Oral Answers to Questions
Debate between Andrew Gwynne and Kerry McCarthy(10 months, 3 weeks ago)
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Kerry McCarthy (Bristol East) (Lab)
Andrew Gwynne (Denton and Reddish) (Lab)
Oral Answers to Questions
Debate between Andrew Gwynne and Kerry McCarthy(1 year, 9 months ago)
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Kerry McCarthy (Bristol East) (Lab)
Andrew Gwynne (Denton and Reddish) (Lab)
EU Referendum: Energy and Environment
Debate between Andrew Gwynne and Kerry McCarthy(8 years, 4 months ago)
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Kerry McCarthy (Bristol East) (Lab)
It is a pleasure to see you in the Chair, Madam Deputy Speaker. It was immensely frustrating to me that the environment received so little attention during the referendum campaign, despite the best efforts of my fellow members of the steering group of the cross-party Environmentalists for Europe. It seems like a lifetime ago that I stood on a rather windswept beach in Hove with my hon. Friend the Member for Hove (Peter Kyle), the hon. Member for Brighton, Pavilion (Caroline Lucas), and Sir Stanley Johnson, the father of the hon. Members for Uxbridge and South Ruislip (Boris Johnson) and for Orpington (Joseph Johnson), brandishing a beach ball and exhorting people to remain for nature. Brighton and Hove voted to remain, and I am sure that that was entirely down to our efforts with the beach ball that day. I am proud, too, that my constituency voted to remain. The public voted narrowly for Brexit, however, although I do not believe that they voted to remove the environmental protections that have served us so well over the years.
Much that is good has flowed from our EU membership. As my hon. Friend the Member for Swansea West (Geraint Davies) and others have said, Britain was once dubbed the “dirty man of Europe”. We used to worry about acid rain, but our sulphur dioxide emissions fell by 89% between 1990 and 2010, and our nitrogen dioxide emissions were down 62% thanks to EU directives, the EU ban on leaded petrol and the requirement for catalytic converters in cars.
Andrew Gwynne
I represent a constituency that has an air quality management area. My hon. Friend will know that there is a public health issue here in respect of obtaining clean air. Does she think that it is incumbent on the Government to tackle the air quality issue so that we narrow the health inequalities that are endemic in constituencies such as mine?
Kerry McCarthy
I absolutely agree with my hon. Friend. Sixty years on from the Clean Air Act 1956, it is clear that many urban areas, in particular—although not just urban areas—are still suffering greatly from air pollution. It is an issue of social justice, because people in poorer communities tend to be most affected. The Government have been taken to court on the matter by ClientEarth and, whether we are in the European Union or outside it, we need to see further action on the issue.
It is hard to believe that we used to allow untreated sewage to flow into our seas before the EU’s bathing water directive forced the UK Government to make our bathing waters fit for swimming and to test for bacteria such as E. coli. In 1990, only 27% of our bathing waters met minimum mandatory standards. By 2014, 99% complied. The EU’s waste framework directive has been the driving force behind our domestic waste policy, requiring us to recycle 50% of household waste by 2020. As we have heard, it looks as though the UK is moving slightly backwards when it comes to progress towards recycling targets, and that needs to be halted.
The nature directive protects our most threatened habitats and birds, with beauty spots such as the New Forest, the Brecon Beacons and Ben Nevis designated as special areas of conservation. Post-Brexit, many of those protections would still apply in certain scenarios, but not in others. There is a lot of uncertainty, and I am keen to hear some early indications from the Minister of what our negotiating stance will be, as well as some reassurance about the importance of such protections. My understanding is that if the UK were to negotiate membership of the EEA, most EU environmental legislation would continue to apply, including measures covering pollution control, chemicals and waste management but not the bathing water directive or the birds and habitats directive. If the UK were outside the EEA, most environmental legislation would cease to apply. The main exception would be when companies sought to export to the EU; they would be obliged to conform to product standards and other requirements in order to do so.
Many EU directives have been transposed into UK law through primary or secondary legislation under Acts other than the European Communities Act 1972, and that legislation would continue to apply until it was changed by Parliament. EU regulations would present a different problem for the Government, however. They are directly applicable in the member states, so they could immediately cease to apply. A thorough audit must be carried out and clear guidance given to the House and the general public—who felt, throughout the referendum campaign, as though they did not really have the information that they needed to make the momentous decision that lay before them—about what protections could be under threat in each possible scenario, so that they can make up their minds about which of the scenarios they ought to support. We also need to know what the Government intend to do in each case.
There are, however, serious doubts about DEFRA’s capacity to do that. We know that the Department was woefully unprepared for a Brexit result; the Secretary of State told us that there was no plan B. The coalition Government slashed DEFRA’s resource budget by 38%, and the Chancellor last year announced a further cut of 15% for this Parliament. DEFRA and its agencies have lost a quarter of their staff. I hope the Minister will be able to tell us how the Department will begin to review and untangle EU directives and regulations when we know it does not have sufficient staff or resources for even its day-to-day work.
I urge the Government to bring in experts from outside Parliament—for example, Professor Tim Lang and the Food Research Collaboration—who are already gathering ideas, meeting, discussing and trying to collate a strategy for how we should proceed. We need to know from the Minister which civil servants from DEFRA and DECC will take part in the EU unit led by the right hon. Member for West Dorset (Mr Letwin), and what their remit will be.
I am concerned that if some in the Government have their way, we will have a bonfire of protections. Some of the most prominent leave campaigners are also climate change deniers, and there has also been much anti-EU rhetoric over the years, casting environmental protections as an over-bureaucratic burden rather than a benefit. The Chancellor, before he became an EU enthusiast, tried to claim that those protections placed
“ridiculous costs on British businesses”—[Official Report, 29 November 2011; Vol. 536, c. 808.]
but the Government’s review proved him wrong.
During the referendum campaign, the Minister with responsibility for farming, the hon. Member for Camborne and Redruth (George Eustice), vowed that the nature directives would go after Brexit. He described them as “spirit-crushing green directives”—although, to be fair to him, he later said that that comment was slightly misrepresented. He also said that the marine strategy framework directive, which requires member states to achieve good environmental status in marine waters by 2020 and promote a more sustainable approach to marine-related economic and social activities, would go. We need reassurance from the Minister that those voices will not prevail in the post-Brexit scenario.
The European Commission’s “fitness check” of the directives and, tellingly, their regulatory burden, is due to report soon. In the largest response ever to an EU consultation, more than 500,000 people called for the nature laws to be kept and to be better enforced. More than 100,000 of those responses came from UK citizens. British organisations such as the Royal Society for the Protection of Birds have been instrumental in defending the directives, not just in the UK but across Europe.
Another example of the European Union discussing issues that affect the UK—it is not a question of legally binding obligations being imposed on us, but we certainly ought to be part of the negotiations—is the EU circular economy package, which was agreed at the end of last year. There have already been reports that during the negotiations, the UK tried to water down the package, arguing against mandatory targets and priding ourselves on inserting the word “voluntary” throughout the text. Scotland has brought forward national plans to implement the package, and Wales has its own blueprint for moving to a more circular economy. What will England do now? If the EU circular economy package is properly implemented—that is quite a big “if”—the potential for new jobs and innovative new lines of business is huge. I would like the Minister to reassure us that we will not allow Brexit to derail our progress.
A further example is the neonicotinoids ban. The European Food Safety Authority is reviewing the EU’s restrictions on the use of neonics and the latest scientific evidence of their harm to bees and other pollinators. Its assessment will inform whether changes should be made to current EU restrictions and, indeed, whether they should be extended to cover all crops. Will the UK base its view on future regulation on the EFSA assessment? Or, since those restrictions were only introduced in the first place thanks to the EU, do the Government see that as an opportunity—as the right hon. Member for North Shropshire (Mr Paterson) does—for overturning the current ban?
I also want to mention the impact on farmers and the managed environment. The common agricultural policy is far from perfect, but it is a lifeline for British farmers—around 55% of their income comes from EU subsidies. Britain’s lack of food self-sufficiency, which now stands at 61%, makes us overexposed and vulnerable to Brexit. As most experts are agreed that prices for imported food are likely to rise, we will have real difficulties offsetting that with more, much needed British-grown food, given how reliant the sector is on free movement of labour from within the EU and on migrant labour—I think I am right to say that 38% of workers in the food and farming sector come from outside the UK, and their situation is much in doubt in a post-Brexit scenario.
The leave campaign promised that a post-Brexit UK Government would be more generous to farmers, but we know that the UK lobbied for cuts to CAP support. We also know that the UK had the option of transferring 15% spending to pillar two for rural development, but only opted for 12.5% modulation, showing worrying signs about the possible direction of travel.
There are already too many examples of the Government not meeting EU requirements. As I have said, they had to be taken to court by ClientEarth for breaching EU clean air laws, as well as by the World Wide Fund for Nature and the Angling Trust over their failure to protect our rivers, lakes and coastal areas from agricultural pollution. The water framework directive required “good” ecological status by 2015 in all water bodies, but only 19% of those bodies currently comply. Some beaches have been de-designated by the Government so that they do not have to warn swimmers about poor water quality or test the waters.
Finally, some people were worried that by staying in the EU we would end up as a signatory to the Transatlantic Trade and Investment Partnership, and that our hard-won environmental, food safety and animal welfare standards could be compromised as a result. For example, the EU does not allow hormone-pumped meat, but the US does. What happens now? Just when the EU looks as if it will resist TTIP—signals from France and Germany suggest that it will do so in its current form—will Brexit mean that the UK Government end up negotiating a bilateral trade deal with the US? If so, will our much weaker bargaining position mean that we cede ground on those important standards? Rather than “taking back control”, bilateral negotiations with the US could leave us with even less control. With so many unanswered questions, and faced with losing EU protections, Ministers need to assure us that Brexit will not mean environmental degradation and pollution spiralling out of control.
Flooding
Debate between Andrew Gwynne and Kerry McCarthy(8 years, 10 months ago)
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Andrew Gwynne (Denton and Reddish) (Lab)
As well as the point my hon. Friend is making, we need an Environment Secretary who understands, particularly in urban areas, the value of floodplains, such as those around Denton and Reddish Vale. They were completely submerged over the Christmas period, doing precisely what they are supposed to do: take the excess water away from further up the Tame valley, where flooding could have been much worse. Those areas are set to be reviewed as part of the Greater Manchester green-belt review. They are at risk of being taken out of the green belt for development.
Kerry McCarthy
As ever, my hon. Friend makes an excellent point. It is partly an issue about house building on floodplains, but there is also an issue, which stems from this piecemeal approach to the problem, of people looking after their own patch, preventing their own land from flooding, only to exacerbate the problem further downstream. We need a coherent overall approach that protects everybody.
Climate Change and Flooding
Debate between Andrew Gwynne and Kerry McCarthy(8 years, 11 months ago)
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Kerry McCarthy
I agree entirely with my hon. Friend. There is almost a consensus that the UK needs to do more, go faster and introduce stronger targets.
Business needs certainty, but people in Cumbria and other flood zones need it too. Last week, I visited Carlisle and Cockermouth with my right hon. Friend the Leader of the Opposition. We are grateful to the councillors, business owners and residents who showed us around their communities and homes, and we left impressed by their resilience and determined that the Government must do all they can to rebuild their communities and reduce their future flood risk. They should never have to go through this again.
Andrew Gwynne (Denton and Reddish) (Lab)
My hon. Friend, who is right about the need for certainty, will understand the concerns of many of the flood-affected communities that the Department for Environment, Food and Rural Affairs cannot provide any certainty over future spending on flooding. Was she as shocked as I was to learn that this year’s flooding budget was £115 million less than last year’s? Is that not short-sighted of the Government?
Kerry McCarthy
I agree with my hon. Friend, as I often do. I want to say a little more about what I saw in the constituencies, and then I will answer his point.
Anyone who has been to Carlisle and Cockermouth or seen the television coverage will have been dismayed at the horrific scenes. We have seen people out on the pavements with their entire belongings, people’s homes saturated, people in temporary accommodation. There is an issue with the availability of temporary accommodation in the area. Some have been lucky enough to move into holiday cottages, but there is not much in the way of private rented accommodation to move into. We spoke to people about their massive flood insurance bills, and the thing they raised with us time and again was the excess on their policies. Now that more floods have happened, their premiums are going to go up, or they might not be able to insure their homes at all.
The Economy
Debate between Andrew Gwynne and Kerry McCarthy(9 years, 12 months ago)
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Kerry McCarthy (Bristol East) (Lab)
We could spend a lot of time trading statistics about the economic recovery, the debt, the deficit and how much more the Chancellor is borrowing at this point in the economic cycle than he said he would. Those things are important but, frankly, they mean little to my constituents, who are tired of the blame game and of hearing the Government constantly saying that everything is the previous Government’s fault, given that they have been in charge for four and a half years. What matters to my constituents is their own jobs and living standards, and economic security for them and their families. It is about whether they can heat their homes, put food on the table, keep their cars running or afford the bus into the town centre to get to work, and keep a roof over their heads. The limited recovery that we have seen, which is barely bouncing along the bottom, is not being felt in east Bristol. That is why I asked the Minister, when she is in east Bristol tomorrow, whether she would be prepared to come and see some of that reality on the ground.
The unemployment figures seem to be moving in the right direction, which is good news. Labour has always had the ambition to move people from welfare into work as a route out of poverty. The right is fond of trying to caricature and misrepresent Labour and our voters as being wedded to welfare dependency. That is simply not the case. Labour has always been the party for workers; welfare for those who need it as an essential safety net and a support for those making the transition to work, and work for those who can and who, despite the misrepresentation, in 99% of cases desperately want to work. But under this Government we have seen a rising phenomenon of in-work poverty; a problem that is masked by the superficially encouraging trend in employment figures, but is undeniably there and is a feature of many people’s lives.
The Joseph Rowntree Foundation has just published a report on this year’s statistics. It says that it
“shows a real change in UK society over a relatively short period of time. We are concerned that the economic recovery we face will still have so many people living in poverty.”
It is estimated that about 13 million people in the UK are in poverty. Poverty among working age adults without children is at a record high, but about 40% of working age adults in poverty are working. So it is not simply an issue about moving people from welfare to work; it is about making work pay. Among children in poverty, most—more than 2 million—are in a working family.
Andrew Gwynne
My hon. Friend makes a powerful point. Is not this why we need a more concerted effort on the living wage? She will know that during this Government’s lifespan, the number of people paid less than the living wage has increased by 1.5 million, and that puts enormous pressure not just on those families and individuals but on the social security system.
Kerry McCarthy
I agree entirely with my hon. Friend. Nearly 20% of working people in Bristol East earn less than the living wage. According to the Joseph Rowntree Trust, two thirds of people who moved from employment into work in the last year are paid below the living wage. That is why in Bristol we have been running a living wage campaign. We have finally managed to persuade the mayor of Bristol to introduce that at the council level, and we want to encourage the organisations that do business with the council, with procurement contracts and so on, also to do that, and for the private sector to follow suit. That is incredibly important.
Finance Bill
Debate between Andrew Gwynne and Kerry McCarthy(13 years, 5 months ago)
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Andrew Gwynne
I am pleased that my hon. Friend has confirmed that those on the Labour Front Bench will oppose this measure. She is setting out the right arguments for why we should do so. Did more people not take up NHS care and treatment under the 13 years of Labour Government because of the improvements in NHS care and treatment that were achieved over the lifetime of the Labour Government?
Kerry McCarthy
My hon. Friend makes a good point as always. That is the crucial thing. Under the Conservative Government, the increased take-up in medical insurance from 500,000 to 600,000 did not necessarily have anything to do with the tax relief that was introduced; it happened because the NHS was in absolute crisis. Waiting lists were going through the roof under the last Conservative Government. People were terribly scared and did not feel confident that the NHS would look after them in their ill health. There were significant improvements under the Labour Government, which meant that fewer people felt the need to take out private health care.
Let me turn to the fairness argument. It remains to be seen how much the Health Secretary’s experiment through the measures in the Health and Social Care Bill—driven once again by a preoccupation with private sector involvement in health care—will eventually take from health care budgets. We know that £850 million will be spent on redundancies alone, and the estimates are that £2 billion of PCTs’ budgets are earmarked for what can only be described as—in those infamous words of the coalition agreement—a “top-down reorganisation”. Despite the Prime Minister’s promise of real-terms increases, NHS expenditure is falling in real terms. The King’s Fund has calculated that the NHS will have £910 million less to spend over the spending review period. Patients and staff know all too well that front-line services are being affected, but tax relief for private patients will not help them.
Finance (No. 3) Bill
Debate between Andrew Gwynne and Kerry McCarthy(13 years, 6 months ago)
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Kerry McCarthy
Before the election, the Economic Secretary said in this House during a debate on fuel duty:
“What people want from the Government today is a helping hand to get them out of their financial troubles. Instead, what they see from the Government is no help at all. Far from providing a hand to pull them out of their troubles, the Government are pushing them further down into them.”—[Official Report, 16 July 2008; Vol. 479, c. 359.]
How astonishing, then, to find that that is exactly what she and her Government are doing. They may have made a show of helping people up with a small fuel duty cut, but that is after they have given them a much bigger push down with their VAT rise on fuel. Before the Chancellor gave his Budget statement, Labour Members called for him to look again at the fuel duty escalator, which I think the Economic Secretary is muttering about from a sedentary position. In previous Budgets, we cancelled or postponed fuel duty rises when pump prices were rising quickly. In the 2010 Budget, the then Labour Chancellor phased in the increase for that year in three stages to ease pressure on business and household incomes. In the 2008 Budget, the previous Government postponed the increase in fuel duty for six months, again to support the economy and help businesses and families. We therefore welcome the fact that the Chancellor has done so again in this Finance Bill. However, when that cut is put in context, we see that families and businesses are facing more pressure than before as a result of the Government’s policies on fuel tax.
This is not the only policy in the Bill that is not all that it seems when it is put in context. The Government have made much of their increase in the personal allowance for income tax. The Chancellor said:
“The increase in the personal tax allowance already announced will vastly exceed anything lost through employee NICs uprating”.—[Official Report, 23 March 2011; Vol. 525, c. 954.]
However, he failed to mention that the rise in the allowance is swamped by his VAT rise, which will take £450 a year, on average, from the pockets of families with children. Families earning as little as £31,000 could lose their child tax credits as the Government take £400 million out of the system, while the Government’s Welfare Reform Bill creates uncertainty for families over whether they will keep their child care support and free school meals. In a couple of years, a family with two children with a single earner earning just £44,000 could find that the Government have taken £1,750 a year away from them in child benefit. It is no wonder that the Institute for Fiscal Studies said that the Chancellor was
“giving with one hand…and taking away with lots and lots of other hands.”
Nor is it surprising that the economist Roger Bootle said today that household incomes were “all but certain” to fall.
All this comes at a time when Government cuts mean front-line cuts in services that people rely on—schools, the NHS, social care, even the police—and workers in those vital public sector jobs are facing redundancies. The Government may say that some factors are outside their control. When we were in government, oil prices rose substantially, as we are seeing now, but we left government with a proportional tax take on fuel lower than when we came into government—down from 75% to less than 65% on petrol and down from 74% to 64% on diesel. It is no coincidence that under the last Conservative Government fuel taxation shot up from 66% of the price of petrol in 1992 to 75% in 1997, and from 66% to 74% for diesel.
The Minister of State for International Development made the front pages in March, saying:
“if this does go wrong”,
referring to the Budget,
“£1.30 at the pump could look like a luxury, $200 a barrel is on the cards”.
He can hardly have expected that remark to put a stop to speculation in the oil markets.
Rather than helping people through the tough times, the Government seem to want to make things worse. There was an alternative for the Government. Before the Budget, we called on the Chancellor to scrap the hike in VAT on fuel. That would have been of genuine help to families and businesses.
Andrew Gwynne
Is my hon. Friend, like me, extremely surprised at the lack of ambition from the Government parties when it comes to seeking a derogation for the rise in VAT on fuel? Given that President Sarkozy managed to get a derogation on VAT for French restaurants, does she not think that the British Government should do the same for fuel?
Kerry McCarthy
My hon. Friend makes a valid point, which I will come on to in a moment. [Interruption.] Ministers are peddling the line that it would take six years to achieve such a derogation from the EU. I ask them, have they even tried? I suspect that the answer is no. It is a fairly defeatist attitude to say that we will not even ask because we know what the answer will be. That is not fighting for Britain’s corner in the European Union.
As I was saying, there was an alternative for the Government. We called on the Chancellor to scrap the hike in VAT on fuel, which would have been of genuine help to families and businesses. It could have been paid for from the £800 million more than expected that was raised from the bank levy. Unlike the stabiliser proposed by the Conservatives in the run-up to the general election, that would not have been “unbelievably complicated and unpredictable”, to use the words of the Secretary of State for Business, Innovation and Skills.
The stabiliser is based on the idea that taxation will vary according to fluctuations in petrol prices, so that
“when fuel prices go up, fuel duty would fall. And when fuel prices go down, fuel duty would rise”,
to use a direct quotation from the Conservative party consultation document on the issue. The stabiliser was a flagship policy for the Conservatives in the general election campaign. The present Prime Minister made an issue of it when he visited a Coca-Cola plant in Morley just a week before polling day, where he said that
“it would give you certainty as you go about your lives, knowing what your salary is, knowing what your mortgage is, we’d be helping with the cost of living by trying to give you a flatter and more constant rate for filling up your car”.
When the Conservative party got into government, it soon realised that that was an empty promise, made glibly without doing the homework required, as we have seen with so many of its policies in its year in government. In the Budget, the Chancellor resorted to a different so-called stabiliser by increasing the supplementary charge on North sea oil. We will discuss that issue later tonight when we come on to the next group of amendments.
It is true, as my hon. Friend the Member for Denton and Reddish (Andrew Gwynne) mentioned, that asking for a special rate of VAT would require our asking for a derogation from the European Commission. The Chief Secretary to the Treasury said that the Government could not afford to “sacrifice income willy-nilly”. However, he was willing to go to the EU to ask for a derogation for remote islands, although not for the rest of Scotland or the UK. Even members of the Conservative party agree that the solution should apply to the rest of the UK.
Kerry McCarthy
It is always a pleasure to follow the right hon. Member for Gordon (Malcolm Bruce). He has made an eloquent case on behalf of his constituents, who are directly affected in more ways than most people by the Government’s proposal to increase the supplementary charge on North sea oil to 32%. Amendment 10 simply asks the Chancellor to produce, before the end of this September, an assessment of the impact of taxation of ring-fenced profits on business investment and growth, including an assessment of the long-term sustainability of oil and gas exploration in the North sea.
The amendment should not be at all controversial, although we saw in the debate on the last group of amendments that the Government were not happy to be asked merely to produce an assessment of the impact of that policy. That is surprising because, after all, the Government say that they want more consultation and more transparency in their tax policy making. They say that they will—I am quoting their tax policy making document—
“embed impact analysis in the policy development process”
and
“integrate impact analysis into the consultation process.”
Those are both the kind of sentences that one has to read several times before one can work out quite what they are on about, but my understanding is that the Government are trying to say that they want more transparency and consultation. We have had to table amendment 10 because, in reality, none of that has happened.
The Government are right to consider increasing taxation on sectors of the economy that are enjoying windfall profits. We did the same when we were in government. There is an urgent need to deal with the fiscal deficit that is recognised on both sides of the House, and it is right that we should ask for more from those who are able to pay, but this change has been rushed through without consultation, as the right hon. Member for Gordon said, surprising the industry, and inevitably it has fallen down at the first scrutiny.
If the Economic Secretary had consulted representatives of the industry, they might have told her that the stability and predictability of the North sea tax regime is important for investment. Oilfields are long-term investments that require long-term certainty and stability to attract investors. The industry believes that the value of investments in UK oil and gas has fallen by 24% as a result of the 2011 Budget. That will cause long-term damage to the industry’s trust in the Government for short-term political gain.
I agree with the Select Committee on the Treasury, which said:
“The decision to increase the supplementary oil and gas levy by 12% without warning, less than a year after the Government had undertaken to provide a ‘stable’ tax regime in the sector, may weaken the Government’s credibility in seeking to establish a stable tax regime in this and other areas.”
Andrew Gwynne
My hon. Friend is making an excellent point. Given the concern I raised earlier about people in the north-west of England who work in the industry, particularly in relation to Centrica’s decision about Morecombe bay, does she find it all the more surprising that the Economic Secretary once worked for Centrica?
Kerry McCarthy
My hon. Friend makes a valid point. I wonder what the current sales and marketing finance manager for Centrica thinks of the actions of the holder of that post from 2002 to 2005, and what experience the Economic Secretary had during her three years working for the company that has caused her to turn against it in such a fashion.
As I was saying, there is a real requirement, as the Treasury Committee has noted, for a stable tax regime in the sector. The Chartered Institute of Taxation has said that
“the last minute and precipitate change in Oil tax rates for an industry that is particularly dependent on long-term planning seems wrong”.
Does the Minister agree?
The threshold chosen by the Government may also be a problem for stability. The average oil price in 2008 was $100 a barrel, but in 2009 it was $60 a barrel and in 2010 it was $80 a barrel. If prices carry on fluctuating above and below the $75-a-barrel mark, as they have over the past three years, the uncertainty about the tax rate and whether companies will be caught by it could drive more investment away from the UK.
Had the Economic Secretary consulted the industry before the Budget, it might have reminded her that the supplementary charge applies to gas as well as oil. Gas prices are on the rise, but at less than 60p a therm they are still significantly below the Government’s $75 a barrel trigger price on an equivalent basis. In the UK, gas prices are less closely correlated with oil prices than in other jurisdictions, where there are often still contractual links between the two. Whereas oil prices are set by the global market, gas prices are more localised. Graham Parker of the Office for Budget Responsibility told the Treasury Committee quite recently that gas prices were “quite variable” so even if the Government think they have chosen the right level for oil, they might have set the balance wrongly for the gas sector. That could be disastrous given that gas accounts for 46% of the North sea industry’s production.
Kerry McCarthy
The Minister is trying to return to the topic we debated in the previous group, so perhaps she should have been a little quicker and thought up her intervention then. I am talking now about stability in fuel prices and the empty promises the Government made to the electorate in the run-up to the election that they would be able to do something to stabilise fuel prices at the petrol pumps.
Representatives of the oil and gas industry tell us that as recently as February the Government were giving assurances that they wanted to keep the North sea tax regime stable, as they had said in their previous Budget, but between February and April they very swiftly changed their mind. Perhaps the Minister can tell us why? What caused the Government to have such an urgent rethink on the fair fuel stabiliser? Many of us suspect that the increased scrutiny that the Opposition brought to bear on the Government’s policy might have prompted them belatedly into action—action they would have realised much sooner was needed if they had only done their homework and listened to what people were trying to tell them.
Inevitably, given the panicked way in which it was put together, the Government’s new version of the fair fuel stabiliser is equally as half-baked as the proposal put forward before the election. As a result, potentially tens of thousands of jobs, as well as billions of pounds worth of investment, are at risk, and the Government have broken their commitment to stable, consultative tax policy making.
Andrew Gwynne
My hon. Friend is making a superb case about the short-termism of the Government’s approach. Is she not absolutely right to point out that, in a short-term fix on gas and oil, this discredited Government are going to risk jobs, industry and investment in this country?
Kerry McCarthy
Again, that is a very good intervention by my hon. Friend. The industry needs stability and long-term investment, because we cannot dig an oil well or develop an oilfield overnight, yet the Government are creating uncertainty that will send investors off to other countries where the tax regime is more stable.
The Government have also completely damaged the trust between themselves and the industry, and that is why we have tabled our amendment. We simply call on the Government to do what they said they would do before making major tax changes: carry out a proper assessment of the impact, so that we can scrutinise it and have transparency. The Government were right to look towards North sea oil and gas to ensure that the burden of taxation was fairly spread, but without stability tens of thousands of jobs could be at risk. For the Opposition, that is not a price worth paying for short-term political gain.