Labour’s oil and gas ban ‘will create £4.5bn tax black hole’

Labour has made a manifesto pledge to block exploration of new oil and gas fields because it would 'accelerate the worsening climate crisis'
Labour has made a manifesto pledge to block exploration of new oil and gas fields because it would 'accelerate the worsening climate crisis' - Getty/Andy Buchanan

Labour’s ban on new North Sea oil and gas will create a £4.5 billion black hole in the public finances that will have to be filled by higher taxes, the Energy Secretary has warned.

Claire Coutinho has accused Sir Keir Starmer of planning to take Britain “back to the dark ages” with his net zero plan to phase out domestic production.

The Labour leader has made a manifesto pledge to block exploration of new oil and gas fields because it would “accelerate the worsening climate crisis”.

Tory analysis has claimed that the ban would lead to lost tax takings of £4.5 billion over the next 10 years and £12.4 billion in total as North Sea production dwindles.

Ministers have warned that the plan would also threaten 200,000 highly paid jobs that are dependent on the sector, many of them based in Scotland.

Writing for The Telegraph, Ms Coutinho branded the plans “a spectacular act of economic self-harm” that would leave the UK “colder and poorer”.

The Energy Secretary said the cash would have to be recouped by hiking other taxes while the policy led to “increased reliance on foreign imports, lost jobs, and even blackouts”.

She wrote: “It would be a triumph of ideology over common sense. Exporting jobs for the sake of importing virtue signalling. The choice is clear.

“Labour’s proposals will destroy jobs, raise taxes and hike up your bills. In a truism of all Labour governments – once they have run out of money, they will come for yours.”

Labour dismissed the claims as “desperate nonsense” and said its plans to invest in renewable energy production would lower bills for households.

The party will today set out how it aims to wean Britain off fossil fuels by creating 650,000 new jobs – many in green technology – in former industrial heartlands.

Rachel Reeves, the shadow chancellor, will pledge to pour £7.3 billion into a new National Wealth Fund that will bankroll the development of renewables.

It is a key plank of her party’s Green Prosperity Plan, which includes the creation of a new state-owned energy company, to replace fossil fuel power.

She will appear at a press conference after Labour was accused of a “conspiracy of silence” over the scale of the tax rises it is planning once in government.

Ms Coutinho said Labour's policy will lead to 'increased reliance on foreign imports, lost jobs, and even blackouts'
Ms Coutinho said Labour's policy will lead to 'increased reliance on foreign imports, lost jobs, and even blackouts' - Carl Court/Getty Images

The Tories said Wes Streeting let the “cat out of the bag” on Sunday when he admitted that his party wants to spend more than it set out in its manifesto.

The shadow health secretary insisted the election pledges were not the “sum total” of its budget plans but that spending would only increase if the economy grows.

In a separate interview he also failed to rule out future council tax rises, though he added: “We don’t want to see the tax burden on working people increase.”

The Tories said his remarks showed “Labour simply aren’t telling the truth about their plans” and that “they are planning to spend and tax more than they are telling the public”.

At the same time, Sir Keir’s most senior aide sparked fresh fears the party is planning to hike capital gains tax on property owners and businesses.

Morgan McSweeney, the Labour leader’s chief of staff, liked a social media post that said the party would be “politically wise” to increase the levy.

He later removed the like and is understood to have told colleagues that it was accidental.

In a bid to see off future Tory attacks, Labour also ruled out bringing back the 50p top rate of tax after an historic video emerged of Sir Keir supporting its reimposition.

Officials said that the party’s manifesto pledge not to increase income tax rates included a promise not to introduce any new brackets for high earners.

Labour has repeatedly insisted it has no plans to hike taxes but has only specifically ruled out increases to income tax, National Insurance and VAT.

Tory strategists have turned fire on Labour’s energy policy after accusing Sir Keir and Ms Reeves of plotting 17 “secret” tax rises on families and businesses.

Conservative HQ sees the opposition’s net zero plans as a key weakness it can use to hammer home the point that Labour cannot be trusted with the economy.

On Sunday, Rishi Sunak claimed the Labour leader would “run riot” with taxpayers money if elected.

He told the Daily Express: “Labour has admitted their manifesto is nothing more than a con.

“At this election, Keir Starmer is asking for you and your family to sign a blank cheque, and we all know what he wants to do with it: Put up your taxes so he can run riot with your money.”

Analysis by the party suggests that the ban on new oil and gas exploration would cost the equivalent of £160 per household over the next decade.

Sir Keir pressed ahead with the ban on new drilling despite facing fierce opposition from the unions, who warned it was “irresponsible”.

He has insisted that he will not revoke existing long-term licences, which were issued by Tory governments to give the industry certainty.

Labour’s manifesto, published last Thursday, stated: “We will not issue new licences to explore new fields because they will not take a penny off bills, cannot make us energy secure, and will only accelerate the worsening climate crisis.”

A Labour spokesman added that its plans to close loopholes in the windfall tax on oil and gas giants would raise billions in tax revenue.

In response to the Tory claims he added: “This is yet more desperate nonsense from a Conservative Party that has lied throughout this campaign.

“Independent analysis shows Labour’s plans will lower imports, lower bills, and increase our energy security.”

Both Labour and the Tories also found themselves under attack from Nigel Farage as he prepared to launch Reform UK’s manifesto in Wales on Monday.

He warned that the state of Wales showed “what the whole country will be like with a Starmer government and a feeble Conservative opposition”.