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Legislate for Annual Oil and Gas Licensing Rounds

Conservative · what the evidence says

An independent, source-checked look at Conservative’s policy “Legislate for Annual Oil and Gas Licensing Rounds” — what it would actually do across the things that affect your life. Every claim below quotes the source behind it. How this works.

Prosperity & living standards — Mixed picture

minor · moderate confidence

Annual North Sea licensing rounds may protect some existing oil and gas jobs and tax revenues in the near term, but the basin is in long-term decline and new licenses are unlikely to meaningfully boost productivity, investment, or living standards at scale. The windfall tax retained at 75% also dampens the investment response the policy depends on.

The evidence

Biggest unknown: Whether the high combined tax rate (75%) suppresses the investment and production response enough to negate the near-term economic benefits the policy targets.

Our reading: On O13 — real living standards, productivity, business investment, and economic opportunity — this policy produces a genuinely mixed picture, though both sides are modest. Near-term positives: The policy preserves a licensing pipeline that supports a tax revenue stream (projected at ~£50bn over five years) and protects some existing employment in an industry that, even in decline, still accounts for tens of thousands of direct jobs concentrated in areas with limited alternative high-wage employment. The windfall tax retention also keeps a flow of fiscal resource. Near-term negatives: The 75% combined tax rate that the policy maintains is, on industry evidence, already suppressing new investment and production — meaning the licensing rounds may generate fewer economic returns than the headline suggests. New licences issued while investment is deterred by tax have limited effect. Long-term picture: The structural case for this policy improving prosperity is weak. The basin is in terminal geological decline (output down 75% since peak). New licensing adds only marginal volumes — projected at roughly four days of extra gas per year. Since most oil is exported and gas is sold at international prices the UK cannot influence, new production does not lower domestic energy costs or materially raise productivity. Import dependency rises regardless. The sector's share of UK energy investment is projected to fall to under a fifth by 2030. These are structural headwinds no licensing regime can reverse. The policy therefore offers a near-term cushion — preserving some jobs and revenues that would otherwise erode faster — but with no credible mechanism to deliver material long-term gains in living standards, productivity, or economic opportunity at population scale. 'Mixed/minor' reflects real but modest near-term preservation effects against a long-term trajectory the policy cannot bend.

Good work & fair pay — Mixed picture

minor · moderate confidence

The policy aims to protect around 200,000 jobs in oil and gas, but the industry has already shed jobs sharply over the past decade despite new licensing, and the windfall tax is pushing some companies to cut investment and staff. The net effect on jobs and pay is small and uncertain.

The evidence

Biggest unknown: Whether continuing licensing rounds can arrest the structural decline in North Sea employment, or whether geological depletion and the windfall tax will keep driving job losses regardless.

Our reading: The policy's positive case for O4 rests on preserving existing employment in a sector that directly and indirectly employs hundreds of thousands of workers, many in high-skill, high-wage roles concentrated in areas like Aberdeen with limited alternative employers. Annual licensing signals investment certainty and could slow the structural rundown of North Sea activity at the margin. However, the evidence points to three significant countervailing forces. First, the historical record is telling: despite continuous licensing over the past decade, total jobs supported by the sector more than halved. Licensing rounds alone have not arrested the employment decline driven by geological depletion of a mature basin. Second, the windfall tax — retained under this policy until 2028-29 — is cited by industry groups as discouraging investment and has already prompted some companies to cut jobs. The policy therefore simultaneously signals licensing continuity while maintaining a fiscal environment that industry says is reducing activity. Third, the projected incremental output from new licences is tiny, meaning the employment uplift from additional drilling activity would be modest at best. On balance, the policy offers a modest, short-term stabilisation of oil and gas employment for workers in the sector, particularly in Scotland, while doing little to address the structural long-run decline. The windfall tax creates a genuine tension: it constrains the investment that would generate the jobs the licensing rounds are meant to protect. For workers in the sector this is a 'mixed' picture — some job-protection upside from maintained licensing, partially offset by tax-driven investment chilling. The effect is minor rather than major, since geological and market forces dominate employment trends far more than the marginal licensing signal.

Crime, justice & national security — Little effect

minor · moderate confidence

The policy aims to boost domestic oil and gas output to reduce reliance on foreign powers, which is the main national-security claim. However, the evidence shows new licensing would add only trivial extra supply, and UK import dependency is projected to rise regardless, so the practical security benefit is minimal.

The evidence

Biggest unknown: Whether a future geopolitical shock could make even marginal additional domestic supply strategically significant in ways that standard price-market analysis misses.

Our reading: O5's national-security indicator is the one this policy directly targets — the stated aim is to reduce reliance on foreign powers, which is a legitimate energy-security concern. However, the evidence does not support a meaningful effect. Because most UK oil is exported and gas is sold at global market prices North Sea output cannot move, new licensing rounds do not translate into lower import dependency or price insulation. Official projections confirm UK import dependency rises steeply even with new fields, and the incremental supply from new licensing amounts to roughly four days' worth of gas per year. The mechanism — domestic licensing improving national energy security — is undermined by the market reality that UK output is neither retained domestically nor large enough to affect global prices. A genuine energy-security improvement would require either long-term domestic supply contracts, strategic reserves, or a step-change in output volume; none of those are present in this policy. The verdict is therefore negligible rather than improves: the policy's stated security goal is real and the direction of intent is right, but the cited evidence shows the mechanism does not fire at the scale needed to move the indicator materially. The main caveat is that in an extreme geopolitical scenario (e.g. coordinated LNG supply disruption) any incremental domestic supply could have outsized strategic value — but that tail-risk argument is not supported by the evidence provided and cannot carry the verdict.

Clean environment & nature — Hurts

moderate · moderate confidence

Legislating for annual North Sea oil and gas licensing rounds locks in continued fossil fuel extraction, which independent advisors say is incompatible with climate goals and risks harming marine ecosystems. The climate compatibility tests built into the legislation have been criticised as too weak to provide meaningful protection.

The evidence

Biggest unknown: Whether the volume of additional production unlocked by annual rounds is large enough to materially shift UK emissions trajectories, given the North Sea's mature and declining basin status.

Our reading: The policy commits to ongoing, legislated annual licensing rounds for North Sea extraction. On the climate dimension, the two most authoritative independent bodies — the CCC and IEA — are clear: new field development is inconsistent with net-zero pathways. The climate compatibility checkpoint tests built into the licensing regime have been widely criticised as too narrow (excluding combustion emissions) and too easy to pass, offering limited environmental protection in practice. The UK's carbon intensity of produced oil is also not self-evidently lower than global comparators once combustion is counted. On biodiversity and water quality, multiple prospective fields overlap with or border marine protected areas, and chronic operational pollution is an established hazard of production. Against this, the government argues domestic gas has lower carbon intensity than imported LNG — a real but partial consideration, since it covers only production emissions, not the much larger combustion component. The declining basin status limits the absolute scale of new extraction, but the directional signal is clear: the policy extends and entrenches fossil fuel extraction beyond what independent climate advisors recommend, weakens the UK's credibility on climate, and poses concrete biodiversity risks. The near-term effect is moderate additional extraction pressure and biodiversity risk; the long-term effect is a harder emissions trajectory and continued pressure on marine ecosystems during a decade critical for meeting climate commitments. Overall the direction is a worsening of O6, at moderate magnitude, felt primarily over the long term.

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