Household Energy Bills: VAT

Debate between Jacob Young and Alan Brown

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?