Energy (Oil and Gas) Profits Levy Bill

Baroness Kramer Excerpts

2nd reading & 3rd reading
Wednesday 13th July 2022 Lords Chamber

[Baroness Kramer (LD)]

My Lords, there is just one question that I would like to ask the Minister before I begin. There has been some rumour in the press that this legislation would be passed but not implemented because of the change in the leadership. I hope that is a misreading of comments that have been made, and perhaps it applies to a potential tax on the energy generators rather than on the oil and gas companies involved. I thought that this might be an opportunity for the Minister to clarify the issue.

My party called for a windfall tax on the surging profits flowing to the oil and gas companies because of soaring prices back on 24 October 2021, well before Labour made up its mind to support such a tax and seven months before the Government suddenly effected their U-turn. Because the profit surge was well under way last October, we are calling for the levy to be backdated to that date in October. I know that we have no possibility of amending this legislation, but I hope that this might cause the Minister to think again. Had the levy been put in place back then, many families would have had significant help with their struggles over the winter.

The Liberal Democrats would also have structured the levy differently, to ensure that the 25% surcharge applied to the excess global profits of oil and gas producers headquartered in the UK, rather than just profits from their domestic activity. Those two changes combined would have yielded the Government some £11 billion, rather than their expected £5 billion. It is a real missed opportunity at a time when ordinary people need so much help. For those who doubt that there are excess profits flowing to oil and gas companies, I suggest that they need only look at the share buybacks announced by the major oil and gas players—more than $8 billion a year announced in share buybacks by Shell, and something like $6 billion announced by BP, with both companies hoping that their shareholders will permit even larger share buybacks.

The Government have also missed the opportunity to use this levy to promote green investment. The super-deduction of 80% in effect doubles the tax relief for oil and gas companies increasing investment in oil and gas extraction in the UK. For every £1 invested, they get a tax savings of 91p. I accept that gas has a role to play in the transition to net zero, but it is a temporary role as we switch to green hydrogen. I also accept that the Russian war in Ukraine has raised issues of energy security, so that some extension of the life of existing UK oil and gas fields may be required. But we have no practical plan from the Government to get to net zero or to deal with the issues of energy supply while dealing with affordability. All we have is a vague strategy which is leaving consumers, businesses and investors in a state of confusion and uncertainty. In that situation of overarching uncertainty for any kind of investment, this reward for oil and gas extraction risks tilting investment back towards fossil fuels and away from green energy. It really is shambolic. At the very least, investment in renewables should have qualified for the super-deduction. I would argue that, given the need we have to immediately tackle soaring energy bills, investment in energy efficiency and retrofitting homes and commercial properties—the quickest way to bring down bills—should have been included.

None of us knows who will lead the Government in the autumn, and none of us knows how the money raised from this levy will be spent, but at least we can get some recognition today that it ought to be on those who are suffering the most from soaring energy bills and the cost of living crisis. I hope that we can hear that reassurance from the Minister.