There can surely be few areas of the economy which better exemplify the terminal incoherence of Keir Starmer’s government — and the modern Labour Party — than North Sea oil and gas.

Chancellor Rachel Reeves is caught between the reality of Britain’s decaying fiscal position and her manifesto commitment not to raise any of the big revenue taxes on ordinary people. As a result, she is reportedly considering bringing an early end to her windfall levy on its profits — returning to the traditional posture of treating the sector as a cash cow. In itself, this is a sensible move. Total tax receipts from the North Sea have declined since the levy was introduced; as so often, businesses have stubbornly insisted on adjusting their behaviour to government policy rather than just letting the line go up as the Treasury wishes.

Labour’s general tone towards the oil and gas sector seems to be changing. Just last month, Starmer said he wants to “double down” on oil extraction. His government is also coming under pressure to do so from key allies. Yesterday, the US Ambassador to the UK, Warren Stephens, suggested that one way Britain could be a better ally to America is by drilling its own oil reserves. “I want the UK economy to be as strong as it possibly can be,” he said, “so the UK can be the best ally to the US that it possibly can be.” He went on: “Having a growing economy is essential to that, and the electricity costs make it very, very difficult […] you’re using oil and gas but you’re importing it. Why not use your own?”

Yet Reeves is apparently “seeking assurances from oil and gas companies that [scrapping the levy] would result in new investment and jobs”, and whilst the drilling companies might be able to put them together to get the measure over the line, nobody could blame them for deciding that the long-term prospects of the North Sea weren’t worth the effort.

The problem, of course, is Ed Miliband. The Energy Secretary is a true believer in the so-called “energy transition”, to the extent that he is perfectly happy to commit economic self-harm in the process. His ban on new exploration licences in the North Sea stands, as does his ban on any new coal mines (even though Britain has excellent coking coal, and the global steel industry will get it from somewhere).

Sceptical oil and gas executives will have noted his apparently unbreakable grip on the Government’s energy policy. Not only did Miliband manage to wrangle £22 billion for carbon capture projects out of a government that is cutting capital investment across the board, but he was able to simply refuse Starmer’s attempt to move him in September’s Cabinet reshuffle.

Indeed, he is even able to impose his will at the expense of Britain’s commitment to Ukraine. We, like other Western energy-producing nations such Canada, are supposed to be driving up production to undermine Vladimir Putin’s war economy. The United States is quite right to argue that the UK should expand drilling if it wants to be a good ally. But it won’t.

Normally we would expect a fight between the Treasury and any other department to only have one winner. But the Prime Minister has already proven too weak to win such battles; Reeves’s U-turn on welfare cuts proved that this Government is incapable of delivering measures the Chancellor had announced.

If you were a betting man or woman, then, the smart money on Starmer versus Miliband would probably be on the Energy Secretary. In fact, the 33/1 you can currently get on the Energy Secretary to be the next Leader of the Labour Party looks like pretty good odds. If Bridget Philipson can’t beat Lucy Powell for deputy leader, and with Angela Rayner out of the Cabinet, who in it actually looks as though they would beat Miliband in a membership vote?

Major oil and gas companies are smart enough — or at least engage the services of people smart enough — to work that out. Major investments such as exploration and drilling require long-term certainty to justify the huge up-front costs. Unfortunately for Starmer and Britain, the only medium-term certainty for the energy sector is more Ed Miliband.

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Henry Hill is Deputy Editor of ConservativeHome.

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