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Sir Keir Starmer, the Labor leader, has abandoned plans to backdate the tax on oil and gas producers to early 2022 if the party wins the next general election, in a further reformulation of the party’s green agenda.
But that concession limited to the energy sector did little to quell the industry’s anger at Starmer’s plans to instead extend the life of the tax by two years, until 2029.
Offshore Energies UK (OEUK), the trade body, said 42,000 jobs and £26 billion of economic value would be “wiped out” by the windfall tax extension and an increase in the levy from 75% at 78%.
David Whitehouse, chief executive of OEUK, said: “Workers are either at a loss or have not considered the alarming impact on employment that will be felt up and down the country.”
He said the announcement was made “without commitment to the industry”.
Starmer has restructured windfall tax in a bid to plug holes in his flagship £28bn-a-year green spending plan, which he slashed this week to just £4.7bn.
Under the proposals, unveiled on Thursday, the new rate would raise £10.8 billion over the next five years, starting in 2024-25. The party would maintain a government-introduced “threshold” under which the tax would cease to apply if oil and gas prices fell below a certain level.
The extra money Labor believes it can get from the tax has been earmarked to pay for half of its scaled-down Green Prosperity Plan, with the rest funded by further government borrowing.
But Starmer blamed his U-turn on tight public finances resulting from Tory management and insisted that Labor would still deliver on its promise to build a green economy if it took power.
The windfall tax that Labor plans to raise – called the “energy profits levy” – was first imposed by the Conservative government in May 2022.
Starmer set out plans in August 2022 to raise £8 billion from a higher windfall tax and said he would backdate the tax to the start of the energy crisis, before the full-scale invasion of Ukraine by Russia.
His original plan was to backdate the tax to cover oil and gas profits from January 2022, but a Labor spokesperson told the Financial Times on Friday: “This is no longer the policy.”
A Conservative official said it was another example of the Labor Party “turning around”.
But a spokesperson for Shadow Chancellor Rachel Reeves insisted there was no need to backdate the policy because Labour’s revised plan for a windfall tax on oil and gas would generate sufficient revenue in the future.
The Labor Party has taken a tougher approach to the oil and gas industry than the government. Starmer has pledged not to issue any new oil and gas licenses despite criticism from the GMB union, one of Labour’s biggest donors.
Its general secretary, Gary Smith, told the FT in May that there was a “national security imperative” to keep the industry alive, given Britain’s dependence on oil and gas.