The Labour Party has won the election, with Keir Starmer the new prime minister. The list of things to do is lengthy for the new government, given demands for change around the NHS, education and crime.

However, also fighting to claim its share of the limelight are the UK’s plans for its energy future. Labour, during the election, signposted that this was one area it would prioritise.

Among the five missions the party set out, making Britain a “clean energy superpower” made the grade. This set out the specific goal of achieving “cheaper, zero-carbon electricity by 2030” and “accelerating to net zero”.

Ed Miliband is likely to take the place of Secretary for Energy Security and Net Zero. Cabinet members will be appointed in the next 72 hours.

Timetable

Parliament will meet on July 9 to elect a speaker and swear in new members. The state opening of Parliament, and the King’s speech, will take place on July 17. The first questions in the House of Commons are expected on July 18.

Starmer has signalled that he will truncate the summer recess, in order to crack on with business. Recess was due to start on July 25 and typically this would run into early September.

Squeezing recess would allow Labour to demonstrate its early resolve to tackle its missions.

Whether or not Parliament is sitting, Labour officials will be busy working on plans for a first budget. The party has said it will not produce such a plan without analysis from the Office of Budget Responsibility (OBR). The OBR requires notice of 10 weeks, which would suggest the earliest date for a budget would be September 13.

Labour could aim to hold its budget in September, but this would clash with party conference season. As such, it may push the date back to October.

Labour's Keir Starmer, the next prime minister — *Keir Starmer, the next prime minister*

Windfall tax

Labour has made little pretence that it aims to increase taxes on the oil and gas sector. The Conservative Party introduced the Energy Profits Levy (EPL) in May 2022 and then increased it in January 2023.

The new government has said it would increase tax to 78%, from 75%, and that it will run to 2029. Of more concern, though, is the question around the investment allowance.

Labour has talked about closing loopholes in the EPL, specifically around the investment allowance.

Zeus Capital has said this refers only to two elements, the 29% uplift for capital allowances against the 35% EPL and the 62.5% uplift against the 10% supplementary charge. Zeus’ Daniel Slater said Labour’s statements seem to apply to the 29% uplift on the EPL.

Under the current system, he wrote, capital expenditure secures 91p of tax relief for every £1 spent. Removing the 29% uplift would reduce this from 91p to 81p. With the EPL rising to 38%, the tax relief becomes 84p.

“In our view, while this is a significant change to the current regime, the potential new regime still bears a relatively strong overall resemblance to the one in place under the current Conservative government,” he said.

More details on the EPL – and exactly which “loopholes” Labour will remove – should be made clear in the autumn statement.

Repsol was reported recently to be in discussions on the acquisition of NEO Energy, as backers HitecVision aim for an exit.

Beyond the tax, Labour has also said it would issue no further exploration licences.

Campaigning versus governing

The key question for the oil and gas industry will be the extent to which Labour aims to deliver on some of its anti-hydrocarbon rhetoric. In the period leading up to the election, the party had a need to try and satisfy as many potential voters as possible. What of this rhetoric will translate into concrete action?

The oil and gas industry continues to be a major employer, in the northeast, but also driving jobs in services around the country.

Unite the Union, for instance, launched a campaign in May calling for “no ban without a plan”. Emissions from the UK North Sea are declining, although on a per barrel metric it continues to lag Norway.

Pragmatically, there is an appeal for the new government to allow industry to continue on a path of managed decline. The North Sea has little impact on the UK’s energy security, but it does have a more important part to play economically.

While the upstream tends to catch more headlines, downstream units play an important part. Petroineos’ Grangemouth refinery employs around 500 people. The company has set out plans to close the facility and convert to a fuel import terminal. In the process, 400 jobs could be lost.

Labour MP Brian Leishman won his election yesterday. During campaigning, he talked about the importance of saving jobs at Grangemouth. The party has set out plans for a “transition hub” at the refinery, working with trade unions and companies.

A Labour government is “committed to investing in Grangemouth and making the site for the future”, Leishman said.

While the Conservatives suffered a historic defeat, the Scottish National Party (SNP) had an even worse night in terms of seats lost. The SNP lost around 80% of its seats.

Revenues at work

The new government has a mountain to climb in terms of investment. Labour has said it will invest in a number of areas to transform the NHS, for instance. It has also committed to moving the budget into balance and to have debt falling by the fifth year.

The green prosperity plan also has its costs. Labour expects to raise £1.2 billion from the windfall tax on oil and gas companies. It will also borrow £3.5bn, raising a total of £4.7bn.

GB Energy will take the largest share of this spending, at £1.7bn, while the National Wealth Fund will take £1.5bn.

The new government will aim to “double onshore wind, triple solar power, and quadruple offshore wind by 2030”. It will pass an Energy Independence Act to set out its energy and climate policies. There has been speculation that this act would be included in the King’s speech, allowing it to fast track into the legislation.

Speaking at a webinar, BMI lead UK analyst James Bennett predicted green transition areas “could really pick up”, with Labour’s focus on the transition. While the party has worked hard to woo business broadly, certain sectors that “fall foul of the green agenda” are likely to face headwinds.

Infrastructure plans

One of Labour’s big thinkers is Torsten Bell, CEO of the Resolution Foundation and new MP for Swansea West.

Commenting in October last year, Bell called for the country to “invest more to underpin its growth and net zero transition”. Speaking on the publication of the National Infrastructure Commission’s assessment, he noted the need to support households with a shift to low carbon heating and intra-city transport.

“Delivering on this scale of infrastructure development is going to require not only higher, but more stable levels of public investment than Britain has managed for decades.”

The Labour manifesto has set out a number of ways to increase the speed of construction. It set sights on cutting red tape and ensuring the communities benefit directly from projects. Furthermore, it has set out plans to upgrade transmission.

This has many similarities with the Conservative government’s plans. For instance, Lord Banner was commissioned to review how to accelerate the deliver of Nationally Significant Infrastructure Projects (NSIPs). The report was completed in May but has not been released.

Balance Power land manager Sarah Spencer, commenting first thing this morning, said despite Labour’s plans “there are serious troubles on the ground. With most clean energy projects being scrapped during planning due to grid bottlenecks, our antiquated infrastructure urgently needs to be updated to cope with a surge in speculative applications.”

Spencer called for clarity around how the new government will work with the ESO to reap the full benefits of the ‘First Ready, First Connect’ policy.

Another area that the new government will want to consider are potential changes to electricity pricing.

Hard yards

There are some easy wins. Miliband, for example, has talked of repealing the de facto ban on onshore wind in England as one of the first acts of a new government.

There are much bigger challenges ahead. Winning local approval for major projects is perhaps the single greatest challenge for the UK’s energy plans. Building out new grid, new nuclear, new energy storage projects – all this is appealing at the macro level. But these ambitious plans inevitably face local opposition.

Peter Dixon, head of EMEA country risk at BMI, said there was a possibility that new investment may come to the UK. “It is possible investors would be more willing to come to the UK than they have been in recent years,” he said. In comparison with France, which is seeing a shift to the right, the UK may start to appear more attractive.

A Labour government has a different set of stakeholders to satisfy than the Conservatives, but the way forward is no easier.

Updated at 11:22 am with comments from BMI analysts.

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