Finance Bill

Debate between Harriet Cross and Scott Arthur

2nd reading
Wednesday 27th November 2024 Commons Chamber

[Harriet Cross (Gordon and Buchan) (Con)]

I will speak about the impact of the Government’s changes to the energy profits levy on people and businesses in my constituency, and on the UK as a whole, in terms of the energy security the Government are meant to ensure and the Government’s ever-more ambitious decarbonisation targets, which are being put at risk.

The Chancellor’s decision to increase the EPL rate to 38% and extend it to 2030, while also removing investment allowances, demonstrates a fundamental misunderstanding of our energy sector—indeed, the global energy sector—and the communities here that depend on it. According to Aberdeen and Grampian chamber of commerce, 100,000 energy-related jobs across the UK, but disproportionately in Aberdeen and Aberdeenshire, are being put at risk because of the changes. The OBR’s figures project that capital expenditure will fall by 26%, with oil production down 6.3% and gas production down 9.2%. For businesses across my constituency, that means fewer contracts, reduced investment and diminishing opportunities. Or to put it another way: fewer jobs, fewer prospects and more redundancies.

What is incomprehensible about the changes to the EPL is that they make no economic sense. Studies by Offshore Energies UK show that the changes will cost the Treasury £12 billion in lost tax revenue—£12 billion. If the Chancellor is so convinced that she is in a hole, maybe not digging deeper would be a good idea. The OEUK put that down to a rapid decline in production due to under-investment. While we are still going to use oil and gas for years to come, the Government are therefore choosing to take it from overseas producers where there are low environmental credentials and worse employment standards, rather than from the UK where we will be able to increase employment, secure employment, help our tax revenues and secure our economic growth both locally and nationally.

Labour’s changes in the Budget will see a wholly punitive regime, with the effective tax rate being 78% on oil and gas companies—the highest of any comparable off-sea mature basin. What other industry in the UK would be expected to deliver something as fundamental as our heating, lighting or transport fuel—indeed, energy to ensure the NHS can operate and schools can run—while also being taxed to such an extent that the Government are driving away investment in a sector so crucial to our national security?

What is particularly concerning about the EPL is the impact on home-grown energy businesses. These are not global multinationals that are often used as examples of the energy giants who make massive profits; companies that can and do buffer the impacts of EPL by increasing their overseas investments and reducing their investments in the North sea. Instead, this policy hits hardest the companies that have emerged and grown out of north-east Scotland, employing local people, supporting local supply chains and helping our local economies.

[Dr Arthur]

I thank the hon. Lady for giving way. In January 2023 the Conservative Chancellor increased the energy profit levy by 10%, from 25% to 35%. What was the impact of that change on North sea jobs and the economy?

[Harriet Cross]

I thank the hon. Gentleman for his question. We must remember that investment allowances have now been reduced and taken away. Increasing the EPL by a further 3% while decreasing investment allowances makes the North sea a really difficult place to invest in.