In a move that signals a decisive break from previous policy, Chancellor Rachel Reeves has used a high-profile speech in the heart of the UK's oil industry to announce an immediate end to the issuance of new oil and gas licences for the North Sea.
The announcement, made in Aberdeen, directly confronts the longstanding tradition of offshore fossil fuel extraction. The Chancellor declared the practice "does nothing to enhance our energy security" and is incompatible with the UK's legally binding commitment to achieve net zero emissions by 2050.
A New Direction for UK Energy
Reeves framed the controversial decision as a necessary step towards a sustainable future. She argued that granting new licences would not lower bills for British households, as the extracted resources are sold at global market prices. Instead, her strategy pivots towards a massive acceleration of homegrown renewable energy and a overhaul of the planning system to fast-track green infrastructure projects.
This policy shift effectively makes good on a key Labour manifesto pledge, drawing a clear line under the Conservative government's strategy of maximising North Sea production.
Addressing the Windfall Tax
Seeking to address industry concerns, the Chancellor confirmed the government will not extend the current windfall tax on oil and gas company profits beyond its planned expiry in 2028-2029, provided market prices normalise. This offers a degree of certainty to operators in the sector amidst the significant change.
However, she was firm in her stance, stating the tax would remain in place until then to ensure companies making extraordinary profits contribute their fair share.
Reactions and the Road Ahead
The announcement has been met with strong, mixed reactions. Environmental groups and climate activists have hailed it as a courageous and essential move towards tackling the climate crisis. Conversely, industry representatives and some Scottish MPs have warned of the potential impact on jobs, investment, and the broader supply chain centred in Aberdeen.
The Chancellor's speech in Aberdeen underscores the new government's commitment to positioning the UK as a global leader in renewable energy, even if it means making difficult choices in traditional economic strongholds.
