Experts: Cutting UK's North Sea Windfall Tax Won't Lower Energy Bills

Experts have warned the UK government that scrapping or reducing the windfall tax on North Sea oil and gas firms would not lower energy bills for consumers, but would instead just increase profits for those companies.

According to reports, Rachel Reeves, the UK Chancellor, is considering reducing or even scrapping the energy profits levy, a windfall tax introduced last year to claw back some of the huge profits made by energy companies amid soaring oil and gas prices.

However, economists and other experts have told the Guardian that such a move would do nothing to help hard-pressed consumers, and would simply fatten the profits of oil and gas firms instead.

The energy profits levy, also known as the windfall tax, was introduced by the UK government in 2022 in response to the surge in global energy prices following Russia's invasion of Ukraine. It applies a 25% tax on the extraordinary profits made by oil and gas companies operating in the UK's North Sea.

But with oil prices now reaching over $100 per barrel, the Chancellor is reportedly considering scrapping the windfall tax or replacing it with a lower duty.

However, experts argue that such a move would provide no benefit to consumers struggling with high energy bills, and would instead just boost the profits of oil and gas companies operating in the North Sea.

"Easing the windfall tax on the North Sea would do nothing for hard-pressed consumers, and merely fatten the profits of oil and gas companies," the experts told the Guardian.

The UK government has faced criticism for not doing enough to help households cope with the cost-of-living crisis caused by soaring energy bills and inflation. Removing or reducing the windfall tax on energy companies is unlikely to change that, according to the experts.