Oil and gas bosses rounded on Rishi Sunak over his new windfall tax at a private 40-minute meeting in Aberdeen as they step up efforts to shape the policy before legislation is passed.
Executives warned that the higher tax on profits will make the UK a less attractive prospect and was forcing them to rethink investment plans just as the Government tries to boost domestic energy supplies, sources said.
Shell is said to have described the tax as a “negative” signal to investors. “No-one held back,” said one industry source. “Larger companies said it showed the UK was not a stable place.”
Another source added: “The Chancellor sort of bounced in bright-eyed and bushy-tailed, and he went out with the tail between his legs. There was annoyance with where things are going.”
The Government is hiking the tax rate on oil and gas producers from 40pc to 65pc to try and raise cash to help households struggling with soaring bills due to high oil and gas prices.
The tax comes just months after the prime minister invited industry bosses to Downing Street to encourage them to drill more oil and gas as Russia’s invasion of Ukraine rocks energy markets.
Executives are now pushing for regular reviews to determine when the tax should return to its lower rate. The higher rate is currently set to remain until 2025 unless oil prices return to “normal” levels before then.
The tax includes an investment allowance, meaning companies can save 91p in tax for every £1 they invest in oil and gas production. Bosses want to see this allowance extended so that it covers recent as well as new investment.
The Government said it expected the tax to lead to an overall increase in investment, adding the investment allowance does cover spending on cutting carbon emissions from oil and gas production.
A spokesman added: “As set out in the British Energy Security Strategy, and with Putin’s invasion of Ukraine illustrating the merit of this, North Sea oil and gas are going to be crucial to the UK’s domestic energy supply and security for the foreseeable future – so it is right we continue to encourage investment there.
“The levy’s investment allowance means businesses will overall get a 91p tax saving for every £1 they invest - this nearly doubles the tax relief available and means the more a company invests, the less tax they will pay.”