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Good morning. Labour has overturned large Tory majorities to win two by-elections in England, in a relief to Keir Starmer following a challenging fortnight.
In Wellingborough, Gen Kitchen won 13,844 votes to the Conservatives’ 7,408, a 28.6 per cent swing. In Kingswood, Damien Egan secured 11,176 votes to the Tories’ 8,675, a 16 per cent swing. Starmer said the results showed Labour was “back in the service of working people and we will work tirelessly for them. The Tories have failed.”
The night also brought success for the right-wing Reform UK party, which won 10 per cent of the vote in Kingswood and 13 per cent in Wellingborough.
Both by-elections were triggered by problems for the Tory party. In Wellingborough, former MP Peter Bone was ousted by constituents in a recall petition in December following bullying allegations which he denied.
In Kingswood, Tory MP Chris Skidmore quit in January in protest over the government’s plans to introduce mandatory North Sea oil and gas licensing rounds, warning that the UK was “rowing ever further back from its climate commitments”.
Yet while Skidmore’s departure opened an opportunity for Labour in Kingswood, the party’s position on North Sea oil and gas production and wider energy policy is coming under growing scrutiny as it gets closer to power. Some more thoughts on that below.
Inside Politics is edited by Georgina Quach. Read the previous edition of the newsletter here. Please send gossip, thoughts and feedback to insidepolitics@ft.com
Labour’s energy conundrum
The future of the ageing North Sea basin is one of the thorniest issues in British politics, with decisions in any direction triggering cries of protest from MPs, industry, unions or climate activists.
But it is also at the heart of one of the biggest challenges facing whoever forms the next government: making far greater inroads in the country’s shift away from fossil fuels, while boosting growth and without upsetting energy security, jobs or consumer bills.
Energy executives and lobbyists have been jostling for space at Labour’s business events in recent months, keen to make sure they don’t miss out on Rachel Reeves’ charm offensive.
Some industry bosses thought they were starting to win over the party, which pledged last year to stop issuing new oil and gas exploration licences. Some were even starting to hope it may soften its position once in power.
They are now feeling short-changed. Last week, the Labour party confirmed its plans to increase the windfall tax on the sector — and said it would also extend it for an extra two years.
Under Labour’s plans, UK oil and gas producers would pay a tax rate of 78 per cent until 2029, compared with 75 per cent now. Windfall taxes were first imposed by the Conservative government in May 2022, under huge pressure as oil and gas producers reported record profits as energy bills soared.
Crucially, Labour also plans to remove “loopholes” — or investment allowances within the windfall tax — which the Conservatives put in place to encourage industry to continue to invest.
Under Keir Starmer’s plan, the restructured tax will raise £10.8bn over five years to fund half of its flagship “green prosperity” plan which it slashed last week from £28bn a year to £4.7bn a year.
There were some concessions to the industry, with no plans to backdate the tax and a “floor” remaining in place. But the oil and gas industry is up in arms. Offshore Energies UK, the trade group, warned that it could trigger an immediate halt to new investment in oil and gas projects, costing a potential 42,000 jobs by the end of the decade. A letter sent to Starmer today by 800 individuals, firms and trade groups claimed Labour’s proposal would unleash redundancies “on a scale not seen in this country since the pit closures of the 1980s”, according to the Times.
The raid on profits is a long way from the Corbyn era, when some energy utilities moved holding companies abroad to try to fend off the threat of renationalisation.
But for some it has nonetheless burst the bubble created by Labour’s overtures to win over investors. As one oil and gas executive put it:
Labour has been hawking itself around the City saying we are on the side of business and we want you to invest in the UK — then a few days later they are U-turning.
It’s a bad day for investors in the UK . . . Everything I’ve heard since Friday suggests they are rushing to the exit.
The sector’s backlash against higher taxes is to be expected, yet there is a lot at stake. The UK still gets about 75 per cent of its energy from oil and gas, and efforts to move towards cleaner energy are proving difficult and slow.
Labour’s stance on oil and gas also raised hackles from typically friendlier quarters, with the GMB Union, one of its biggest donors, pushing back against the party’s plans to stop issuing new oil and gas licences.
“It would be self-defeating not to maximise extraction from our own oil and gas, and that’s going to be a difficult debate but it’s one we’ll have to face down,” Gary Smith, GMB general secretary, said in an interview with the FT in May.
That debate over the oil and gas industry’s future is now set to take place against the backdrop of up to 2,800 job cuts planned at Tata Steel’s steelworks in Port Talbot, Wales, as it moves from blast furnaces to less carbon-intensive electric arc furnaces.
The plans have triggered enough concern in Labour’s top ranks that it dispatched Jonathan Reynolds, shadow business secretary, to meet Tata Sons’ chair, Natarajan Chandrasekaran, in Mumbai last week, urging him to hold off.
Meanwhile, about 400 jobs in Scotland are at risk due to the planned closure of the Grangemouth oil refinery in 2025.
Richard Hardy, commissioner at Scotland’s Just Transition Commission, which advises the Scottish government on a fair transition to a greener economy, warns that the path to net zero could get more complicated if it is mismanaged.
“From a ‘just transition’ perspective, I think we are at a real crux point,” Hardy, who is also national secretary for Scotland and Ireland at Prospect, the trade union, told me recently.
“If we don’t have examples of a good, just, transition to point to, those siren voices that say, ‘we’ll just kick the can down the road’, that will gain traction and people will think we don’t have to change.”
The debate on the UK’s oil and gas sector is set to rear its head again next week, as parliament debates the government’s bill to introduce mandatory annual oil and gas licensing rounds (which triggered Skidmore’s resignation).
Critics have deemed the bill a “political stunt” to create political dividing lines. But with industry bosses seeking urgent talks and energy bills still high, Labour, too, will need to make sure its energy policy is one of substance over style.
Now try this
A trip down memory lane (music lessons) led me to the Barbican Centre, near the FT’s London offices, for Anton Bruckner’s Ninth Symphony, last week. While I don’t agree that its Brutalist building is an “architectural treasure”, the London Symphony Orchestra, conducted by Nathalie Stutzmann, was a reminder of the excellent programme inside.
