Oil and Gas: Subsidies and Licensing

Baroness Jones of Moulsecoomb Excerpts

Thursday 20th January 2022 Grand Committee

Asked by

[Baroness Jones of Moulsecoomb]

To ask Her Majesty’s Government what steps they have taken to ensure that (1) subsidies, and (2) licensing decisions, related to the oil and gas industry are not subject to undue influence from outside interests.

[Baroness Jones of Moulsecoomb (GP)]

First, I apologise for speaking seated; it is because I sprained my knee. Secondly, I welcome the noble Lord, Lord Offord, to his first outing as a Minister, and I look forward very much to his maiden speech later.

Between July 2019 and March last year, government Ministers had 63 meetings with fossil fuel and biomass producers. That is nine times the number of meetings they had with renewable energy companies. That strikes me as slightly odd: a Government who chaired COP 26 and are meant to be switching to renewables very fast are meeting fossil fuel and biomass companies nine times more than the companies they are meant to be relying on to deliver the sustainable future they promise.

As well as the small private meetings, Ministers also attended hundreds of other larger group meetings with fossil fuel companies and their representatives. Fossil fuel producers were present at 309 of these, compared with 60 for renewable energy generators. Again, I do not understand why Ministers are focusing on a polluting industry that we need to shut down rather than renewables—with all the new job opportunities —which we need to grow very rapidly. But there is a clue, because the Conservative Party under Boris Johnson has taken almost £1.5 million in donations from the energy industry since 2019.

I mention this slightly disturbing fact because my intention in this debate is to draw attention to the fact that we live in a corrupt country run by autocratic Ministers who facilitate their friends pocketing large amounts of public money either directly, via government contracts, or indirectly, through putting holes in the regulatory system. We have seen this recently with the fast-track scheme for PPE contracts, the second-jobs scandal involving MPs, and all sorts of lobbying, such as David Cameron on behalf of Greensill. Money buys access, and access gives you everything from subsidies to licences.

The point I am making is that corruption has real-world impacts on government policy and the lives of ordinary people. If you are in the development industry, it might give you changes to planning red tape. If you are in the energy business, it might buy you another decade of profitable polluting while the planet burns.

We have a Government who are keen to support a polluting industry that is equally keen to support the Government. That might be excused if the oil and gas industry was filling the coffers of the Treasury as well as the Conservative Party, but surprisingly that is not always the case. In a recent court case brought by some climate campaigners, the judge acknowledged that in some years oil and gas companies had paid less in taxes than they received in tax breaks. The judge wrote:

“The claimants point to clear evidence of negative taxation flows in particular years; specifically negative tax flows overall in 2015-16 and 2016-17 of £2 million and £359 million respectively.”


The judge quite rightly said that focusing on single years ignored the fact that

“the tax position over the life of the concession is at worst neutral”.

We know that the UK is one of the most profitable countries for the oil and gas industry in the world, but we cannot even be sure that it pays its own way in tax.

The Government will claim that there is no subsidy for oil and gas, as they define fossil fuel subsidies as

“measures that reduce the effective price of fossil fuels below world market prices.”

In other words, the Government are giving the industry millions of pounds in tax breaks, but this is not a subsidy because it does not result in lower prices for consumers—well, that is obviously absolutely brilliant. But if the Government do not like “subsidy”, we could just call it “fossil fuel support”. Our Government do not deny the tax breaks; they just make it clear that this does not lower prices—it just enables the companies to make more profit. In fact, it is so profitable that those making money out of this polluting industry have enough spare cash to give it to the Conservative Party. That is obviously something we need to be concerned about.

Of course, if a previous Prime Minister, Cameron, had not cut what he called the “green crap”, our energy bills would be £40 lower each. Imagine how much lower they would be if he had been serious about insulating homes and expanding cheap renewable electricity, reducing our current reliance on foreign gas.

I will not go into all the details of the donations made by the industry, directly and indirectly, as we would need far longer than the hour that we have just to list them. Our self-regulatory system of government does not stop people buying influence. Civil servants are not around to take notes when a Minister attends a party fundraiser where oil executives have paid £12,000 for a seat at the table. Civil servants cannot know what conversations go on when an MP gets a huge donation to the private office a few months before they are appointed as a Minister in charge of projects that the donor wants to push through. It has happened in the past few years and, to be fair, the Minister I am thinking about stepped aside from a major decision—but only after the media contacted them.

The National Audit Office cannot even get access to Ministers’ WhatsApp conversations with party donors about favoured projects, unless the Minister self-declares that they regard the messages as relevant. Even when Ministers have been taken to court to get those messages, suddenly the phone is broken or lost—or they do a Boris, who claimed that messages were lost when he changed his phone number. It is not very nice, is it, quite honestly? It is shameful.

Last year, we chaired COP 26, but the Government are now dishing out a large number of licences for North Sea exploration. I really do not see how that can be compatible with reducing our greenhouse gas emissions. Generic conditions have to be met, but only on new submissions; as I understand it, projects already in the pipeline get a licence without reference to climate change. How is that possible?

Individuals and companies linked to the oil and gas industries have donated more than £400,000 to the Conservative Party in the past year, while the Government mulled over these new licences. There might be parliamentary rules that stop Peers like me from asking Written Questions about the influence that such donations have on the Ministers making the decisions—which I have tried to do, but was stopped—but it is clear and obvious that the influences is there.

We have an acknowledgement that corruption is rife, the negative impacts on our environment are clear, and I really want to hear from the Minister today how we are going to junk the broken system of self-regulation in favour of a more robust legal system that involves either the police or an end to large-scale donations. The days of having a Ministerial Code enforced by someone appointed by the Prime Minister really should be gone. It does not work when Ministers do not play by the rules.

--- Later in debate ---

[Lord Lilley (Con)]

I have not looked at the profitability per barrel and the tax paid per barrel, but I used to do that every day 40 years ago. I assume that it is because our fields are now running down, whereas the Norwegian fields are still far from fully mature. As far as I know, Norway’s tax regime is not hugely different from our own; it was not then. On the question of whether we have to restrict supply as well as restricting demand, no, we do not. If you reduce demand and anyone has supply available and no market for it, they lose money—that is their problem—but if you reduce supply without reducing demand, you raise prices, increase profits to the industry and increase costs to ordinary households.

[Baroness Jones of Moulsecoomb (GP)]

Before the noble Lord sits down, can I ask him how he thinks demand could be reduced?

[Lord Lilley (Con)]

You could do all sorts of things to reduce demand for oil and gas—requiring people to spend thousands of pounds on shifting from gas to electric heat pumps, that sort of thing. The noble Baroness knows the answer to her own question.

[Baroness Jones of Moulsecoomb (GP)]

Except—

[Baroness Worthington (CB)]

My Lords—