Energy firms call for windfall tax to fall with prices

Energy firms have called on ministers to reduce the windfall tax as oil and gas prices fall, ahead of a package of measures on energy security expected to be announced on Thursday.

Trade body Offshore Energies UK said that "when prices drop, it is fair that the windfall tax should fall away".

The Treasury insists it keeps all taxes under review.

Last year, the government introduced a windfall tax on oil and gas firms, to help fund its scheme to lower energy bills for households and businesses.

A windfall tax is used to target firms which benefit from something they were not responsible for. Energy firm profits have soared recently, initially due to rising demand after Covid restrictions were lifted, and then because Russia's invasion of Ukraine raised energy prices.

Oil and gas prices have now come down from their highs.

David Whitehouse, chief executive of Offshore Energies UK, said the windfall tax has "damaged the confidence" of companies to invest in the long-term energy security of the UK.

"If this tax is changed, as conditions and prices have changed, that would be a positive move that would go some way to start rebuilding confidence," he said.

He added it would also spur companies to invest in the UK energy industry and in new technologies such as offshore wind, hydrogen and carbon capture, as well as in jobs.

It comes as the government is expected to set out measures to boost the UK's energy security on Thursday.

A Whitehall source confirmed the plans, which will be set out by the Energy Security Secretary Grant Shapps, will focus on bringing down wholesale electricity prices in the UK and reducing energy bills for consumers and businesses.

The Financial Times reported that ahead of this, ministers have been holding talks with energy firms about adjusting the windfall tax if oil and gas prices dropped below a certain level.

Shadow climate secretary, Ed Miliband said the report was more evidence that next week's announcements would be "Fossil Fuel Thursday".

He said it would see "giveaways to companies already making record profits, for a policy that will make no difference to energy bills or security, fleecing the public whilst trashing the climate."

The Treasury insists it does not comment on speculation.

But said the windfall tax "strikes a balance between funding cost of living support from excess profits while encouraging investment".

It added that "the more investment a firm makes into the UK, the less tax they will pay".