Select committee presses Huhne over knowledge of Osborne's windfall tax as energy lobby claims move could cost 30,000 jobs
Government ministers clashed with MPs on the energy select committee and North Sea operators today as they sought to head off criticism that budget changes would stop oil investment and raise consumer gas prices.
Chris Huhne, the energy secretary, refused to say whether he had been consulted about George Osborne's windfall tax, which aims to raise £2bn to ease pressure on petrol pump prices.
The Oil & Gas UK lobby group told MPs that the Department of Energy and Climate Change had not been consulted about the rise of up to 81% in some field tax rates and were only informed by the Treasury at the last minute.
Asked repeatedly by the committee chairman, Tim Yeo, whether this was true, Huhne kept insisting it was a government convention not to discuss such issues. "We don't comment on consultations," he said, adding that it was "absolutely not" correct to suggest, as Yeo later did, that his high-profile criticism of Osborne over the alternative vote referendum reflected anger at not being consulted over a key fiscal energy issue.
Huhne and the Treasury economic secretary, Justine Greening, defended the tax hit, saying there was independent backing from the energy consultancy Wood Mackenzie and others that the rise in North Sea taxes would only have a "marginal impact" on investment.
But a procession of industry officials led by Malcolm Webb, of Oil & Gas UK, and Paul Warwick, president of the oil firm ConocoPhillips UK, argued that the tax came as a "complete shock" and would chase away investment and jobs. "We forecast 15,000 jobs coming into the industry. We are not at all confident now]," said Webb. Others suggested a £2bn loss of investment could cost 30,000 jobs.
One committee member, Ian Lavery, repeatedly challenged the energy secretary to say what estimates had been made on how many jobs might be hit by the move, while others warned it could lead to more gas imports and higher domestic heating bills.
Huhne and Greening said there had been a 50% increase over the last two years in North Sea corporate profitability due to soaring oil prices and the government was already in talks with companies about specific field developments that could be heavily hit.
A new study by Oil & Gas UK data showed 50% of firms surveyed said their optimism had already decreased due to the tax increase. Another 25% of respondents reported high-activity levels in the first quarter of the year but were likely to see tax changes having a negative impact on their business in the longer term.
Centrica, parent of British Gas, halted production on three fields on the Morecambe Bay gas reservoir for planned maintenance at the weekend and said that due to the tax increase the fields might not restart when the work finishes in four weeks.
Last week Shell said the tax rise could threaten investment in more marginal or difficult fields, while Norway's Statoil, France's Total have all said they will have to reassess their investment plans as a result of the tax change.