Oral Answers to Questions
David Duguid Excerpts(2 months, 3 weeks ago)
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The Chief Secretary to the Treasury (Laura Trott)
The university sector is one of the jewels of this country and I am proud that we have four of the world’s top 20 universities. I am happy to look at any individual proposals from the hon. Gentleman.
David Duguid (Banff and Buchan) (Con)
Last June the Exchequer Secretary announced the energy security investment mechanism, and I welcomed the announcement in last November’s autumn statement that the floor price would rise with inflation from April. How and when will that be legislated for, and will he look at alternative ways of setting that floor price, other than the 20-year reference period that is already used?
Gareth Davies
The energy security investment mechanism was designed, as my hon. Friend points out, to give more certainty not only to the oil and gas sector, but to investors, ensuring that the energy profits levy is disapplied when prices return to historically normal levels. To provide additional certainty, on the back of urging from him and the industry, we have agreed to legislate for ESIM and will be announcing that shortly.
Oral Answers to Questions
David Duguid Excerpts(5 months, 2 weeks ago)
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Jeremy Hunt
I think £94 billion of support to help families up and down the country, including with food prices and energy prices, is a rather different answer from saying that we are doing nothing.
David Duguid (Banff and Buchan) (Con)
The Exchequer Secretary to the Treasury (Gareth Davies)
Since March 2021, the Government have committed a total of £30 billion in public investment for the green industrial revolution. Since then, the Chancellor has announced £6 billion for clean heat and improving energy efficiency, and £20 billion for carbon capture, usage and storage. Alongside the launch of Great British Nuclear and the small modular reactor competition, the Government have also invested £1 billion in Sizewell C.
David Duguid
According to a recent survey, 90% of North sea oil and gas operators have reduced spending since the energy profits levy was introduced. I therefore welcome recent announcements on new North sea licences and the announcement before the summer of the energy security investment mechanism, by which the EPL will be removed when appropriate. Can my hon. Friend tell me when we can expect a response to the consultation on the ESIM and what plans this Government have to legislate for the mechanism? Will he meet me to discuss how investor confidence in our home-grown industry can be assured further?
Gareth Davies
Introducing the price floor for the oil and gas industry comes from the principle that, while it is right that oil and gas companies pay a higher share of tax during exceptional times, it is also right that when prices fall to normal levels, so do their tax rates. That is why we introduced the price floor in June and we have extensively engaged with the industry since then. I know that legislating will provide some certainty; we are looking carefully at that and will respond soon. I will always be happy to meet with my hon. Friend.
Oral Answers to Questions
David Duguid Excerpts(7 months, 3 weeks ago)
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John Glen
My hon. Friend always has constructive suggestions in this difficult area. The Chancellor brought forward a number of interventions in the Budget to get people back into work after some of the behavioural shifts that we saw following the pandemic. We look forward to continuing to work with my hon. Friend on solutions for his community.
David Duguid (Banff and Buchan) (Con)
Simon Baynes (Clwyd South) (Con)
The Chancellor of the Exchequer (Jeremy Hunt)
Investment zones are part of our industrial strategy to make sure that the benefits of our national strengths in our five growth priority sectors are spread throughout the UK.
David Duguid
I thank my right hon. Friend for his response. The north-east of Scotland has long been an exemplar of innovation in the fields of food and drink and energy, to name a few. Can he confirm that the north-east Scotland investment zone will lead to more innovation to promote these key industries not just in Aberdeen City, but in the wider north-east, including my constituency of Banff and Buchan?
Jeremy Hunt
I know that the Acorn carbon capture, usage and storage project is based at St Fergus in my hon. Friend’s patch, and that Banff and Buchan is within the north-east of Scotland region, which is one of two eligible areas and has been a long-standing global centre for excellence in clean energy, so I wish him every success as those discussions with the Scottish Government continue.
John Glen
I have not heard that matter raised before, but I am very happy to take it back and correspond with the hon. Lady on it. Obviously, we have taken advice on the state pension age and have made clear our policies previously, but I am happy to look at any specific cases she raises.
David Duguid (Banff and Buchan) (Con)
Jeremy Hunt
My hon. Friend is absolutely right to raise that issue. I actually had a breakfast with clean energy industry representatives this morning to discuss their concerns. There is a huge amount of potential investment, and he is right to say that maximising the use of our own oil and gas reserves during transition is a vital part of our energy security policy.
Oral Answers to Questions
David Duguid Excerpts(10 months, 1 week ago)
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Alan Brown (Kilmarnock and Loudoun) (SNP)
David Duguid (Banff and Buchan) (Con)
The Exchequer Secretary to the Treasury (Gareth Davies)
Advanced economies around the world share the challenge of high inflation from the energy shock, and the UK has been affected by those global factors. The Government have taken significant action to help households with rising energy prices and the cost of living by providing a significant support package totalling £94 billion. That includes supporting households with energy bills by extending the energy price guarantee and removing the premium paid by 4 million households using prepayment meters. Overall, the Government have paid about half of a typical household bill since October 2022.
Gareth Davies
I would simply point out that across the United Kingdom we have provided extensive support, as I said in my answer to the substantive question. I am very happy to write to the hon. Gentleman with details on his specific point.
David Duguid
When the energy profits levy was introduced to help the Government’s support of household energy bills, I welcomed the investment tax allowance that was introduced along with it on new oil and gas for energy security. In recent weeks, I also welcomed the Exchequer Secretary’s announcement in Aberdeen of a price floor in the form of an energy security investment mechanism, at which the EPL will be removed. The devil, of course, will be in the detail. I welcome the Treasury’s ongoing engagement and dialogue with the oil and gas industry, but will the Minister commit to a regular, perhaps quarterly, fiscal forum with the industry, as used to happen prior to covid? Does he agree that Labour’s plans to ban all new oil and gas is based on ideology and not a pragmatic approach to this country’s energy security and net zero?
Mr Speaker
Order. The hon. Gentleman ought to put in for an Adjournment debate. It would be easier for all of us.
Energy Trilemma
David Duguid Excerpts(1 year, 1 month ago)
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Ian Blackford (Ross, Skye and Lochaber) (SNP)
It is a considerable privilege to follow the right hon. Member for South Northamptonshire (Dame Andrea Leadsom), and I thank her for securing this vital debate for all of us.
This has been an important week because we have had the latest Intergovernmental Panel on Climate Change report, which bluntly gives what is essentially a final warning to humanity. The report lays bare what is already happening because of the damage that we are collectively doing to our planet as a direct result of the energy choices we have made for the last century. Extreme weather caused by climate breakdown has led to increased deaths from intensifying heatwaves in all regions, millions of lives and homes destroyed in droughts and floods, millions of people facing hunger and “increasingly irreversible losses” in vital ecosystems. That is the damage that has already been done, and if we continue down this path, the final consequences will not simply be about deepening that damage. It is much more fundamental; it is about whether we can continue to live and survive on this planet. That is the harsh reality of where we are, and that is why this debate is so vital.
In the years to come, energy is everything. It is quite literally the be-all and end-all, because the types of energy we use will determine whether we meet the challenge of climate change, and it will determine whether humanity can live on this planet for the foreseeable future. Unless we move immediately to a completely new system of energy production, we will have neither security nor prosperity. We often talk in this House about the scale of the challenges we have faced since the financial crisis in 2008: how to deliver sustainable economic growth, drive investment in our economy, drive prosperity and drive up living standards. The enormous opportunities that we have in green energy would enable us to kick-start that, to answer the questions on the supply chain that the right hon. Member for South Northamptonshire raised and to ensure we have the skills, so that we can lead the way in not only providing energy for ourselves but exporting green energy, just as we did with the oil and gas revolution in the 1970s. We have to rise to that challenge, and we have to rise to it here and now.
The terrible truth is that the UK is being left behind when it comes to green energy and green growth. The US and the EU are powering ahead, and we need to make sure that we are not playing catch-up in the United Kingdom. The Inflation Reduction Act passed in August 2022 makes a remarkable $369 billion available to climate and clean energy programmes in the US—just think of the scale of the opportunity that comes from that ambition. Where is our ambition to match that? President Biden’s programme is a real levelling-up agenda, making green energy the economic catalyst to restore and renew the industrial heartlands of the US. Likewise, the European Union is powering ahead. It is debating the passing of the green deal industrial plan, with which it wants to grow clean energy production, revitalise manufacturing and support well-paid jobs.
If I may, I will just look narrowly at Scotland for a minute or two, because I know the figures there better than the figures elsewhere. Last year, the SNP Westminster group commissioned what has been called the Skilling report—“The Economic Opportunity for Scotland from Renewable Energy and Green Technology”—which I know some colleagues in the House have read. There is no fantasy in that report, because we are just reflecting on what we already know.
When the report was published, Scotland was producing 12 GW of green energy. It is now producing about 13 GW, but the report highlights the potential to increase that figure to 80 GW by 2050: a fivefold increase over the course of that period, generating as much as four times the green energy that Scotland needs. That represents the opportunity to keep the lights on—a phrase that was referred to earlier—right across the United Kingdom, and ultimately to produce hydrogen on a scalable basis and export to other parts of the European Union as well. We need to take advantage of the natural opportunity that we have in green energy, making sure that we are at the cutting edge of that. According to Skilling, the transition from fossil fuels will ultimately deliver more jobs than we currently have in oil and gas—over 300,000 jobs by 2050.
The right hon. Member for South Northamptonshire talked about the planning regime and the skilled jobs that we need to develop in order to make this happen, but there needs to be a sense of urgency in doing all of those things, or we will miss that opportunity. There is an enormous challenge, if I may say so, in making sure that we have the jobs in turbine manufacturing and providing cabling. We will achieve that only if we have the visibility of the orders coming in that will encourage people to invest here from across the United Kingdom, and indeed, to come and invest from elsewhere.
David Duguid (Banff and Buchan) (Con)
Will the right hon. Gentleman give way?
David Duguid
I am genuinely grateful to the right hon. Gentleman for giving way, and I agree with pretty much everything he has said so far, which is unusual. I am sure he is familiar with the report by Professor de Leeuw at Robert Gordon University in Aberdeen, which assessed that at least 90% of the skills required for the net zero future already exist in the oil and gas industry. We should make the most of those skills while we can.
Ian Blackford
Actually, I agree with those comments from the professor and from the hon. Gentleman. When I have been in Aberdeen and been out looking at some of the offshore technology there, it has struck me that there is that transferability—if I may call it that—of skills from the oil and gas sector. Of course, we need to make that happen.
But what I would say is that, if Skilling is right—and I believe he is—the scale of the opportunity goes way beyond the jobs that we currently have in oil and gas. We need to make sure that we have the research and development and the innovation right across the supply chain, and that we are utilising not just our higher education sector, but the further education sector to deliver people with the appropriate skills to do this. That is an enormous opportunity. Out of that, there is an enormous opportunity to make sure that we have an industrial strategy that is fit for purpose as well. I would be delighted if we had these kinds of debates more often in this House—if we were actually having detailed discussions about how we do all this. What do we have to do to make the planning system work in a way that is respectful to local communities, but recognises the need and desire to move ahead?
Ian Blackford
I agree. The right hon. Member has made an important point. Often, the question is: how do we make sure we are protecting the rights of stakeholders and the rights of communities, while being able to do things at pace? What we have been talking about highlights the potential loss of technological leadership, because if we cannot do these things, we will not get that investment. In that context, let me go to the side a little, because I want to talk about one of the subsets of the green industry that has enormous potential for us.
We heard a comment earlier about nuclear and the opportunity to provide baseload. I have mentioned this in the House on a number of occasions, and I do not apologise for doing so again: there is enormous opportunity in tidal, and that has been demonstrated with the success we have seen with a number of projects. I encourage everyone in the House to examine a peer-reviewed Royal Society report published just ahead of COP26. It highlighted the opportunity of developing 11.5 GW of energy from tidal. If we look at the projects already developed in the United Kingdom, we tend to find that as much as 80% of that supply chain has been generated domestically. A number of the companies doing that are supplying equipment to such countries as France and Canada, as has been mentioned. There is a real danger that unless we recognise the scale of the opportunity, we will lose that leadership.
I am delighted that in the last contracts for difference round, the UK Government put in place a ringfenced pot of £20 million for tidal. That got us off to a degree of a start in fulfilling that ambition laid out in the Royal Society report. It was not as much as I would have liked. For us to fulfil that potential, we need to provide as much as £50 million annually, but I regret that over the past few days we have seen that that ringfenced pot will be cut to £10 million. I say to the House that we run the risk of losing this industry, and I appeal to the Government to revisit this issue. We can provide that baseload from tidal, as an alternative to nuclear energy. If we are ambitious about getting to that kind of scale in tidal, ultimately we will be providing that baseload on a more affordable basis.
David Duguid
I do not want to interrupt the right hon. Gentleman’s flow, and we can all agree that we wish there was more money available for different things, but he might not be aware that the £20 million that was initially ringfenced was for a two-year period. It has since been changed to a one-year or annual allocation. The £10 million for one year is essentially equivalent to £20 million for two years.
David Duguid (Banff and Buchan) (Con)
It is a pleasure to serve under your chairmanship, Mr Deputy Speaker—I have not had the pleasure before now, so welcome to the Chair.
It is a pleasure to follow the right hon. Member for Ross, Skye and Lochaber (Ian Blackford). I found that I agreed with most of his speech, although perhaps not with some of it. In particular that last point about there being a simple binary choice—I think it is a mistake to think it is either one side of the argument or another. This issue is far more complex than that, and I will try to cover some of those points in my speech. I congratulate my right hon. Friend the Member for South Northamptonshire (Dame Andrea Leadsom) on securing this important debate. I joined her committee as the report was being completed, but I was delighted to play a small part in that report and provide a forward to it.
The energy trilemma refers to the need to find a balance between energy security, affordability, and sustainability. As we continue through the energy transition, which we have already started, we need to keep the lights on, generate heat, and enable transportation—in other words, we need to keep our society and economy alive and well, and do that in an affordable and sustainable way. We are all aware of the increased energy prices right across the globe, caused initially by global shortages as the world economy started to recover from the covid-19 pandemic, and exacerbated further by Vladimir Putin’s invasion of Ukraine and the ongoing conflict there.
On affordability, I welcome the Government’s support for households and businesses through this difficult period, and particularly for those hardest hit. Fundamentally, however, affordability is best achieved by securing a reliable and plentiful supply of energy from a range of sources. Sustainability can also be defined in terms of keeping a secure and prosperous energy sector alive, including jobs and communities that the energy sector supports. More typically, sustainability usually refers to the impact that our social and economic activity has on the environment, and specifically to the impact on climate change from the emission of greenhouse gasses. Therefore, we need to keep the energy flowing, we need to make that energy affordable, and we need to reduce the impact on climate change created by the production and consumption of that energy. That is the energy trilemma.
The generation of energy for power, heat and transportation has, for many years, depended greatly on the combustion of hydrocarbons. That combustion of hydrocarbons has been shown to have a direct impact on the climate. So clearly, we must do something about that, and we are. The United Kingdom has already reduced carbon dioxide emissions by almost 50% compared with 1990 levels. Until covid, we had also grown the economy by more than 70% while doing so. In June 2019, the UK became the first major economy in the world to pass legislation to end our contribution to global emissions—in other words, net zero—by 2050.
Net zero means that any emissions would be balanced by schemes to offset an equivalent amount of greenhouse gases from the atmosphere, by planting trees or using technology such as carbon capture and storage. However, if climate change is a man-made problem as we keep hearing, it will need a man-made solution. Planting trees will make a contribution of course, and it is important we do that, as a return to nature, providing habitats and so on is very important.
Direct air capture is an exciting technology by which CO2 can be stripped directly from the atmosphere using a facility that, although large, takes up only about one 100th of the footprint that an equivalent area of forest would take to do the same job. That very expensive solution is still under development and we should keep a close eye on it. Besides, the captured carbon from such a process will still need to be utilised and stored somewhere.
That leads me to carbon capture, utilisation and storage. The inconvenient truth—if I can borrow that phrase—for some is that today about three quarters of the UK’s energy comes from oil and gas. Some 20% of our energy today is electricity. The rest of our energy use is fuel for transport, heat for homes, and industrial power and processes. It is absolutely right that we accelerate the installation of as many renewable sustainable and low carbon sources as possible, and as fast as possible. The UK Government’s 10-point plan for a green industrial revolution, launched in November 2020, set out plans and commitments for a range of technologies, many of which have been discussed and will be discussed today, including CCUS.
That was followed in March 2021 by the North sea transition deal, incorporated later into the British energy security strategy in April 2022. The deal was and is a transformative partnership between the UK Government and the UK’s offshore oil and gas sector to harness the power of that industry to help deliver net zero by 2050. As well as formalising energy transition and decarbonisation commitments, the North sea transition deal unlocks up to £16 billion of private investment, supports up to 40,000 jobs, and reduces emissions by up to 60 million metric tonnes. In the two years since the deal was agreed, the offshore oil and gas industry has made significant strides in supply decarbonisation, developing CCUS and hydrogen, transforming the supply chain and facilitating workforce mobility, as was discussed earlier. The industry has reduced its own production emissions by 20% since 2018. Leasing rounds are being developed for electrification. Access to the grid is very important, something that has already been discussed. Just last week, the Chancellor committed £20 billion for CCUS development. Offshore Energies UK, the trade body that represents the offshore energies sector, has developed the world’s first well decommissioning guidelines for carbon capture and storage, and is advising on best practice for things like methane emissions reduction.
But some of the key pillars of the deal—Government support for domestic energy supplies, a stable fiscal regime for the sector and encouraging continued investment—have taken a little bit of a hit. I will come back to the energy profits levy later in my speech. Part of the deal is to ensure oil and gas for as long as we need it, and there continues to be demand. Even by 2050, it is estimated that we will still require between 15% and 20% of our energy, heat and transport to be supplied by hydrocarbons. It therefore makes sense that our own domestic source of oil and gas will need to be maintained and expanded to supply that demand, even as it continues to decline. We produce a little under 50% of our own gas at the moment, with a majority of the shortfall being supplied by other countries such as Norway, the US and Qatar. The carbon footprint of just getting that gas here can be up to twice as high as if it was produced here.
I welcome the UK Government’s launch of the 33rd UK offshore licensing round. Many have asked—I was hoping for a Labour intervention on that point, but the Labour Benches are woefully empty today—how that can at all be consistent with our net zero objectives. For the reasons I described, a barrel of oil or cubic metre of gas produced in this country is better for us than those produced elsewhere while we are still using it. Hydrocarbons produced here are done so much more responsibly, under the strictest of regulatory regimes, and create fewer emissions from transportation than those imported from elsewhere.
We also need to make sure we retain the skills, expertise, technology and the capital and revenue generated by oil and gas, which is still significant, despite being in decline, to help deliver the energy transition. Unlike previous licensing rounds, this licensing round has been launched following the introduction by the Government of the climate compatibility checkpoint. The checkpoint ensures that no offshore licence will be awarded that puts the UK’s Paris agreement and COP26 commitments at risk. It also puts more emphasis on the industry’s own operational emissions than previously, as well as keeping a close eye on the status of the UK as a net importer of oil and gas. We have been a net importer of oil and gas since 2004.
We will not get to 2050 with the lights on, our homes and offices heated and our economy still moving without oil and gas. It follows that we will certainly not get to net zero by 2050 without CCUS. The Acorn CCS and hydrogen project in my constituency forms part of the Scottish CCUS cluster. At the time of track 1 bidding it was generally regarded as the most advanced cluster and ready to go, and was selected as the reserve cluster for track 1. Crucially, as the right hon. Member for Ross, Skye and Lochaber (Ian Blackford) said, it is the only CCUS cluster in Scotland. It is vital for capturing emissions from industrial complexes such as Grangemouth in the central belt or Mosmorran in Fife.
There are plans for a new CCS power station in Peterhead in my constituency, which, when complete, will be able to provide a stable baseload powered from natural gas but with the Scottish cluster activated, and 95% emission free. This new CCS power station will help to maintain energy security into the future, particularly as—unless we hear differently today—there is unlikely to be new nuclear anytime soon in Scotland. I look forward to the further detail on the £20 billion announced by the Chancellor last week on CCUS and the progression of track 2. I also look forward to the Energy Bill, currently on Report in the other place but due to come back here soon, I am told.
Even if we were to get to absolute zero emissions—never mind net zero—across the whole of the UK, those UK emissions add up to around 1% of global emissions. We often hear that as an excuse for not doing anything, but I do not believe that for a second. The real opportunity that we have as a United Kingdom is for Governments and Parliaments to come together and work constructively with industry, not only to get where we need to be in future but to use the skills, experience, technology and resources available to us here in this country. That will enable us to make the energy transition to net zero in the most predictive and successful way, to take the opportunity to lead the world in the process of energy transition and to show not just how it is done but that it can be done.
I want to finish on the subject of the energy profits levy. Opposition parties have called for and continue to call for ever higher taxes on oil and gas producers. Compared with almost every other business that currently pays corporation tax of 19%—due to rise next month to 25%—oil and gas companies were already paying 40%, with the EPL bringing them to 75% overall. Contrary to Opposition parties’ calls for a straightforward punitive tax, I welcome the investment allowance provided by this Government. However, the allowance is not available for all investment opportunities, including in renewables, as has been pointed out. I am told by OEUK that over 90% of members have downgraded their investment plans in the UK as a result of the EPL. I recognise that the revenues raised by this tax go some way towards paying some of the energy support provided by this Government, but I look forward to engaging with the industry and Government on how and when the profits made by these companies in this country are deemed to have returned to a more normal level.
The EPL has a particular impact on smaller independent operators such as Harbour, Ithaca, Spirit, EnQuest and a number of other small businesses, which do not have the resources of BP and Shell to invest elsewhere in the world. Another impact on the small independent producers comes from the revisions to the EPL to eliminate the price floor, which has had the unintended consequence of reducing lending capacity available from banks to the sector. Unlike some larger companies, the smaller organisations cannot afford to fund capital expenditure solely from their own balance sheets.
The independent operators will be vital to ensure the continued development of North sea oilfields as the major companies redeploy assets elsewhere, and are therefore critical to help the Government avoid the costs of stranded North sea assets in the medium to long term. That will be critical to safeguard the UK’s security of energy supply in years to come, while at the same time those companies’ resources, skills and expertise are used to ensure that we make the energy transition to net zero as planned.
Dr Alan Whitehead (Southampton, Test) (Lab)
This has been an interesting debate, and I congratulate the right hon. Member for South Northamptonshire (Dame Andrea Leadsom) on securing it. I thought that it was about tackling the energy trilemma, so I have prepared all sorts of interesting things about the energy trilemma and how it works. However, although the contributions have been interesting, the debate has not necessarily been about the energy trilemma.
The right hon. Lady spent a lot of her contribution talking about the 1922 Back-Bench committee report on energy, which sounds very interesting. Indeed, it appears to contain quite crucial insights, particularly on the need for speeding up the planning system as far as grid development is concerned, speeding up connections, and developing new connections and ring main in offshore wind. As far as I am concerned, those things are crucial to delivering the rest of our green agenda. I can offer her a slogan, “no transition without transmission”, which she might want to put on the front of a future report. They are crucial insights, and it would be a good idea for her to provide a submission to the Labour party national policy forum on this, because she would get a better hearing than she would from the present Government.
The right hon. Lady mentioned the three-legged stool. This is about how we achieve our net zero outcomes while taking the whole question of affordability and of energy security along with us as we go. This is not a zero-sum game. It is not the case that if we consider affordability and security, we take away from our net zero ambitions. After all, we in this House already decided which of those legs we are going for most strongly when we decided on net zero as our target as far as climate change is concerned. That means we have to consider the energy trilemma from the point of view of not whether we will get there but how we can get there with those other matters being taken into account.
I would prefer to put the question of energy security into a slightly different mode, and that is the one it was put in by the World Energy Council, which has done a lot of work on the energy trilemma as a tool for deciding how we make progress in these areas together. It has produced an isosceles triangle—I am confident that the word “isosceles” has not been recorded in Hansard before—that has spines going to the centre of it, and we can advance further along to each corner from the centre with various elements of the energy trilemma in it. We have decided to advance substantially down the left-hand spine, which is the sustainability part of the triangle. The job we have to do is make sure that what happens with the other two legs does not draw back the sustainability leg but enhances it, which is exactly the point that the hon. Member for Kilmarnock and Loudoun (Alan Brown) made.
It also means we have to take decisions in other areas that are compatible with the particular length of spine we have gone down on that triangle. I would politely say to the hon. Member for Banff and Buchan (David Duguid) that, while it may be the case that the hydrocarbons we bring into the UK are more carbon-intensive than the ones we produce in the UK for transport reasons and others, they are still hydrocarbons. With what we have decided, yes, we are going to need oil and gas in our future economy, but in far smaller quantities than is the case in our economy at the moment. We have to think about the right use for oil and gas in our future energy economy, making sure that as much of that as possible is produced in the UK as opposed to importing, but also that the total that we have coming into the economy as a whole is compatible with that net zero goal on the left leg of the sustainability triangle.
David Duguid
I appreciate the hon. Gentleman giving me the chance to come back on that point. Surely he will recognise, as I think he did in his statement just now, that there will be a gap for some time, and that we need to keep that gap closed. As rapidly as we all want renewable and low-carbon energy to be developed, we need to make sure that that gap is closed, and that we do not become even more dependent on foreign imports than we already are.
Dr Whitehead
The hon. Gentleman is absolutely right: we should not be dependent on foreign imports. However, we need to be thinking about a long-term overall reduction in what we are doing. I do not think that simply saying, “We’re going to increase oil and gas production over the next period” is an answer to our present problems, because in the end, that is incompatible with the commitments we have made on net zero. We cannot go down that path in the long-term future.
Energy (Oil and Gas) Profits Levy Bill
David Duguid ExcerptsMonday 11th July 2022
(1 year, 9 months ago)
Commons ChamberRead Full debate Energy (Oil and Gas) Profits Levy Act 2022 View all Energy (Oil and Gas) Profits Levy Act 2022 Debates Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: Committee of the whole House Amendments as at 11 July 2022 - (11 Jul 2022)
Craig Mackinlay
I am saying very clearly that big companies can make investments anywhere they please in the world, perhaps with tax regimes that are more suitable to them and where they are not being taxed at 65%. I would rather that they were investing here and staying here than going abroad to invest, with all the potential consequential impacts on the environment and employment. It seems that the hon. Gentleman agrees with me.
David Duguid (Banff and Buchan) (Con)
I rise in response to the hon. Member for Kilmarnock and Loudoun (Alan Brown). I declare an interest: I used to work for BP. I worked in the oil and gas industry for 25 years. I worked for BP in the North sea in this country, and in Angola, Venezuela and a range of different places. I worked for other companies in other countries as well. It is true that these companies have made their bread and butter in this country, and cut their teeth in the North sea, particularly from a safety point of view. The hon. Member for Aberdeen South (Stephen Flynn) mentioned Piper Alpha, which led to our having one of the highest regulatory regimes on the planet. It is not true to say that companies abandon that when they work elsewhere; it does make it a lot more difficult for them to work in those environments, but it does not stop them.
May I take the opportunity to totally agree with what my hon. Friend was saying before? This legislation, for all its flaws, compared with what Labour is proposing—
Stephen Flynn
Repetition is of course a convention of this House, but I am not much for many of the conventions of this House, so I do not intend to say much more than I did earlier about the Bill in general. I will just reflect very briefly on the amendments in my name and the names of my hon. Friends.
Amendment 9 relates directly to the electrification of North sea assets. We have heard comforting words about that from two Ministers now. I am sure the Minister for Energy, Clean Growth and Climate Change, now sitting beside the Financial Secretary to the Treasury, would agree that it will be in guidance that the electrification of assets will be able to get the taxation incentives. We cannot escape the fact that Ministers come and go, as we have seen so clearly in this place over the course of recent times, but what industry needs in relation to this issue is certainty. The best way—the only way—to provide certainty on the electrification of grids is to put that on the face of the Bill.
I agree with the hon. Member for South Thanet (Craig Mackinlay) on one point he made: it is deeply disappointing that there is not additional scope for the wider renewable sector to get these incentives. If the Government were serious about combating climate change and reaching their net zero ambitions, they would have extended those incentives to that industry.
That takes me on to new clause 6, again in my name and those of my hon. Friends, which aptly relates to net zero. The Government have rightly promoted, and will continue to promote, climate compatibility checks. I think we all in this place agree about those. What we need to be clear about, however, is the implications of this Bill for reaching net zero. The easiest, indeed the obvious, way to do that is to ensure that those climate compatibility environmental checks take place in relation to any investments. I thought that would be a very straightforward thing for the Government to agree with, and I hope they will do so.
Finally, in relation to new clause 7, I have teased this argument out on a couple of occasions in exchanges with Ministers: we know there is going to be a sunset clause on this levy, to end it in a couple of years’ time. However, the phrase “normal oil and gas prices” keeps being used again and again. We heard inferences from the former Chancellor that somewhere around $60 to $70 a barrel was normal. I just did a very quick calculation of prices. Between 2015 and 2021 the price was $56 a barrel, but between 2010 and 2015 it was double that, at $101.4 a barrel. I again ask the Minister—[Interruption.] Indeed, oil and gas is a good argument for independence.
Stephen Flynn
I will not give way to the hon. Gentleman. That has nothing to do with this Committee stage, and I would hate to get diverted, as some others did earlier.
What we and the industry need to be clear about is what price the Government regard as normal. If we are to have serious legislation, we need serious answers to the most basic of questions.
Economy Update
David Duguid Excerpts(1 year, 11 months ago)
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David Duguid (Banff and Buchan) (Con)
As the Chancellor knows, I have spoken in this House and privately to him against Labour’s proposals for a windfall tax—[Interruption.] I was waiting for the heckle. In my opinion, which I believe the Chancellor shares, they were entirely too blunt an instrument and frankly punitive for the sake of being punitive. I welcome his support for those most affected by the rising costs, his more targeted and specific approach to excess profits in the oil and gas industry and the relief on investment, which is already extensive, as he knows.
I have two questions. Can my right hon. Friend provide assurance that that charge will be applied to excess profits and that those will be distinguished from the increase in profits that would be expected in the natural cycle since the downturn of the past 12 years? Will he also commit to continuing the constructive dialogue with the industry that has been evident from this Government, in the interests of energy security and the transition to net zero?
Rishi Sunak
My hon. Friend is an excellent champion of the industry, and he is right to be so, because it is an important industry for the success of our future economy. It employs hundreds of thousands of people and it invests an enormous amount. We want to see that industry succeed and I know that, with his support and this Government’s, we will make sure that that happens.
Tackling Short-term and Long-term Cost of Living Increases
David Duguid Excerpts(1 year, 11 months ago)
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Alan Brown (Kilmarnock and Loudoun) (SNP)
I would like to say it is a pleasure to follow the Chancellor, but we have just heard 16 minutes of platitudes and no new ideas. He said that Opposition Members are causing people more worry. What is causing people more worry is not having enough money in their pockets to pay their bills. It is nothing to do with what we say here; it is what they see in reality.
The Chancellor mentioned yet again his £9 billion support package for energy bills, but he did not say that only a third of that is money from the Treasury that will not be clawed back. Two thirds of that £9 billion will be added to our energy bills and recovered through our bills, so he is making bills higher for some while providing crumbs of support to the most vulnerable. He mentioned growing the economy while ducking the fact that, after the past five years, the economy had already started to contract in March. Then, for good measure, we heard some bluster about Labour’s past record, as if to hide the issues. What that tells us is that Westminster has not been working for a very long time.
It is a dereliction of his duty as Chancellor to have no new measures and no new finances associated with the Queen’s Speech to address the Tory cost of living crisis. The stark reality is that the longer nothing is done, the more people will plunge into fuel and food poverty. The April 2022 price cap is 75% higher than just a year ago. National Energy Action estimates that up to 6.5 million households could now go into fuel poverty. That underlines why more action is needed by the Chancellor. The October increase coming could see up to 40% of households becoming fuel-poor. National Energy Action previously estimated that about 10,000 premature deaths a year arise from fuel poverty. How many more premature deaths are likely to occur with these increasing fuel costs? They have such an impact that people die early through fuel poverty. How can any Minister who claims to have compassion stand by and do nothing? Even the British Chambers of Commerce has asked for an emergency Budget. Companies such as Scottish Power are calling for £1,000 of support for energy bills, and yet the Chancellor has insisted that taking measures now would be silly. Why is he so out of touch with reality when even businesses are telling us what is required?
Looking back to April 2020 and the onset of the covid crisis, the Government increased universal credit by £1,040 to help people to live, but back then home energy bills were 75% cheaper and petrol was 50% cheaper, and we are now dealing with food inflation and with general inflation rising to 10%. If that £20 a week uplift was required for people to live two years ago, surely the Chancellor must recognise that he needs to reinstate that uplift and do so quickly. Even Asda chairman and Tory peer Stuart Rose backs reinstating the £20 per week uplift to universal credit, so it really is time for the Chancellor to listen. People on universal credit are more likely to be on prepayment meters and are therefore further penalised with a higher energy tariff. Those people will be forced to self-disconnect this winter, as they simply will not have the funds to put in the meter. They do not have a dilemma about whether to turn the heating on; they do not have the choice.
Yesterday I was at a meeting with Ewan McCall of the Wise Group. He and others within the Wise Group deal with people who are on the frontline of fuel poverty. A survey of nearly 300 people in Glasgow found that 24% were self-disconnecting or rationing their heating. There are really heartrending individual stories behind this: people reliant on candles and using hot water bottles, reduced to living in misery. The Wise Group, like others, provides fantastic help with turnaround, but it can only do so much. Other groups such as the Trussell Trust, which does fantastic work with food banks, have confirmed that ever more people are reliant on their services.
Rather than action, we have had the bizarre admission from the BEIS Secretary that his Department’s nuclear power policy will increase our energy bills. It is economic madness—and, unfortunately, madness cheered on and encouraged by Labour. It should come as no surprise that new nuclear will add to our bills. With an upper estimate of £63 billion for the capital and finance costs for one new nuclear power station, it is crazy to proceed when the costs of renewable energy are ever falling. So-called small modular reactors are neither small nor cheap, at circa £2 billion per new station. Rolls-Royce does not want a contract for just one small modular reactor; it wants a contract for 12 to 15. The Government should be focusing on providing cheaper dispatchable energy and agreeing a minimum electricity price for the proposed pumped storage hydro scheme at Coire Glas and the proposed extension at Cruachan Dam. Those can be delivered much quicker and at a fraction of the costs of nuclear. Indeed, the £1.7 billion that the Chancellor has used to buy a stake in Sizewell C would pay for Coire Glas to be built outright.
One obvious way to reduce bills and emissions is to increase energy efficiency measures massively. The Scottish Government rightly treat that as a national infrastructure programme and spend four times more on it per capita than the UK Government. The Green Alliance estimates that retrofitting 11 million homes will reduce peak heat demand by 40%. Shamefully, instead of showing increased ambition, the UK Government have not even brought forward the regulations for ECO4, yet the programme was supposed to have started on 1 April and is part of the £9 billion package the Chancellor keeps bragging about.
This Government are trapping more children in poverty who are therefore destined to have fewer opportunities and to be less likely to have positive outcomes in life. The Child Poverty Action Group estimates that there are currently 4 million children in poverty and says that the legacy of this Queen’s Speech will be even more children going into poverty. Yet at a stroke, overnight, the Chancellor could lift 250,000 children out of poverty by scrapping the two-child limit for universal credit. When he knows that he has at his disposal the power to take 250,000 children out of poverty overnight, why does he not act and scrap the cap? Why are Tory Back Benchers not calling for the two-child limit to be scrapped altogether? Instead we hear demands for tax cuts which the Chancellor has promised are coming, but which will disproportionately help the richest and not the poor.
Another decision taken by this Government is not to uprate benefits even close to the rate of inflation. That is a conscious decision, and as others have said, blaming the IT system is a piece of nonsense. The Chancellor is hiding behind weak excuses. There is something far wrong if the Government’s IT system is so poor that they cannot press a button to provide a percentage uplift.
We have heard one new policy announcement, which is making 91,000 civil servants redundant during this crisis. It beggars belief that the Government use the slogan “Making work pay” while wanting to sack 91,000 people. Unfortunately, many who are working know that work does not pay. The number of people who are in work and in poverty is increasing, and no amount of bluster will change that statistic. The Government could help by making the minimum wage equivalent to the real living wage. At a stroke, that would take more people out of poverty, and it would not cost the Government any money, so why do they not do that?
There is talk about balancing the books, and another cohort on whom the Government have balanced the books is pensioners. Scrapping the triple lock is costing pensioners more than £500 a year during this crisis. If inflation is running at 10% when the next uprating assessment is undertaken for pensions, will the Chancellor stand by the pledge to reinstate the triple lock? Will he actually increase pensions by 10%, if that is what inflation is telling us? It would be good if he could confirm that. Okay, he is just staring into space.
The topic of pensions takes me to the Women Against State Pension Inequality Campaign and the millions of women still awaiting compensation. The recent Parliamentary and Health Service Ombudsman report has highlighted and confirmed that there was clear “maladministration” in how the Department for Work and Pensions delivered—or failed to deliver—the news of the increased pension age for millions of women. Some form of compensation would not only be at least a nod towards justice, but put money in people’s pockets at this time of need.
I met two representatives from Ayrshire WASPI on Friday, and they highlighted that fair compensation in Ayrshire will be about £150 million for 15,000 women. That money would then be spent locally on services and goods in a real form of levelling up. Even then, much of that money would return to the Government in various taxes. Sadly, by the end of this calendar year, more than 220,000 women across the UK will have died waiting for justice in the seven years since the WASPI Campaign began. Thousands more women will die waiting unless the DWP and the Treasury sit down with campaigners to agree fair, fast compensation. I put it to those on the Front Bench: how acceptable is it just to sit back and let people die, instead of providing them with justice and the compensation they deserve?
Returning to the issue of the Treasury and how to pay for support, we agree with Labour on the principle of a windfall tax. However, it should not just be a cash raid on the North sea; rather, it should be a wider pandemic profit levy. Tax Justice UK has identified that just six companies made an excess profit of £16 billion in the financial year 2020-21. A 10% additional levy on them would realise £1.6 billion for the Treasury. A much wider pandemic profit levy of 10% across the board would raise even more money.
The right hon. Member for Doncaster North (Edward Miliband) said that companies should not profit from circumstance and from just being there. On that principle, he should agree that a pandemic profit levy makes more sense, because that would affect companies that benefited from the covid situation just by virtue of being there. That levy would also target the companies that made excessive profits from personal protective equipment contracts awarded to them directly by the Government.
There is no doubt that things have moved with the oil and gas sector. As the right hon. Gentleman pointed out, the chief executive of BP has said that investment would not be at risk. If we look at the reality of it, Shell and BP combined are on course to reach £40 billion in profit this year, so there must be some loose change there for the taking. It is interesting that the Tesco chairman wants a windfall tax on oil and gas, so I am sure he would also welcome a windfall tax on Tesco and other companies that benefited during the pandemic.
David Duguid (Banff and Buchan) (Con)
I genuinely thank the hon. Member for giving way. It is two or three short months since I welcomed his stance against Labour’s calls for a windfall tax, but putting that aside, he quoted Bernard Looney, the chief executive of BP. Is he aware that, as well as saying that currently committed investments would not be at risk from a windfall tax, Bernard Looney has also said that future investments could be?
Alan Brown
At the end of the day, there is so much excess profit here that something needs to be done. We need to have a serious conversation about it. Interestingly, in front of the Business, Energy and Industrial Strategy Committee, the chief executive of Centrica spoke about the record profits it is making and about how it pays much more tax in Norway than here. He confirmed that a tax regime can be balanced and that he is quite happy paying more if it is a stable regime. We could have a serious debate about a tax regime that realises more money for the Treasury, especially in this time of need.
That takes us to the Treasury. The Chancellor has generated his own windfall. As our energy bills have nearly doubled, so has the VAT intake to the Treasury. As petrol prices have soared, so have the VAT returns to the Treasury. Indeed, the duty cut he was bragging about is actually a loan paid for by the extra VAT that was already getting raked in. As we have heard, there is now a real risk that that duty cut is being gouged out by greedy petrol companies and not being passed on to consumers. That is another thing on which the Chancellor needs to get a grip. Oil and gas revenues have increased by £3.5 billion in the past couple of years, and I have a funny feeling that in the autumn statement, the Chancellor will predict even greater income from oil and gas revenues. That income alone should be getting recirculated and used to support people.
The Scottish Government are doing what they can to mitigate the crisis, but we cannot make decisions a normal country can make. The Scottish Government introduced the game-changing child payment and doubled it to £20 a week, and it will increase to £25 a week later this year. That could lift 50,000 children out of relative poverty, but it cannot have the positive impact it otherwise would have had due to Tory cuts. That also demonstrates the lack of real options for Scotland within the current constitutional settlement. We cannot make decisions a normal country can make. It is not in our gift to change VAT on energy bills. Whatever the views are on a windfall tax, we cannot do that. We do not have control over fuel duty or VAT either. We have limited borrowing powers. We are locked into bad decisions by the UK Government on the race for nuclear—encouraged by Labour—on money on nuclear weapons, and on being taken out of the EU, and we are short-changed in funding from the UK Government in relation to that.
As a country, we are energy-rich, yet we have citizens living in fuel poverty. We have exported oil and gas for years, but we do not even have an oil and gas fund. It is time for a different direction. We have had 315 years of the so-called most successful Union ever, yet we have a Government whose slogan is “level up” and “we know best”. If the Union is so successful, we should not need a slogan about levelling up. It is time for independence and time we made decisions for ourselves.
Cost of Living Increases
David Duguid Excerpts(2 years, 3 months ago)
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Andrew Bowie
The hon. Gentleman knows very well that separating Scotland from the United Kingdom would be far more than just repatriating powers to Holyrood; it would be the break-up of an economic, political and social Union that has been in existence for 300 years and, in fact, it would make Brexit look like a cakewalk. I understand the concerns of the hon. Gentleman, who stands up and fights for, for example, his exporters and fishermen, who are struggling with some of the burdens that Brexit has brought—I have said openly that I recognise that—but that is as nothing compared with the burden that independence would put on businesses and people in Scotland.
David Duguid (Banff and Buchan) (Con)
My hon. Friend makes an excellent point about the cost and financial strife that an independent Scotland would inevitably go through, but does he also agree with me and many others, especially in the business community, about the cost of an independence referendum and how investor confidence would be shaken up by merely having an independence referendum?
Andrew Bowie
Yes. That goes to the heart of one of the arguments that was made earlier about uncertainty for business. Actually, I take issue with what my hon. Friend the Member for Moray (Douglas Ross) about the hon. Member for Aberdeen South (Stephen Flynn) being a lone voice on the SNP Benches in calling for continued investment in the North sea, because he is not. A couple of other SNP Members are in the Scottish Parliament. For example, Gillian Martin, the SNP MSP for Aberdeenshire East, said that decreasing domestic oil and gas supply would lead to greater imports. Jackie Dunbar, the SNP MSP for Aberdeen Donside, said that
“a hard shutdown of the oil and gas sector”
would see Scotland “with thousands left unemployed”. What does that say about uncertainty for businesses that are looking to invest, create jobs and take people out of the cost of living crisis in my constituency in the north-east of Scotland, and around the entire country?
Let me go back to the point I was making about independence. I understand that SNP Members do not believe what I say—that independence would be a bigger shock to the system than our leaving the European Union —but they might believe their own growth commission, which the SNP commissioned a couple of years ago. [Laughter.] There is laughter from SNP Members. Maybe they are laughing at the SNP’s growth commission, which said that creating a separate state in Scotland would cost £450 million. I wonder what that would do to the cost of living. It also says that £5 billion would be paid to the rest of the United Kingdom annually to account for its share in the national debt, while public spending—despite what the hon. Member for Glasgow East would like to do to combat child poverty and poverty across the board—would have to be capped at 1% less than annual GDP growth. What would that do to the cost of living in Scotland?
I genuinely respect the efforts of quite a few SNP Members in what they do in their constituencies, along with Members across this House, to combat poverty in this country. The problem is that they cannot argue that the impact on business of leaving the European Union was bad for growth and created more poverty while saying that independence and the hammer blow that it would bring to the economy would be good. I am afraid that that is why I will not be joining them in the Lobby tonight.
Household Energy Bills: VAT
David Duguid Excerpts(2 years, 3 months ago)
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Alan Brown
I will make it clear for the hon. Gentleman: yes, our ambition is to be an independent country and yes, we want to join the EU. The vote today is about a temporary VAT holiday. The argument could be made that that could not happen under the EU, but energy policy would be reserved to Scotland so we would have much fairer policies. We would be able to do more and make other decisions, which would not rely on us having to back a 5% VAT holiday in Westminster. We would be able to do a lot more as an independent country, even in the EU.
David Duguid (Banff and Buchan) (Con)
I am interested in the hon. Gentleman’s point about an independent Scotland being able to make its own decisions. Within their devolved responsibilities, the SNP Scottish Government announced the £500 million north-east just transition fund. Is he aware of any announcement yet from the Scottish Government of precisely what the money will be spent on?
Alan Brown
That will come out. There have been some initial announcements. I presume from that intervention that the hon. Gentleman does not welcome the development of a £500 million fund that will serve his area and that he does not support any calls for the UK Government to add to that. Does he not welcome it?
Alan Brown
I take that to mean that the hon. Gentleman does not welcome it.
David Duguid
I welcome any funding in support of the energy transition. Much of it comes from the oil and gas companies themselves. In that respect, I welcome the stance of the hon. Gentleman and the SNP against Labour’s calls for a windfall tax on the oil and gas industry. I believe that is what he said, so I welcome that. The specific question that I am asking of the Scottish Government via SNP Members of this House is what precisely that nice-sounding £500 million will be spent on. It is not that I do not welcome it.
Alan Brown
I am not responsible for the administration of the £500 million fund, but the hon. Gentleman should just be grateful that it is there. It is for a 10-year investment period, so clearly it is for long-term planning.