Oil and Gas Producers: Windfall Tax

Sarah Olney Excerpts

Tuesday 1st February 2022 Commons Chamber

[Lee Rowley]

I am very glad that the hon. Gentleman raises that point. I am not sure whether he was present at the end of the last debate, but it was made clear from this Dispatch Box that that is not the case in the slightest. This Government will continue to pursue the recovery of as much of that money as possible. The Labour party can keep repeating the point if it wants, but it would not be fair, accurate or real to do so.

To come back to the Opposition motion, if it is not all about the money, the motivation has to be different. If that is the case, the Labour party should just be clear. The right hon. Member for Doncaster North knows that policy actions have consequences and decisions have reactions. He has put forward a specific proposal for a windfall tax, so he should be held to account for it.

The implications of a windfall tax structured in such a way would have to fall somewhere: on consumers, on investors or on the activity itself. I assume that the Labour party does not propose to go after consumers or to reject the idea of oil and gas as a commodity, so ultimately it will have to be the investors who shoulder the burden. If so, the right hon. Gentleman should be clear that he is expecting less of a return for pension funds and therefore for pensioners and the many hundreds of thousands of people out there who are reliant on the performance of the stock market to ensure that they can be supported in old age.

Perhaps the proposal is just a blunt tool to reduce production in general. If so, the right hon. Gentleman should just say so. That certainly seems to be the inference to draw from his statements today, and from his questions over recent weeks to other Government Front Benchers. It does not sound as if he is simply looking for a source of money to fund others; it does not sound as if he is seeking to maximise economic return; it sounds as if he is deliberately trying to penalise activity on the UK continental shelf and, if possible, to reduce it. If that is the case, he should say so out loud, because then will we know.

[Sarah Olney (Richmond Park) (LD)]

Will the Minister give way?

[Lee Rowley]

I will make progress.

The Labour party’s position is to immediately and artificially retard the amount of oil and gas that we produce domestically through penalty taxation, not necessarily because a windfall is needed, for aims that should or should not be laudable, but because reducing production is the ultimate objective. If the Labour party wants to reject the notion that getting to net zero requires a transition period, let it be clear about that. Let it highlight the fantastical world that Labour Members live in, shorn of the reality that we are on a journey over a generation.

Moreover, the Labour party should be clear that its objective over the long term—no doubt as it comes back for more and more money—is to reduce our energy security. Taxing out of existence the oil and gas industry, which we need to conclude the transition, will make us more dependent on other countries whose actions may have caused some of the things that the Labour motion seeks to deal with—greater foreign imports and fewer jobs in north-east Scotland and in supply chains all the way through constituencies such as mine, North East Derbyshire, or the shadow Secretary of State’s constituency of Doncaster North. The Labour party has no clear plan for energy to ensure in a measured and balanced way that we move from hydrocarbons to renewables and tread more lightly on the earth. That is what the Labour party is about these days: extinction, not transition.

We are used on Opposition day debates like this, on motions that do not add up, and this one has it in spades—incoherent, confused and unclear. Perhaps some of the hon. Members who are about to speak might be able to clear up the ultimate objective in the way that the right hon. Member for Doncaster North failed to do. For a party that talks so much about good government, Labour has demonstrated this afternoon that it is only interested in good headlines.

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[Sarah Olney (Richmond Park) (LD)]

It is a real pleasure to participate in this debate, particularly because we have heard so much from the Tories about this being the issue that their constituents would like us to talk about instead of cakes and parties. It is great to see so many of them here to discuss it! [Laughter.]

The Liberal Democrats support Labour in its call for a one-off windfall tax. I regret that the Minister would not allow me to intervene earlier, because I wanted to ask him what exactly is his understanding of a windfall tax, as he did not seem to be very clear on that point. We are clear that the profits being made by the oil and gas sector over the past few months are related to the market price of gas going up way beyond typical levels, and that that is very much as a result of increased demand. We expect it to be very much a medium-term rise that will not last very long. That is why we support the calls for this one-off, targeted tax in order to lessen the burden on those who will feel the impact. We have heard many great contributions, particularly from the Labour Benches, about the impact on ordinary people who will have to pay. It is quite right that we try to equalise that impact. We are proposing not only to double the warm home discount payments from £150 to £300 but to extend it to all those on universal credit and pension credit, and to double the winter fuel allowance to give up to £600 a year to 11.3 million elderly pensioners to help them with their heating bills.

There is no doubt—I think there has been some unanimity on this—that we are where we are with oil and gas, but we really need to move towards renewable forms of energy, with a long-term plan in order to make that happen. The Government keep talking about their plans for net zero but we do not see those plans. We do not know what the Government are planning to do to move us from our dependence on oil and gas towards our net zero future. I commend the hon. Member for Aberdeen South (Stephen Flynn) for everything he said about the impact on his community. I think he agrees with us and with many other Members that we need a plan for that transition.

[David Duguid]

On the UK Government’s plans for transition, may I politely refer the hon. Member, just as a starting point, to the North sea transition deal, the Prime Minister’s 10-point plan for a green industrial revolution, and the energy White Paper?

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[Sarah Olney]

I have read the Prime Minister’s 10-point plan for a green industrial revolution, and it gives no detail as to how we are actually going to transition from a dependence on oil and gas towards net zero.

One thing we could be doing much more is reducing the demand for domestic electricity and gas. We have seen that come down over the past 10 years, but we could do much more if we could commit to a programme of proper insulation of homes. Since the dismal failure of the green homes grant, we have not seen enough action from the Government on how we are going to do that. We are not seeing action on standards for buildings to make them net zero in future. There is so much more that the Government could be doing to insulate our homes properly, particularly for the poorest.

The hon. Member for West Aberdeenshire and Kincardine (Andrew Bowie) talked about business and the importance of the oil and gas industry, but he needs to remember—I am addressing an empty seat, since he is no longer in his place—that there are many other energy-intensive businesses across the UK that are facing a double whammy this April. They face not only increased energy costs—and they already find themselves uncompetitive compared with EU businesses on energy costs, which tend to be higher in this country than they are abroad—but the planned increase in national insurance, which will hit employers as much as it will hit employees. We have been calling for the Government to scrap that planned tax rise. It is the wrong tax rise at the wrong time.

The Government need to look at the cost of living crisis in the round. They need to look at energy costs, tax rises, and at all the other costs being imposed on British consumers. One Member—I am afraid I forget which—made the point that the more people have to pay for basics, the less they have in their pockets for discretionary spending on our local high streets, and to help our economy grow. The Government need a much better plan for the cost of living crisis, and we are seeing woefully little of that.