London Daily

Focus on the big picture.
Monday, Jan 26, 2026

How would a UK windfall tax on oil and gas profits work?

How would a UK windfall tax on oil and gas profits work?

Analysis: Sunak hints Labour proposal ‘not off the table’ but criteria suggests very few firms would be penalised
Until this week, the government repeatedly rejected the notion of a windfall tax on oil and gas companies, which have been reaping huge profits from sky-high energy prices.

But the chancellor, Rishi Sunak, hinted at a possible U-turn on Wednesday, telling Mumsnet that such a policy was “never off the table”, and would be looked at if investment by companies in Britain’s energy security failed to materialise.

The idea is that the money raised could be spent on easing the cost of living crisis for those households most under pressure from soaring prices. So what would a windfall tax on oil and gas companies be worth to the Treasury?

Labour has repeatedly argued that a one-off, year-long windfall levy could raise £1.2bn to fund discounts on home energy bills, which are already at a record high of £1,971 for an average dual-fuel tariff, with a further eye-watering rise on the way in October.

The party has proposed levying an extra 10% on the corporation tax paid by oil companies that are active in the North Sea. This would be on top of the 40% rate they pay on their profits, already higher than the 19% headline rate of corporation tax.

This would not only affect well-known firms such as BP and Shell but also lesser-known ones such as Harbour Energy – which actually produces more oil from the North Sea than any other extractor: about 163,000 barrels a day last year.

The sector’s big firms have certainly done extremely well out of the high oil and gas prices that have sent energy bills and the cost of filling up a car to record highs. BP made a profit of £10bn last year, admitting it has “more cash than we know what to do with”. The company was a “cash machine”, its chief executive, Bernard Looney, said – around the same time as dismissing calls for a windfall tax.

Shell did even better at £15bn, after record quarterly earnings in the last three months of 2021. Both companies will report first-quarter figures next week, including any boost connected to the war in Ukraine.

On Wednesday, Sunak appeared to leave the door ajar for a levy – but one that would penalise those oil firms that fail to do their best to help the UK squeeze more drops out of the North Sea.

“What I would say is that if we don’t see that type of investment coming forward and companies are not going to make those investments in our country and energy security, then of course that’s something I would look at and nothing is ever off the table in these things,” he said.

It is not immediately clear how the government would set the criteria for judging which companies are underinvesting. In practice, forecasts of increased investment in the North Sea suggest very few firms, if any, are likely to be penalised under current circumstances.

Spending in the North Sea is forecast to hit £21bn over the next five years, according to a report published last September by the UK oil trade body Offshore Energies UK, a higher annual rate than the £3.7bn of investment in 2020.

Habour Energy, which produces a fraction of either BP or Shell’s global output, increased its spending on new and existing projects from $556m to $640m last year.

It plans to increase its spending further this year, indicating it would be unlikely to fall foul of any penalty for perceived underinvestment.

Shell is already considering a U-turn on its decision to abandon the Cambo oilfield, which lies about 75 miles north-west of the Shetland Islands.

The company said this month it planned to invest £20bn-£25bn in the UK energy system over the next decade, although 75% will be on offshore wind, hydrogen and electric vehicle infrastructure, rather than North Sea oilfields. But it too is planning more extraction.

“We plan to continue to invest in the North Sea,” BP said in its latest annual report.
Newsletter

Related Articles

0:00
0:00
Close
UK Banks Pledge £11 Billion Lending Package to Help Firms Expand Overseas
Suella Braverman Defects to Reform UK, Accusing Conservatives of Betrayal on Core Policies
Melania Trump Documentary Sees Limited Box Office Traction in UK Cinemas
Meta and EssilorLuxottica Ray-Ban Smart Glasses and the Non-Consensual Public Recording Economy
WhatsApp Develops New Meta AI Features to Enhance User Control
Germany Considers Gold Reserves Amidst Rising Tensions with the U.S.
Michael Schumacher Shows Significant Improvement in Health Status
Greenland’s NATO Stress Test: Coercion, Credibility, and the New Arctic Bargaining Game
Diego Garcia and the Chagos Dispute: When Decolonization Collides With Alliance Power
Trump Claims “Total” U.S. Access to Greenland as NATO Weighs Arctic Basing Rights and Deterrence
Air France and KLM Suspend Multiple Middle East Routes as Regional Tensions Disrupt Aviation
U.S. winter storm triggers 13,000-plus flight cancellations and 160,000 power outages
Poland delays euro adoption as Domański cites $1tn economy and zloty advantage
White House: Trump warns Canada of 100% tariff if Carney finalizes China trade deal
PLA opens CMC probe of Zhang Youxia, Liu Zhenli over Xi authority and discipline violations
ICE and DHS immigration raids in Minneapolis: the use-of-force accountability crisis in mass deportation enforcement
UK’s Starmer and Trump Agree on Urgent Need to Bolster Arctic Security
Starmer Breaks Diplomatic Restraint With Firm Rebuke of Trump, Seizing Chance to Advocate for Europe
UK Finance Minister Reeves to Join Starmer on China Visit to Bolster Trade and Economic Ties
Prince Harry Says Sacrifices of NATO Forces in Afghanistan Deserve ‘Respect’ After Trump Remarks
Barron Trump Emerges as Key Remote Witness in UK Assault and Rape Trial
Nigel Farage Attended Davos 2026 Using HP Trust Delegate Pass Linked to Sasan Ghandehari
Gold Jumps More Than 8% in a Week as the Dollar Slides Amid Greenland Tariff Dispute
BlackRock Executive Rick Rieder Emerges as Leading Contender to Succeed Jerome Powell as Fed Chair
Boston Dynamics Atlas humanoid robot and LG CLOiD home robot: the platform lock-in fight to control Physical AI
United States under President Donald Trump completes withdrawal from the World Health Organization: health sovereignty versus global outbreak early-warning access
FBI and U.S. prosecutors vs Ryan Wedding’s transnational cocaine-smuggling network: the fight over witness-killing and cross-border enforcement
Trump Administration’s Iran Military Buildup and Sanctions Campaign Puts Deterrence Credibility on the Line
Apple and OpenAI Chase Screenless AI Wearables as the Post-iPhone Interface Battle Heats Up
Tech Brief: AI Compute, Chips, and Platform Power Moves Driving Today’s Market Narrative
NATO’s Stress Test Under Trump: Alliance Credibility, Burden-Sharing, and the Fight Over Strategic Territory
OpenAI’s Money Problem: Explosive Growth, Even Faster Costs, and a Race to Stay Ahead
Trump Reverses Course and Criticises UK-Mauritius Chagos Islands Agreement
Elizabeth Hurley Tells UK Court of ‘Brutal’ Invasion of Privacy in Phone Hacking Case
UK Bond Yields Climb as Report Fuels Speculation Over Andy Burnham’s Return to Parliament
America’s Venezuela Oil Grip Meets China’s Demand: Market Power, Legal Shockwaves, and the New Rules of Energy Leverage
TikTok’s U.S. Escape Plan: National Security Firewall or Political Theater With a Price Tag?
Trump’s Board of Peace: Breakthrough Diplomacy or a Hostile Takeover of Global Order?
Trump’s Board of Peace: Breakthrough Diplomacy or a Hostile Takeover of Global Order?
The Greenland Gambit: Economic Genius or Political Farce?
The Greenland Gambit: Economic Genius or Political Farce?
The Greenland Gambit: Economic Genius or Political Farce?
Will AI Finally Make Blue-Collar Workers Rich—or Is This Just Elite Tech Spin?
Prince William to Make Official Visit to Saudi Arabia in February
Prince Harry Breaks Down in London Court, Says UK Tabloids Have Made Meghan Markle’s Life ‘Absolute Misery’
Malin + Goetz UK Business Enters Administration, All Stores Close
EU and UK Reject Trump’s Greenland-Linked Tariff Threats and Pledge Unified Response
UK Deepfake Crackdown Puts Intense Pressure on Musk’s Grok AI After Surge in Non-Consensual Explicit Images
Prince Harry Becomes Emotional in London Court, Invokes Memory of Princess Diana in Testimony Against UK Tabloids
UK Inflation Rises Unexpectedly but Interest Rate Cuts Still Seen as Likely
×