Finance Bill

Andrew Snowden Excerpts

Committee of the whole House
Tuesday 10th December 2024 Commons Chamber

[Harriet Cross]

We were saying a moment ago how extraordinary it is that they are not here to stand up for their main industry. That shows how much they value or care about jobs across Scotland.

We are seeing warning signs already of the impact of these measures. Just a week after the Budget, Apache confirmed that it would cease operations in the North sea, saying:

“The onerous financial impact of the EPL, combined with the substantial investment that will be necessary to comply with regulatory requirements, makes production of hydrocarbons beyond 2029 uneconomic.”

According to the Aberdeen and Grampian Chamber of Commerce, 100,000 jobs may be at risk across the UK because of the changes. Offshore Energies UK says that 35,000 jobs directly related to projects that may not now go ahead are at risk. New clause 3, which would allow the Government the opportunity to assess and account for the impact of the Bill’s changes on jobs relating to the oil and gas sector, the supply chain and the wider economy, should be welcomed across the Committee.

[Mr Andrew Snowden (Fylde) (Con)]

On the impact that increased tax on the industry will have on jobs, was my hon. Friend as disappointed as I was to hear the Liberal Democrats talking only about how much cash can be raised from an industry, without asking how many jobs would be affected across Scotland and the UK, or about the impact on the economy as a whole?

[Harriet Cross]

Absolutely; sometimes there is a complete disconnect in this place between how much we can tax and squeeze something dry and what that does to investment. These companies, especially the global ones, do not have to invest in the UK—they can invest across the world. They are choosing to invest here at the moment, and therefore we get jobs, opportunities and employment. That investment can go abroad, and if it does, it will take jobs with it, to the detriment of all of us, but particularly us in north-east Scotland.

--- Later in debate ---

[Dave Doogan]

The changes to the EPL, particularly those set out in clauses 15 and 17, will have a hugely damaging effect on jobs and the Scottish economy. This is also an inauspicious day for Scotland in this so-called United Kingdom as Norway’s sovereign wealth fund records a €1.7 trillion breakthrough, while Scotland’s oil wealth has been squandered by successive Westminster Governments. Norway gets financial security in perpetuity; Scotland gets Labour’s bedroom tax, cuts to winter fuel payments for our elderly and the highest energy prices in the G20—that is the Union dividend wrapped up and served on a plate right there. More than £400 billion has flowed from our waters to the Treasury over the years, with very little coming back in the other direction. Rather than reverse the train, the Labour Government have, with this increase to the EPL, chosen to accelerate it.

The cumulative effect of clauses 15 to 18 will sound the death knell for Scotland’s hydrocarbon production in advance, crucially, of the transition—economically illiterate, fiscally incompetent and with industrial suicide as the result. A windfall tax is supposed to be a tax on extraordinary profits, yet the extraordinarily high global oil and gas prices that preceded the introduction of the tax have long since abated. Through these changes, the Labour party jeopardises investment in Scotland’s offshore energies and risks the future of our skilled workforce and our ability to hit net zero while employing those workers. Analysis from Offshore Energies UK shows that the increase and extension of the EPL risks costing the economy £13 billion and putting 35,000 jobs at risk.

The analysis from OEUK also shows a collapse in viable capital investment offshore under these changes from £14.1 billion to £2.3 billion in the period ’25-29. It is increasingly apparent that the Government do not really understand how investment horizons work offshore. They are not on a month-to-month basis; they take years to work up. This loss of economic value impacts on not only the core sector, but domestic supply chain companies, many of whom exist in my constituency, which have an essential role to play in the just transition.

The Labour party promised that there would be no cliff edge, yet it has concocted one for the 35,000 workers whose jobs this EPL change puts at risk. Labour had claimed that these changes would keep the UK in line with Norway, but the regime after Labour’s changes cannot be compared to that of Norway, which allows companies a maximum £78 of relief per £100 expenditure —in the UK, this relief would be £46.25. After these past couple of weeks, I am given to wondering if those on the Treasury Front Bench can actually count.

Changes to the EPL will hinder the just transition. The Government argue that the reduction in the rate of the decarbonisation investment allowance to 66% will maintain the overall cumulative value of relief for investment expenditure following the rate increase, reflecting the fact that this relief will increase in value against a higher levy rate. However, the policy still reflects a political choice by Labour to deprioritise investment in decarbonisation. Rather than allowing more valuable decarbonisation relief as the solitary positive by-product of its tax hike, Labour has striven to ensure that there is absolutely no silver lining to this fiscal attack cloud on Scotland’s energy industry.

[Mr Snowden]

At the heart of this, when we have comparisons to Norway, is a sheer focus on trying to squeeze as much taxation out of the industry as possible, without a focus on how to become more competitive. Does the hon. Gentleman agree that what we need for jobs and for energy security in the UK is to compare ourselves to the most competitive oil and gas economies in the world, and not those that squeeze and tax the most out of the industry and kill jobs?

[Dave Doogan]

Exactly. The hon. Gentleman raises the question of jobs, and the Government are playing fast and loose with jobs in the oil and gas sector. They are playing Russian roulette. They do not seem to understand that when what they have got wrong comes home to roost, they cannot just say, “Sorry, we got that wrong.” When it is gone, it is gone—they cannot bring it back. This is 2024, not 1972. We are already in the closing chapter of the sector; it will not be coming back. This Government seem to completely misunderstand that.

The simple truth is that the UK state cannot meet net zero or create green growth if Labour’s policies to hack away at investment in both the domestic workforce and the sector are allowed to progress. It is clear that the Labour party is abandoning Scotland’s existing energy sector, and putting at risk the just transition into the bargain. With these changes to the EPL, Labour will be creating the worst of all worlds: it will starve industry of investment, sacrifice the jobs of those who can deliver net zero, threaten energy security, keep energy bills high and harm the economy of Scotland, while at the very same time failing to invest the money required to truly deliver against a green transition.

--- Later in debate ---

[Sammy Wilson]

The Government have set a number of objectives that they wish to achieve over the next five years. Central to those objectives are growth, highly paid jobs, energy security, and increased investment. However, when I look at clauses 15 to 17, I ask myself, “Have the Government gone mad?” They are undermining the very objectives that they are seeking to achieve through their policy of taxation, a policy that I believe is driven more by green ideology and by prejudice against some high-earning companies than by any economic logic. The economic logic of these proposals, and indeed the predictions made by those who have fed in the data and the information about them, indicate that, at least in our major oil and energy industry, investment will go down, production will go down, and highly paid jobs will go down.

The hon. Member for Earley and Woodley (Yuan Yang) said that hers was the party that was interested in ordinary workers. As has already been pointed out, no Scottish Labour Members are taking part in the debate. I suggest that the 100,000 workers in Scotland who depend on the oil and gas industry feel abandoned today because there is no one here to defend them—although I have to say that if I were a Scottish Member I might not want to stick my head over the parapet, defend measures such as these, and then have to go back to my constituents to explain. I suspect that they will go through the Lobby and vote for those measures, but—[Interruption.] The hon. Member for Hamilton and Clyde Valley (Imogen Walker) is opening her arms and saying that she is from Scotland. I look forward to hearing her speak later in the debate in defence of these measures, which will cost jobs.

We have heard that those jobs will be replaced by highly paid, skilled jobs in the renewables industry, but there is little evidence of that so far. Indeed, if we look at the sources of the materials and the providers of, for instance, wind turbines, we see that the skilled jobs are not in Britain. We are making ourselves dependent on countries such as China which have control of the earth metals and valuable metals that are required to provide the necessary equipment for the renewables industry.

[Mr Snowden]

The right hon. Member has touched on an important point. Meeting the Government’s 2030 target and creating the green jobs to which he has referred will require two technologies that have not yet been tried and tested at scale, carbon capture and battery storage. Why would we gamble such an important 100,000-job industry in favour of technologies that have not even been tried and tested at scale?

[Sammy Wilson]

It is not just that they have not been tried and tested. There is also an acceptance—indeed, it is the Government’s own stated position—that even with those technologies, we will be reliant on, and will need, oil and gas not until 2030 and not even until 2040, but beyond 2050. If we do not extract as much oil and gas from our own resources here in the United Kingdom, where will we get it from? We will get it from abroad, which brings us to the issue of energy security.

The places where energy is likely to be produced will not be stable countries, countries that will always be favourable towards us, or countries that are ruled by rational rulers. It will come from countries where rulers are irrational, and take political decisions about who they do or do not trade with on a whim. The idea that we will rely on fossil fuels until well beyond 2050 but not produce them ourselves—in fact, we are going to discourage companies from producing them in the United Kingdom, even though we know that we have the resources—and somehow or other we will still guarantee security of supply, and security of energy, for our constituents is just madness.

--- Later in debate ---

[Adrian Ramsay (Waveney Valley) (Green)]

I would like to echo the arguments made by the hon. Members for Earley and Woodley (Yuan Yang) and for Bath (Wera Hobhouse) . I rise to speak to whether clause 18 and schedule 3 should stand part of the Bill. I argue that both should be omitted, to remove the proposed new tax relief for carbon capture and storage installations as currently drafted. The tax regime for oil and gas is riddled with reliefs, exemptions and loopholes. The windfall tax introduced by the last Government was widely reported, but was slightly less reported was the increased tax relief that went along with it, which allowed oil and gas companies to deduct 91% of their capital investment costs from their tax bill.

We are now many years into an escalating climate crisis, and one that the oil companies have known they were causing since at least 1977. There is absolutely no excuse for public subsidies that incentivise fossil fuel companies to expand their operations. So while I welcome the increase in the rate of the energy profits levy and the reduction of the investment allowance, I want to highlight the fact that, because of other reliefs that still exist, North sea oil and gas companies will still be able to offset 84% of capital expenditure against tax in relation to their expansion of operations.

[Mr Snowden]

Does the hon. Gentleman accept that capital reliefs are about attracting investment that creates jobs and secures energy security for this country? If UK countries are to make such investments, we have to be competitive in the global market. If we do not make those investments, what does he think will happen to the industry and the 100,000 jobs that go with it?