Rachel Reeves doesn’t need an exit tax for fleeing founders - she needs a u-turn on North Sea licences to plug the fiscal gap

The national debt is above 100% of GDP, interest payments are running at nearly £90 billion a year – more than the entire schools budget – and the tax burden is at its highest since the 1940s.

Growth is forecast at a limp 0.1% this quarter and 1.2% in 2026, barely enough to keep the lights on. Reeves has promised “iron discipline”, but in truth she’s balancing the books with string and tape.

Her press conference last week, in which she warned the public to expect “difficult decisions” and signalled an unavoidable rise in taxes, underscored just how narrow her fiscal path has become – and how little room she believes she has to manoeuvre.

The wealth tax mirage:

Cue the rumour mill: a so-called “wealth tax” on pensions, ISAs or property. The sort of thing that excites think-tanks in Islington but terrifies wealth creators, many of whom have already uprooted to Dubai, Milan or Portugal.

Speculation has now stretched to the absurd, with talk of an “exit tax” – the kind of policy associated with economies trying to prevent capital flight, not one claiming to be open for business.

And Treasury leaks hinting at potential income tax rises – a direct breach of Labour’s manifesto commitment – have only deepened concern that the Government is running out of politically palatable options.

The Institute for Fiscal Studies reckons such a wealth-focused tax might raise £10–15 billion at best – but only once, before capital flees abroad. In practice, it would send the FDI we need elsewhere. Britain doesn’t need to scare away capital; it desperately needs to attract it.

The money under our feet:

There’s a simpler answer that our Department for Energy won’t like: the North Sea. Oil and gas production handed the Treasury £9 billion in 2022, thanks to soaring prices. Even in 2023, receipts were £6.2 billion.

But thanks to Labour’s moratorium on new drilling and the Treasury’s short-sighted “windfall tax”, revenues are set to slump to £2 billion by 2029, according to the Office for Budget Responsibility. That’s billions Reeves is choosing to throw away, while writing ever-bigger cheques for imported gas from Norway – swelling Oslo’s sovereign wealth fund instead of Britain’s.

And here’s the kicker on climate:

North Sea oil and gas is among the least carbon-intensive in the world to produce, with emissions per barrel around half those of imported liquefied natural gas.

Pumping at home isn’t just fiscally smarter – it can actually cut global emissions compared with shipping the same fuel halfway across the planet. And with advancements in artificial intelligence, operators can now optimise extraction with lower emissions than ever before. Technology built here in Britain means domestic production is not only economically smarter, but cleaner too.

A rational fix:

Industry analysis suggests that reforming the windfall tax into a stable, profit-based regime could deliver £12 billion more to the Exchequer by 2050.

Lift the moratorium on new licences and output decline could be slowed, keeping annual receipts in the multi-billion range. That’s real money – revenue Britain is walking away from today, while households are squeezed and energy imports climb.

It’s real money that can negate the need for the Chancellor to tax our wealth creators even more in the short term.

Politics too:

Reviving the North Sea isn’t just fiscal common sense. It’s a political win: jobs in Scotland and the North East, greater energy security, and a fiscal cushion large enough to fund the energy transition without spooking markets.

It’s going to be heavily opposed by Ed Milliband’s department. But rumours are he’s on the way out anyway - and he’s deeply unpopular with business in his own right. So a fight she can pick and win.

At a moment when backbench unease is rising and gilt yields have already nudged upwards in response to Reeves’ cautionary signals on tax, a stable, pro-investment approach to domestic energy would do more to reassure markets than another round of hurried revenue grabs.

Reeves could style herself as the Chancellor who drilled Britain back to solvency – not the one who chased investors out with another doomed wealth tax.

Britain is broke. The tax base is exhausted, debt is suffocating and growth is anaemic. Reeves doesn’t need to raid the nation’s piggy banks; she needs to look seaward.

The North Sea is not a relic. It’s Britain’s best chance to balance the books, secure energy independence and invest with confidence in the transition ahead.

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Callum Adamson is the CEO of Applied Computing

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