Oral Answers to Questions

Caroline Lucas Excerpts

Tuesday 15th November 2022 Commons Chamber

[Jeremy Hunt]

Let me just say to my right hon. Friend that he and I both agree on the vital responsibility of any Government to defend their shores and their peoples, and we are committed to doing what it takes to make sure we do that.

[Caroline Lucas (Brighton, Pavilion) (Green)]

In a letter to the Chancellor last week, Lord Deben, the chair of the Climate Change Committee, said clearly that demand reduction is “now the biggest gap” in UK energy policy. Will Thursday’s autumn statement include an emergency investment of at least £3.6 billion over the course of this Parliament, so we can finally roll out the long-awaited and very overdue home insulation programme that this country needs?

[Jeremy Hunt]

Lord Deben speaks extremely wisely on environmental and climate change issues, and we would always take what he says with the utmost seriousness.

Economic Update

Caroline Lucas Excerpts

Monday 17th October 2022 Commons Chamber

[Jeremy Hunt]

This is an issue that has raised its head in my own constituency. Let me simply say to my hon. Friend that the Government’s position is clear: we will not proceed unless there is local support.

[Caroline Lucas (Brighton, Pavilion) (Green)]

In the bonfire of Government policy that has just taken place, the Chancellor was not very specific about what would happen to the Prime Minister’s investment zones policy. Personally, I was hoping that it would be incinerated as well, not least because it is designed to undermine environmental regulation, to avoid fair taxation and to bypass local democracy. In the past, he has said that he is a green Tory. I have to put it to him that that is sadly an endangered species right now, but if he is serious about being a green Tory, will he now take steps to demonstrate it by ruling out any policies that will undermine nature protection and restoration, and will he accept there is no financial capital that is not entirely dependent on a thriving natural capital?

[Jeremy Hunt]

I am absolutely committed to protecting our green spaces and boosting biodiversity, but I also think it is important to look at environmental regulations to see if they can be streamlined in a way that is consistent with allowing the natural world to flourish as well as the economy.

The Growth Plan

Caroline Lucas Excerpts

Friday 23rd September 2022 Commons Chamber

[Kwasi Kwarteng]

The freeports are certainly continuing and I would be very happy to speak to my hon. Friend about how we can, as he puts it, unblock the process to accelerate the Humber freeport bid.

[Caroline Lucas (Brighton, Pavilion) (Green)]

This Budget amounts to an environment wrecker’s charter and it is a statement of missed opportunities. For example, a report just this week shows that a major programme of insulating homes in Britain and installing heat pumps could benefit the economy by £7 billion a year, create 140,000 jobs by 2030, get our fuel bills down and get climate emissions down too. Tucked away on page 14 of the growth report is a tiny reference to some investment in energy efficiency. It is nowhere near enough. Why is the Chancellor setting his face against the kind of retrofit revolution that offers the only viable way out of the current crisis, as well as reducing our dependence on fossil fuels? Is it because, for him, dogma and deregulation trump evidence and common sense every time?

[Kwasi Kwarteng]

It is not about dogma and deregulation. In fact, I campaigned for the eco and energy efficiency measures when I was Business Secretary and ensured that there was reference in the growth plan to the eco plan. We may well expand that at a future date.

Financial Services and Markets Bill

Caroline Lucas Excerpts

2nd reading
Wednesday 7th September 2022 Commons Chamber

[The Economic Secretary to the Treasury (Richard Fuller)]

I beg to move, That the Bill be now read a Second time.

The provisions of the Bill create the conditions for the United Kingdom to roll back or reform all European Union legislation for financial services that remains on our statute book. The Government will move at pace to implement a more agile and more internationally competitive set of rules that will harness the potential of UK financial services to stimulate growth across the United Kingdom.

Financial centres in the European Union, in the United States and across Asia are engaged with the United Kingdom in a global competition to attract financial services expertise, and to be the most successful in adopting the benefits of technology-driven change that may radically alter the shape and reach of financial services. The Bill will enable the United Kingdom to assert its leadership, and to drive forward change to capture a greater share of the global market for financial services. As the Prime Minister has said, the financial services sector is the

“jewel in the crown of the UK economy”,

and we are committed to supporting its ability to realise its full potential. An effective, efficient and easily accessible financial services sector is a vital foundation for the ease of daily life and for the national economy. The Government are therefore taking forward an ambitious set of reforms in this landmark Bill.

[Caroline Lucas (Brighton, Pavilion) (Green)]

The Bill contains a new statutory objective on competitiveness and growth, which ranks those elements above the UK’s legally binding nature and climate targets. Given that a thriving economy depends on a thriving environment, will the Minister look at this again and consider introducing a climate-and-nature-specific statutory objective as well, so that there are two statutory objectives rather than a statutory objective and a regulatory principle, which are not the same thing?

[Richard Fuller]

The hon. Lady is right to point to the importance of the objectives that are set for the regulators in financial services, but surely she will accept that the most fundamental principle for each of them should be the stability of financial services in the United Kingdom, and we pay regard to that in the Bill. We have added, as she pointed out, some focus on global competition and on achieving growth across the United Kingdom. Those are the fundamental demands that the British people have of the financial services sector. However, it is important that we have regard to the issues that the hon. Lady has mentioned, and I am sure we will discuss them, and the priority that should be attached to them, in more detail in Committee.

--- Later in debate ---

[Tulip Siddiq (Hampstead and Kilburn) (Lab)]

I thank the Minister and his officials for all the information about the measures in the Bill that they have shared in recent weeks and for how they have co-operated with me.

As the Minister said, the Bill implements the outcomes of the future regulatory framework review and attempts to set out a clear direction of travel for the regulation of the City post Brexit. It is important that the UK is able to take advantage of this opportunity to create a more competitive financial services sector and to strengthen our regulatory standards for financial stability and consumer protection outside the UK. After more than a decade of stagnant growth, averaging just 1.8% a year, and with the current dangers that face our economy, enabling the City to thrive will be fundamental to the delivery of the tax receipts we need to fund public services and support people through the cost of living crisis.

We on the Opposition Benches broadly support the Bill as it stands. In particular, we welcome clauses 1 to 7 and 8 to 23, which empower the UK, the FCA and the PRA to tailor regulation to meet our needs outside the EU. The Labour party recognises that the City is now in a place very different from where it was in 2016. The consensus view across the sector now is that the ship has sailed on regulatory equivalence with Europe, but regulatory divergence with the EU has the potential to produce many opportunities for the sector and the wider economy, such as the reform of Solvency II to unlock capital for investment in the green transition.

EU regulation can often be over-restrictive, particularly in respect of financial technologies, as the Minister will know, and we welcome the fact that the Bill enables regulators to take a more outcomes-based approach to areas such as fintech. However, Europe will always remain an important market for our financial services sector. In 2021, exports of financial services to the EU were worth £20.1 billion—that is 33% of all UK financial services exports.

Since 2018, the value of UK financial services exports to the EU have fallen by 19% in cash terms, and there has been little progress in securing trade deals for our financial services around the world. I have to say to the Minister that the sector is disappointed that the Government have so far failed to finalise a memorandum of understanding on regulatory co-operation, or to negotiate with the EU for the mutual recognition of professional qualifications for our service sectors. I hope that when the Minister sums up he will tell us what impact he believes the Bill will have in securing those important agreements with the EU and boosting financial services exports more generally.

The Minister will know that I like to ask a series of questions when I deal with him, and I am afraid there is more to come. Let me turn to clause 24. We support the principle that there is a role for the FCA and PRA to advance international competitiveness and growth. We on the Opposition Benches are strongly committed to supporting the City to retain its competitiveness on the world stage and to ensuring that the UK remains a global financial centre outside the EU. But it is also right that financial stability and consumer protection remain the priority for regulators. Any compromise on those important objectives would be self-defeating.

[Caroline Lucas]

I completely accept the hon. Lady’s point about our being a competitive financial centre, but does she agree that there is a real opportunity to be a competitive green financial centre? As that opportunity is time-limited—other countries are moving faster than we are—does she agree that a secondary objective in respect of climate and nature will be essential to ensure that we regulate in a way that allows us to make the most of that potential?

[Tulip Siddiq]

I thank the hon. Lady for her intervention. I will come on to that issue later in my speech. It felt as though Conservative Members did not agree with her, but I agree with what she said.

Energy (Oil and Gas) Profits Levy Bill

Caroline Lucas Excerpts

Committee stage
Monday 11th July 2022 Commons Chamber

[Craig Mackinlay]

Thank you, Dame Rosie, for clarifying that. I think that we will find that the hon. Member for Aberdeen South (Stephen Flynn) was being a touch facetious.

[Caroline Lucas (Brighton, Pavilion) (Green)]

Will the hon. Member give way?

[Craig Mackinlay]

I had not developed a point, but, please, make an intervention.

[Caroline Lucas]

I am grateful to the hon. Member for giving way—I am intervening on a previous point on which he was intervened on. Is he aware that the 65% tax that the Government are proposing is still below the global average? The figure in Angola is actually higher at 70%, so there is not any real logic to what he is saying. These oil companies are already operating in places where the tax is higher.

[Craig Mackinlay]

Let me take a couple of those points. The hon. Lady makes the point that tax rates on the oil and gas industry are higher elsewhere in the world. Well, that may be the case. I know that some will be fundamentally opposed to the whole concept of being energy secure in the UK. Gas, in my view, is part of an interim solution as we get on the path to net zero, but it is a fact of life. I do not have an awful lot of time for the output of the Climate Change Committee, but even it is saying very clearly that we will be using gas and oil up to 2050 and probably beyond. My view is that that gas and oil should be sourced in the UK. Hence my support for the nudge part of this legislation, which may encourage businesses to stay here and invest here.

I did not address properly the point from my hon. Friend the Member for Banff and Buchan (David Duguid). He makes the point that we have the most fantastic environmental standards not just in oil and gas technology, but in practically everything that we do in the manufacturing space in the UK. There will be very few regimes around this world that have such high standards. On the issue of methane venting, which we have not really addressed, I can be absolutely sure that, with a very robust and advanced regulatory regime, the advanced oil and gas companies of this country will be telling the truth and doing the right thing rather more than may be the case elsewhere, and I think we have to accept that as a fact of life.

[Caroline Lucas]

First, the hon. Member seems to think that just because gas is exploited in the UK, it will get used in the UK, yet he must know that it gets sold on global markets and therefore might get used anywhere. Secondly, he talks about our environmental standards being higher than others. He will know that we get most of our gas from Norway, where, actually, its carbon footprint is significantly less than it is here in the UK. His argument just does not stand up.

[Craig Mackinlay]

I am so delighted that the hon. Lady has expanded this debate. This is not somewhere that I wanted to go, Dame Rosie, but I think it is my duty to respond to the intervention. Surely it is obvious, no matter where on the spectrum on net zero we are—I am obviously on the rather more critical part of that spectrum—that we will be having gas in this country. We have a choice: do we import it halfway across the world on a liquefied natural gas ship, with the CO₂ cost of chilling it, transporting it and regasifying it, or do we try to do that domestically?

[Caroline Lucas]

We sell it on international markets.

[Craig Mackinlay]

If I may, Dame Rosie, I will address the hon. Lady’s questions. On international markets, I do not know any more about economics than this: if we add more capacity to any system, the price should drop. Even if her view of economics holds water and the price does not drop, which I think is the basis of what she is saying, would I prefer the pounds of gas revenue to be at least retained and spent in the UK, or do I want to export those pounds to Qatar? I do not think there is much choice, and the answer is obvious.

I will finish now, Dame Rosie—I am sorry for the time I have taken, but I am grateful for your indulgence. If we take up this type of proposal of penal taxes that can be changed within a month, we will lose in future deferred taxes the opportunity cost of investment. Big companies will say, “Do you know what? The UK is not a place for good investment. I think I will take my money elsewhere.” We may get £5 billion out of this tax as a windfall, but over time, in my view, we will lose more than £5 billion in the lost opportunity of businesses being attracted to the UK.

I have never believed, as has said in the House this afternoon, that the investment plans of the big oil and gas companies will be unaffected by this. I have been having discussions with them. There are already signs that they are scaling back their investment activities to the detriment of UK energy security, and I am afraid this Bill does not help with that all. If there is a Division on Third Reading, I will be voting against the Bill this evening.

--- Later in debate ---

[Richard Burgon]

That is an important point well made by my hon. Friend. That is what this is really about. It is a political choice that we are discussing.

On the Government’s major loophole that I referred to, which gives a 91p tax saving for every £1 invested by the oil and gas companies, we need to be clear that it is a subsidy to oil and gas giants. It takes money away from supporting families and encourages further fossil fuel production when we need to be ending all new oil and gas production to avoid climate catastrophe.

With another huge spike in energy prices now expected, much more needs to be done to help families. The Government should start by accepting my amendment and others that would see less going into profits for oil and gas firms, and more into bailing out people facing the biggest crisis in living memory.

[Caroline Lucas]

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

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

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

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

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

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

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

[Geraint Davies]

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

[Caroline Lucas]

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

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

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

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

[Geraint Davies]

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

[Caroline Lucas]

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

[Christian Matheson]

To make the same point that I made to my hon. Friend the Member for Leeds East (Richard Burgon), can I urge the hon. Lady to follow the money? For as long as these tax credits are given to the oil and gas companies, they are passed on to the people who control the Conservative party in the City—the big hedge fund investment billionaires who have massive incomes because of their ownership stakes in those companies.

--- Later in debate ---

[Caroline Lucas]

The hon. Gentleman puts it perfectly succinctly and I very much agree.

It has been estimated that existing decommissioning relief deeds could enable the extraction of the equivalent of 1.7 billion barrels of oil that otherwise would have remained unextracted, and that will only increase if we continue with the vicious cycle of handsomely subsidising fossil fuel companies to exploit oil and gas reserves. In response to the Glasgow Climate Pact’s call for parties to

“phase out inefficient fossil fuel subsidies”,

the Climate Change Committee said that the Treasury should initiate a review of the role of tax policy in delivering net zero, and was very clear that no fossil fuel subsidy should be considered efficient in the UK. Will the new Chancellor now commit to that review, listen to his own Climate Change Committee, and take its advice?

New clause 10 would require the Government to produce an assessment of the impact of the investment allowance on achieving net zero and on limiting the global temperature increase to 1.5°. It is frankly astounding that the Government need to be reminded yet again that the IEA has been clear that limiting global temperatures to 1.5° necessitates

“no new oil and gas fields approved for development”

as from last year. Yet according to the United Nations Environment Programme, the level of fossil fuel production planned and projected worldwide by Governments in 2030 is more than twice the levels consistent with that goal. The UK has given North sea oil and gas companies almost £14 billion in subsidies since signing the Paris agreement in 2015 alone. This Bill was an opportunity for the Government to change course, but instead they have chosen to double down and to play with fire by bringing forward a Bill that is plainly incompatible with a safe future.

It is patently obvious that the Government should amend the Bill to ensure that oil and gas profits are taxed properly, but I believe fundamentally that that should pave the way for a much wider overhaul of our tax system. We need a carbon tax, which, if implemented properly with a dividend to shield low-income households, could be pivotal in driving the change we need in order to decarbonise our economy fairly. That tax—it has long been Green party policy—would target the big polluters such as oil and gas companies. It is estimated that, starting at a rate of about £100 per tonne of CO₂, it could generate up to £80 billion to fund the transformation necessary to achieve our climate goals. That is the kind of innovative policy we need right now to save ourselves from the climate emergency that is only growing deeper.

[Lucy Frazer]

Many of the points that have been raised in Committee were considered on Second Reading, but I would like to touch on a few of them and then deal with amendments.

The hon. Member for Ealing North (James Murray) asked how the new investment allowance works. On 6 June, I said I was very happy to look further at this point, and I can reassure him that the investment allowance within the levy will be generated on investment expenditure —that is, capital expenditure and some operating and leasing expenditure—incurred on or after 26 May. The legislation includes an anti-avoidance provision to prevent any recycling of existing assets from getting the allowance, and that is all very clearly set out in clause 6.

I want to deal with some of the points made by my hon. Friend the Member for South Thanet (Craig Mackinlay), because I understand his objections, and no Conservative wants to bring in a tax rise where it is not necessary. I have had the opportunity to talk to him on a number of occasions about these measures, and he will know that they are targeted and temporary. He says he fears for investment coming through, but of course that will be assessed by the OBR in due course. I am not sure whether he was in the Chamber earlier when I quoted some companies that have said that they will be investing and that this encourages investment, but I will mention a further one. Kistos has said that it is

“assessing opportunities in the UK that would enable us to take full advantage of the investment allowances implicit in the recently introduced UK Energy Profits Levy”.

I turn to the amendments. Amendment 1 would require companies to report on how much additional tax relief they are claiming as a result of the levy’s investment allowance, in addition to the existing requirement to report how much levy is payable. The amendment would also require that data to be published on a quarterly basis. Companies will already be reporting the information to HMRC that allows it to ensure appropriate compliance with the law, and figures on the amount of tax raised through the levy will also be published on a periodic basis in line with other taxes. As a result, this amendment should not be made to the Bill.

Amendment 9 would add clarification to the allowable purposes of expenditure under the levy’s investment allowance. I have already dealt with that point on Second Reading, and I confirm to the Committee that HMRC will clarify this in written guidance.

New clause 1 calls for an assessment of the impact on revenue and on oil and gas companies’ profits of a 45% levy rate. Similarly, new clause 8 calls for assessments of the revenue impact of a permanent 30% levy rate, which would bring the permanent headline rate of tax for oil and gas companies in ringfence corporation tax to 70%. However, it is not standard—I will be saying this in relation to a number of new clauses—for the Government to publish assessments of the fiscal and economic impacts of measures that they are not introducing, and it is not clear that doing so would be a beneficial use of public resources. Therefore, I recommend that the Committee rejects these new clauses.

Again, new clauses 3, 5 and 9 would require reviews or assessments of policies that the Government are not introducing. New clause 3 would require a review of the revenue that would have been raised had the levy taken place from early January. I set out on Second Reading why we did not bring forward this measure earlier, and I did so last week as well. We are not supporting these measures because, as I have said, it is not usual to bring forward public assessments of measures that we are not introducing.

New clauses 2, 6 and 10 would require reviews or assessments of the impact of the investment allowance on the energy market, climate change commitments and exploration activity. The Government oppose these amendments on the basis that the Treasury already carefully considers the impact of all measures on the energy market and our climate change commitments as a matter of course.

New clause 4 would require a review of the amount of investment allowance that will be claimed and how it relates to expenditure that would have happened were the investment allowance not in place. The first point to reiterate here is that the Government expect the combination of the 25% levy and the 80% investment allowance to lead to an overall increase in investment, and the OBR will take account of this policy in the next forecast. HMRC already publishes data on the costs of non-structural reliefs, which will include the investment allowance in due course, once data is available.

Finally, new clause 7 would require the Government to publish regular reviews of the oil and gas market, including assessments of the need for the levy and whether it should be continued to promote further decarbonisation of upstream oil and gas activities. That is also unnecessary, since the Government already monitor the UK oil and gas sector, and data is published on gov.uk on a monthly and quarterly basis.

For all the reasons I have set out, I urge Members to reject all the amendments and new clauses. I commend the clauses and schedules to the Committee.

Question put and agreed to.

Clause 1 accordingly ordered to stand part of the Bill.

Clause 2

Additional expenditure treated as incurred for purposes of section 1

Amendment proposed: 9, page 2, line 42, at end insert

“, which may include electrification investment that decarbonises upstream oil and gas activities”.—(Stephen Flynn.)

This amendment would put on the face of the bill that electrification investment which decarbonises upstream oil and gas activities is eligible for relief.

Question put, That the amendment be made.

Energy (Oil and Gas) Profits

Caroline Lucas Excerpts

Tuesday 5th July 2022 Commons Chamber

[Caroline Lucas (Brighton, Pavilion) (Green)]

The Government are introducing this Bill in response to the extraordinary profits being made by the oil and gas sector—profits that are not earned but are a consequence of high global gas prices, fuelled by Russia’s illegal invasion of Ukraine. As families across the country are struggling to make ends meet, faced with rising energy bills and a cost of living scandal, energy companies operating in the UK are predicted to make an eye-watering £11.6 billion of unexpected windfall profits this year from oil and gas extracted from the North sea. Not only is it right that those windfall profits are taxed and redistributed to provide vital support to households, some 6.5 million of which are now living in fuel poverty, but, frankly, it would be morally reprehensible to do anything else.

I therefore welcome the fact that the Government are finally introducing a windfall tax—or an “energy profits levy”, as Ministers prefer to call it. That is something that I, too, called for a very long time ago. However, I am extremely concerned that it is being rushed through, with the consultation open for just five working days and the Bill receiving only one day of full scrutiny in this House. That is patently insufficient time to consider legislation of this complexity and importance.

We must consider first whether the tax is set at a level that constitutes an adequate response to the ongoing energy crisis. In the sixth richest country in the world, April saw more than 2 million adults not eat for a whole day because they could not afford or access food. The energy levy is one of the tools we have to tackle this social scandal. We have a deep responsibility to use it to full effect and to ensure that this is the beginning of the end for such grotesque levels of poverty and inequality.

Secondly, we must consider the impact of the proposed investment allowance on not just domestic but global emissions. I know that the Treasury does not even recognise the idea of subsidies in the fossil fuel sector, but that does not change the reality. Make no mistake: this is a subsidy. It is reckless, and its climate impacts make a mockery of the Government’s claim to global climate leadership.

I understand the Government’s desire to give certainty to companies and bring forward this tax with urgency, but the draft explanatory note makes it clear that the levy

“will have effect for profits arising on or after 26 May 2022.”

In other words, it is already backdated. That means that allowing more time for proper consultation and scrutiny would not materially affect the outcomes of imposing the levy.

I support going further than the Government intend to by imposing a permanent tax on companies, to be levied at a rate of at least 30%, bringing the total level of tax on oil and gas company profit to 70%. That 30% increase is a small one on the Government’s proposed 25% levy, yet it would bring the UK in line with the global average, joining countries such as Angola and Trinidad. It has been estimated that a tax of that level would generate an additional £13.4 billion for the Exchequer. I made this point in my submission to the Government’s consultation, and I very much hope that Ministers will judge that it warrants serious consideration and will revise their Bill accordingly before it is presented to the House next week.

On the permanency of the tax, I know that Ministers will point to the fact that this Bill is intended to address the windfall profits of oil and gas companies, and that there will come a time again when gas prices are lower and profits are not so high. But as the Treasury team know, the UK currently has the lowest tax take in the world from an offshore oil and gas regime. That is not a badge of honour; it is a badge of shame. In Norway, the Government get $22 per barrel of oil in tax, whereas here in the UK we are talking about just $2. So we should use this opportunity to bring the UK in line with the permanent tax rate of other countries, regardless of the scale of profits

One other change is crucial: preventing this Bill from including the 80% so-called “investment allowance”. That outrageous proposal would, according to the Government’s own factsheet, mean that for every £1 that businesses invest in North sea oil and gas they will

“overall get a 91p tax saving”.

First, let us consider the fact that this relief will come at a huge cost to the taxpayer. Analysis by the New Economics Foundation showed that the investment allowance would cost £1.9 billion a year, because any subsidised oil and gas projects will not start to return a profit until after 2025, the date of the sunset clause laid out in the draft Bill. The E3G think tank estimates that lost revenue from the investment allowance over the next three years could have insulated 2 million homes over the same period, saving households £342 a year, on average. I struggle to believe that anyone thinks that handing money back to oil and gas companies is better than kick-starting the street-by-street nationwide home insultation programme that so many of us have been speaking about at such length this evening.

Secondly, this allowance dangerously undermines our climate targets by actively encouraging new fossil fuel projects. Indeed, up to 39 fossil fuel projects are eligible for this “super-deduction” and could be developed in the next three years. Together, those could emit as much as 899 million tonnes of greenhouse gases, which is more than double the UK’s estimated net emissions in 2020. The International Energy Agency and the Intergovernmental Panel on Climate Change are clear that new fossil fuel developments are simply not compatible with limiting global temperatures to 1.5°. The most recent IPCC report in April was unequivocal that

“further installation of unabated fossil fuel infrastructure will ‘lock in’ GHG emissions and put 1.5°C out of reach”.

It could not be clearer. Alignment with 1.5° is not just some kind of “nice to have” benefit; it is literally critical to avoiding climate catastrophe.

Thirdly, this investment allowance will not help to address domestic energy security, because, as the Treasury team know, 70% of the remaining reserves in the North Sea are oil and are not the kind suitable for use in UK refineries, meaning that we currently export about 80% of it. I therefore urge the Government to reconsider this aspect of the proposal, which is not just bad for the public purse, but potentially disastrous for our planet and will not deliver the benefits that the Government may claim.

To conclude, at the World Economic Forum in Davos, Fatih Birol, the IEA’s executive director, was clear that decision makers should not use

“the current situation as an excuse”

to invest in projects that are incompatible with net zero. I very much hope that the new Chancellor, whoever they may be, will heed that warning and reform this Bill before it comes to Parliament next week.

New Wealth Taxes

Caroline Lucas Excerpts

Tuesday 14th June 2022 Westminster Hall

[Richard Burgon]

That is absolutely right. The increase in national insurance contributions was iniquitous, regressive and absolutely outrageous, but from this Conservative Government, it was no surprise.

We currently have the scandal where income derived from wealth is taxed below income derived from work. For example, someone living off share dividend payouts would pay less in tax than someone who earns the same amount by getting up each and every day and going out to work. How on earth can that be justified? Likewise, capital gains tax, paid on profits when selling assets such as a second home, is paid below income tax rates.

There is huge scope for increasing tax revenues by ending the significant tax discounts afforded to income from wealth over income from work. Simply ending the lower rates paid on capital gains and share dividends, and removing the related exemptions on those taxes, would raise around £22 billion per year. That is a lot more than was raised by the national insurance tax hike on working people that we have just discussed.

[Caroline Lucas (Brighton, Pavilion) (Green)]

I am grateful to the hon. Member for giving way, and I apologise for my voice. This debate is very important. People sometimes say that a wealth tax would not work because wealthy people would just up sticks and leave. Does the hon. Member agree that, actually, it is a matter of political will? If we chose to, we could levy an exit tax on vacating wealthy individuals, as they do in the United States. That would be a big discouragement for people to do that. Put simply, what is lacking here is political will—that is what is preventing us from attacking this obscene level of inequality, both here and around the world.

North Sea Oil and Gas Producers: Investment Allowances

Caroline Lucas Excerpts

Monday 6th June 2022 Commons Chamber

[Lucy Frazer]

With the greatest respect, I think that the hon. Member misunderstands the policy. What we are introducing is a significant tax on the oil and gas sector that will fund the most vulnerable, so it is the firms handing money over, as he puts it, to us. We have said that we recognise that companies should invest, because it is good for jobs, good for investment, good for our competitive industries and good for our energy security for the future. We have recognised that we will give tax reliefs if that investment is made.

[Caroline Lucas (Brighton, Pavilion) (Green)]

Just six short months ago, the UK hosted COP26, and it remains its president—not that we would know that from this appalling policy from this Government. The Glasgow climate pact, which the UK signed, commits to the

“phase-out of inefficient fossil fuel subsidies”,

so can the Financial Secretary explain on what grounds handing an 80% tax break to the dirty, dangerous and outdated energy of the past could possibly be considered efficient, especially when new fossil fuel production will do nothing to help with energy security or affordability? It will simply be sold at global prices on international markets. How is that climate leadership?

[Lucy Frazer]

The hon. Lady will know that we need to ensure energy security. At the moment, oil and gas account for 50% of our domestic energy. It is important that we transition, but that we transition safely, as well as securing domestic energy security.

The hon. Lady makes a very important point about our leadership at COP. We led the world. We were the first country to introduce net zero targets; many others followed. The Chancellor set out packages to ensure private sector investment and Government support for transitioning, and that is what this Government are doing.

Tackling Short-term and Long-term Cost of Living Increases

Caroline Lucas Excerpts

Tuesday 17th May 2022 Commons Chamber

[Edward Miliband]

The hon. Gentleman anticipates a later part of my speech. That is the Conservative party today: it will blame anyone else and never take responsibility. The hon. Gentleman should have been supporting our measures, because in his constituency 11,353 people would get our combination of a VAT cut and the warm home discount of £600. If he votes against us tonight, he will have to explain to them why he is denying them the help they need.

[Caroline Lucas (Brighton, Pavilion) (Green)]

The right hon. Gentleman is making a powerful speech. I wonder whether he shares my anger at the news this week that the Government have underspent their net zero budget by a staggering quarter of a billion pounds, at exactly the same time as our constituents are struggling to keep their homes warm and deal with accelerating fuel poverty.

[Edward Miliband]

I completely agree with the hon. Lady. At every step of the way, the Government have had the chance to act, and they have not done so.

--- Later in debate ---

[Caroline Lucas (Brighton, Pavilion) (Green)]

We are in the grip of multiple crises: a cost of living scandal that is pushing millions of households into fuel and food poverty; a war in Ukraine with disastrous consequences; and the accelerating climate and nature emergencies. In the short time that I have, I want to outline their common roots in our fossil fuel-based energy systems.

The cost of living crisis is the most visible part of a deeply entrenched social crisis that the Government have systematically not only ignored, but actively exacerbated. Even now, we get the ignorance and arrogance of Tory MPs lecturing about value brands and learning to cook “properly”. I sometimes wonder what planet they are on. In the sixth richest country in the world, more than 2 million adults did not eat for a whole day last month, because they could not afford or get access to food. That is not just a crisis; it is a scandal.

The international price of energy and fuel, a global pandemic, the war in Ukraine and disruption to supply chains are all factors in what is happening to inflation and the cost of living, as is Brexit, but make no mistake: the associated social scandal is a direct result of this Government’s political choices, which include cutting universal credit and refusing to uprate benefits in line with inflation.

The choices locking us into fossil fuel reliance and climate catastrophe are equally unforgivable. Companies such as BP and Shell are gambling on Ministers failing to rein in their deadly plans for more oil and gas production. They are deadly because, as the International Energy Agency has warned very clearly, there can be no new fossil fuel exploration and development if we are to keep global heating below the 1.5°C threshold, yet the fossil fuel giants are investing in carbon bombs that will accelerate climate breakdown, and the consequences will be felt heavily by the poorest and most vulnerable. That is nothing less than criminal.

The Government’s choices have consequences for the war in Ukraine, too, and for Putin’s war chest. I welcome the consensus that we must stop financing his war crimes, and need to stop importing Russian oil and gas. However, I cannot welcome the fact that, for years, policies that could have brought us to a place of energy resilience have recklessly been torn up, with UK energy bills nearly £2.5 billion higher as a result; or the fact that the Government are about to deliver an unambitious, under-financed energy strategy that will leave millions in poverty and accelerate the climate crisis while doing nothing to reduce the UK’s dependence on Russian oil and gas.

Here are five policies to help us rise to the challenge. The first is a street-by-street, local authority-led retrofit revolution. That is the cheapest, fastest and most effective way to cut household bills, reduce demand, cut climate emissions, and create thousands of jobs in the process. The second is a transition to the abundant homegrown renewables with which our nations are blessed. Those renewables are already cost-competitive; onshore wind is six times cheaper than gas. The third is a dirty profits windfall tax on the obscene profits of the energy giants, but it should not stop there; instead, it should pave the way for a carbon tax levied on every tonne of CO₂ released. That critical lever would help to shift us fairly towards a clean, green economy. The revenue would contribute to free home insulation for those who need it, free public transport and a universal basic income.

Fourthly, there should be no more subsidising of fossil fuels. The UK has one of the most lax regimes in the world for the oil and gas sector. For example, in 2019, companies got away with paying 12.5 times less tax for a barrel of oil produced here than for one produced in Norway. In 2020, Shell effectively paid no tax at all in the UK; it is the only country in which Shell operates where that was the case. Why does the Gracious Speech not include legislative proposals to kick these climate criminals out of Britain for good? Tell Shell that it is not welcome to relocate its headquarters to London. We should introduce laws that would allow us to put on trial not the peaceful protesters who are defending our futures, but the energy bosses who commit crimes against humanity by continuing to plan vast oil and gas projects that would shatter the 1.5°C climate goal.

Finally, there should be no new oil, gas or coal licences. Every penny spent pumping oil from the North sea is making the future less liveable. That is absolutely unacceptable. It is criminal, and it has to stop.

Financial Statement

Caroline Lucas Excerpts

Wednesday 23rd March 2022 Commons Chamber

[Rishi Sunak]

I congratulate my hon. Friend on his new appointment and look forward to working with him in both his committees over the coming months, particularly to flesh out the business tax options that we want to finalise by the autumn Budget. He is right to say that the distribution analysis published today, which looks at all tax, welfare and spending decisions, shows that this Government have been highly progressive in their actions and that those on the lowest incomes have benefited the most.

[Caroline Lucas (Brighton, Pavilion) (Green)]

Once again, quite incredibly, there is climate-shaped hole at the heart of this statement. Once again, the Chancellor did not even mention the word “climate”. That is all the more unforgivable as the measures we need to tackle the climate crisis and those we need to tackle the cost of living crisis are the same. With 6 million people now facing fuel poverty, where is the home retrofit revolution and the investment that we need to make 19 million homes warmer by 2030, saving families £400 on their bills and creating hundreds of thousands of jobs in the process? How many more people will have to freeze in their homes before he will act?

[Rishi Sunak]

We already acted in the spending review last autumn to outline billions of pounds to improve the energy efficiency of hundreds of thousands of homes across the country. The hon. Lady is right to say that that saves £300. We have grants available of up to £20,000, depending on the scheme, that will do that over the remainder of this Parliament. Also, the energy company obligation does the same thing for hundreds of thousands of people in fuel poverty through their energy bills. So we already did it; we are getting on with it. And I think she missed the fact we have just cut VAT today on energy-saving materials.