Boris Johnson is resisting pressure for a windfall tax on oil and gas producers on the grounds that it would be "ideologically unconservative".
The prime minister has come under pressure to introduce a one-off levy on oil and gas producers, who have benefited from globally high oil and gas prices, and use the revenue to fund measures to ease the cost-of-living crisis on households struggling with rising bills.
But Mr Johnson told MPs on Wednesday that "this Government are not, in principle, in favour of higher taxation".
He added: "What we want to do is take a sensible approach, governed by the impact on investment and jobs."
Meanwhile The Times reports this morning that treasury officials believe that the levy is "politically unavoidable", but are said to be being blocked by the prime minister's advisers.
Offshore Energies UK said last night it has highlighted to Energy Secretary Kwasi Kwarteng its concerns over the negative consequences of a windfall tax on North Sea oil and gas producers.
The trade body warns that, when windfall levies have been used in the past, investment has fallen away.
And it points out that the offshore oil and gas sector is expected to pay nearly £8billion in taxes this year - roughly equal to 1% of the nation's entire tax revenue.
OEUK adds that this represents a 20-fold increase on the figure for 2020-21. Back then, plummeting demand and prices saw most energy companies make multi-billion-pound losses, contributing to a UK tax take of just £400million from the country's offshore oil and gas sector.
The trade body’s chief executive, Deirdre Michie, said: "We are deeply concerned about the difficult circumstances facing UK consumers, and our industry is committed to supporting the nation now and building a low-carbon future.
"We are proud that we are able to help by contributing a predicted £7.8billion in UK taxes this year alone. Those payments, equivalent to £279 per home, can help the Government soften the pressure for households. This year is not a one-off. Between 2021 and 2026-27 the Office for Budget Responsibility (OBR) predicts our industry will pay around £23billion in UK tax.
"This also shows the wider value of our industry to the country. Many European countries are facing energy shortages and the risk of energy rationing. The UK's offshore resources, oil, gas and offshore wind, are helping protect us from similar crises. They boost our energy security as well as the Exchequer.
"Our industry and its supply chains also support 195,000 workers - whose skills are going to be essential in building the low-carbon and renewable energy systems that will enable the UK to reach net zero."
Ms Michie says in her letter that the fiscal regime is a key factor in determining investor confidence and in ensuring that proposed investments are sanctioned.
She goes on: "The offshore oil and gas industry and its supply chain work to long-term investment cycles with multiple and complex risks, that result in projects having to be worked for many years before a commitment can be made.
"Historically, a stable and predictable regime has led to an increase in investment and activity levels in the basin, which in turn has driven an increase in tax revenue.
"When windfall taxes have been used in the past, data demonstrates that investment has fallen away, undermining capex and opex activities, jobs and production.
"Therefore, we continue to reinforce the need for stability and predictability in the fiscal regime to be maintained."