Energy (Oil and Gas) Profits Levy Bill

Debate between Geraint Davies and Caroline Lucas

Committee stage
Monday 11th July 2022 Commons Chamber

[Caroline Lucas]

It is a pleasure to follow the hon. Member for Leeds East (Richard Burgon), whose new clause 1 I am happy to support. I rise to speak in favour of new clauses 8 to 10 tabled in my name.

First, new clause 8 would require the Government to produce an assessment of the revenue that would be generated if the level of taxation on oil and gas companies were permanently raised to the global average of 70%. That is 5% higher than the total level of taxation with the addition of the Government’s levy, but it would be permanent.

I know the new Chancellor may be disinclined to increase taxation on the oil and gas industry, given that he has benefited so handsomely from it in the past, previously earning £1.3 million from his executive position at Gulf Keystone Petroleum, including a whopping £285,000 settlement payment when he stepped down from that role in 2018 after becoming a Minister. However, it is important to understand that the level of taxation that this new clause proposes on oil and gas would simply bring the UK into line with countries such as Angola and Trinidad and is backed by 63% of the public. By way of comparison, it may be interesting to note that the UK’s North sea neighbour, Norway, has a taxation rate of 78%, and that does not seem to have done it any harm. I therefore hope that the Government will recognise that this is a very reasonable amendment that it should be easy for them to support.

The reason I am proposing a permanent taxation level is that the UK currently has the lowest tax take in the world from an offshore oil and gas regime. That is not a badge of honour; it should be a badge of shame. Indeed, Norway’s tax take from a barrel of oil in 2019 was over 10 times the equivalent here in the UK. The amendment would simply require the Government to assess the impact of ending that shameful state of affairs. Greenpeace estimates that a tax at that level would generate an additional £13.4 billion for the Exchequer in comparison with the status quo—money that, in addition to providing immediate support to households to cope with the cost of living scandal, could be used to invest in much-needed energy efficiency, quite literally insulating households from escalating costs.

To date, the Government have spent £37 billion on short-term financial support. Although that support is of course very welcome, gas prices are likely to remain high for several years, and a more long-term approach is necessary, especially when the CEO of Ofgem is warning that the number of households in fuel poverty could reach 12 million in October when the energy price cap rises again. The think-tank E3G estimates that the average household with an energy performance certificate of D or lower will be paying what it calls an inefficiency penalty of £916 per year for adequate heating compared with households with an EPC of C or higher. Investment to kick-start a local-authority-led, street-by-street home insulation programme would save cash-strapped families money not just this year but every year. It would also rectify a glaring omission in the Government’s approach so far, with the Climate Change Committee saying clearly in its 2022 progress report to Parliament:

“Given soaring energy bills, there is a shocking gap in policy for better insulated homes.”

New clause 9 would require the Government to produce an assessment of how much revenue would be generated by the energy profits levy if the investment allowance were removed. I also support the Labour Front-Bench amendment that would simply delete the clause on the investment allowance, which is nothing less than a scandal. As the Chancellor and his team very well know, it will come at huge cost to the taxpayer. Analysis by the New Economics Foundation suggests that the investment allowance will cost £1.9 billion a year because any subsidised oil and gas projects will not start to return a profit until after 2025—the date of the sunset clause in the Bill.

[Geraint Davies]

I very much support what the hon. Lady is saying. Is she aware that in Germany for three months in succession people are being offered a €9 a month pass that can be used on all public transport, thereby shifting people on to public transport, reducing energy costs, encouraging environmental green investment, and stopping our addiction to fossil fuels? Does she think that a higher tax could help us to do that and put us on a more sustainable route to a green future?

[Caroline Lucas]

I am grateful to the hon. Gentleman for his intervention, particularly since it helpfully highlights a party policy of the Greens, who were, as he knows, in coalition Government in Germany. It has absolutely been their policy to introduce those kinds of incentives, and they are being massively taken up because they are incredibly popular.

I was talking about the investment allowance and just how egregious it is. The Institute for Fiscal Studies says that investing £100 in the North sea now will cost companies just £8.75, with the public picking up the remaining investment costs in the form of the forgone windfall tax. What is more, there is a chance that this new subsidy could lead to the development of otherwise economically unviable projects, becoming stranded assets of little or no economic value. Oil and gas companies are benefiting from that right now. For example, according to analysis by Rystad Energy, Shell, which recorded quarterly profits of over £7 billion earlier this year, will pay £210 million less in windfall tax for investment in the newly approved Jackdaw gas field.

The investment allowance also significantly reduces the amount of revenue generated, which is why I can only assume that the Treasury believes that its levy will raise only £5 billion in its first 12 months, especially since oil and gas company profits are expected to reach £11.6 billion this year, with BP’s chief executive describing the company as a “cash machine”. Let us remember that, as other hon. Members have outlined, these profits are not earned; they are a consequence of high global gas prices fuelled by Russia’s illegal invasion and war in Ukraine, and must be urgently redistributed to provide vital support to struggling families. Will the Government now publish their full impact assessment? Will they accept this crucial amendment so that we can have clarity over the cost of their perverse proposal?

The subsidy in the Bill is unfortunately entirely consistent with the Government’s approach to subsidising the fossil fuel sector overall. While they refuse to acknowledge that tax reliefs are indeed subsidies and prefer to use the very narrow International Energy Agency definition of a subsidy, Ministers and colleagues will know well that there are much wider definitions in use, including that developed by the World Trade Organisation, which would very definitely include the investment allowance. If the Government go ahead with this subsidy, it will come on top of countless other tax reliefs from which the sector benefits, including those for exploration for new fields, for R&D, and for decommissioning. The latter, for decommissioning, has an especially egregious element in the form of decommissioning relief deeds that guarantee future tax reliefs for oil and gas companies at a given rate. Imagine any other sector being guaranteed tax reliefs in perpetuity with future Governments unable to make changes to that! Companies should pay decommissioning costs, with decommissioning plans required to ensure a just transition for workers. That is the only fair approach. The measures in the Bill will add to the decommissioning tax relief burden faced by the public purse going forward, to say nothing of the impact on fossil fuel extraction.

[Geraint Davies]

The hon. Lady will be interested to know that people in Swansea University are looking at using the energy from wind farms that is not used by the grid off-peak to create hydrogen that can be put in the gas pipes to dilute the gas to reduce the carbon footprint of everyday gas. Would it not be better to put the money into those sorts of green investments rather than digging more and more holes to destroy the planet?

[Caroline Lucas]

Again, I am grateful to the hon. Gentleman. Those are precisely the kinds of forward-looking policies that we need rather than the backward-looking, dinosaur policies that seem to think that digging out more and more fossil fuels is the way forward.

Environment Bill

Debate between Geraint Davies and Caroline Lucas

Wednesday 20th October 2021 Commons Chamber

[Geraint Davies]

I rise briefly to support Lords amendment 3, which would put legally binding World Health Organisation limits of 10 micrograms per cubic metre into law now. The arguments that have been put in place against that—that we might have some other target in October 2022—are fine, but let us have a minimum standard now. Nearly a year is a long time when we have a target to be achieved by 2030 and we can focus rational expectations.

We know that 64,000 people are dying a year. We know that globally it is 8.7 million. We know we are hosting COP26. We profess to be global Britain. My view is that this measure ticks all the Government’s ambitions and boxes. The Government talk about NHS prevention and limiting the amount of money spent on the NHS. The Royal College of Physicians says that the cost of air pollution is £20 billion a year. The World Health Organisation says it costs £60 billion a year in lost productivity and NHS costs. If we are serious about increasing productivity, we should improve air quality standards. In terms of value, if we saved even £3 billion of the £20 billion—on the lower number—we could invest that in a stream that would generate an investment of about £300 billion in capital for green infrastructure to head towards net zero.

We have talked about the problem with dementia, which is massively related to air quality, and an incremental increase in PM_2.5 can increase mental health hospital admissions by a third. We have heard from the Government about levelling up, but we know that air quality particularly hits the poorest and the most diverse areas. Having a cap of 10 micrograms would make a lot of difference to levelling up.

We have talked about pathways and how we will get there without getting rid of cars and wood burners. We need to devolve power to local authorities to give them responsibility. Frankly, the situation is that wood burners generate 38% of PM_2.5 and 2.5 million people have them. In urban environments, we need to stop selling them and phase them out. We may have to compensate people. Otherwise, we will never hit those targets and the targets will get away from us.

We certainly do not want the Government to have an ambition to double the amount of incineration by 2030, which they have. The latest incinerator in north London will generate 700,000 tonnes of carbon a year, as well as ultra-fine particulates that will give rise to leukaemia. We need to get our act together. We have the opportunity. People such as Stephen Holgate are already saying that they want a guiding light of 10 micrograms. We have heard the case of Ella Kissi-Debrah, who died at the age of nine and would be 17 now—that is how long we have been waiting after her death, despite knowing that she died of air pollution. Of course, we also need an office for environmental protection that has teeth, as there is currently in the EU.

In a nutshell, people have the right to clean air and the Government have a duty to deliver on that right. Let us get on with it and do it now.

[Caroline Lucas]

I start by adding my voice to that of others who have paid tribute to Sir David Amess and James Brokenshire. I knew neither of them really, but I can see how much I missed in not knowing them. They sound like they were absolutely the very best of us and I send my love and thoughts to their families. My heart goes out to them.

This Bill is meant to be a once-in-a-generation piece of legislation. It has been described by the Government at various times as a flagship or a lodestar, and it is about time it started to live up to that kind of rhetoric, given that the UK is one of the most nature-depleted countries in the world with 15% of its species now threatened with extinction. With that in mind, I welcome the improvements that have been made to the Bill in the other place, many of which address issues that have been raised repeatedly in both Houses. I also welcome the amendments that have been tabled by the Government to set legally binding targets to halt the decline of nature.

The Bill has a very long history: it was first proposed in 2018, has been repeatedly delayed and, last year, was absent from Parliament for more than 200 days. I urge the Government not to now create further delays and to accept these crucial amendments from the other place to make the Bill law before COP26. That is the kind of leadership that people are looking for from the country that will host that key meeting.

On Lords amendment 1, which requires the Prime Minister to

“declare that there is a biodiversity and climate emergency domestically and globally”,

I am utterly dumbfounded that the Government cannot agree to it. They may argue that it does not meaningfully change the Bill, which may be the case, but it is none the less incredibly symbolically important. With the Intergovernmental Panel on Climate Change’s most recent report spelling a “code red for humanity” with 1 million species now threatened with extinction, we know that an emergency is upon us.

As Lord Deben said in the other place, refusing to accept this amendment

“will send the wrong signal, at a time when we should be united in sending the right signals, so that in all discussions people will know precisely where Britain stands.”—[Official Report, House of Lords, 6 September 2021; Vol. 814, c. 618.]

I therefore urge the Government to rethink their position and to listen to the scientists raising the alarm, to the young people on the streets worried for their future, and to the parliamentarians in this House. There are now less than two weeks until COP26 and if the UK is serious about demonstrating leadership, rejecting this amendment just seems so contrary to what we need to see—so perverse.

Soils and air are the very substance of what the Bill is about. Lords amendment 2, tabled by my noble Friend—I do not often get to say that—Baroness Bennett of Manor Castle, sets soil health and quality as a priority area for long-term target setting. Soils, as we know, are the complex ecosystems upon which all life on this beautiful planet relies. A staggering 25% of the world’s biodiversity lives in our soil. Britain’s soils alone store almost 10 billion tonnes of carbon. It is not simply dirt that can endlessly be abused and neglected; it is life itself. Its health is absolutely essential if the UK is to succeed in achieving its climate and biodiversity targets, yet we lose more than 3 million tonnes of topsoil every year in the UK. In its recent independent assessment of the UK climate risk, three of the Climate Change Committee’s eight urgent priorities relate to the impacts of the climate crisis on soils, and just today a new report was published that identifies poor soil health as a threat to national security.

I welcome the Government’s commitment to publish a new soil health action plan for England to ensure that soils are sustainably managed by 2030. That is desperately needed, but I am concerned that the draft outline will not even be consulted on until next spring. It is also positive to hear that the Government are exploring the possibility of a new target on soil health under future Environment Bill regulations, yet soil health merits proper referencing and legal protection through this Bill to take it beyond one Parliament. When our soils are rapidly degrading, we need that target now, so I urge Ministers to review their decision on Lords amendment 2.

Many hon. Members have spoken very eloquently about Lords amendment 3 on air pollution, and I would simply echo what others have said about the perversity of this. At a time when the WHO has just slashed the guideline limit for air pollution, the fact that we are refusing even to bring ourselves in line with the current—out-of-date—pollution target just seems to be incredibly perverse. Everyone has the right to clean air, as others have said, and we should be acting on it.