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Fossil Fuel “Subsidies” In The UK

July 25, 2020

By Paul Homewood

 See the source image


It has often been claimed that the UK is one of the leading subsidisers of fossil fuels in Europe.  But I have always had great difficulty in getting hold of the actual numbers which form the basis of such claims.

Fortunately, Bruce Everett’s study, which I published earlier, includes a full spreadsheets of his workings, including detail of the OECD’s estimation of subsidies. Detail is here.

The following table summarises what the OECD call subsidies in the UK:

OECD Fossil Fuel Subsidies 2015 £m
Tied Oil Scheme 1205
Reduced Rate of VAT 4249
North Sea Tax Breaks 137
Exemption from CCL 727
Inherited Coal Liabilities 232
Total 6550

  • The tied oil scheme essentially applies to oils which are not to be used for fuel, for instance lubrication. This cannot be regarded as a subsidy for fossil fuel, as it merely applies the same tax treatment as alternative products, such as synthetic oils.
  • Reduced rate of VAT mainly applies to the rate of 5% which is charged to domestic users of gas and power. Again, this is not a fossil fuel subsidy, or even taxation foregone, as it applies to all sources of power including renewables. There is no law or precedent that says energy should be taxed at the full rate of 20%, and many other goods are zero rated, as energy used to be.
  • North Sea oil tax breaks are not subsidies either – they simply define what expenses are allowable and when they can be claimed against corporation tax. Such breaks are common across many industries, and even after allowing for them, overall corporation tax rates on oil and gas producers remains substantially higher than other businesses.
  • Exemption from the Climate Change Levy – businesses pay the levy on purchases of electricity, gas and coal, but there are certain exemptions, such as use in CHPs, non fuel use and not used in the UK. Also intensive energy users can claim partial exemption if they sign Climate Change Agreements, committing them to reducing emissions of CO2. The bottom line, of course, is that the CCL is an extra tax on fossil fuel use, so any “exemption” cannot be regarded as a subsidy.
  • Finally, inherited coal industry liabilities. When the coal industry was privatised in the 1990s, there were massive liabilities outstanding dating back decades, for instance for workers’ compensation claims and environmental clean ups. As part of the sale, the state retained responsibility for these liabilities. Once again, these are not “subsidies”, merely a cost associated with coal production many decades ago.

Bottom line is that there are no subsidies for fossil fuels in the UK.

  1. Ian Miller permalink
    July 25, 2020 5:53 pm

    We need to remove Hall from the BBC propaganda machine, and others from the Fake News televised media and let the truth flood in.
    This single action alone, would quickly change public awareness and release the UK from the Totalitarian Communist inspired Climate Warming religion we – as a servile people – are currently being forced to accept. Only when properly informed with the truth will this country be able to really prosper once again.

    If we don’t, our living standards will absolutely tank.

    Freedom is seldom cheap, but the cost of losing it is IMMENSE.

  2. In the Real World permalink
    July 25, 2020 8:15 pm

    The media tell lies , & politicians lie to the media , but if a politician wants to prove a point , he will ask a question in Parliament . Because written answers which appear in Hansard , must by law , be the truth .

    But actual facts will never stop the Green loonies telling lies .

    • Stuart Brown permalink
      July 25, 2020 9:17 pm

      That second one is worth printing out in full – thank you ITRW

      Asked by Caroline Lucas
      (Brighton, Pavilion)
      Asked on: 06 February 2017
      HM Treasury
      Fossil Fuels: Tax Allowances
      To ask Mr Chancellor of the Exchequer, what the value is of the subsidies provided for the (a) production and (b) consumption of fossil fuels in the current financial year.
      Answered by: Jane Ellison
      Answered on: 13 February 2017

      The Government does not provide subsidies to fossil fuel production or consumption.

      The UK’s oil and gas ring-fence regime means that profits from oil and gas production are taxed at a higher rate of 40%, compared to 20% for other sectors. The regime for oil and gas does include allowances, such as the Investment Allowance, which are designed to ensure otherwise economic developments are not uncommercial. This allows oil and gas companies to claim tax relief when making large, upfront investments in new infrastructure. Even where income is covered by an allowance, those companies continue to pay tax on their profits at a minimum rate of 30%.

      Well, that wasn’t the answer she wanted! I assume nothing has changed in the last 3 years, given the general sentiment in government.

      • Joe Public permalink
        July 25, 2020 10:56 pm

        Lucas always shows her ignorance.

        Back on 17th August 2015 DECC confirmed in its written response to an FoI request:

        “The UK defines fossil fuel subsidies as government action that lowers the pre- tax price to consumers to below international market levels. The UK has no fossil fuel subsidies.” (My bold)

        Click to access FOI_2015_15038_PUB.pdf

      • dennisambler permalink
        July 26, 2020 2:34 pm

        I suspect she will call for the removal of susbidies for fossil fuels, even thought they don’t exist. It’s part of the Renewables litany.

  3. CheshireRed permalink
    July 25, 2020 8:16 pm


  4. Phillip Bratby permalink
    July 25, 2020 9:02 pm

    The UK Government says this about fossil fuels: “There are a wide range of definitions of what constitutes a fossil fuel subsidy. The UK, like the EU and the IEA, excludes tax treatment from its definition of what is meant by a fossil fuel subsidy, using international market price as a benchmark. The UK therefore has no fossil fuel subsidies” (Review of the Feed-in Tariffs Scheme. DECC 17 December 2015)

    In fact in the UK fossil fuels are very heavily taxed. For example, companies operating in the North Sea pay three separate profit-based taxes on oil and gas production: corporation tax, petroleum revenue tax (PRT), and a supplementary charge.

  5. Harry Passfield permalink
    July 25, 2020 9:10 pm

    In the great game of things, as Alinsky showed us, always keep your opponent occupied with trivia that can be ignored. It’s the same with the statues nonsense: when the BLM Marxists say that Churchill’s statue should come down, all they really want to do is tie us in knots opposing that particular protest – while they, quietly, get on with what they really want to do.

    Fossil fuel subsidies is Green’s way of finessing us to make us chase a phantom. Watch the pea. They have other plans for the destruction of Western Democracy. The answer to their protest it to call ‘bollox’ – and carry on.

  6. It doesn't add up... permalink
    July 25, 2020 9:25 pm

    It would be rather amusing to look at an offshore wind farm taxed under the Petroleum regime. No subsidised revenue for a start.

  7. July 25, 2020 10:44 pm

    Greens like to create confusion by conflating tax concessions that benefit many industries for various reasons and direct subsidies.
    For instance in Australia the tax on fuel is ostensibly designed to be used for road maintenance etc.
    Coal miners get a fuel tax concession because the fuel they use is not used for transport on public roads yet Greens claim it is a subsidy.
    The other side of the coin is government imposed mandates.
    For instance, as I understand it, there are legally binding renewable obligations applying in the UK.
    Fossil fuel use has never had to be mandated by governments while the solar and wind energy industries would hardly exist without them.

  8. July 26, 2020 6:36 am

    It isn’t jut the UK, as I just read over at Greenie watch, second post of his from top, here…

    And from that I was able to find the source, here…

    What’s absurd is that we’ve known for years that the greenies are lying. I’ve posted about it at NTZ several times. here are just 2.


    One link I posted there was from 2014.

    My point is that it’s now 2020, and I can’t believe they are able to keep repeating that lie and getting away with it.

    • dennisambler permalink
      July 26, 2020 2:38 pm

      It’s as Harry Passfield says above, they are no interested in the truth, they just wish to keep the opposition tied up in responding to fantasies so they can progress the agenda in behind the scenes UN meetings.

      • Harry Passfield permalink
        July 26, 2020 5:19 pm

        Thanks, Dennis.

      • July 26, 2020 9:46 pm

        Thank you. Absolutely!

        But what is disturbing is that there are so few pushing back, which is why they are able to keep up their assault on reality. Here’s David Archibald using their own words to expose them.

        Click to access stop-the-climate-stupidity.pdf

        In a sane world that should be sufficient to sent them scurrying back under the rocks they crawled out from.

        I agree with you both. As Harry writes “The answer to their protest it to call ‘bollox’ – and carry on.”

        Hear, hear! If only enough of our countries’ respective leaders had our interests at heart, that is exactly what they would have done long ago.

  9. Chaswarnertoo permalink
    July 26, 2020 7:51 am

    Lucas wants all fossil fuels taxed at petrol rates, ie 200+%. Never mind about fuel poverty and freezing to death. She’s a maniac.

    • CheshireRed permalink
      July 26, 2020 11:18 am

      She is that. The danger she poses is underestimated because she’s usually a well turned out show pony.

    • Harry Passfield permalink
      July 26, 2020 5:21 pm

      She should get some of her model-maker friends to show what would happen if FFs were taxed at petrol rates.

  10. July 26, 2020 8:56 am

    Back-up power for the National Grid has been using diesel generators for years to help cover for the excessive intermittency of wind and solar.

  11. July 26, 2020 11:00 am

    There was a Polar Bear debunk in the Times yesterday
    “Meet Misha, darling of the polar paparazzi” (with video)
    The Norway Photoshop Polar bear
    Film crews like to use PPB Mum cos she is semi-tame
    and works with the filmcrewss
    eg they distract sea lions and she comes up behind them
    “Misha is the most photographed polar bear in history.
    Give or take Paddington, Baloo and a few notoriously asexual pandas, she is also by far the most famous.”

    but she has lost two cubs
    One was shot aft it trampled a Czech tourists tent
    Another died in a scientists failed attempt to tranquillise it


    Ended with a wacky takeaway line
    “Thanks to mineral exploitation and climate change, the global population is DOWN to about 25,000.
    With that in mind her fans might do well to leave her alone for a while”

  12. Tim Spence permalink
    July 26, 2020 1:33 pm

    A subsidy is something paid before or along the way, something you could pocket and run away and disappear with, ask Solyndra for more details.

    A reduction in tax is not a subsidy because taxes are generally paid on profits and gains, not on losses.

    As for North Sea oil, they did suffer the infamous ‘windfall tax’ on top of their normal tax obligations during the early 1980’s (if I remember correctly)

  13. Up2snuff permalink
    July 26, 2020 5:11 pm

    Paul Homewood: “Reduced rate of VAT mainly applies to the rate of 5% which is charged to domestic users of gas and power. Again, this is not a fossil fuel subsidy, or even taxation foregone, as it applies to all sources of power including renewables. There is no law or precedent that says energy should be taxed at the full rate of 20%, and many other goods are zero rated, as energy used to be.”

    1. While we are in the EU, just, the VAT rate that the Chancellor has to apply must be within a range common to all Member States.
    2. After we finally leave, (finally!), our Chancellor can vary the rate of VAT.
    3. There is therefore a law and a precedent for taxing energy because tax harmonisation was being pursued by Brussels and the Commission. VAT was introduced into the UK following our accession to EEC/EC/EU membership at midnight on 31 December 1972
    4. The EC, as then was, demanded that we add the full rate of VAT to electricity and gas invoices in the mid-1990s. John Major & Ken Clarke (oh, the irony!) decided that that would be a politically suicidal move on top of the Fuel Duty Escalator which was already enhancing inflation and the mini-recession following the Black Wednesday debacle. Ken Clarke (more added irony) went to Brussels and haggled the EC down from full VAT rate to 5% and there the rate has stayed ever since.

    Roll on 31 December 2020!

    • Gerry, England permalink
      July 27, 2020 8:04 pm

      We are NOT in the EU, we left months ago. We ARE in the transition period under the terms set out in the withdrawal agreement and this ends at 11pm on 31 December. After that the most likely outcome is a bare agreement on tariffs and quotas that is hardly distinguishable from No Deal and then we can watch our economy swirl around the plughole.

      • July 27, 2020 8:45 pm

        Gerry. What a bizarre viewpoint.

      • Up2snuff permalink
        July 30, 2020 11:57 am

        Gerry, I am not sure that is the case for VAT purposes. The transition period – which upset Brexiteers, I wonder why? – keeps us tied to the EU’s coat tails until 31/12/20. You didn’t really read my post, did you?

        You should have also noticed that in his late Spring mini-Budget, Rishi Sunak did not cut the VAT rate substantially as the whole country had been hoping. That was probably because Treasury mandarins were telling him he could not do so until next year.

        I hope the Chancellor will switch back to an end of Winter Budget and help everyone out with a VAT cut, including on energy bills. The gas price has remained worryingly high compared to oil prices.

  14. July 26, 2020 8:21 pm

    The rate of VAT is a complete red herring. This is a tax which is collected on behalf of HMRC from the consumer by the supplier of goods and services. This is then passed to HMRC. It makes absolutely no difference to an energy producer whether the rate is 5% or 20% as they retain the same quantum of money from gross receipts either way.

    More generally, there is a fundamental difference between a tax break, i.e.taking away less money, and a subsidy, i.e. giving some money. This should be obvious to anyone apart from communists who believe that all property belongs to the State.

    • Up2snuff permalink
      July 30, 2020 12:08 pm

      David, I think you are another guilty of not reading my posts fully or not understanding them. Paul Homewood and I were both considering tax on energy from the point of view of the consumer, not the utility producer.

      You are more correct in your second paragraph, although Communists could be said to hold all property as belonging to the State and for it to be enjoyed only by the favoured few, especially those in the Politburo.

      I look forward to Caroline Lucas MP doing all that she wants others to do. 😉

  15. July 27, 2020 12:32 am

    In the U.S. the media counts tax breaks as subsidies, so as to say “look, fossil fuels receive subsidies, too”. But of course tax breaks aren’t subsidizes, as subsidies are money given by a government. Tax breaks let you keep money that was already yours. Two totally different things.

  16. July 27, 2020 2:07 pm

    Anything that diverts attention from the fat subsidies showered on greencrap supposed to reduce ’emissions’ is worth a go for climate alarm propagandists.

  17. Nial permalink
    July 27, 2020 2:48 pm

    Euan Mearns published this interesting post about worldwide ‘fossil fuel subsidies’ a few years ago. Also worth a read….

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