Energy (oil and gas) profits levy

Debate between Aaron Bell and Bim Afolami

Tuesday 22nd November 2022 Commons Chamber

[Bim Afolami (Hitchin and Harpenden) (Con)]

It is a pleasure to speak in support of this autumn statement. In the time available to me, I will talk about an issue that has come up a lot today, but I will talk about it in a very particular way to illustrate the problems we have with it. That issue is inflation.

Inflation is at the heart of our economic problem. Inflation is the reason why food prices are high. Inflation is the reason why energy prices are so difficult to manage. Inflation, as we have heard from many Members, is the core reason why the debt interest bill that the Government have to pay is now so high. We have heard a lot about the different global causes of this inflation, but it is worth making the point again that this inflation is happening in every single western country—it is happening in most countries in the world, not just western countries. We should never stop underlining that point. This is not about escaping political responsibility—I am not playing a party political game here—but we can deal with the problem only if we understand its true causes.

The first cause, as mentioned by my right hon. Friend the Member for North West Hampshire (Kit Malthouse), is about central banks and the policy of quantitative easing, which pumped several trillion pounds into the economy over the last 10 years. Regardless of people’s view as to whether that was necessary at the beginning as we came out of the financial crisis, many people rightly ask whether, if we—not just globally, but the Bank of England—expand the money supply to such a degree, it is a shock that, at some point, when there is an exogenous factor such as the war in Ukraine, inflation appears to be structurally embedded and higher than it was before. The Bank of England and global central banks, such as the US Fed and the European Central Bank, need to examine their policies over the last 10 years that have contributed to the global rise in inflation.

The second global cause of inflation is what has been going on in China. Its zero covid policy means that its growth rate this year is 3.2% or 3.3%, while its growth target is 5.5%. China tends to hit its targets—at least officially—so that shows that it is not soaking up global demand in the way that it did, which is also having a big impact. At the same time, it hurts supply chains across the world, particularly this country’s manufacturing businesses as well as others, which need China to be open.

Those problems have contributed to inflation, but I do not want to focus on them. I want to focus on the cost of energy, because that underpins many other things in our economy. Indeed, the difficulties that the pound sterling, the euro and many other currencies had, and still have, against the dollar in the last couple of months were in large part because of energy prices being priced in dollars, and the impact of that on the world economy.

We are trying to decarbonise our economy, as hon. Members on both sides of the House agree, but oil and gas are still hugely significant to absolutely everything in the economy. Structurally, demand for oil and gas from the developing world—not primarily China, but India and sub-Saharan Africa—is rocketing, because the people in those countries want to have what we have. They want to industrialise and make their lives better, and they need energy to do that. At the same time, we are seeing lower investment in new oil and gas by major energy companies. That is happening for myriad reasons, but principally because the messages that we have been sending around the necessary green investment have made shareholders demand higher returns for shareholders rather than those profits going into investment.

The long and short of it is that we do not have enough oil and gas and the demand for it is rising, so prices are going up. Although the war in Ukraine has hugely exacerbated and accelerated the difficulty, it is worth saying that the problems with energy have been building for a long time. Even when the war in Ukraine concludes, as we hope happens soon, prices will still be higher than we have been used to.

Every economic expansion in the world over the last 300 years was founded on not just innovation but cheap energy. We have to be honest as a House, as a country and as the Conservative party that all our hopes and dreams about what our economy should do—all the funds that we want to put into the NHS, all the infrastructure that we want to build, all the tax cuts that we want to give—are founded on having affordable energy for individuals and businesses.

What are we going to do about that? All hon. Members on both sides of the House agree that we need more renewable investment—more nuclear, more wind, more solar. We will always talk about investing more in those things, so it is about not just the investment, but our ability to get it done. I am sure many Members will share my frustration at the gap between our intentions, whether through legislation or policy, on the investments that are made and the big numbers that we talk about and see, and the slow deliverability of that on the ground. In energy in particular, the amount of time it takes to get a nuclear power station off the ground is too long. The amount of time it takes even to get a wind farm and wind terminals off the ground is too long; in fact it is getting longer. On solar, we have problems with planning in that area as well.

[Aaron Bell]

I thank my hon. Friend for what he is saying. The Science and Technology Committee, on which I sit, is currently looking at our nuclear investments for the future. Is he aware that, for example, the number of documents submitted in planning for Sizewell C is over 4,000 compared with about 1,000 for Hinkley Point C and it is basically the same design? Is that not an example of what he is talking about?

[Bim Afolami]

It is, and I would love to speak much more about that point, but I do not have much time. I would just say that we must start to take seriously the issues of delivering much more renewable energy on our own soil, and of exploring oil and gas in the North sea to the maximum we can. A lot of the other economic debates we have are largely irrelevant in the context of that energy challenge.

We have heard a lot today about investment for public services. I remind all Members, particularly Opposition Members, that we cannot oppose measures for the growth of our economy, and we cannot always oppose investments or incentives for investment for successful businesses or individuals and, at the same time, say that we need more investment in our public services. We need to remember that the only money spent by the Government is the money that we generate as a private sector and private enterprise. That is why we need to tackle inflation, that is why the core of tackling inflation is dealing with the cost of energy and that is why I support this autumn statement.