Oil companies have been handed millions by the government, Labour analysis shows.
Shell and BP have received £700m in government handouts for their oil and gas production since 2016 despite raking in record profits, analysis by the Labour Party shows.
Meanwhile, new “poorly designed tax breaks” are set to hand back “billions more” to these companies in the coming years even as millions struggle to pay energy bills, Labour said.
Ed Miliband, Labour’s shadow climate change and net zero minister, said it was “obscene” that the government was planning further tax breaks for oil companies as families are facing a “cost of living emergency”.
A government spokesperson said that the UK’s tax regime “ensures the oil and gas industry pays billions in taxes every year which in turn go towards paying for our vital public services”.
They added that they expect the energy profits levy to raise “an extra £5 billion in its first year to help pay for our £37 billion package to help families with rising costs”.
The analysis comes as oil companies record sky-high profits due to the rising cost of energy, with the chief financial officer of BP recently commenting that the company will have “more money than they know what to do with” if prices stay high.
Meanwhile, millions of people have been plunged into fuel poverty by the soaring cost of energy bills, even before a planned rise to the price cap which could see bills rise to £4,200 in January.
This is despite BP and Shell paying £17bn in tax in other jurisdictions like the US and Norway.
The analysis shows that millions of pounds in payments from the UK government have been given to oil and gas companies over the past six years.
Labour said the £700m payout shows “the absurdity of the government failing to backdate their windfall tax and leaving months of windfall profits untaxed”.
In May, then-chancellor Rishi Sunak announced that a new windfall tax – or “energy profits levy” – would be levied on oil and gas companies’ profits.
However, under the scheme, oil and gas companies can claim a 91p tax saving for every £1 they invest in new energy in the UK.
The move was widely criticised by environmental charities and NGOs for incentivising further investment in oil and gas at a time when the UK is seeking to decarbonise its energy system.
Kerry McCarthy MP, Labour’s shadow climate change minister, said: “Since 2016 oil and gas giants have been paid huge amounts from the public purse under the uniquely generous tax regime the Tories have created for them.
“Even now, when oil and gas profits are soaring to record levels and people are struggling to pay their energy bills, the Tories have given them yet another tax break. It is time that they pay their fair share.”
Miliband said the government was “asleep at the wheel” when it came to solving the energy crisis, and called for a withdrawal of tax plans which will hand “£4bn of public money” to oil and gas companies, using the money to help families instead.
“To bring down energy bills for good, we need Labour’s plan for a green energy sprint for home-grown power, and our 10 year warm homes plan to cut bills for 19 million cold, draughty homes,” he added.
A spokesperson for Shell said:
“The tax payments, which were set out in our voluntary Payments to Government report, published this spring, relate to a tax relief framework that both Conservative and Labour governments have had in place to provide the oil and gas industry with long term investment clarity.
“We have a responsibility to safely and efficiently decommission legacy assets, which requires significant expenditure. Under the tax framework, which dates back to 1975, companies holding a licence in the UK or on the UK Continental Shelf and decommissioning an asset can claim a tax deduction in their corporation tax return equal to the amount spent on decommissioning those assets.”