Oil and Gas Producers: Windfall Tax

Nigel Evans Excerpts

Tuesday 1st February 2022 Commons Chamber

[Peter Dowd (Bootle) (Lab)]

Yesterday, many Conservative Members, not many of whom are here today, said that they wanted to talk about the real things that affect their constituencies. I am as happy as they are to talk about the things that affect our constituencies.

One of our constituents’ most immediate concerns, of course, is the increase in their energy bills, which amounts to an energy crisis for millions of people. As we have heard, rising wholesale gas prices are threatening to drive energy bills up by almost a third—a huge £700 increase to £2,000 a year. As for getting things done, delivering on people’s priorities or levelling up, the situation is worth a perusal. What did the Government get done on energy infrastructure? Not a lot. They have refused to invest in the infrastructure necessary to decarbonise our energy supplies and reduce our reliance on external providers. Instead, the British public have been left at the whim of oil and gas companies.

Financial challenges loom for our constituents because the Government did not get the job done in that policy area. The Joseph Rowntree Foundation has found that single adult households on low incomes could soon be spending 54% of their income on energy bills—a shocking statistic. The energy crisis is compounded by inflation at 5%, the highest level since 30 years ago when the Tories were last in government. There is a slash-and-burn approach to the country’s energy supply. Households across our nation have had their resilience tested time and again by this Government. Millions more are struggling with the cost of living, and it is becoming impossible to heat houses. Energy bills are shooting up and there is no action of any substance from the Government.

What is the Government’s response? Let us say that there are two options: a windfall tax on the oil and gas companies that have profited from the Government’s mess, or an increase in taxes on struggling low-income families and workers. Of course, we all know what the Government will go for and have gone for: taxing £12 billion out of people’s pockets. It is worth remembering that a 1.25 percentage point increase on national insurance contributions is in effect an 8% increase, given a national median wage of about £29,900. On that income, in 2021-22, a person will have paid £2,439, but in 2022-23 they will pay £2,652, which represents an increase of 8%.

The gas companies have made mega-profits over the years. The largest made a combined profit of $174 billion in the first nine months of 2021. Huge profits are being made, but despite the ambitious plans from BP, for example, to reduce its carbon footprint and move towards renewables, they are not being reinvested at the level that they should be—not at all.

Data published by the UK Government-backed extractive industries transparency initiative shows that in 2019-20, ExxonMobil received £117 million in total from HMRC, while Shell got £110 million and BP received £39 million. What are the Government going to do about those tax reliefs? Can we have an answer to that? What was the total expenditure forgone in tax reliefs in 2020-21?

Households will continue to struggle unless the Government get a grip. The behaviour of the oil and gas companies only goes to show that we cannot rely on the sector alone to deliver net zero in the time available. We need to take action. The Government really do need to take action. They need to get a grip on this issue, because people out there—our constituents—are struggling and challenged.

Finally, we have heard the outrageous suggestion that no one supports a windfall tax. May I remind—or bring it to the attention of—Conservative Members that 75% of Tory voters support a windfall tax?

[Mr Deputy Speaker (Mr Nigel Evans)]

I thank the hon. Gentleman for being so succinct. As Members can see, there are 12 standing. I advise them to speak for no more than five minutes, then we will be able to get everyone in.

--- Later in debate ---

[Greg Hands]

I will make a bit more progress.

We will see commitments from industry that will achieve a 60 megatonne reduction in UK greenhouse gas emissions, including 15 megatonnes through the progressive decarbonisation of UK production over the period to 2030, which puts the sector on a path to deliver a net zero basin by 2050.

I turn to the contributions in the debate itself. My right hon. Friend the Member for Wokingham (John Redwood) made an excellent speech. He said: please can we burn our own gas, rather than importing it? That is a really strong point, not just in terms of jobs in this country but for our energy security as well. It makes no sense for us to be importing, beyond what we have to, expensive volatilely priced foreign hydrocarbons—hydrocarbons that come with a significantly increased emissions content. LNG has up to two and half times the emissions content compared with natural gas produced in the UK. He also made strong points about tax revenues.

My hon. Friend the Member for Banff and Buchan (David Duguid) knows oil and gas better than anybody in the House. The sector is hugely important for his constituency, as I saw when I visited in December. He talked about the punitive intervention that Labour is proposing. He also rightly pointed out that renewables have increased by four times under Conservative Governments since the right hon. Member for Doncaster North was Secretary of State.

My hon. Friend the Member for Waveney (Peter Aldous) talked about the unintended consequences. He is right that in the transition we need the oil and gas sector to co-operate with the offshore wind and hydrogen sectors. He is the living embodiment of transition, representing both the older and newer energy industries.

My hon. Friend the Member for West Aberdeenshire and Kincardine (Andrew Bowie) made an excellent speech. He praised British business and discussed how Labour is giving up on Aberdeen. Mr Deputy Speaker, you, the right hon. Member for Doncaster North, the Labour Chief Whip, the right hon. Member for Tynemouth (Sir Alan Campbell), and I were here in the days when Labour had two Members of Parliament for Aberdeen. It has now totally given up on the North sea and the North sea transition deal, and the jobs that it represents. My hon. Friend’s excellent speech was about how Labour is giving up on Scotland. We have seen the right hon. and learned Member for Holborn and St Pancras (Keir Starmer) implicitly doing a deal with the SNP—it was implicit in one of his rare visits to Scotland just this last week.

My hon. Friend the Member for Poole (Sir Robert Syms) made another excellent speech, rightly pointing out that energy prices are rising due to world economic recovery and praising the work of this Government on job numbers and economic recovery. I agree with him. The North sea is a great British success story. He also made a really strong point about nuclear energy.

I want to correct a few points made by Labour Back Benchers. The hon. Member for Birmingham, Hall Green (Tahir Ali) made an extraordinary speech. He seemed to be saying that companies cannot make a loss without going bust. That is extraordinary: of course companies can make a loss without going bust. The hon. Member for Sunderland Central (Julie Elliott) made some important points about the supplier of last resort processes. If she has constituents whose credit balances are not being transferred from their previous suppliers to their new suppliers, could she write to me—or even better, to Ofgem—with details? I am sure we could look at that.

The right hon. Member for Leeds Central (Hilary Benn) made his usual quality speech. He said that there are not enough heat pumps—of course there are not. The role of the Government, though, is not to provide a heat pump for every home but to stimulate the private sector heat pump market, so that it can provide that solution. He asked where our plan was for 10, 15 or 20 years’ time. The answer is the net zero strategy, which we published back in October and which the Climate Change Committee says is a leader in the world.

We then heard from the SNP spokesman, the hon. Member for Aberdeen South (Stephen Flynn). I am afraid his nice words about oil and gas are at odds with his party overall, which has a nonsensical energy policy. The people of Scotland will be relieved that energy policy is reserved.

Not only is the SNP anti-nuclear, cheering the closure of plants such as Hunterston and Chapelcross and reportedly telling Rolls-Royce that its small modular reactors are not welcome in Scotland, but the hon. Gentleman’s colleagues and the Scottish First Minister seem to be opposed to new gas licences off the Scottish coast. They want to close oil and gas down. They say they want a windfall tax—just not the same windfall tax that Labour wants. They are still on a mission of trying to close down the industry. The SNP is against Scottish energy consumers, it is against Scottish energy jobs and it is against Scotland’s energy transition.

To finish off, Labour is still in a state of confusion. This time, the motion is not four pages. It has been shortened to around 100 words—or perhaps 280 characters; I am not quite sure. Where Labour has cut the words, however, it has not made up for them with any numbers. The motion includes no costings. There are no numbers in it at all. We have no information about this windfall tax and no information on the package of support for families and businesses. There is no detail there, but still a lot of confusion. There are no impact assessments on the taxes raised, on jobs—there are 40,000 jobs in north-east Scotland and 195,000 jobs in all—on fuel bills or on gas production.

Labour has split energy from climate change; the right hon. Member for Doncaster North is the person who combined them, and now the Labour Front Bench has split them, which means inevitably it is following a policy of hammering business. Labour is not the party of business; it is the party against business. The hon. Member for Kilmarnock and Loudoun (Alan Brown), who often makes quite acerbic interventions on other Opposition parties’ policies—I sometimes wish he would probe his own party’s policies as well as he probes those of others—asked whether the Labour Front Bench had spoken to anybody in the sector, and there was no answer. We did not hear anything about whether it had engaged with anybody in the sector.

Does Labour agree with our ground-breaking North sea transition deal? No answer. Its solution is, again, to hammer domestic UK continental shelf production and increase imports, reducing our energy security and increasing our emissions at the same time. Labour’s approach is confused and misguided. It is not a plan, it is a motion for less energy security, higher emissions and higher fuel bills. I urge the House to stick with our approach: North sea transition, support for households and the UK’s remaining open for business.

[Mr Deputy Speaker (Mr Nigel Evans)]

The Question is as on the Order Paper. As many are of that opinion say “Aye”—[Hon. Members: “Aye!”] Of the contrary no—I think the Ayes have it, the Ayes have it. [Interruption.] I am sorry, you had the opportunity to do it then, and nobody shouted “No” when I put the Question. Do you want me to put the Question again? [Hon. Members: “Yes.”] Can you be a little more prompt this time, please? Do not forget that your votes should follow your voices.

Question put.