PolicyLens

Methodology note

Repeal the Energy Profits Levy: calculation note

Scenario assumptions behind the Repeal the Energy Profits Levy estimate. The figures are illustrative and exclude unrelated Conservative pledges.

View main policy page: Repeal the Energy Profits Levy

Central fiscal result

+GBP 2.2bn - Net fiscal impact in 2028-29

Low case: +GBP 0.5bn. High case: +GBP 5.0bn. Positive numbers are fiscal costs or borrowing pressure. Negative numbers are Exchequer savings or receipts.

Scenario and baseline

  • Model early repeal of the Energy Profits Levy by 2028-29.
  • Central cost is GBP 2.2bn lost receipts.
  • Baseline levy rate is 38 percent with expiry in 2030.
  • New licensing is modelled separately.

Affected population

  • Affected population is UK upstream oil and gas producers.
  • Direct beneficiaries are firms with taxable North Sea profits.
  • Indirect exposure includes supply-chain workers and Treasury receipts.
  • Consumers are not treated as direct beneficiaries.

Gross impact

  • Central lost levy receipts: GBP 2.4bn.
  • Investment and corporation-tax offset: GBP 0.2bn.
  • High case assumes strong prices and high foregone receipts.
  • No consumer-bill reduction is scored.

Fiscal build-up, central case

  • Lost EPL receipts: +GBP 2.4bn
  • Higher corporation-tax receipts: -GBP 0.1bn
  • Investment-related receipts: -GBP 0.1bn
  • Administration savings: GBP 0.0bn

Central net impact: +GBP 2.2bn in 2028-29.

Behaviour and pass-through

  • Low case assumes low prices and weak profits.
  • Central case assumes moderate receipts and modest investment response.
  • High case assumes high prices and substantial foregone revenue.
  • Investment response is not assumed to self-finance repeal.
  • Consumer prices follow wholesale markets, not levy incidence.

Phasing

  • 2026-27: +GBP 0.4bn. Preparation or partial implementation.
  • 2027-28: +GBP 1.8bn. Main ramp-up year.
  • 2028-29: +GBP 2.2bn. Target-year central estimate.
  • 2029-30: +GBP 2.2bn. Continuation at steady-state assumptions.

Main source groups

  • con-plan-2026: Conservative live policy page; used to identify current pledge wording.
  • epl-2024: Energy Profits Levy policy note; current levy rate and revenue effects.
  • obr-efo-oct-2024: OBR October 2024 forecast; fuel-duty, energy and oil-gas receipts.
  • obr-efo-mar-2026: OBR March 2026 forecast; fiscal and macro baseline.
  • mirrlees-2011: Tax design principles; informs behavioural and incidence assumptions.
  • saez-slemrod-giertz-2012: Taxable-income responses; informs behavioural and incidence assumptions.