Jeremy Hunt is set to extend the windfall tax on the profits of North Sea oil and gas companies, despite the lobbying of senior Scottish Tories including Douglas Ross.

According to reports, money raised from the Energy Profits Levy will help fund a 2p cut to National Insurance for millions of workers.

Both The Times and Sky News say the Chancellor has opted for NI cut, worth £450 on average, rather than reduce income tax.

READ MORE: Douglas Ross warns Chancellor against Budget Windfall Tax plan

The decision came after the Office for Budget Responsibility told Mr Hunt he had significantly less “fiscal headroom” than hoped.

The government will bring forward legislation next week to enable the national insurance cut to come into effect in April, prompting speculation of a May election.

Mr Hunt is also reportedly set to freeze fuel duty for another year at a cost of about £5 billion.

It’s understood the Chancellor will look to raise money through the windfall tax as well as a new levy on vaping and a hike in tobacco duty. He is also expected to reduce the scope of non-dom tax relief.

Tax breaks for people with second homes let out as holiday rentals will also be reduced.

He is also reportedly considering cutting projected increases for future public spending from 2% to 0.75%.

While this would give him an extra £5 billion a year it would lead to a near austerity level of spending.

Over the weekend, Mr Ross warned that extending the windfall tax would be “an unacceptable blow” to the industry and workers.

He said he had spoken to Mr Hunt, the Prime Minister and Energy Minster Claire Coutinho about Wednesday’s Budget a number of times over the weekend.

He was also due to “strenuously” to make the case against maintaining the levy at a meeting with the Chancellor on Monday.

Speaking to journalists after his speech to the Scottish Tory conference, Mr Ross was asked about reports of a possible extension.

“Well, I don't support that,” he said. “When it was introduced, it was introduced with the support of some big businesses within that sector.

“Things have moved on a lot since then. And what I've heard from Offshore Energy UK, indeed even just last night at their reception here at a conference, it's about confidence and confidence going forward.

“And that would be an unacceptable blow to the confidence and the confidence of the jobs and the workers here [in the North East] and I have and will continue to make that most strenuously to the chancellor in the UK Government.”

READ MORE: Budget: SNP in call for new hospitality 'mini enterprise zones'

Rishi Sunak first announced the windfall tax - set at 65% - back in May 2022 after Russia’s invasion of Ukraine led to a surge in wholesale and retail energy prices.

He always insisted it would be temporary and was due to end next year.

However, after Liz Truss’s mini-budget crashed the economy, Mr Hunt increased the rate to 75% and extended it for a further two years to 31 March 2028.

Last month, Labour announced plans for a “proper” windfall tax, saying they would raise the rate to 78% and keep it in place until 2029.

That led to them being branded “traitors” by the Aberdeen and Grampian Chamber of Commerce.

Ryan Crighton, policy director at the chamber, told The Herald:  “The windfall tax needs to go. The North Sea is being used as a cash cow to plug financial holes created by the financial mismanagement of others – and Aberdeen, which now has the lowest growth of any UK city, is clearly paying the price.

“Businesses in the North-east are watching through their fingers as politicians of all parties fall over themselves to make things worse.

“After years of stagnation, the UK economy desperately needs investment to grow. North Sea firms are standing by ready to invest £200billion – but they need the right conditions. Jeremy Hunt has the chance to put that right on Wednesday.”

He added: “This saga again highlights why we need a seismic shift in how we draw up long-term energy policy in this country.

“Right now, we are at risk of the North Sea oil and gas industry being wound down through rhetoric, rather than strategic policy. If we simply tax it to death, it will be as chaotic as it will be economically damaging.

“We need a new body, entirely independent of government, to set a policy direction for the next 40-years. Like the Bank of England – which has maintaining monetary and fiscal stability as its central mission – the new body should be charged with developing recommendations which could command cross-party consensus and insulate the sector from political policy shocks in the future.

“If nothing changes, and we get more of the same muddled policy, discretionary capital will continue to move overseas, the transition will stall, and a world class supply chain built up over decades will go. We can – and must – do better.”