Oral Answers to Questions
Caroline Lucas Excerpts(9 months, 3 weeks ago)
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Nigel Huddleston
I know my right hon. Friend has been campaigning on the issue. I respect and appreciate the information he has provided, and his contributions to the debate. I assure him that I am in listening mode and looking forward to the meeting this evening, because I want to ensure that I hold HMRC to account to make sure everyone involved is treated fairly and respectfully.
Caroline Lucas (Brighton, Pavilion) (Green)
Jeremy Hunt
I am sure the hon. Lady understands that I cannot talk about what will be in the Budget ahead of the Budget because no decisions have been made. I celebrate with her that the UK recently became the first major economy in the world to decarbonise by more than 50%, ahead of France, Germany, Japan and the United States.
Oral Answers to Questions
Caroline Lucas Excerpts(1 year, 2 months ago)
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Jeremy Hunt
My hon. Friend is absolutely right to raise that issue. I actually had a breakfast with clean energy industry representatives this morning to discuss their concerns. There is a huge amount of potential investment, and he is right to say that maximising the use of our own oil and gas reserves during transition is a vital part of our energy security policy.
Caroline Lucas (Brighton, Pavilion) (Green)
Will the Chancellor consider introducing a windfall tax on banks’ excess profits? The profits of the big four banks for the first half of this year were up 700% compared with 2020, yet the Bank of England is forecast to pay out as much as £42 billion in interest on reserves to banks in 2023, at the same time as the Government have cut the level of surcharge on banks’ profits by 60%.
Andrew Griffith
With millions of British jobs dependent on financial services, including an estimated 20,000 jobs in Brighton and Hove, I hope the hon. Lady will join me in celebrating a sustainably profitable financial sector. It is only that that gives us the ability to invest in skills and technology.
Finance (No. 2) Bill
Caroline Lucas ExcerptsWednesday 19th April 2023
(1 year, 7 months ago)
Commons ChamberRead Full debate Finance (No. 2) Act 2023 View all Finance (No. 2) Act 2023 Debates Read Hansard Text Watch Debate Read Debate Ministerial Extracts Amendment Paper: Committee of the whole House Amendments as at 19 April 2023 - (19 Apr 2023)
Caroline Lucas (Brighton, Pavilion) (Green)
I am delighted to have the best part of an hour and a half to talk about the electricity generator levy—[Interruption.] No, not really.
I rise to speak in support of new clause 11, which would require the Government to conduct an assessment of the impact of the electricity generator levy on investment in renewable energy in the UK, exactly picking up on the point that was made by the Official Opposition just a moment ago.
In his speech in the spring Budget, just one month ago, the Chancellor proudly declared:
“We are world leaders in renewable energy”.—[Official Report, 15 March 2023; Vol. 729, c. 840.]
Since then, the Government have published their latest energy security plan, which points to “low-cost renewables” as being “central” to their goal of Britain having among the cheapest wholesale electricity prices in Europe. The strategy is absolutely right in that regard; the International Energy Agency’s “World Energy Outlook” makes clear that, in the context of the energy price crisis, countries with a higher share of renewables also had lower electricity prices. In the words of the IEA’s executive director, Dr Fatih Birol:
“The environmental case for clean energy needed no reinforcement, but the economic arguments in favour of cost-competitive and affordable clean technologies are now stronger—and so too is the energy security case.”
In light of all that, it seems extremely perverse—to put it mildly—that, rather than the Government doing everything they can to unleash our abundant renewables, their current policy is stifling the investment we desperately need. A recent report by Energy UK warns that the investment climate for renewables has deteriorated significantly in recent months due to a combination of factors, including what it describes as “poorly designed windfall taxes. The report also states that, without urgent action to address concerns and prevent investment from moving elsewhere, the UK risks losing out on £62 billion-worth of investment this decade, which could also lead to a shortfall of 54 GW of potential solar and wind capacity, which would be enough to power every single UK home.
RenewableUK has criticised the Government for continuing to develop policies that,
“increase uncertainty and dampen investment”,
with the electricity generator levy in particular damaging investor confidence and increasing costs. While it is right that companies are taxed fairly on their excess profits, hampering our vital renewable energy industry when a expansion is essential to deliver on our climate targets is reckless.
The Government’s own plans include increasing our offshore capacity by four times over current levels by 2030 and solar by five times by 2035. My amendment would therefore also require an assessment to cover the impact of the electricity generator levy on the delivery of those UK climate targets, including net zero by 2050, and on our legally binding carbon budgets.
Most egregious of the complaints laid at the door of the EGL is that it is more punitive than the tax and relief regime for oil and gas companies. The sector has highlighted three key differences between the regimes. First, the electricity generator levy is a tax on revenue rather than overall profit, as with the energy profits levy, which results in an above-the-line cost of doing business rather than a reduction in profit.
Secondly, the electricity generator levy is not deductible from corporation tax, whereas the energy profits levy is an extension of an existing scheme. That leads to higher effective tax rates for electricity generators than is currently the case for oil and gas companies.
Thirdly and most importantly, oil and gas companies are eligible for vast and frankly obscene subsidies through the investment allowance that renewables do not have access to. If we add to all that the decarbonisation allowance, which means that the taxpayer is paying oil and gas companies to decarbonise—even though, in their own words, the companies already have more cash than they know what to do with, thanks to their vast windfall profits—it seems to me that the Government’s approach is misguided.
The approach means that, in the case of a decarbonisation allowance, companies are eligible for more tax relief if they are putting a wind turbine on an oil platform than if they are installing a wind turbine to feed into the grid. Put simply, we should be incentivising investment in renewables to power homes, not rigs. The amount of power it takes to drill for oil and gas is comparable to the total amount of power generated by offshore wind, or enough power to generate electricity for every house in Wales.
That should be paid for by the very oil and gas companies that are reaping such huge profits, not by the taxpayer. Surely the Chancellor and Treasury team can see that, when we need to urgently get off fossil fuels to secure a liveable future, it is madness to subsidise oil and gas extraction at all, let alone at the expense of renewable energy, as the Government are doing.
My amendment would require a comparative assessment of the impact of the energy profits levy, including the investment allowance, on investment in oil and gas production versus the regime the Government are proposing for renewables. Renewable energy companies have rightly called for a level playing field with oil and gas, but, in the face of an escalating climate emergency, we should be going further than that and responding to the ambition of other countries. Biden’s Inflation Reduction Act, for example, offers $216 billion-worth of tax credits to companies investing in clean energy and transport.
Finally, I record my support for the amendments tabled by the hon. Member for Richmond Park (Sarah Olney), which would allow generators of renewable energy to offset money reinvested in renewable projects against the levy. Yet failing that, surely the Chancellor cannot object simply to having, at the very least, clarity on the impact of this policy. That is exactly what my new clause would do, and I very much hope that the Treasury team will consider it.
The Government are fond of pointing to the fact that almost 40% of our electricity is now generated from renewables, but if we are to fully decarbonise our electricity system, we need the right incentives, a supportive policy framework, an improved grid fit for the 21st century, and a planning system that does not hold renewables back. We simply cannot rely on what the Chancellor called a “clean energy miracle”. I very much hope that the Government will take new clause 11 seriously.
James Cartlidge
It is a pleasure to respond to the hon. Member for Brighton, Pavilion (Caroline Lucas). I hope that she will not take it as a lack of respect if I say that it is probably a good thing that she did not go for the full one-and-a-half hours, but she made important points to which I will respond. Both she and the Labour Front Bencher, the hon. Member for Erith and Thamesmead (Abena Oppong-Asare), asked about the impact on investment.
New clause 11, in the name of the hon. Member for Brighton, Pavilion, specifically proposes that the Government publish within six months an assessment of the impact of the EGL on investment in renewables, and a comparison with the impact of the energy profits levy. First, I am bound to say, in the immortal words of the Treasury, that we keep all policies under review. We will, in the course of normal tax policymaking, return to make an assessment of the EGL’s impact at a suitable time. On investment specifically, we have to appreciate that this country has led the way in securing investment in renewables. Bloomberg New Energy Finance data shows that the UK has secured nearly £200 billion of public and private investment into low-carbon industries since 2010. Generators have received to date almost £6 billion in price support from the contracts for difference scheme for low-carbon electricity generation. CfDs have contracted a total of 26 GW of low-carbon generation, including around 20 GW of offshore wind. I hope that we are all proud of the result, which is that we as a country now have the largest array of offshore wind in Europe. Going forward, we have committed £160 million for the floating offshore wind manufacturing investment scheme to support floating offshore wind, and up to £20 billion for early deployment of carbon capture, usage and storage.
Our record to date is also crucial. The hon. Member for Brighton, Pavilion spoke about the Inflation Reduction Act and the steps being taken in the US. Of course, that is important, and we watch what is happening there very carefully, but it is worth reflecting on the fact that, as she quite rightly said, about 40% of our electricity came from renewables last year, while in the US that figure was about 20%.
There are two key things about the EGL and investment. First, we have to remember that the levy does not apply to the contracts for difference, which have been hugely successful in securing renewable energy investment and will cover the mainstay of future deployment in this country in relation to renewables. Secondly, the threshold price of £75 per megawatt-hour is exceptional; it is about 50% higher than the average over the past decade. The extraordinary energy prices, driven by Putin’s invasion of Ukraine, would not have been foreseen by investors when they committed capital to the building of wind and solar farms—they would not have foreseen such a huge increase.
The hon. Lady, whom I respect, has made her key point about oil and gas consistently; in many ways, the Labour party’s criticism of our investment allowance, which it calls a loophole, is the same point. We differ in our view. In the world today, we face a most profound energy crisis. It is a strategic energy crisis. We look at Russia, which has weaponised energy, and we ask ourselves: “Is it the right moment to be turning our back on our own domestic supply of oil and gas?” We need it. Of course, we are on the path to net zero—this country has cut its emissions more than any other nation in the G7; we are making that difference—but the journey is a long one. In that time, we will need oil and gas, which make up about three quarters of our energy demand when all transport is included. Unless the hon. Lady and the Labour party think that we should stop using oil and gas tomorrow, what they are really arguing for is simply to use more imported oil and gas.
Caroline Lucas
I am so fed up with this argument from the Government, because nobody is talking about turning off oil and gas tomorrow. We are talking about whether the world can sustain more new oil and gas, particularly from a country such as the UK, which is so blessed with alternatives. We were also one of the first countries to industrialise, so we have a greater responsibility to take a real lead on this. That is why the Government should invest in alternatives, renewables and energy efficiency, and listen to the IEA, which says that there is no space for new oil and gas.
James Cartlidge
As I have said, I respect the hon. Lady’s position, but the point is that if we were to have no further investment, the North Sea Transition Authority estimates that we would lose about 1.5 billion barrels-worth of output. There is no realistic estimate that we would not use an equivalent amount. In other words, we would simply import it, and if we import gas, that means 50% more emissions. Most importantly—and I feel very strongly about this—we would undermine our energy security. Even yesterday, representatives of the Kremlin were still talking about weaponising energy. If we have learned one thing, surely it is that we have to be realistic and pragmatic. We want to support the UK economy. Above all, we have a balanced approach. We are on the journey to net zero. We have cut our emissions more than any other country in the G7, and we continue to back renewables.
Caroline Lucas
The Minister is very generous in giving way again. I simply want to make the very obvious point that simply because oil and gas are extracted from the North sea, there is no guarantee that they will be used by people in the UK. They get sold on global markets at the highest price, so the argument that this is the best way to reach energy security is flawed. The best way to reach energy security is through introducing a mass energy efficiency and home insulation upgrade system, which the Government have not done; through more on electrification of transport, which they have not done; and through investing in renewables, which they are not doing enough of, as we have been saying this afternoon.
James Cartlidge
This is entirely true, but of course selling on the international market means that, through our balance of trade, we have an economy where we can afford to import. It is about comparative advantage.
As I have described, the Government are providing extensive support for renewables in order to decarbonise our power system and meet our ambitious net zero commitments. The EGL has been carefully designed with those objectives in mind. I therefore urge the Committee to reject the amendments and to agree that clauses 278 to 312 stand part of the Bill.
Question put and agreed to.
Clause 278 accordingly ordered to stand part of the Bill.
Clauses 279 to 312 ordered to stand part of the Bill.
Clause 27
Power to clarify tax treatment of devolved social security benefits
Question proposed, That the clause stand part of the Bill.
Finance (No. 2) Bill
Caroline Lucas ExcerptsTuesday 18th April 2023
(1 year, 7 months ago)
Commons ChamberRead Full debate Finance (No. 2) Act 2023 View all Finance (No. 2) Act 2023 Debates Read Hansard Text Watch Debate Read Debate Ministerial Extracts Amendment Paper: Committee of the whole House Amendments as at 18 April 2023 - (18 Apr 2023)
Caroline Lucas (Brighton, Pavilion) (Green)
As well as the economic cost of the way that the windfall tax has been designed, does the shadow Minister agree that it has a massive climate cost, in the sense that we are incentivising oil and gas at exactly the time when we need to make the transition to green energy technologies?
James Murray
The hon. Member is right to point that out that, in addition to the points that I have made, the Government’s decision has a climate change impact. It shows, I think, in the design of the windfall tax that investment allowances really should have no place in a proper windfall tax on oil and gas giants’ profits. We want to scrap those investment allowances and to make sure that that money is spent helping people through the cost of living crisis that we face right now. I would very much welcome the hon. Member and any Member on the Conservative Benches joining us in voting for new clause 6, which will force the Government to come clean about how much money they would raise by strengthening the windfall tax—money that could go towards freezing council tax this year.
I have spoken so far about the clauses of the Bill that relate to the main rates of corporation tax, capital allowances and reliefs. I now turn my attention to another important way that the Bill impacts on corporation tax through parts 3 and 4, which relate to the new multinational top-up tax and the related domestic top-up tax. As I set out earlier, we desperately need greater stability and certainty in business taxes and allowances to help the economy grow in the future. We also need greater fairness to help people with the cost of living crisis right now.
That principle of fairness is crucial in making sure that British businesses that pay their fair share of tax face a level playing field when competing with large multinationals that may not do so. That is why we have, for so long, pressed the Government to back an ambitious global minimum tax rate for large multinationals. We have long needed an international deal on a global minimum corporate tax rate to stop the international race to the bottom and to help raise revenue to support British public services. We welcome the international agreement, fostered by the OECD, that makes sure that large multinationals pay a minimum level of 15% tax in each jurisdiction in which they operate.
As I set out on Second Reading, it has been a long and winding path to get to this point. The Prime Minister, when he was Chancellor, was often lukewarm in his support of such an approach. However, the deal now faces a new front of challenges, as Conservative Back Benchers have begun to be open in their hostility towards the implementation of the deal, as we have seen in this place today. We believe that it is crucial to get this legislation in place, so I hope the Minister can reassure us today that those parts of the Bill that introduce a multinational top-up tax will not be bargained away in the face of opposition from Conservative Back Benchers.
On Second Reading, we heard from the right hon. Member for Witham (Priti Patel) and others as they rallied their colleagues against the global minimum rate of tax for large multinationals. We therefore want to press the Government to make sure that, in the face of opposition from their Back Benchers, they do not back away from implementing this landmark deal.
That is why we have tabled new clause 1, which would require the Chancellor to report every three months for a year on the Government’s progress in supporting the implementation of OECD pillar two rules. The quarterly reports mandated by the new clause would update the House on the Government’s progress towards implementation. Those updates must include details of what efforts the Government have undertaken to make the rules as effective as possible. They must explain what the Government have done to encourage more countries to implement the pillar two rules—a point made by the right hon. Member for Chelmsford (Vicky Ford), who is no longer in her place. This is important because we know that the rules will be more effective the more widely they are implemented. I hope that the Government will support our new clause, which commits them to giving these updates. Surely that is a matter on which we broadly agree. Even if Ministers do not support the new clause, I hope that many Conservative Back Benchers do.
On Second Reading, the right hon. Member for Witham expressed her concern that the implementation of the OECD rules had so far progressed with “very limited scrutiny”.
Although I know that she and I, and others on the Conservative Benches, may have very different views on these rules and on what they will achieve, surely she and her fellow Back Benchers will not vote against transparency and will not try to block our new clause that simply requires updates to Parliament every three months.
Sarah Olney
I welcome the Scottish National party’s support for our new clause.
I ask the Government to accept the Liberal Democrat amendment proposing an impact assessment on the changes to R&D tax credits. It is essential that this policy is kept under review and its impact on the UK’s tech industry and long-term economic growth is monitored if we are to ensure that the UK becomes the powerhouse of technical innovation it so badly needs to be if we are to drive the productivity we need to increase growth across all economic sectors.
Caroline Lucas
I rise to speak in support of new clause 10, which stands in my name and addresses the decarbonisation allowance first announced by the Chancellor in the autumn statement and now legislated for in this Bill. Although in principle the decarbonisation allowance may sound innocuous or even useful, it is in fact an outrageous subsidy that sees the taxpayer paying companies to decarbonise their activities.
Under this scheme, a company spending £100 on so-called “upstream decarbonisation”—in other words, reducing emissions from the process of extracting oil and gas that then goes on to be burned—is eligible for £109 in relief. We should remember that these companies have themselves admitted that they have
“more cash than we know what to do with”,
and earlier this year they recorded obscene, record profits, with BP’s profits more than doubling to £23 billion and Shell reporting annual profits of more than £32 billion, all while millions of UK households face unbearable choices between basic needs and desperately struggling to make ends meet.
In his Budget statement, the Chancellor recognised what he called the enormous pressures on family finances, with some people remaining in real distress, yet even with the decision to freeze the energy price guarantee at £2,500 as of this month, bills will still rise by almost 20% and 7.5 million households will be in fuel poverty. It is utterly perverse that in this context the Government have decided to hand the climate criminals—those who have profited from the spoils of war—yet another subsidy. These are, at bottom, political choices.
The Chancellor may say, in response to my amendments, that we should be endorsing the decarbonisation allowance to cut emissions from the oil and gas sector, but that ignores the economic reality of the situation and the reality of our planetary boundaries, with upstream decarbonisation doing nothing to mitigate the end result of the fossil fuels choking our precious planet. I am afraid that, in the face of worsening climate impacts, paying companies to power oil rigs with wind turbines or to monitor emissions to detect leaks simply does not cut it. Even more alarming is the provision in the Bill for the decarbonisation allowance to support carbon capture. That UK taxpayers would pay oil and gas companies to capture their emissions in order to allow them to continue production—essentially, to continue business as usual—is a shocking violation of the “polluter pays” principle.
If the Government were seriously looking at reducing production emissions, they would, for example, be looking to bring forward an outright ban on flaring by the end of 2025 at the very latest—I remind Members that flaring has been banned in Norway since 1971—or they would be strengthening the lamentable targets in the North sea transition deal from a 50% reduction in emissions by 2030 to at least a 68% reduction, as proposed by the Committee on Climate Change in its balanced pathway, both of which have been called for by the Environmental Audit Committee, of which I am a member. Yet in their response to the EAC’s report on “Accelerating the Transition from Fossil Fuels and Securing Energy Supplies”, the Government roundly rejected both recommendations, maintaining that the existing targets in the North sea transition deal are “sufficiently ambitious”.
This is not a Government who are serious about cutting emissions from production, and they are certainly not serious about the climate crisis. New clause 10 recognises that the decarbonisation allowance is just one of the handouts to fossil fuel companies that have been introduced under the energy profits levy. It would require the Government to produce an assessment of the cost of the decarbonisation allowance to the Treasury and, crucially, its impact on overall investment in oil and gas production. It would also reveal how much money would be raised through the energy profits levy without the enormous gas giveaways in the form of both the investment allowance and the decarbonisation allowance, as well as assessing their impact on delivering our crucial climate targets.
At this point, I would like to say a few words in support of new clause 6, which would require the Chancellor to conduct a review of the decarbonisation allowance and its impact on public finances, although it is important to note that the amendment is somewhat narrower in not requiring an assessment of climate impacts as well. The Government are very transparent about the fact that the investment allowance is directly aimed at encouraging companies to pump more money into oil and gas extraction in the UK by allowing them to claim £91.40 for every £100 invested. That policy runs directly counter to the advice of the world’s leading scientists on what is needed to keep 1.5° within reach, with the UN Secretary-General calling for a cessation of
“all licensing or funding of new oil and gas”
at the recent launch of the Intergovernmental Panel on Climate Change’s “AR6 Synthesis Report”, and the report itself being clear that emissions from existing fossil fuel infrastructure already exceed the remaining carbon budget for 1.5°.
The bottom line is that our climate simply cannot take any new oil and gas licences. As I have said time and again, new licences would also fail to deliver energy security. With the oil and gas sold on global markets to the highest bidder, they will not bring down bills in the UK and will inevitably come at a huge cost to the taxpayer. Indeed, if we take just one example, Rosebank, the UK’s largest undeveloped oilfield, the costs become clear. Rosebank is enormous. At triple the size of the neighbouring Cambo oilfield, it would produce more emissions than 28 low-income countries combined or, to put it another way, it would produce the carbon dioxide equivalent of running 58 coal-fired power stations for a year. If developed, its owners will be gifted a £3.75 billion taxpayer-funded subsidy from the Government to the estimated £4.1 billion project. The Norwegian state-owned company Equinor, which made a staggering £62 billion last year, contributed just £350 million while pocketing enormous profits.
Non-domestic Energy Support
Caroline Lucas Excerpts(1 year, 10 months ago)
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James Cartlidge
The hon. Gentleman is right about the need to be swift. I have responded to a number of Members by referring to the letter to Ofgem that the Chancellor was sending today, asking it to produce an urgent update, before the Budget, on the review of the non-domestic energy market, because of all the stories we are hearing from colleagues about the way in which some non-domestic providers are behaving. I will ensure that the letter can be found on gov.uk. It must be said that there are many excellent providers in the market, but it is less regulated than the domestic side, so I think it important for Ofgem to consider these many points. I should also say to the hon. Gentleman that there have been some recent changes in the cost of connecting to the grid, and I am happy to write to him with further details about that.
Caroline Lucas (Brighton, Pavilion) (Green)
I appreciate that balances must be struck, but I think that small businesses, including many in my constituency, will have listened to this announcement with deepening anxiety. Research from the Federation of Small Businesses suggests that one in four small businesses are expected to close, downsize or radically change their business models when the Government reduce energy support. Obviously, that research was conducted before we knew the shape of this proposal, and it is much less supportive than the FSB and others hoped.
Let us be clear: this decision poses an existential threat to small businesses, many of which think that, in a sense, they are being left vulnerable to wholesale energy price hikes while the Government wash their hands and walk away. Will the Minister look at it again, and, in particular, will he look at other ways of supporting small businesses with the multiple challenges that they face, for example by suspending covid loan debt repayments so that they have some hope of surviving this year?
James Cartlidge
I understand why colleagues are concerned when they receive correspondence, whether it involves the FSB acting at a national level or individual businesses in their constituencies. These have been incredibly challenging times. I ran a business before I came to the House, and I went through the credit crunch, which was unbelievably stressful. We were a mortgage company, and mortgages disappeared on a far greater scale than they did some months ago. It is good to see them returning, and with lower rates in recent days.
Let me say to the hon. Lady, however, that this remains generous support. It is not as generous as it might be—I have been clear about that—but it will still be significant for businesses. Let me also stress a point that I made in an earlier answer. If we go back to the beginning of the EBRS and then up to the end of the discount scheme in April 2024, we see that there are 18 months in which businesses can adapt. I know that it is not easy, but significant funds are available to support efficiency. I think that, in circumstances such as these, all of us—people who run charities or businesses, and Ministers —must look at what more we can do to run our operations more efficiently in the face of huge changes in energy prices.
Oral Answers to Questions
Caroline Lucas Excerpts(1 year, 11 months ago)
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Jeremy Hunt
We will certainly do that. I know that the 75% discount we announced for retail, hospitality and leisure businesses will make an enormous difference to businesses in Gloucester, as will the £2.5 billion annual discount in business rates overall as we make the transition to the new system.
Caroline Lucas (Brighton, Pavilion) (Green)
A very Merry Christmas, Mr Speaker.
With oil and gas companies making grotesque profits from high global prices, it is beyond belief that the Chancellor does not scrap the so-called investment allowance announced in the autumn statement, which means that companies are still able to claim £91.40 in tax relief for every £100 invested in oil and gas infrastructure. Will he now come clean about the cost to the taxpayer of this perverse and utterly unjustified subsidy?
James Cartlidge
I am happy to confirm that that levy will raise £40 billion. As I said earlier—and this is very important—the support that the hon. Lady’s constituents, and indeed all our constituents, will receive this winter has to be paid for somehow. A key purpose of the levy is to help fund support for businesses and for our constituents, with higher cost of living payments for the most vulnerable and those on benefits. It is extremely generous, and, as I have said, it is bringing down inflation for the whole country.
Financial Services and Markets Bill
Caroline Lucas ExcerptsWednesday 7th December 2022
(1 year, 11 months ago)
Commons ChamberRead Full debate Financial Services and Markets Act 2023 View all Financial Services and Markets Act 2023 Debates Read Hansard Text Watch Debate Read Debate Ministerial Extracts Amendment Paper: Consideration of Bill Amendments as at 7 December 2022 - Clarification of Schedule 2 (Transitional amendments): Large print edition - (7 Dec 2022)
Andrew Griffith
I beg to differ with the hon. Lady, because it is important to finance the transition to achieve a just green financial future. While we are making all these efforts and coming forward with things such as the taskforce on nature-related financial disclosures, we will therefore make sure that we are not defaulting to divestments and boycotts, because that is not our view of the way that the Government will finance the clean energy revolution.
Caroline Lucas (Brighton, Pavilion) (Green)
The Bank of England’s climate stress test, published in May, showed that banks need to take climate action immediately or face a hit to annual profits of up to 15%. This is not just about airy-fairy words about the transition, but about banks that, as we have just heard, are bankrolling the fossil fuel industry, which will bring real risks to the finance sector as well as to the rest of the world. Can the Minister say whether he will support new clause 25?
Mr Deputy Speaker (Mr Nigel Evans)
Before the Minister does, I will just say that he has been speaking for three quarters of an hour now. A lot of people want to contribute to the debate.
Caroline Lucas
This Bill should be a once-in-a-generation opportunity to ensure a rapid, stable, co-ordinated and just transition to a low-carbon economy, to advance financial inclusion and to protect consumers, investors, banks, asset managers and other financial institutions against the catastrophic financial risks associated with climate and nature breakdown. Sadly, I believe that it fails to deliver on all those counts, and many others too.
I have signed a number of new clauses with the aim of improving the Bill, on matters such as free access to cash and better regulation of buy now, pay later credit. I also strongly support the new clauses tabled by the hon. Member for Sheffield, Hallam (Olivia Blake). However, I want to use my speaking time to focus on three new clauses in my name.
New clause 25 goes to the heart of what the Bill is about. It seeks to reposition the objectives of the regulator so that they are consistent with the future that we are facing. It would change the strategic objective so that it is no longer simply about ensuring that the relevant markets function well, but about ensuring that they deliver long-term economic resilience and prosperity. It would also create two new operational objectives. The first is a climate objective to facilitate the meeting of targets set out in the Climate Change Act 2008 and the 1.5°C temperature rise limit of the Paris agreement. The second is a nature objective, to facilitate alignment with the Government’s commitment to halting and reversing biodiversity loss by 2030.
Those changes matter on a great many levels. Most obviously, as the United Nations Secretary-General warned just last month:
“We are in the fight of our lives and we are losing…And our planet is fast approaching tipping points that will make climate chaos irreversible.
We are on a highway to climate hell with our foot on the accelerator.”
We therefore need to deploy every tool at our disposal to the task of creating an economy that reflects this new reality. There is no greater moral imperative, or indeed any greater financial imperative.
The Bank of England’s first climate stress test was published in May. It sought to understand how climate change would affect banks’ business models, and whether they held enough capital to cover climate-related risks. The results were clear: banks need to take climate action immediately, or face a hit to annual profits of up to 15%. If the net zero transition is delayed by a decade and global temperatures reach 1.8°, by 2050 banks will face losses of £225 billion. However, the banks are not alone in being exposed to huge climate risks. Investors, consumers, anyone with a pension, asset managers, savers, mortgage holders and other financial institutions are all threatened.
The Bill should provide an opportunity to meet those challenges and lay the foundations for a secure and stable future-facing economy, but I believe that without my new clauses, it simply does not do that. Leading financial institutions agree, including Aviva Investors, Phoenix, Hargreaves Lansdown and BUPA Insurance. They raised concerns with the Bill Committee, saying that
“the proposed regulatory principle will not provide a sufficiently strong legal basis for regulators to promote a thriving net zero financial sector. It certainly won’t encourage the regulators to ensure that the UK becomes the world’s leading green financial centre.”
Moreover, as it stands, nothing in the Bill acknowledges the crucial role of nature, although the Economic Secretary himself recognised in Committee that we could not achieve our climate goals without recognising and acknowledging that vital role.
New clause 25 would go further and remove the proposed competitiveness and growth operational objective for the FCA. The financial impacts of pursuing a climate-busting competitiveness and “growth at all costs” approach over climate action is clear. For example, it is estimated that the UK will lose 10% of GDP by 2050 if we do not tackle climate change, and that Europe will see a 30% rise in defaults on corporate loans to the most exposed companies. No wonder the Treasury Committee advised against a primary focus on competitiveness, warning that it could lead to weakening standards and a reduction in the UK’s financial resilience, and could undermine the reputation of the UK’s finance sector.
It is worth recalling that Parliament itself deliberately removed competitiveness from the mandate of the financial regulator just a decade ago, learning the lessons from the regulatory failure leading up to the global financial crisis of 2007-08, which saw millions lose their savings, homes, businesses and jobs. With so much at stake, I can think of no good reason why the Government is making such a reckless move, and no good reason why it could not instead support a focus on the creation of a wellbeing economy designed to foster long-term economic resilience and prosperity.
I have also tabled new clause 21, which mandates the introduction of a one-for-one capital requirement for the financing of new fossil fuels. In other words, for each pound that finances fossil fuels, financial institutions should have a pound of their own funds held liable for potential losses. It is a principle that is used elsewhere. In June 2021, for example, the Basel Committee on Banking Supervision—the global standard setter for the regulation of banks—recommended its application to some cryptocurrencies’ exposures. At present, however, the Government are not seizing these opportunities.
Even with no fossil fuel expansion, by 2025 global emissions from existing projects will be 22% too high to stay below 1.5° and 66% too high by 2030—all while the scientific reality makes it clear that fossil fuels assets are uneconomic and financially uncompetitive in a 1.5° or 2° world. Fossil fuel financing increasingly threatens economic stability. It increases the physical risks of climate change, thereby leaving the financial system exposed to significant losses from balance sheets and from environmental damage to the wider economy. That is why these amendments are so important and that is why we should get fossil fuels out of our financial sector now.
Danny Kruger (Devizes) (Con)
I am going to speak briefly to new clause 7 on access to cash, and to new clause 27 on access to banking services. I very much support the Bill and completely commend what the Government are trying to do. It is a source of great pride that they are bringing financial regulation home as one of the great benefits of Brexit. I applaud what they are doing and appreciate all the engagement that Ministers have had with colleagues on the new clauses that I am speaking to.
I understand that there is an intention not to push new clause 27 to a vote, and I intend to abstain on new clause 7 if there is a Division on it, because I look forward to the policy statement that the Government have promised. I support the principle behind both the new clauses. As Members have mentioned, we seem to be moving inevitably towards a cashless society, and we can all see the personal convenience of that. Like the royal family, I personally do not carry cash around. It is only embarrassing when I am in church and the platter comes around. That is pretty much the only occasion when I feel the need for it, but that is not the case for everyone.
For anyone using a digital payments system, the operator of the platform has potentially immense control over their life, in principle and in practice. That is why what PayPal did to the Free Speech Union and others a few months ago is so important. Yes, we can acknowledge that that event was an outlier. It was a rare and slightly inexplicable event and, yes, it was quickly corrected in some of the cases of the accounts that were closed, but the fact is that it happened. It was a straw in the wind, and the fact that individuals and organisations with heterodox political opinions found themselves unable to operate economically because of the decision of a private company acting entirely on its own initiative, possibly under pressure from external campaigns, is a troubling development. So it is vital that we send the strongest regulatory, and also cultural and political, signal to these private payment platforms that the opinions of their customers are none of their business.
Nor are private opinions any business of the state, and this is why the question of access to cash is about more than the important issue of protecting the vulnerable, although I agree with the points that have been made on that. It is also about liberty. Just now, behind the scenes, the Government and the Bank of England are developing plans for their own central bank digital currency. Again, we can see the practical appeal, but the threat is that the Government will have oversight of the economic activity of private citizens, which is something that no Government of this country have ever had in our history. It is therefore vital that the debate on a central bank digital currency has liberty front and centre. We can all say warm words about the importance of safeguards and freedoms, but the fact is that if the emergency is bad enough and the powers are available, those powers could well be used.
We saw this happening around the world, and to some degree in our own country, during the covid crisis. We have only to look at what the Canadian Government did to block access to the bank accounts of truckers protesting against the covid policy there to see what can be done in a modern liberal western country. It would be a shame if we took back control of financial regulation from the EU only to empower private payment platforms, or indeed our own central bank, in that way. Cash services and banking services are part of the infrastructure of our communities. They are also part of the infrastructure of liberty.
Finance Bill
Caroline Lucas ExcerptsWednesday 30th November 2022
(1 year, 12 months ago)
Commons ChamberRead Full debate Finance Act 2023 View all Finance Act 2023 Debates Read Hansard Text Watch Debate Read Debate Ministerial Extracts Amendment Paper: Committee of the whole House Amendments as at 30 November 2022 - (30 Nov 2022)
Victoria Atkins
I will happily do so. My hon. Friend will know the definition of “extraordinary” in relation to the electricity generators levy. We will come to the profits levy in due course.
The Government are raising the rate of the levy from 25% to 35% from 1 January next year, bringing the headline tax rate for the sector to 75%. That is because commodity prices—particularly gas—are expected to remain above their long-term average for the foreseeable future. However, the Government want the oil and gas sector to reinvest its profits to support the economy, jobs and the UK’s energy security, which is why the levy has an investment allowance that means that businesses overall get a 91p tax saving for every pound that they invest, providing them with an additional, immediate incentive to invest.
Clause 2 makes changes to the rate of the investment allowance within the levy to ensure that the total tax relief remains broadly the same following the increase in rate to 35%. Specifically, the clause reduces the rate of the investment allowance from 80% to 29%, effective, again, from 1 January next year. That will maintain the overall cumulative value of investment reliefs, which means that a company investing £100 will be able to claim £91.40 back in tax relief. To be clear, the investment allowance will remain at 80% for investment expenditure on upstream decarbonisation, so that we continue to support the transition to low-carbon electricity production. That will be legislated for in the spring Finance Bill, following further detailed technical work and consultation with interested parties.
Caroline Lucas (Brighton, Pavilion) (Green)
The Minister will know that oil and gas companies are raking in obscene levels of profit. Why does she think it is reasonable to give incentives—through taxpayers’ money—to companies that are already raking in huge profits at a time when a cost of living crisis is driving so many families into real hardship?
Victoria Atkins
Certainly. I hope the hon. Lady will agree that we all want to see more decarbonisation, which is precisely why we have set the net zero landmark achievement for 2050, as she knows. In relation to energy security, we have to be realistic about where we are. Much as some campaigners would like it, we cannot stop using oil tomorrow. We have to find reasonable and methodical ways of decarbonising, which is precisely what the investment allowances aim to do, while encouraging different businesses, and indeed those businesses, to invest in carbon-free and low-carbon forms of energy production.
Clause 3 will extend the levy so that it ends on 31 March 2028 rather than in 2025. Although the levy remains a temporary measure, the change simply reflects the fact that global factors are now expected to keep commodity prices, particularly gas prices, elevated for longer than was first anticipated. At the same time, the Government recognise that certainty is key for oil and gas investments. There will therefore no longer be an early phase-out of the levy ahead of the new March 2028 end date, according to prices.
Together, the changes introduced in clauses 1 to 3 will raise approximately £20 billion over the next six years. The total revenue now expected from the levy is just over £40 billion over the same period.
Clause 4 relates to rates of research and development tax credits. The changes it makes will ensure that taxpayers’ money is spent as effectively as possible. Despite the UK spending the most in the OECD on R&D tax reliefs, the current system does not provide good enough value for taxpayers. The cash value of the scheme that looks after small and medium-sized enterprises is currently three times that of the research and development expenditure credit. The corporation rate change due from April next year will make the issue worse by incentivising less R&D per £1 of taxpayer support. Sadly, the SME scheme’s generosity has also made it a target for fraud.
The clause will therefore rebalance the generosity between RDEC and the SME scheme, specifically by increasing the RDEC rate from 13% to 20%, decreasing the SME enhanced deduction from 130% to 86%, and decreasing the SME credit rate from 14.5% to 10%. The changes that the clause will introduce are also a step towards a possible simplified single RDEC-like scheme for all.
Despite raising revenue, this reform is forecast to leave the level of R&D investment in the economy unchanged. More broadly, the Government have recommitted to increasing R&D spending to £20 billion by 2024-25. Ahead of the spring Budget, we will work with industry to understand whether further support is necessary for R&D-intensive SMEs. I know that is the point that most concerns several colleagues; I suspect that we will hear more about it in due course.
Clauses 5 and 6 relate to income tax thresholds. As the autumn statement sets out, the path to fiscal sustainability requires us to ask everyone to contribute a little more towards our public finances, but we are doing so in a fair way: those with more are being asked to contribute more.
Clause 5 will set the personal allowance at £12,570 and the basic rate limit at £37,700 for 2026-27 and 2027-28. Those thresholds, which have already been fixed at the current levels until April 2026, will be maintained for a further two years until April 2028. I hope hon. Members will note that the personal allowance is still the most generous tax-free personal allowance of any G7 country. Thanks to previous significant real-terms increases, it will still be more than £2,000 higher by April 2028 than if it had been uprated by inflation since 2010, with an estimated 1.6 million more people taken out of paying tax. Approximately 30% of people do not pay tax as a result of the personal allowance. I hope Government Members are proud that we have achieved that.
This Government also enacted the largest ever increase to a personal tax starting threshold in July this year by raising the national insurance starting threshold to £12,570, ensuring that some of the lowest earners do not pay any tax. That means that in 2028 someone on the average salary of £28,000 will still pay almost £900 less in tax than if tax thresholds had gone up with inflation since 2010. The income tax higher rate threshold is still high enough to protect the vast majority of people from paying the higher rate of income tax; approximately 80% of taxpayers pay tax at the basic rate.
Clause 6 will deal with those at the higher end of the income scale, to ensure that our return to sustainable public finances happens in a fair way. It will lower the additional rate threshold from £150,000 to £125,140 from April next year, meaning that income above that level will be taxed at 45%. Only the top 2% of taxpayers will be affected by this measure, which is expected to raise £800 million per year by 2024-25, with the vast majority of revenue—more than 80%—coming from those who earn more than £150,000.
Sir Robert Syms
I rise, as I did on the autumn statement resolutions, broadly to support what the Government are trying to do. I am pleased that the Minister is in listening mode, which is good because not everything is perfect in these debates. Even if things are not quite right in the autumn statement, there will be further Budgets in the years ahead. I am sure she will have a very successful career and will be in the Treasury for a while, and I therefore hope she will take our comments on board.
Clearly, at a time when money is short and the demands of struggling people are high, it is more difficult to redesign the tax system in an ideal way. I raised in my second intervention the difficulty in which those earning between £100,000 and £120,000 find themselves, and I hope their marginal rate of 60% will be reviewed at a future date.
I have some sympathy with the comments about research and development. The Treasury has a habit of introducing incentives and then worrying about losing too much tax. Actually, research and development should be a priority for this Government. A business investing in new technology wants to know what will happen three, five or seven years ahead. Sudden changes to the research and development rate may undermine the funding model of new businesses. I am sure there will not be a change this year, but I hope we will review this area very carefully, because it was one of our better measures in previous Budgets.
My main remarks are about the windfall tax. I do not like windfall taxes, but the way in which the Government have designed this windfall tax is good because of the investment allowance, which is the subject of a number of amendments. The objective has to be to keep companies investing. We are blessed as a nation, as we have oil all the way around our coastline. The only question is, at what oil and gas price is it worth recovering?
What has happened in the North sea in my lifetime is a tremendous British success story. Getting oil and gas from the great depths of the North sea made us, at one point, self-sufficient. We still have a lot of oilfields that we can develop, but eking out further discoveries needs incentives. I am a bit worried about the windfall tax, but I understand the current political need to have one. I am pleased with the investment allowance, because it will encourage companies to invest, and that investment should help us to produce more oil and gas and should help the British economy.
Something else that has occurred in my lifetime is that Aberdeen and many other areas of the United Kingdom that are near oilfields have created thousands of jobs. Those people may no longer be working in our oilfields, but they are working in oilfields abroad. This is an area that we need to develop.
My concern about extending the windfall tax to 2028—I raised the word “extraordinary” in my first intervention—is that there will come a point at which prices fall, perhaps because there is peace in Ukraine or because other forms of energy come on tap. If we maintain the windfall tax, we will then do great damage to the oil and gas industry. We need a way of assessing what the Government do and do not consider to be extraordinary.
Some years ago, the Wood review of the North sea looked at what could be done to extend the life of the North sea fields. It would be helpful if the Government reported on where they stand on the oil price and the windfall tax. It might be better if they employed an expert, independent of both the Government and the oil and gas industry, to look at what is being done to assess whether investment is being hurt and whether the rates are appropriate. We assume a rate of 35% all the way up to 2028; we are not assuming a reduction, even if oil prices reduce.
I see the autumn statement as a little like a business plan that we might show to our bank manager. It does not mean that everything will necessarily happen as set out until 2028. If we expect the industry to invest, it is important that it knows what will happen to the tax rate if oil and gas prices change. North sea oilfields and gas fields are five, 10, 15 or 20 years’ worth of investment, so they are long-term, not short-term, investments. We need to focus on the short-term need to raise money, which even the oil and gas industry probably understands. The investment allowance is good, and it will encourage short-term investment, but there will be long-term damage if we are not flexible enough either to reduce the rates or to abolish the windfall tax when we get back to more normal gas prices.
Caroline Lucas
I am grateful to the hon. Gentleman for giving way, because my anger is becoming so extreme that I might burst at any moment. Does he recognise that this country has the world’s most generous tax regime for oil and gas companies? Does he recollect that BP’s CEO said the company is raking in more money than it knows what to do with? He compared his company to a cash machine.
Does the hon. Gentleman not think his constituents in Poole might be rather more impressed if some of the money that has been forgone by the Treasury instead went into making sure we have enough teachers in our schools and enough health workers in our hospitals?
Sir Robert Syms
I am glad the hon. Lady is irritated by my comments, because I think I am right. We want a very successful oil and gas industry. My constituency is on top of the Wytch Farm oilfield, which has been going for 40 years. Most of my constituents do not know they are on top of an oilfield, so they keep writing to me about oil and gas. The reality is that we will need oil and gas over the next 30 or 40 years. Apart from power, many products derive from oil and gas.
Oil and gas is a very successful industry for the United Kingdom. The hon. Lady and I probably disagree on most things, but we need to ensure that we keep the industry growing, which will create lots of jobs. This very successful industry creates a lot of wealth, which does not undermine the fact that many oil companies are now investing heavily in renewables. The North sea investments of Shell and many other major companies are consistent with decarbonisation. What we can do in producing more North sea oil and gas and in decarbonising a lot of that production is very exciting.
That is my main concern for the Minister. This has been a difficult year for the Government, partly because of worldwide factors. I look around the world and see shipping costs falling and inflation starting to tail off. I hope there will be peace in Ukraine, and I hope the Ukrainians win, which may well improve the economic situation over the next two years. The Treasury needs to be flexible in how it looks at the situation. When I listen to Opposition Members, I feel they have a very inflexible view of the oil and gas industry that I think would do us great damage. I am glad the Government are in listening mode, and I hope they listen further to the comments of Back Benchers.
Caroline Lucas (Brighton, Pavilion) (Green)
I rise to speak in support of my new clause 1, on an assessment of the impact of the investment allowance.
When the Chancellor delivered his autumn statement, he did so not just against a backdrop of recession and rising inflation, but in the context of the twin challenges of the climate and energy crises—both of which have fossil fuels at their core—and while millions of households face fuel poverty and unimaginable hardship this winter. The UN Secretary-General memorably warned at COP27 that:
“We are on a highway to climate hell with our foot on the accelerator.”
My new clause would address the continuation of a policy that locks us further into fossil fuels at the expense of the taxpayer and at the cost of exacerbating climate breakdown.
Although I welcome the strengthening of the windfall tax to 35%, bringing the total tax on oil and gas to 75%, which is still notably lower than Norway’s 78%, it is genuinely incomprehensible that the Government have failed to close the gaping loophole that lies at the heart of this windfall tax.
Peter Grant
Does the hon. Lady agree that the Government have missed a huge opportunity in limiting the windfall tax to oil and gas companies? They could have introduced a windfall tax on other companies that have, fortuitously, made massive profits as a result of the pandemic.
Caroline Lucas
I certainly agree with the hon. Gentleman. If I had to make a suggestion about where the Government should look next, it would be the distribution network operators—the companies that run the grids. There has been no spotlight on them at all even though they are making massive profits right now.
The hole at the heart of the windfall tax has led Shell—the UK’s fourth largest oil and gas producer—to pay no windfall tax or, indeed, any normal oil and gas tax at all. Indeed, oil and gas companies, which have made frankly grotesque profits, will still be able to claim £91.40 in tax relief for every £100 invested in oil and gas infrastructure. What is more, from January 1 a company spending £100 on upstream decarbonisation—which essentially translates as reducing emissions from the process of extracting oil and gas that goes on to be burned—will now be eligible for £109 relief. In other words, the taxpayer is actually paying the oil companies, which are already raking in massive profits—not the other way around.
The Government plan to make real-terms cuts to Departments that have already been starved of funding. They talk about “sacrifices” and “difficult decisions”, as the Chancellor has. Charities warn of a humanitarian crisis, and new research published this weekend shows that almost 200,000 additional young families will be pushed into fuel poverty come April when the energy price guarantee rises to £3,000. In that context, how can the Government possibly justify a situation in which taxpayers are supporting oil and gas companies, whose profits have absolutely ballooned, to fulfil obligations that they can perfectly well afford to pay for themselves.
It is also worth comparing this tax with the one on low-carbon electricity generators, which will be subject to a windfall tax of 45% for revenues above £75 per MWh, yet will not be eligible for investment relief at all. That leads to a ludicrous situation whereby companies will get a bigger tax break for building a wind turbine to power an oil rig than for building one that generates power for the energy grid. I simply cannot see how that is defensible in any shape or form.
The autumn statement should have been the moment where the Chancellor launched a transformation of our economy, powered by abundant renewable energy and with good green jobs. Instead, we had continued support for a costly and slow nuclear white elephant, and for the fossil fuels choking our planet. The so-called investment allowance—it is better termed “obscene subsidy”—is, frankly, a disgrace that fails to tax oil and gas companies properly and comes at huge cost to the public purse. Indeed, it has been estimated that if Rosebank—the UKs largest undeveloped oilfield—is developed, its owners would effectively receive more than £500 million in taxpayer subsidies.
To put that figure into context, it would be enough to extend free school meals to every child whose family receives universal credit, to pay the annual salaries of more than 14,000 nurses, or to build one new medium-sized hospital. Choosing between genuinely improving our society or subsidising a climate-wrecking project—Rosebank, in this case, which would produce more emissions than 28 low-income countries combined—should not be a difficult choice.
Make no mistake, it is a subsidy—including, it would appear, according to the Government’s own definition in the Subsidy Control Act 2022. I am sure the Government will deny that, but perhaps they will be more inclined to take note of the Institute for Fiscal Studies, which has stated that the investment allowance
“means that North Sea investment will be massively subsidised”,
through which loss-making investments could be rendered commercial.
Put simply, my new clause would require the Government to publish an assessment of the impact of the investment allowance on revenue raised by the windfall tax. The Government estimate that the oil and gas sector will pay around £80 billion in tax over the next six years, but it is essential that we have greater transparency on how much revenue will be forgone. That revenue could help to finance a real retrofit revolution to upgrade the UK’s leaky homes so that we get off gas for good.
Of course, I welcome the £6 billion investment in energy efficiency from 2025, but that will be of little comfort to households that are struggling to heat their homes right now. Crucially, my amendment would also require the Government’s assessment to cover the impact of the investment allowance on the UK’s ability to meet its domestic and international climate targets. The Glasgow climate pact, which the UK presided over, includes the commitment to pursue efforts to limit global heating to 1.5°C degrees, but the UN has made it clear that Governments plan to produce more than double the amount of fossil fuels in 2030 than would be consistent with staying below that critical threshold. I am aware that a number of amendments seek that kind of assessment of the investment allowance, and I welcome them, but I believe mine goes further because it would require the assessment to consider the impact on the 1.5° target, in addition to net zero and the UK’s carbon budgets.
It is no longer acceptable for the Government to look at its policies in isolation from our planet’s shared carbon budget. Not only does oil and gas extracted in the UK add to global emissions regardless of where it is burned, but, as the Committee on Climate Change has acknowledged, further extraction
“will support a larger global market overall”—
I remind hon. Members that that global market already has more oil and gas planned than we can possibly burn in keeping below 1.5°, and that is before we start extracting more. I therefore urge the Government not only to accept my new clause but to scrap the investment allowance once and for all, for the sake of our climate and the lives of so many people who are struggling with the cost of living crisis.
Victoria Atkins
I thank hon. Members for their thoughtful contributions to today’s Committee of the whole House. I will take a few moments to set out our views on the proposed amendments and the reasons why we will not support them.
I will deal first with amendments 3 and 4 and new clauses 1, 2 and 9, which relate to the energy profits levy clauses in the Bill. Starting with the amendments, my hon. Friend the Member for Poole (Sir Robert Syms) asked how “extraordinary” profits are defined, and we have not had a chance to draw that out in the course of the debate so far. The definition for the energy profits levy applies only to the profits that companies make from producing oil and gas in the UK and on the UK continental shelf. That is why we see reports in the newspaper about certain companies not contributing to the levy this year. I am not allowed to speak about individual taxpayers, but we have had to specifically focus it on UK business because we are raising taxes for the UK Treasury. That is how we are defining it.
My hon. Friend expressed concern, it is fair to say, about what will happen with the levy if prices go down, as we sincerely hope they will. Through this difficult announcement in the autumn statement, we are expanding the time in which the levy will operate until March 2028. We have done that to provide companies with certainty, because the latest OBR autumn statement price expectations for oil and gas across the forecast horizon exceed average predictions when the levy was first introduced. Commodity prices, particularly for gas, are expected to remain above their long-term average for the foreseeable future, but we will continue to keep the levy under review, as we do with all forms of taxation, while it is in place.
Moving on to amendment 3, the Government reject the premise that the levy should have been in place earlier. In the early months of this year, three significant things changed: first, there was a new war driven by Putin in Ukraine, which introduced significant instability to global energy markets; secondly, inflation was considerably higher than was previously expected; and thirdly, the Government had concrete information on the autumn and winter energy price cap. We therefore introduced the levy in response to these fast-moving conditions.
I welcome to her place the hon. Member for North Shropshire (Helen Morgan), whom I have not had the pleasure of seeing across the Chamber, if she can look up from her phone. Just to give a little context to the statistics, before covid the British economy spent £40 billion a year on energy costs. Today, the annual figure is closer to £200 billion. That means the British economy has to pay an additional £160 billion a year on energy. That is like withstanding a pressure equivalent to an entire second NHS. That is why we have had to make many of these very difficult decisions in the autumn statement, but in particular we introduced the energy profits levy and are now increasing it because of this difficult financial situation.
Amendment 4 and new clause 1 would require the Government to report on how much additional revenue would have been generated without the investment allowance. We have always been clear that we want to see significant investment from the sector to help protect our energy security. The North sea will continue to be a foundation of our energy security, so it is right that we continue to encourage investment in oil and gas. The levy will raise substantial revenues following the changes introduced by this Bill—more than £40 billion over the next six years. That takes into account the tax relief available through the investment allowance. Figures on the amount of tax raised through the levy will be published periodically, in line with other taxes, and His Majesty’s Revenue and Customs also publishes data on the costs of reliefs, and that is likely to include the investment allowance once data is available.
Although it is important to note that many companies already publish tax data through voluntary transparency schemes, the Government respect the commercial confidentiality of taxpayers. Companies within scope of the levy will be reporting information on their taxable profits in their tax returns. New clause 1 also refers to the impact of the investment allowance on the UK’s climate commitments, as does new clause 9. Supporting our domestic oil and gas sector to boost energy independence is not incompatible with these commitments, as we will need these fuels for decades to come as we transition to clean energy.
Our domestically produced gas generates lower emissions than imported seaborne liquefied natural gas, so supporting home-grown hydrocarbons helps to reduce emissions overall. When the upstream industry has reduced its overall emissions by 11% since 2018, it would not make sense to remove support towards further progress. The industry has agreed with the Government’s stretching targets towards 2030, and the investment allowance will provide additional relief to support that.
Autumn Statement Resolutions
Caroline Lucas Excerpts(2 years ago)
Commons ChamberRead Full debate Read Hansard Text Watch Debate Read Debate Ministerial Extracts
The Chief Secretary to the Treasury (John Glen)
I beg to move,
That—
(a) provision may be made increasing the rate at which energy (oil and gas) profits levy is charged to 35%,
(b) provision may be made reducing the percentage in section 2(3) of the Energy (Oil and Gas) Profits Levy Act 2022 (amount of additional investment expenditure) to 29%, and
(c) (notwithstanding anything to the contrary in the practice of the House relating to the matters that may be included in Finance Bills) provision may be made for and in connection with extending the period for which the levy has effect until 31 March 2028.
In the face of coalescing global headwinds, we have delivered an autumn statement that provides the fairest and most effective way through to brighter days. We must rebuild the economy and repair public finances after the covid-19 crisis, the Ukraine war and rising debt interest costs.
We are not alone in dealing with these economic challenges—the euro area is facing inflation of 10.6%, interest rates have risen higher in the US, Canada and New Zealand, growth forecasts have fallen more in Germany, and one third of the global economy is forecast to be in recession this year or next—but it is with honesty, integrity and compassion that we will deal with the challenges that we face. It is only by doing so that we will curb rising prices, restore faith in our country’s economic credibility internationally and, ultimately, deliver growth.
Our international reputation is vital because it has a large impact on the price we pay to borrow as a country, but I recognise that many hon. Members are concerned primarily about what this means domestically for their constituents. We want to be honest with the public about the challenge and fair in our solutions. What does that mean? It means a focus on stability, growth and public services.
To provide a shelter for those most at risk from the economic winds, we are uprating pensions and benefits in line with inflation next year, based on September’s figure of 10.1%, fulfilling our pledge to the country to protect the pensions triple lock. In April, the state pension will increase in line with inflation: an £870 increase, the biggest ever cash increase in the state pension. The benefits uplift will cost £11 billion and will mean that 10 million working-age families see a much-needed increase next year. To increase the number of households that can benefit from this decision, the benefit cap will rise with inflation next year.
To support those on the lowest incomes, we are increasing the national living wage by 9.7% to £10.42, its largest ever cash increase. To continue helping households to pay for their energy use, we will levy a new tax on electricity generators and an even higher tax rate on oil and gas companies, which have been gifted higher profits simply because Putin’s barbaric invasion of Ukraine sent prices soaring.
Caroline Lucas (Brighton, Pavilion) (Green)
Although the increase in the windfall tax is certainly welcome, the changes to tax reliefs from January of next year will mean that a company spending £100 on upstream decarbonisation will be able to deduct £109.25 when calculating its levy. In other words, the taxpayer will be paying money to the oil and gas companies, rather than the Treasury receiving net money. Can the Chief Secretary explain how on earth that can be justified, particularly when there is an economic crisis and we need to decarbonise?
Autumn Statement
Caroline Lucas Excerpts(2 years ago)
Commons ChamberRead Full debate Read Hansard Text Watch Debate Read Debate Ministerial Extracts
Jeremy Hunt
My hon. Friend has campaigned hard for East West Rail and I am happy to confirm that, as a result of the difficult decisions that we have taken today in the round, it will proceed. It will make an enormous difference to our country, because of the connectivity that it will provide between two of the greatest universities in the world. It is a very important step forward for the country. With regard to the extension of VED to electric cars, which we are doing at the point at which half of all cars sales in the UK will be of electric cars, it asks people who have electric cars for £165 a year. Given that we have spent £2.5 billion on electric car charging points, I do not think that that is an unreasonable request.
Caroline Lucas (Brighton, Pavilion) (Green)
The Chancellor said that he would be honest about the challenges we face, so it is frankly extraordinary that he could speak for almost an hour without once acknowledging the economic catastrophe of Brexit. According to the OBR, it will slash productivity by 4%; it has delivered a 15% drop in trade; there will be a 14% drop in investment; it will increase food prices by 6%; and it will deliver lower wages, workforce shortages and the highest inflation in the G7. When will he name the elephant in the room? When will he start to address that and reverse some of the damage that it is doing?
Jeremy Hunt
I do not deny for one second that Brexit will be a change in our economic model, but whether we make a success of it is up to us. This Government will make a success of it and make it a tremendous opportunity.