North Sea oil and gas could raise £2bn, says Labour

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A windfall tax on North Sea oil and gas operators could raise more than £2bn to cushion the pain of rising energy bills.

Analysis by the Labour party – which has called for the one-off levy – reveals that it could rake in at least £1.95bn for the Treasury, far more than the £1.2bn the party forecast in January.

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Profits on North Sea oil and gas firms are taxed at 30% corporation tax plus a 10% surcharge. Labour has proposed hiking the combined rate from 40% to 50%.

The new calculation is based on forecasts from the Office for Budget Responsibility (OBR), released alongside the Spring Statement in March, which took in price surges in the week after Russia invaded Ukraine.

In March the OBR increased its forecasts for UK oil and gas tax receipts by £5.2bn to £13bn in the year to April 2023, up from £3.1bn in the previous financial year. That is far higher than before the pandemic and is the highest return from the North Sea since 2010-11, when £9.6bn was collected.

However, analysts said the rise in energy prices since March, could increase the income from a windfall tax above £2bn.

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The debate was reignited last week when BP and Shell reported bumper profits, aided by high energy prices. On Tuesday, Tesco chairman John Allan said there is an “overwhelming case” for a windfall tax, while British Gas owner Centrica announced a surge in profits.

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Boris Johnson has so far resisted calls for the levy, arguing it would hamper investment into Britain’s energy sector.

Britons face another painful rise in energy bills this autumn without further intervention from government.

However, even £2bn of aid from a windfall tax may fall far short of what is needed to help the most squeezed households.

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The chief executive of Scottish Power has proposed a £10bn deficit fund to take £1,000 off bills for the 10m households estimated to be facing fuel stress. The fund would be underwritten by government and repaid via a surcharge on customer bills at a later date.

Darren Jones, chair of the Commons business, energy and industrial strategy committee, urged the government to publish its analysis on a windfall tax. He told the Guardian: “A windfall tax on excessive profits is an obvious policy for government to introduce to help bill-payers who are facing increasing difficulties.

“Last year the secretary of state for business, Kwasi Kwarteng, told the committee the government would look at it. I have not seen an assessment from government of the pros and cons and would like to see that published.”

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