The windfall tax on oil and gas producers in Britain will be waived if prices remain below certain levels for six consecutive months, the Treasury has said today.
The Energy Profits Levy will be extended until March 2028, with the introduction of a new Energy Security Investment Mechanism to protect the domestic energy supply and preserve jobs in the sector.
This move is part of the government’s strategy to support households with energy bills and provide investor certainty for the future of domestic energy production.
According to government data, the Energy Profits Levy has generated approximately £2.8 billion so far, contributing to nearly half of the typical household energy bill last winter.
Initially implemented to tax extraordinary industry profits resulting from high oil and gas prices triggered by Putin’s invasion of Ukraine, the levy is expected to raise nearly £26 billion by March 2028.
These funds will be used to finance measures aimed at easing the cost of living, such as the Energy Price Guarantee.
While the levy included an investment allowance to encourage ongoing investment in UK oil and gas extraction, concerns have been raised by the industry about reduced investment levels.
To address this, the government has introduced the Energy Security Investment Mechanism – it aims to provide the oil and gas sector with certainty, enabling companies to raise capital and invest in new and existing projects.
The government has confirmed that if oil and gas prices return to historically normal levels for a sustained period, the tax rate for companies will revert to 40%, the rate before the Energy Profits Levy was implemented.
Gareth Davies MP, Exchequer Secretary to the Treasury, said: “It is right that we recover excess profits resulting from Putin’s war and use the money to help people with their energy bills.
“Thanks to the revenue raised from windfall taxes on energy profits, we have helped save the typical household over £1,300 on their energy bill last winter.
“While we stepped into help, never again can our energy supplies be at the whim of petrostate despots like Putin. That’s why it’s so important that we secure investment in our own domestic supply, protecting the tens of thousands of British jobs that come with it.”
According to Khan, this decision prioritises the interests of oil and gas companies over the well-being of the British public.
She argues that these companies continue to generate substantial profits while households and businesses struggle with high energy costs and the escalating climate crisis.
