Energy (Oil and Gas) Profits Levy Bill

Debate between Alan Brown and Lucy Frazer

2nd reading
Monday 11th July 2022 Commons Chamber

[The Financial Secretary to the Treasury (Lucy Frazer)]

It is a pleasure to close this important debate on behalf of the Government. We have talked today about the context of the Bill: the high oil and gas prices, and the extraordinary profits that are being received by the industry while working people struggle with the cost of living. We are introducing a temporary, targeted levy to fund cost of living support, at the same time as encouraging companies to invest.

Let me start by responding to some of the points made by the hon. Member for Ealing North (James Murray). He criticised our levy for not raising enough, but, as was pointed out by the hon. Member for Aberdeen South (Stephen Flynn), Labour’s proposal would have raised only £1.2 billion at the time when it was made, whereas our levy will raise £5 billion—more than the £4 billion called for by Greenpeace, more than the £3.7 billion called for by the Green party, and, as I have said, significantly more than the amount proposed by the Labour party.

The hon. Member for Ealing North criticised our scheme because it will encourage investment, while the hon. Member for Erith and Thamesmead (Abena Oppong-Asare) said that we needed domestic energy security. We are ensuring that the important oil and gas sector will continue to invest so that we have that domestic energy security. The hon. Gentleman criticised us for not listening to industry, but I noted that neither of the Labour Front Benchers was able to say how or when they had engaged with industry. As Conservative Members know, last month the Chancellor held an industry roundtable which was attended by me and by the former Exchequer Secretary, my hon. Friend the Member for Faversham and Mid Kent (Helen Whately).

Let me quote some of what has been said by representatives of the industry about our investment proposal. Orcadian Energy has said:

“We believe the immediate investment allowance, included in the Energy Profits Levy, has transformed the attractiveness of domestic oil and gas projects for companies extracting oil and gas in the UK and it should spark further investment in the North Sea.”

Cornerstone Resources has said that there has been

“more interest in partnering with us”

in the last few weeks. I could go on, but what we are trying to do is raise money to help with the cost of living, at the same time as encouraging industry to invest in a vital sector.

Let me now answer some of the questions put to us by the hon. Member for Ealing North. First, I can confirm that the Chancellor supports the Bill. I also want to respond to the point about consultation. The hon. Gentleman was, of course, encouraging us to do this a long time ago, but now he says that we should have consulted for longer and, therefore, introduced the measure later. We have sought to engage, and put the industry on notice, as much as possible regarding the announcement of the levy. Ministers in my Department have been in regular contact with the industry and we also undertook a short period of technical consultation on the legislation for the levy. Hon. Members will know that draft legislation was published on 21 June, with stakeholders able to provide technical feedback on it until 28 June.

The hon. Member for Ealing North asked what we were doing about the electricity generation sector. As the former Chancellor said at the time, that is something we are urgently looking at. The hon. Gentleman said that we should follow Labour’s plan. Well, let us remember what Labour’s plan is. Labour has put forward £100 billion-worth of spending proposals, of which only £10 billion-worth are fully funded.

I would like to mention the passionate and important speech from my hon. Friend the Member for Waveney (Peter Aldous). He rightly identified the need to balance short-term measures with long-term investment, and I hope that that is what we are doing. He raised the importance of renewables. As I have had the opportunity to discuss with him before, there are other tax levers and non-tax levers to support non-oil and gas investment, including the super deduction and the UK’s research and development tax credit scheme. There is also the contracts for difference scheme, which provides developers of low carbon electricity generation with direct protection from volatile wholesale prices, and the £1 billion carbon capture infrastructure fund.

My hon. Friend also asked about the timeframe. That is an important point, because this is a temporary measure. There is a sunset clause in the legislation. It is rare to include a sunset clause, but we have done so to underline that this is a temporary measure with a timeframe of 2025. He raised the importance of dialogue with the industry, and I reassure him that we have engaged fully with the industry and will continue to do so.

[Alan Brown]

On carbon capture infrastructure, the Minister is well aware that the Scottish cluster has been made a reserve and been let down yet again. Can she define what “reserve” means, because nobody seems to know? Does she expect one of the two selected projects to fail, at which point the reserve would step up, or is it a question of dangling a carrot in front of it? What does “reserve” really mean, and why do the Government not just make the Scottish cluster a track 1 cluster?

[Lucy Frazer]

The hon. Member makes an important point, because we value the investment and work that is going on in Scotland in the oil and gas sector and in renewables. He knows that, because I and Ministers from the Department for Business, Energy and Industrial Strategy have stood at this Dispatch Box and engaged with him regularly on this. He is right to identify that that cluster is in reserve, and I am sure these matters are being discussed with the relevant Ministers in BEIS.

I recognise the points that the hon. Member for Aberdeen South made about the sacrifices made by those who work in this sector. I am grateful to him for making those points, which I am happy to associate myself with. He asked what the normal price was, and I would like to refer him to the comments that the former Chancellor made when he was questioned on this by the Treasury Committee. He said:

“The last time this was done, a price target was published, which was $74 or $75 for Brent…If you look at average Brent price over the last five or 10 years, that will give you something like $60 or $70 for oil…so that gives you a sense.”

This is something we will be considering in due course.

North Sea Oil and Gas Producers: Investment Allowances

Debate between Alan Brown and Lucy Frazer

Monday 6th June 2022 Commons Chamber

[Lucy Frazer]

What we have proposed is a windfall tax that will recover more than what Labour proposes would recover. That money—£5 billion—will support those who are the most vulnerable, which is why we have introduced the measure.

[Alan Brown (Kilmarnock and Loudoun) (SNP)]

This policy confirms that we are seeing more take, take, take from Scotland’s North sea oil and gas. The Government are taking resources and taking money. Norway has the biggest sovereign wealth fund in the world, but Westminster squandered all the income from oil and gas from the North sea. At the very least, will the Government reverse their decision and support the Scottish carbon capture and storage cluster and make it a track 1 cluster, and will they consider matching the Scottish Government’s £500 million just transition fund?

[Lucy Frazer]

I think the hon. Member is aware that the Scottish CCS is a reserve. [Interruption.] I am grateful to the hon. Member for confirming that he is aware of that.

Carbon Emission Charges

Debate between Alan Brown and Lucy Frazer

Monday 1st November 2021 Westminster Hall

[Alan Brown]

Will the Minister give way?

[Lucy Frazer]

I will make a little bit of progress, because I am about to address a point that the hon. Member himself mentioned, which was about aviation duty. The point about a domestic increase in air passenger duty has been made over the past few days, but I would like to highlight some other work that is being done in this industry to try to ensure that it is compliant with our net zero targets and ambitions. We have the Jet Zero Council, which is looking at how we revolutionise this industry and make it more carbon neutral.

[Alan Brown]

I know about the work of the Jet Zero Council, but what measures were in the Budget to help the airline industry decarbonise?

[Lucy Frazer]

The Budget set out a number of measures to ensure decarbonisation. There was a significant amount of spending in relation to decarbonisation in various transport areas, including the electrification of cars. We have already talked about heat pumps, and in relation to the airline industry, the hon. Member will remember that as well as reducing the tax on domestic airlines, we increased the tax on long-haul flights, recognising that it is not particularly carbon friendly for people to travel further.

I would like to address two important points that were not really raised in the debate but which were in the petition. The petition makes the link between air quality and subsidies to fossil fuel companies. I want to highlight that the UK has been a long-standing supporter of the multilateral efforts to promote fossil fuel subsidy reform since they were first proposed in 2009, including through the G7 and the G20. In December 2020, the UK announced its support for the statement on global fossil fuel subsidy reform. Inefficient fossil fuel subsidies encourage wasteful consumption, reduce our energy security, impede investment in clean energy resources and undermine efforts to deal with the threat of climate change. In March of this year, the Government went further, confirming that the UK

“will no longer provide any new direct financial or promotional support for the fossil fuel energy sector overseas”

other than in tightly defined and limited circumstances, such as technical or regulatory assistance that supports health and safety or to support decommissioning.

The other important matter raised in the petition was air quality. I want to underline that the Government are taking significant steps to improve air quality in the UK. It is not just tax measures, but non-tax measures, that achieve our aims, which is why we have a strong and proportionate regulatory framework that requires industry to reduce emissions, including of carbon dioxide, nitrogen oxide and particulate matter. The industry has responded with investment and innovation to meet those standards.

I would like to conclude by saying that it is a pleasure for the Government to answer on this extremely important topic. The petitioners’ success in securing this debate should not come as a surprise to any of us—it is simply evidence of the widespread recognition of the challenge we face, the importance of the issue and the cross-party support for tackling climate change. As the Prime Minister said yesterday,

“The UK has proved it can be done—we have lowered our greenhouse gas emissions by 44%... And we’re cutting our contribution to climate change more and more every day.”

I reassure hon. Members and the thousands of petitioners that the Government take the issue extremely seriously. We will continue to act on many fronts, both nationally and internationally.