Restart new oil and gas licences: calculation note

Central fiscal result

+£0.1bn - Net fiscal impact in 2028-29

Low case: -£1.0bn. High case: +£2.0bn. Positive numbers are fiscal costs or borrowing pressure. Negative numbers are Exchequer savings or receipts.

Scenario and baseline

• Model new North Sea licensing from 2026-27 onward.
• Central fiscal effect is near zero by 2028-29.
• Baseline is declining North Sea receipts and current tax rules.
• Energy Profits Levy repeal is modelled separately.

Affected population

• Affected population is oil and gas producers and supply chains.
• Direct exposure includes licensed operators and contractors.
• Indirect exposure includes emissions budgets and local workforces.
• Household bill exposure is indirect and limited.

Gross impact

• Central: licensing administration costs roughly offset early receipts.
• Low case assumes some extra bonus, fees and investment receipts.
• High case assumes tax reliefs and decommissioning exposure dominate.
• No consumer-price saving is scored.

Fiscal build-up, central case

• Licensing and administration: +£0.1bn
• Early tax and fee receipts: -£0.2bn
• Investment reliefs and allowances: +£0.2bn
• Decommissioning and monitoring: £0.0bn

Central net impact: +£0.1bn in 2028-29.

Behaviour and pass-through

• Low case assumes commercially viable fields and higher prices.
• Central case assumes long lead times and limited near-term output.
• High case assumes tax reliefs exceed receipts by 2028-29.
• Investment may be deterred by policy uncertainty.
• Energy security benefits are not treated as fiscal receipts.

Phasing

• 2026-27: £0.0bn. Preparation or partial implementation.
• 2027-28: £0.0bn. Main ramp-up year.
• 2028-29: +£0.1bn. Target-year central estimate.
• 2029-30: +£0.1bn. Continuation at steady-state assumptions.

Main source groups

• HM Treasury and HMRC, "Energy Profits Levy: reforms 2024" (2024): The note raises the levy to 38%, extends it and removes the investment allowance; defines the oil-and-gas tax baseline.
• Office for Budget Responsibility, "Economic and fiscal outlook: October 2024" (2024): The OBR scores fuel-duty, EPL and environmental-receipts measures and discusses oil-and-gas uncertainty; anchors energy and motoring estimates.
• Office for Budget Responsibility, "Economic and fiscal outlook: March 2026" (2026): The OBR forecast sets the macro, borrowing and receipts baseline used for broad fiscal context; prevents treating tax cuts or spending changes as self-financing.
• Dechezlepretre and Sato, "The Impacts of Environmental Regulations on Competitiveness" (Review of Environmental Economics and Policy, 2017): Environmental regulation can impose costs but competitiveness effects are often smaller than claimed; relevant to deregulation claims around net zero and ESG.
• Goulder and Parry, "Instrument Choice in Environmental Policy" (Review of Environmental Economics and Policy, 2008): Instrument choice matters: taxes, permits and standards differ in efficiency and distributional effects; relevant to carbon pricing, CBAM and ZEV mandate choices.
• Conservative Party, "Our Plan for Britain" (2026): Used to define the pledge wording, policy scope and implementation scenario being modelled.