Finance Bill

Dave Doogan Excerpts

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

[Dave Doogan (Angus and Perthshire Glens) (SNP)]

We in the SNP and the Scottish Government believe in progressive taxation. I think that is evident from the changes we have made to income tax since those matters were devolved. We would like a more progressive influence in the changes before us, rather than simply clawing at allowances and increasing the rate. Nothing in clauses 7 to 12 is designed to make matters better in Scotland, but at least the Labour party is consistent on that.

Inheritance tax and capital gains tax are increasingly out of step with modern activity in the UK economy. As the IPPR points out, since the 1980s, household wealth in the UK has risen from three times the national income to more than seven times, yet over the same timeframe wealth taxes have not risen at all as a share of that income. Taxing unearned wealth more fairly and efficiently is a legitimate long-term ambition in a state where the economy is on life support. Taxpayers are left wondering from this Budget whether more tax rises are on the way, after a substantial lack of clarity from the Chancellor, who said a week or so ago that the Government would not come back for more tax rises, or indeed more borrowing, but has since refused to echo those rather injudicious remarks. If she does not have the confidence to stand by her own statements, it is hard to imagine the effect on business and investor confidence across the UK.

The Chancellor should have worked with economic experts, such as those at the IFS, to create a fairer and more growth-friendly capital gains tax, but instead she has been captured by the same old Treasury dogma that has served the UK so badly over recent decades. Capital gains tax raises a growing amount of revenue—about £15 billion last year—partly reflecting the increased role of wealth accumulation in the UK, but it is still less than 2% of all tax take, and although CGT is paid by about 350,000 people each year, two thirds of receipts are from just 12,000 people with an average gain of £4 million.

CGT rates vary significantly across assets, and are almost always significantly lower than income tax rates. That rate differential is unfair and creates undesirable distortions, including to what people invest in and how long they choose to work. The IFS has criticised the Chancellor for choosing simply to increase CGT rates with no effort to carry out what it describes as much-needed reform. It also describes the whole design of CGT as “flawed”, adding:

“There are steps the government could and should take to make the tax fairer and less harmful to economic growth and well-being.”

Moreover, the Centre for the Analysis of Taxation proposes further changes to CGT, including aligning capital gains tax rates with income tax rates, introducing allowances to incentivise investment, taxing the increase in an asset’s value when it is inherited, and implementing an exit tax to prevent individuals from dodging UK taxes on gains made while residing in the UK. It estimates that that package would generate £14 billion, but none of those measures is in the Bill.

The IFS says that if the Chancellor chose to raise CGT rates while leaving the flawed tax base unchanged, she would be choosing to raise some limited revenue at the expense of weakening savings and investment incentives, and of further distorting which assets people buy and how long they hold on to them. The IFS says that that would not be the decision of a Chancellor who is serious about growth. Well, what a portent that turned out to be. She did not reform CGT, and look what happened to growth: forecasts were down immediately after first contact with this inverse Midas-touch Chancellor. It is clear that, in preparing for the Budget, she could have done with a full hour or more with the IFS, but I doubt that she would have listened.

[The Chairman of Ways and Means (Ms Nusrat Ghani)]

We come to the final Back-Bench contribution, and have saved the best until last. I call Bobby Dean.

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[Dave Doogan]

Certainty is only good if it relates to a positive outlook, not a negative outlook. The hon. Member for Gordon and Buchan (Harriet Cross) asked a clear question about the duration. It was not about whether the sector pays fair taxes; we all believe that people should pay fair taxes. Does the Minister still believe that the industry is making extraordinary profits?

[James Murray]

I would like to explain to the hon. Gentleman how the energy security investment mechanism works, because that, to be fair, was put in place by the previous Government, and we are maintaining it. It says that if prices drop below a certain threshold for six months, the energy profits levy ceases early. That gives some certainty and predictability to the oil and gas sector. If prices go below that level, the sector can have confidence that the energy security investment mechanism will end the levy early. If that does not happen, the levy will continue, as we have said, until March 2030.

I am keen—I will set out a few more details later—to engage with the oil and gas sector on the regime post the energy profits levy, because it is important for oil and gas companies making decisions about investment to have certainty about what will happen up until March 2030, and to understand what the regime might be like thereafter. That is why I am looking forward to my conversations with the sector on what the post energy profits levy regime will look like.

Long-term certainty and confidence is being provided to the oil and gas sector by our retention of the levy’s price floor, the energy security investment mechanism, which I was explaining to the hon. Member for Angus and Perthshire Glens (Dave Doogan). It means that the levy will cease permanently if oil and gas prices fall below a set level for a sustained period. Furthermore, as I also just said, to provide stability for the long term, the Government will publish a consultation in early 2025 on how the tax regime will respond to price shocks once the energy profits levy comes to an end. That will give oil and gas producers and their investors predictability and certainty on the future of the fiscal regime, which will support their ability to continue investing, while also ensuring that the nation receives a fair return at a time of exceptional crisis.

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[Harriet Cross]

I will speak to clauses 15 to 18 briefly, but mainly to new clause 3 in the name of my right hon. Friend the Member for Central Devon (Mel Stride). It would require the Chancellor to publish within three months a review of the expected changes introduced by the Bill on employment, capital expenditure, production, demand and the economy. It is inherently sensible, and considers the importance of the oil and gas sector to regional and national employment and economic growth in the UK.

On the need to review the impact on employment, 82% of direct jobs in the oil and gas sector are located in Scotland. My Gordon and Buchan constituency is at the heart of that. New clause 3 would review the impact of the changes to employment across the country, as it is not just direct jobs that are on the line but supply chain and other indirect jobs. Of those, 90,000 are in Scotland and 200,00 are across the UK.

[Dave Doogan]

The hon. Member highlights the economic consequences of this heading south on jobs in Scotland. Is she surprised and disappointed, as I am, that not a single Scottish Labour MP has turned up to take part in this vital debate?

[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.

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[Madam Deputy Speaker]

Before I call Dave Doogan, I remind Members that if they wish to speak, they need to be bobbing consistently—I cannot read people’s minds to put together a speaking list.

[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.

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[Wera Hobhouse]

I thank the hon. Lady for her intervention. It is absolutely by putting in place the measures for transition that we will meet net zero. If we continue with business as usual and continue to listen to people who ultimately do not understand that unless we get to net zero our whole economy will suffer, then people will suffer. We will also have big, big problems with issues such as huge migration if climate change can rule unchallenged. This is why the Liberal Democrats believe the transition to net zero is important and why we need to put measures in place to make that happen. It is disappointing that the Conservatives, as the previous Government and now the Opposition, still do not understand how urgently we require climate action.

[Dave Doogan]

I am very grateful to the hon. Lady for giving way. What is her understanding of what will happen to domestic consumption of oil and gas products in the United Kingdom if the domestic industry atrophies but domestic demand still exists? What will happen in that scenario? Where will the oil and gas come from, or will we just give it up overnight?

[Wera Hobhouse]

I thank the hon. Gentleman for that intervention. The whole argument is that we will continue to rely on oil and gas for the time being, but unless we start to change something, on the current projection we will not get to net zero as urgently as we need to. Progress has been too slow, so the longer we hesitate the more difficult it will become. The new Government have understood that urgency, and the Liberal Democrats support them in dealing with this issue with more urgency than we saw from the previous Government. I therefore repeat that we support the measures, but we would like the Government to support our new clause 2. As I said, it will show what we can raise by closing the loophole. It would by extension, as my hon. Friend the Member for St Albans clarified, show what has been squandered by the previous Government—money that could have been invested.

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[Sammy Wilson]

Only a fool would say that climate change is not happening. Climate change has occurred in all the time that the earth has been in existence. Of course it happens, and of course it is happening. The hon. Lady asks me a question to which I think anybody could give an easy answer. Yes, climate change is happening, but does that mean that we have identified all the sources of the change in our climate? Does it also mean that we should distort our economy, in such a way as she would suggest, to try to make changes to the world’s climate, especially given that other countries are not making any changes to their economy and are not following our lead? They are simply ignoring us and doing what they believe is best for their own economies.

The second point I want to make is that we are leaving ourselves open to a situation in which companies that we need to invest in energy production will not do so. The OBR has made that quite clear, but even if it had not made its predictions, economic logic should make us understand that if we take investment allowances away from people and tax them, they will have less money to invest.

The Minister makes a great point: by putting all these measures on the statute book, he creates certainty for the industry. He does create certainty, because anybody looking at the Bill knows for certain what the future entails: they are going to be taxed until the pips squeak, so they will look for other places to go and make their investment. He argues that putting out a tax plan somehow gives assurance to companies, but sometimes it confirms their prejudice that Britain will not be a place where they have a future, or where they wish to invest.

I turn to the third impact of these measures, building on a point made by the hon. Member for Earley and Woodley. The Government’s whole approach is to tax oil and gas companies, get money, and help working people by putting it into schools and so on. But the predictions are that we will not get more revenue, because if there is less production, there is less tax to be paid. If there is less tax to be paid, the Government have less revenue to invest in the things that hon. Members on both sides of the House would wish them to invest in. Where does that tax go? It will go to foreign countries, because that is where production will take place and where the oil companies will be taxed. They will get taxed where they make their profits. If they are not making any profits in the United Kingdom, they will not pay any revenue in the United Kingdom. They will take their production and tax revenue elsewhere.

There does not appear to be any economic logic to this proposal, other than that the oil companies are seen as bad so the Government have to tax them, even though they are taxed heavily already, and that the Government want to ensure that we have this transition to net zero, even though we know that we will still need the product that the oil companies produce for many decades into the future and we will be turning our back on that production in the United Kingdom.

If the Government are so sure that this cunning plan is going to work—I think Baldrick would have been embarrassed by this cunning plan, I have to say—they should not fear any examination of it. They should welcome it. In fact, maybe once the assessment is done, they will be able to point to red faces on the Opposition side of the House. If I were as certain as the Minister is that his plan was going to work, I would be saying, “Right, we’ll do the assessment and we’ll make you eat your words.” I suspect that the reason that new clause 2 will be rejected today is that the red faces and the eating of words are going to be on the Government’s side of the House. Unfortunately, the people who will suffer will be the hundreds of thousands of people facing rising fuel bills, the 100,000 workers who will face redundancies and an industry that we very much need in this country going into decline.

[Dave Doogan]

On a point of order, Madam Chair. The last but one speaker, the hon. Member for Earley and Woodley (Yuan Yang), called me out regarding my perfectly legitimate comment that there was not a single Scottish Labour MP in here. I chose my words carefully, taking part in this debate. I appreciate that there is a Labour Member here who, unless I am very much mistaken, is fulfilling the role of a Parliamentary Private Secretary and therefore will not be taking part in the debate. I ask your guidance, Madam Chair, on whether it is legitimate to call somebody out in a debate and not give them an opportunity to respond. I tried to intervene on the hon. Member for Earley and Woodley to correct the record, but she refused to give way. How can we correct the record to underline the fact that there is not a single Scottish Labour MP in here taking part in this debate on Scotland’s energy?

[The Second Deputy Chairman of Ways and Means (Caroline Nokes)]

The hon. Gentleman will be aware that that is not a matter for the Chair, and therefore I cannot provide advice as to how he can put that on the record. He will know as well as other hon. Members do that it is entirely at the discretion of the individual contributing at that time whether or not they take an intervention, but he has done good work in putting his point on the record via the mechanism of a point of order.