London — British finance minister Jeremy Hunt is set to announce a one-year extension of a windfall levy on energy firms’ profits in this week’s budget, industry sources briefed on the move said.
The Energy Profit Levy (EPL) was introduced in May 2022 after a jump in energy prices resulting from Russia’s full-scale invasion of Ukraine.
Hunt increased the tax in November 2022 from its initial 25% rate to 35%, bringing the overall tax burden on North Sea oil and gas producers to 75%, among the highest in the world.
The chancellor also extended the tax until 2028 rather than 2025 and expanded it to electricity generators with a levy of 45% in an effort to raise tens of billions of pounds to plug a major hole in public finances.
In his annual tax-and-spend speech on Wednesday, Hunt is set to extend the levy by one more year to 2029, the three sources told Reuters.
The tax rate itself, as well as a 29% investment allowance in the windfall tax that allows companies to offset spending, will remain unchanged, the sources said.
A spokesperson for Britain’s finance ministry said: “We keep all taxes under review and do not comment on future tax policy outside of fiscal events.”
North Sea producers have said in the past that the levy has the effect of reducing investment in Britain’s oil and gas output.
One source in the industry said that neither of the major political parties appeared to appreciate the damage that a further increase in an already destructive tax burden would cause to British jobs and public finances.
Over the weekend, Hunt sought to dampen speculation about big pre-election tax cuts in this week’s budget, saying the economic outlook had worsened, but he hinted at some help for voters.
*Ron Bousso, Andrew MacAskill & Deep Vakil; Editing by Alex Richardson and Kevin Liffey
