Energy companies make £60m in profit a day from operations in the North Sea and should pay more tax to fund a council tax freeze for cash-strapped households, according to Labor.
Labor’s call comes ahead of the latest financial updates from Shell and BP this week. Energy companies are expected to report more windfall profits in the London market due to rising prices caused by the Russian invasion of Ukraine.
UK-based Shell posted $40bn (£32bn) in profit last year, one of the biggest in British corporate history and the best performance in its 115-year history, while BP more than doubled annual profits to $28 billion.
Other energy companies, including Centrica, which owns British Gas, also posted record profits last year.
Labor estimates that the biggest energy companies have already made £7bn in profit so far this year, the equivalent of around £60m a day, from North Sea operations.
Ed Miliband, the shadow secretary on climate change and net zero, said: “As families grapple with the crisis of skyrocketing bills, these new figures confirm once again that the Tories refuse to do the fair and the right thing to do and generate a windfall tax suitable for oil and gas giants to help freeze council taxes this year.
“That is the choice that Labor would make before these local elections, because we are on the side of the workers.”
Prime Minister Rishi Sunak originally introduced a 25% energy profit tax, better known as the “windfall tax”, which was meant to apply until the end of 2025, when he was chancellor. In January, the extraordinary income tax was increased to 35% and will be in force until March 2028.
Harbor Energy, the largest producer in the North Sea, has claimed the tax “almost wiped out” its profits last year. Oil and gas companies operating in the North Sea also pay a 30% corporate tax on their profits and an additional 10% additional tax. Other companies currently pay corporate tax at 25%.
Labor has criticized the windfall tax scheme because it applies to profits made from extracting UK oil and gas, but not from other activities such as oil refining and the sale of petrol and diesel at petrol stations. . It also allows companies to claim tax savings worth 91 pence for every pound sterling invested in the extraction of fossil fuels in the UK.
Labor said the tax relief should be removed to implement a “proper windfall tax”.
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Shell initially said it did not expect to pay any windfall tax by 2022 as its investments in the North Sea meant it was not considered to have made a profit in the UK.
However, the company subsequently announced it would pay $134m (£108m) by 2022 and expected to pay more than $500m (£400m) by 2023. BP said it would pay $700m (£583m) in one-off taxes. by 2022.
Europe, which uses a different method to tax windfalls under its “solidarity contribution” scheme, collected the largest sum of $520 million in payments from the EU last year.
The government says tax revenue from companies operating in the North Sea will be £11bn in 2022-2023. Jeremy Hunt, the chancellor, has said the windfall tax will raise £40bn over six years.