Household Energy Bills: VAT

Jacob Young Excerpts

Tuesday 11th January 2022 Commons Chamber

[Alan Brown]

I was not aware of that, but it appears from recent figures relating to the impact of Brexit that the protocol is protecting Northern Ireland, and it is not taking the same hit to its economy as the likes of Scotland. It is swings and roundabouts. The Northern Ireland economy is doing much better than it would have as part of Brexit Britain.

I have said that I certainly support the VAT holiday, but I am not sure that some of the rest of Labour’s £6.6 billion package and rhetoric has been completely thought through. The real windfall tax should be levied on the Treasury. As our energy bills have increased, so have VAT returns to the Treasury; as fuel prices have increased, the Treasury has raked in more money in fuel duty and VAT; and as for the North sea, it was confirmed in the Red Book for the November Budget that this financial year the Treasury will receive an extra £1.1 billion in oil and gas revenues compared with the March 2021 prediction, and the Treasury will receive an extra £2 billion from oil and gas revenues in this coming year and £6 billion in total over the Parliament. The Treasury should release the additional windfall revenue it has received.

Although to impose a windfall tax directly on oil and gas companies is an easy political soundbite, it has potential implications, so what discussions has Labour had with the industry? What assessment has Labour made of the levels of investment—which could be part of the decarbonisation agenda—that might be clawed back because of such a tax? The harsh reality is that every previous windfall tax on the oil and gas industry has led to a drop in capital investment.

In our transition to net zero, we do need to get off our dependence on oil and gas, but the reality is that carbon capture and storage is part of the pathway to net zero. What assessment has Labour made of the potential impact on such projects, and particularly on the Scottish carbon capture cluster, which has already been sacrificed to reserve status by the Tory Government?

[Jacob Young (Redcar) (Con)]

On low-carbon energy, if the hon. Gentleman wants us to get on a more sustainable footing where we do not rely on oil and gas as much, why did he, his SNP colleagues, the Lib Dems and even some Labour MPs oppose the Nuclear Energy (Financing) Bill last night?

[Alan Brown]

Let me come to the next part of my speech, which will address that point. I am absolutely incredulous that, as the hon. Gentleman pointed out, Labour MPs were whipped to vote for that Bill, which will add billions of pounds to electricity bills. The Bill’s impact assessment, published by Ministers, shows an upper estimate of £63 billion for the capital costs and financing of a new nuclear power station. That is to be paid for by bill payers. That is not low cost: it is a burden of something like £40 billion to £60 billion added to our energy bills—and Labour voted for it. How can Labour MPs talk about lowering energy bills when they just voted to add £50 billion to our bills as bill payers? It is nonsensical and they need to rethink their nuclear policy rapidly.

On nuclear, the Chancellor allocated £1.7 billion for the development of Sizewell C to the final investment stage. That sum of money could pay for the Coire Glas pumped hydro storage scheme in Scotland, as well as the Cruachan dam extension. Those projects could be delivered quicker than Sizewell, they do not come with a £50 billion capital finance burden, and further investment in pumped hydro storage would save £700 million per year in operational costs compared with a reliance on nuclear.

Greater imagination is required in energy policy. The policies from both major UK parties sum up Scotland’s place in the Union: the Scottish CCS project has been relegated to reserve status; Scottish bill payers are having to pay for a new nuclear power station; and we are stuck paying the highest grid charges in Europe, which not only disadvantages Scottish renewable projects but means higher bills for everybody across Great Britain. Meanwhile, the Scottish oil and gas industry is asked to pay to mitigate high fuel bills throughout the UK. What about demanding that at least some of the additional oil and gas revenues are released to match fund the Scottish Government’s £500 just transition fund for the north-east of Scotland?

--- Later in debate ---

[Tommy Sheppard (Edinburgh East) (SNP)]

The last two years have been brutal and miserable for millions of people in this country, but not everyone has had a bad pandemic. Last year the number of millionaires in Britain increased by 10% and the number of billionaires increased by 15%. In fact, The Sunday Times estimates that, between them, the 171 billionaires in the United Kingdom are worth £600 billion, which is enough for them by themselves to fund every single pound of Government covid support over the last two years and still be the richest people in the country.

[Jacob Young]

I take on board what the hon. Gentleman is saying. I am confused, because the hon. Member for Kilmarnock and Loudoun (Alan Brown) signalled that the SNP will be supporting today’s motion, yet this is a tax cut for the very millionaires the hon. Member for Edinburgh East (Tommy Sheppard) is talking about.

[Tommy Sheppard]

I am not sure of the relevance of that intervention. I was describing the manifest economic injustice apparent in our country, and that is the context against which we need to examine rising energy prices.

It might be thought that any Government would want to do something about the extremes of wealth and poverty in Britain, but in fact this Government are making it worse. Last autumn they chose to cut the household income of the 6 million poorest families in the United Kingdom by £1,000 a year—that was a political choice. They are now preparing to introduce tax increases this April, and tax is always a political choice. One could choose to make the wealthiest pay more or one could choose to tax accumulated wealth and capital, but no. This Government are increasing taxes for average and low earners in order to avoid increasing tax for the wealthiest people in the land, for whom tax is at a historically low level. That is the moral tapestry against which we should judge this.

The Government need to take serious action, because standing aside and doing nothing about the cost of living crisis would be to abdicate government. Of course there should be a cut in VAT on energy bills. In fact, consider what it means not to do that. It means that families the length and breadth of the land will face the misery of higher gas and electricity bills and, at the same time, the Government will profit from that misery by bringing in more money from the tax levied on those bills. That is immoral, and of course this proposal should be supported.

Two other things are required. First, the energy cap must be maintained and the Government must take action to make sure energy suppliers are capable of delivering on it. Secondly, as a matter of priority, the Government need to make a heating and energy payment to low-income families that will allow them to deal with the increases that have already happened.

I would hope that these are reasonable asks of the Government of the United Kingdom, but I do not doubt what is going to happen. I know those asks will be ignored, and I know this Government think their 80-seat majority makes them impervious to reason and logic, so they will continue as they wish. That is why, in Scotland, people will be looking again at whether we have to forever be hitched to this Government—whether we have to go along with them and these policies, which benefit the well-off at the expense of the poorer—or whether it is time to take matters into our own hands and, through the political agency of being an independent country, be able to deliver things in a better way, and build an energy supply system and an economy based on fairness and community solidarity.

--- Later in debate ---

[Jacob Young (Redcar) (Con)]

People in Redcar and Cleveland will remember the last time the Order Paper was wrestled from the hands of Government. It was, of course, when ardent remainers, ably supported by the Labour party, tried to block the decision made in the 2016 EU referendum. The irony of this situation should not be lost on us, because the Leader of the Opposition is attempting to use the same tool he used then to try to block Brexit, but this time to exploit one of the freedoms that Brexit gave us: the ability to get rid of VAT on energy bills.

Axing the 5% VAT on energy is clearly an option to support people, but it is an expensive and incredibly poorly targeted one. The Labour party usually complains about tax cuts that help high earners, yet that is what it is supporting here. I am left asking why I or any of us, given the salaries we are on, should expect the Government to subsidise our energy costs. My view is that we should be focusing our support on those who need it most, not those who want it. That must be the cause of any responsible Government.

How are we supporting people right now? We are supporting people through winter fuel payments, the warm home discount, cold weather payments, the energy company obligation and the household support fund. That is on top of our general measures, such as increasing the living wage to £9.50 an hour and freezing fuel duty for the 12th year in a row, and the help given over the course of the pandemic. The Government supported 12,500 people in Redcar with furlough payments, and spent more than £16 million supporting businesses in my area.

Of course, for the Labour party it is never enough. During the pandemic Labour criticised the cost of test and trace, and then demanded that covid tests remain free indefinitely. Labour criticised the Government for not producing enough personal protective equipment fast enough, and then demanded investigations into why contracts were given quickly. They want it both ways. They want to go back into the EU while benefiting from the freedoms that Brexit gave us. I begin to wonder whether “Goldilocks and the Three Bears” is required reading for the shadow Cabinet—everything is a bit too much and a bit too little; nothing is ever just right.

What we are discussing today are short-term measures to support people, and I think that it is as important to discuss how we handle energy in the long term. We are in this position today because policy decisions—some good and some bad—made over the decades have left us without an alternative to imported gas for baseload supply, whether that was Blair’s Government rejecting new nuclear in the early 2000s, Cameron’s Government and hesitancy about fracking, or this Government and our decision to phase out coal completely. We have made these policy decisions, which have left the most vulnerable vulnerable to the swings in gas prices that we are seeing today.