Question to the HM Treasury:

To ask the Chancellor of the Exchequer, with reference to his oral statement of 26 May 2022 on Economy Update, Official Report, column 451, if he will take steps to ensure that such a policy is (a) fair and equitable given and (b) reflects the comparative complexity of the oil and gas sector.

As the Chancellor announced in the Economy Update 2022, the Government is introducing the Energy Profits Levy, a new 25 per cent surcharge on the extraordinary profits the oil and gas sector is making.

The new Energy Profits Levy will raise around £5 billion over the next year which will go towards supporting people with the new cost of living measures, also announced by the Chancellor.

Within the Levy, a new ‘super-deduction’ style relief is being introduced to encourage firms to invest in oil and gas extraction in the UK. The new 80 per cent Investment Allowance will mean businesses will overall get a 91 pence tax saving for every £1 they invest.

The Levy ensures the extraordinary profits that oil and gas companies have benefited from are taxed fairly, and provides a significant incentive for companies to invest. Officials and Ministers regularly engage with representatives from the sector.

Within the Economy Update, the Chancellor also set out that the Government is urgently evaluating the scale of extraordinary profits in the energy generation sector and the appropriate next steps.

As part of this process, officials are urgently engaging with industry stakeholders on this matter to gather evidence on energy generators’ level of profitability and the operation of their business models. The Government remains committed to achieving a Net Zero Economy and to fully decarbonising the power system by 2035, subject to security of supply. As we transition to net zero, we will make sure the costs of doing so are distributed fairly. The Government will take these factors into consideration when deciding on the appropriate action with regard to energy generators’ profits.