Oil and Gas Producers: Windfall Tax

Clive Lewis Excerpts

Tuesday 1st February 2022 Commons Chamber

[Lee Rowley]

If I were not being heckled, I might get on with it.

As most of the House knows, and as most reasonable people will accept, the recent rise in energy prices in the United Kingdom has largely been driven by the increase in the wholesale price of gas caused by growing demand and broader geopolitical issues as we emerge from the pandemic. Those price rises are visible across many parts of Europe and beyond, and they demonstrate the importance of long-term security of supply and energy resilience, to which I will return in a moment.

With that in mind, it is important to answer the questions that have been asked, although it was wholly absent from the speech of the right hon. Member for Doncaster North that the Government are already doing much to support those in the greatest need.

[Clive Lewis (Norwich South) (Lab)]

rose—

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[Clive Lewis]

Is the hon. Gentleman not making an excellent case for a just transition, where taxes such as this, on those who have made billions—perhaps trillions—over the past century from sucking our resources out of the ground and making excessive profits, are invested to ensure that his constituents and the workers in those oilfields are entitled to a decent, sustainable, well-paid job?

[Stephen Flynn]

A just transition is at the forefront of my thoughts almost every day, because I see first-hand the impact of the decisions taken in this place on oil and gas. My own constituency contributes £14.4 billion of gross value added to the economy. How many other people’s constituencies can say that? However, I am aware of the poverty that exists notwithstanding that.

We need to see a just transition, which is why we have tabled our amendment today, but I must repeat that I have concerns about Labour’s proposal. Without their detailing what they believe the impact on investment would be and what the subsequent impact of that would be on workers, it is a proposal I simply find difficult to support in its current form.

That is not to say that the Government should be let off the hook, because the just transition, as has been said, is incredibly important. It is important to my constituents and to the constituents of Government Members, because there will be a change in the coming years and a transition to net zero. From the Scottish Government, we have seen a £500 million just transition fund put in place, with £80 million put towards the Acorn project, which the UK Government continue to drag their heels over supporting.

--- Later in debate ---

[Clive Lewis]

Over the past two years, the North sea oil and gas that was exported doubled. It is not our oil and gas. It belongs to the corporations that bring it out of the ground, and they sell it to the highest bidder. It does not increase our energy security. The right hon. Gentleman made a point about Biden inheriting fracked shale oil and gas in the US, but he failed to mention the ecological costs, which every year run into hundreds of millions of pounds of damage to the natural world. That is the price the United States is paying for its fracking, which I imagine the right hon. Gentleman would expect us to take up here as well.

[John Redwood]

I was not talking about onshore gas at all; I was talking about North sea gas, which comes from under the sea. A variety of reservoir easing techniques have been used for many years and never caused political controversy. I was recommending that we review again the opportunity to explore for more, to develop more and to bring into production the fields that we know are out there. That would also help the SNP spokesman, the hon. Member for Aberdeen South (Stephen Flynn), who would rightly like more jobs or to sustain jobs in his successful oil and gas city, which faces the problems that he described. I was interested in his warning about how a windfall tax could, like last time, collapse investment and reduce the amount of extraction and future investment that we get.

The hon. Member for Norwich South (Clive Lewis) said that not all the gas produced in the North sea would be sold to us. That may be right, but the European market in general is chronically short of gas and the continental market is cruelly dependent on Russian gas, which today we can see is not a good idea. A North sea supply would therefore help when we are trying to ease supply pressures and bring prices down.

The second reason why it makes much more sense to use our own gas—or to extract more of it—rather than rely on imports is that we collect much more tax on it, and we are losing all that tax revenue on imports. The hon. Gentleman should remember that we now import 53% of the gas that we need, and we do not get anything like the revenue that we could if we extracted more of our own. Preferably, we would sell it to ourselves, but even if we exported it—we may well do that—we would still collect the extra revenue. There would also be a benefit in jobs and prosperity, because the industry tends to create quite a lot of well-paid jobs, which is good for the communities that sponsor those activities.

I hope that Ministers will look favourably on the idea that, during this transition, we will burn a lot of gas—as will everyone else—so it makes a lot of sense for the UK to produce gas and offer it on long-term contracts, trying to smooth some of erratic prices that we see because of what is happening on the continent, and make our contribution to greater security of supply for ourselves and—indirectly—for Europe.

Finally—I know that time is limited—electricity is much in demand, and it will be much more in demand if the electrical revolution that the Government wish to unleash comes true. One reason why we had a big spike in gas prices was that the wind did not blow, which added to the need to burn a lot more gas in power stations. That can happen again, because the wind clearly is an unreliable friend, and it is particularly difficult if it goes down at times of peak demand or when it is very cold. We therefore need to ensure that we are putting in enough reliable electricity capacity, because that has a direct relationship with the gas supply and demand issue as well as with gas prices, and I do not think that the current plans have nearly enough new capacity in them.