Some of the world’s biggest oil companies are currently paying negative tax on their fossil fuel extraction and production operations in the North Sea.
Official data published by the UK government-backed Extractive Industries Transparency Initiative shows that in the tax year 2019-20, ExxonMobil received £117m in total from HMRC, Shell got £110m, and BP received £39m.
But these organisations are not alone.
A third of all significant energy companies operating in the North Sea paid negative tax last year.
This is possible in large part because of a UK tax policy that was brought in just a few months after the Paris climate accord was agreed in 2015.
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The policy allows oil and gas companies to claim back public money in order to help with decommissioning rigs and infrastructure as the UK progresses towards its net zero carbon emissions targets.
Since the Paris agreement, Exxon has received net tax repayments of £360m on its North Sea operations, BP £490m, and Shell £400m, rounded to the nearest 10 million.
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Some of these sums relate to corporate tax arrangements, but significant portions relate to money for decommissioning.
The UK government’s Oil and Gas Authority has estimated that the total bill for decommissioning will be £51bn.
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But because of the government’s tax policy, the British taxpayer will be responsible for nearly 40% of that over the coming decades.
HMRC has estimated that the cost to the exchequer will be £18.3bn between now and 2065.
This comes as total government income from taxes on oil revenue is decreasing, largely due to falling demand and the cost of decommissioning payments.
Energy Research company Rystad Energy recently named the UK as the country that offers oil and gas companies the “best profit conditions” in the world “to develop big offshore fields.”
This has been illustrated by researchers like Greg Muttitt, who is a senior policy adviser at the International Institute for Sustainable Development.
He has calculated that in 2019 the UK government took $1.72 (£1.24) in taxes per barrel of oil, while the Norwegian government took $21.35 (£15.44).
Campaign groups say the current tax policy effectively amounts to the British public subsidising fossil fuel extraction, even as they are being urged to make greener choices in their own lives.
Environmental lawyer and campaign group Uplift founder Tessa Khan told Sky News: “These companies are allowed to extract oil and gas for private gain, not the public’s benefit and certainly not the Treasury’s.
“They’re not helping to pay for our hospitals and schools, they’re taking public money and handing it to their executives and shareholders.
“The harm to the climate from their actions will be borne by us all, with the poorest hit the hardest.
“There can be no excuses for propping them up with subsidies in a climate emergency. That era is over.”
A Treasury spokesperson told Sky News: “We’re leading the world in building back better and greener from the pandemic.
“We were the first major economy to commit to net zero by 2050 and one of the first to phase out petrol and diesel car sales by 2030.
“The UK oil and gas industry has paid around £375bn in production taxes to date.
“Relief for decommissioning costs is a fundamental part of the UK’s tax system, contributing to the safe removal of oil and gas infrastructure from our natural environment whilst ensuring companies are encouraged to invest in the UK.”
A spokesperson from ExxonMobil said: “The figures in the UK EITI report relate only to extractive operations (oil & gas production), several of which are nearing the end of their economic life.
“ExxonMobil also has downstream and chemical operations in the UK, and overall made a contribution to the UK of £5.2bn in direct and indirect taxes and duties in 2020.
“Over the lifetime of the North Sea, we have been a major, net contributor to the tax revenues generated by the basin and the recent refunds simply represent a repayment of some prior paid taxes as some of our older fields enter the decommissioning phase of their life.”
A spokesperson from Shell told Sky News: “We are open about our tax payments so that people can understand what we pay and why.
“We voluntarily disclose more information than we are required to and lead best practice in this area.
“The question you raise is whether it is right that companies get tax relief for decommissioning assets.
“Decommissioning is part of the lifecycle of oil fields.
“This phase of work is heavily regulated and subject to tax legislation that enables tax relief.
“The concept of granting tax relief for genuine business expenses is fundamental to regimes that tax profits and is applicable and available to all businesses in all industries with few exceptions.
“Decommissioning costs in the oil and gas industry are treated consistently as a business expense.”
A spokesperson for BP told Sky News: “The EITI’s data cover only the extractive part of our business in the UK, our North Sea business.
“All BP’s North Sea assets are owned by companies subject to UK tax in accordance with UK law.
“BP has contributed over £40bn in taxes to the UK government with respect to its North Sea business.”
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April: Why has BP had such a successful quarter?
Sky News has launched the first daily prime time news show dedicated to climate change.
The Daily Climate Show is broadcast at 6.30pm and 9.30pm Monday to Friday on Sky News, the Sky News website and app, on YouTube and Twitter.
Hosted by Anna Jones, it follows Sky News correspondents as they investigate how global warming is changing our landscape and how we all live our lives.
The show also highlights solutions to the crisis and how small changes can make a big difference.
Barclays has been fined £40m over capital raising that averted its need for taxpayer aid during the 2008 financial crisis.
The Financial Conduct Authority (FCA) found that the bank should have disclosed more details to the stock market about the £11.8bn in funding, from Qatari and other sovereign investors, that it had previously described as “reckless” and lacking integrity.
The penalty followed a protracted investigation that began in 2013 but was held up by criminal proceedings brought by the Serious Fraud Office that led to the acquittal of all defendants charged, including Barclays.
A decision by the bank not to refer the FCA’s enforcement case to an Upper Tribunal meant that the watchdog’s planned fine could be imposed.
Its regulatory action concerned Barclays’ navigation of the events of 2008 when the-then Labour government took huge stakes in major lenders, including Lloyds and RBS – now NatWest – to prevent a collapse of the banking system.
The FCA said of its action: “The events in 2008 were of national importance as banks sought emergency recapitalisation.
“The FCA has a primary objective to ensure market integrity. Banks should treat their obligations to the market and shareholders seriously.”
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Barclays was yet to comment.
This breaking news story is being updated and more details will be published shortly.
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Tax rises announced during the recent budget will hit businesses rather than encourage growth, the head of one of the UK’s most prominent business groups will warn on Monday.
The Confederation of British Industry (CBI) has joined a choir of voices opposing Chancellor Rachel Reeves’s fiscal measures, which the Labour Party claims are needed to plug a £22bn “black hole” left by 14 years of Tory government.
Labour put growth at the heart of their campaigning during the last general election, but business believe the £40bn tax rises announced last month – the largest such increase at a budget since John Major’s government in 1993 – will stifle investment.
Rain Newton-Smith, who heads the CBI, is expected to say at the group’s annual conference in London that “too many businesses are having to compromise on their plans for growth”.
She will say: “Across the board, in so many sectors, margins are being squeezed and profits are being hit by a tough trading environment that just got tougher.
“And here’s the rub, profits aren’t just extra money for companies to stuff in a pillowcase. Profits are investment.”
Ms Newton-Smith will add: “When you hit profits, you hit competitiveness, you hit investment, you hit growth.”
The Office for Budget Responsibility (OBR), which monitors the government’s spending plans and performance, has previously said most of the burden from the tax increase will be passed on to workers through lower wages, and consumers through higher prices.
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Last week, dozens of retail bosses signed a letter to the chancellor warning of dire consequences for the economy and jobs if she pushes ahead with budget plans.
Up to 79 signatories joined British Retail Consortium’s (BRC’s) scathing response to the fiscal announcement, which claimed Labour’s tax rises would increase their costs by £7bn next year alone.
It warned that higher costs, from measures such as higher employer National Insurance contributions and National Living Wage increases next year, would be passed on to shoppers and hit employment and investment.
The letter, backed by the UK boss of the country’s largest retailer Tesco, said: “The sheer scale of new costs and the speed with which they occur create a cumulative burden that will make job losses inevitable, and higher prices a certainty.”
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1:22
From October: ‘Raising taxes was not an easy decision’
‘Businesses will now have to make a choice’
A few days after the budget, Chancellor Reeves admitted she was “wrong” to say higher taxes were not needed during the election campaign – as she warned businesses may have to make less money or pay staff less to cover a tax increase.
But she claimed the previous government had “hid” the “huge black hole” in finances and she only discovered the extent of it once her party was voted in.
She told Sky News’ Sunday Morning With Trevor Phillips: “Yes, businesses will now have to make a choice, whether they will absorb that through efficiency and productivity gains, whether it will be through lower profits or perhaps through lower wage growth.”
Potential suitors have again begun circling ITV, Britain’s biggest terrestrial commercial broadcaster, after a prolonged period of share price weakness and renewed questions about its long-term strategic destiny.
Sky News has learnt that a number of possible bidders for parts or all of the company, whose biggest shows include Love Island, have in recent weeks held early-stage discussions about teaming up to pursue a potential transaction.
TV industry sources said this weekend that CVC Capital Partners and a major European broadcaster – thought to be France’s Groupe TF1 – were among those which had been starting to study the merits of a potential offer.
The sources added that RedBird Capital-owned All3Media and Mediawan, which is backed by the private equity giant KKR, were also on the list of potential suitors for the ITV Studios production arm.
One cautioned this weekend that none of the work on potential bids was at a sufficiently advanced stage to require disclosure under the UK’s stock market disclosure rules, and suggested that ITV’s board – chaired by Andrew Cosslett – had not received any recent unsolicited approaches.
That meant that the prospects of any formal approach materialising was highly uncertain.
The person added, however, that Dame Carolyn McCall, ITV’s long-serving chief executive, had been discussing with the company’s financial advisers the merits of a demerger or other form of separation of its two main business units.
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Its main banking advisers are Goldman Sachs, Morgan Stanley and Robey Warshaw.
ITV’s shares are languishing at just 65.5p, giving the whole company a market capitalisation of £2.51bn.
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The stock rose more than 5% on Friday amid vague market chatter about a possible takeover bid.
Bankers and analysts believe that ITV Studios, which made Disney+’s hit show, Rivals, would be worth more than the entire company’s market capitalisation in a break-up of ITV.
People close to the situation said that under one possible plan being studied, CVC could be interested in acquiring ITV Studios, with a European broadcast partner taking over its broadcasting arm, including the ITVX streaming platform.
“At the right price, it would make sense if CVC wanted the undervalued production business, with TF1 wanting an English language streaming service in ITVX, along with the cashflows of the declining channels,” one broadcasting industry veteran said this weekend.
“They would only get the assets, though, in a deal worth double the current share price.”
Takeover speculation about ITV, which competes with Sky News’ parent company, has been a recurring theme since the company was created from the merger of Carlton and Granada more than 20 years ago.
ITV said this month that it would seek additional cost savings of £20m this year as it continued to deal with the fallout from last year’s strikes by Hollywood writers and actors.
It added that revenues at the Studios arm would decline over the current financial year, with advertising revenues sharply lower in the fourth quarter than in the same period a year earlier because of the tough comparison with 2023’s Rugby World Cup.
Allies of Dame Carolyn, who has run ITV since 2018, argue that she has transformed ITV, diversifying further into production and overhauling its digital capabilities.
The majority of ITV’s revenue now comes from profitable and growing areas, including ITVX and the Studios arm, they said.
By 2026, those areas are expected to account for more than two-thirds of the group’s sales.
This year, its production arm was responsible for the most-viewed drama of the year on any channel or platform, Mr Bates versus The Post Office.
In its third-quarter update earlier this month, Dame Carolyn said the company’s “good strategic progress has continued in the first nine months of 2024 driven by strong execution and industry-leading creativity”.
“ITV Studios is performing well despite the expected impact of both the writer’s strike and a softer market from free-to-air broadcasters.”
She said the unit would achieve record profits this year.
ITV and CVC declined to comment, while TF1, RedBird and Mediawan did not respond to requests for comment.