Jeremy Hunt is facing a revolt by the Scottish Conservative leader and at least one junior minister after he ignored their pleas and extended the windfall tax on energy companies.
Douglas Ross, who is also the MP for Moray, near Aberdeen, said he would vote against the chancellor’s “deeply disappointing” decision to prolong the tax until 2029 because it damaged Tory claims to champion North Sea oil and gas jobs.
It was “a step in the wrong direction”, Ross said, winning support from Andrew Bowie, a junior energy minister who holds the neighbouring seat of West Aberdeenshire and Kincardine, where he has a wafer-thin majority over the Scottish National party.
Bowie stopped short of announcing he would also vote against the measure – he would have to resign as a minister to do so – but said he would join Ross in lobbying Hunt to reverse or soften the decision.
The Scottish Tories had hoped to be able to trumpet Hunt’s decision to again cut national insurance rates by 2p as proof the Conservatives were the low-tax party at a time when Scottish employees face rising income tax bills.
Income tax rates in Scotland are set at Holyrood, and Scottish taxpayers earning above £28,845 will pay the most in the UK because of decisions taken by the SNP and Scottish Greens in Edinburgh; national insurance rates are set at Westminster, so Hunt’s cuts will lower their overall tax bill.
The rebellion over the windfall levy has been fuelled by the Scottish Tories’ anxieties about defending their three seats in north-east Scotland at the general election, where the oil industry hopes to make energy policy the defining political issue.
While Ross is standing down as an MP, he, Bowie and David Duguid, the MP for Banff and Buchan, had urged Hunt to reduce or end the energy levy to bolster the Tories’ chances of holding these seats.
The chancellor said the continuing war in Ukraine continued to push up energy prices and therefore the unearned profits for oil, gas and electricity producers. Extending the levy for a year would help raise a further £1.5bn to spend on public services, Hunt predicted.
To demonstrate their support for the region, the Scottish Tories held their annual conference in Aberdeen last weekend. Before his keynote speech, the prime minister, Rishi Sunak, seemed to play down the prospects of extending the windfall tax by insisting the Tories were the only party determined to protect North Sea jobs.
Buoyed up by those remarks, the Scottish Tories then tabled a motion for debate at Holyrood timed to take place two hours after Hunt’s statement on Wednesday afternoon attacking Labour’s plans to extend the windfall tax as a “reckless assault on North Sea oil and gas workers and Scotland’s economy”.
Alister Jack, the Scottish secretary, downplayed the political impact of Hunt’s decision in a briefing with political reporters. “The profits levy being extended for a year I don’t believe will have any impact on jobs,” he said.
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“I still believe that with the huge profits the energy companies have made, following Putin’s illegal invasion of Ukraine, it is right that some of that money comes back to the Treasury to be able to help people with the challenges they face.”
The debate around energy industry profits during the cost of living crisis has become increasingly febrile in north-east Scotland in the run-up to the election.
Aberdeen chamber of commerce and a lobbying firm with close links to the energy industry referred to Labour as “traitors” in a local newspaper article over the party’s plan to increase the windfall tax to 78p.
That language was quickly picked up and repeated by Humza Yousaf, the Scottish National party leader and first minister, who hopes to retake several Tory seats in the region and to strengthen the SNP’s slender lead over Labour.
