Oil and Gas Producers: Windfall Tax

Jonathan Edwards Excerpts

Tuesday 1st February 2022 Commons Chamber

[Lee Rowley]

If the hon. Gentleman will give me a moment, I will try to answer these questions. The first solution is the warm home discount scheme, which provides support for household energy bills through rebates, helping households stay warm and healthy in winter. The scheme currently provides more than 2 million low-income and vulnerable households with more than a £100 rebate on their winter energy bill, and a further consultation is under way on whether that is to be expanded.

Secondly, the winter fuel payment from the Department for Work and Pensions is worth between £100 and £300 and is paid automatically to those in receipt of the state pension and other social security benefits. Thirdly, the cold weather payment is a £25 payment to vulnerable households on qualifying benefits when the weather is, or is expected to be, unusually cold.

Fourthly, last autumn the DWP announced a £500 million household support fund to help those most in need during the winter, which includes provision for utility costs, including energy. Longer-term energy schemes are also assisting, and every year more and more people are having their home insulated or upgraded to reduce their energy bills for the long term.

[Jonathan Edwards (Carmarthen East and Dinefwr) (Ind)]

The Minister is right to say that we are in a unique position, but that requires a unique policy response. He will know that the most vulnerable are at risk from inflationary pressures, especially in energy prices. We are looking at inflation of 6%. When the rates for social protection were set in September, inflation was 3%. Do we not need a unique response just for this situation and this year, to reset those levels to reflect the true cost of living in April?

[Lee Rowley]

I am grateful to the hon. Gentleman for his intervention. The reason I articulate and go through existing programmes and policies that have already been done is because hon. Members, such as the right hon. Member for Islington South and Finsbury (Emily Thornberry)—[Interruption.] She continues to heckle from a sedentary position. She absolutely refuses to acknowledge that the Government are doing a substantial amount and, as has been indicated, we will continue to look at what else we can do in the coming days, weeks and months ahead. We of course recognise that the immediate situation is challenging, but it would be remiss of the Opposition to refuse to acknowledge the significant immediate help and the long-term subsidy going in to support those who need assistance with energy costs. As I have said, the Government remain committed to working with all to see what more can be done.

Let us turn to the second part of the motion. As the House knows, taxation matters are dealt with by the Treasury. As hon. Members are aware, and as Governments of all colours have regularly reminded them from this Dispatch Box over many decades, all taxes are kept under review. Yet given that the Opposition want to couple the cost of living with fiscal matters such as this, let me say a few words about this particular rabbit out of the hat from the Labour party—its big idea; its solution to the problem. This money will no doubt be spent multiple times, as it always is, and on multiple causes in the multiple Opposition day debates ahead. This is the Labour party’s generous offer, to take the words of the right hon. Member for Doncaster North a moment ago, and its reason to be cheerful. I confess, following the right hon. Gentleman’s speech, that if this Miliverse is the reason to be cheerful, we should all be very gloomy. I am none the wiser about the ultimate purpose of what the Labour party proposes. Its objective is mystifying. Its aim is confused.

So what is the purpose? Is it simply a money source? Or are we instead talking about the use of the tax system for something more fundamental? The right hon. Gentleman talks about the long term, but he should also recognise that short-term decisions are required. Either way, he should be clear about the position he argues for and its implications. If this is to be a money source, the best way to maximise that money—both at the time the Opposition presumably want to implement this, and then in the future when they inevitably come back for more money—is to maximise the amount of oil and gas coming out of the ground.

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[Imran Hussain (Bradford East) (Lab)]

While the Prime Minister, the Government and Tory MPs have spent the past several months arguing among themselves about the untenable future of the right hon. Member for Uxbridge and South Ruislip (Boris Johnson), my constituents have been on the blunt end of rising fuel prices, mounting food costs and soaring energy bills, which have pushed already struggling household finances to the brink and created a grave cost of living crisis for many families across the Bradford district. I remind the Minister that that is the central part of the debate. Let me be clear, however, that the cost of living crisis, which means that many families in Bradford need to choose between heating and eating, is no accident. It is the direct result of a decade of this Conservative Government’s incompetence and complete indifference to the lives of ordinary people in places such as Bradford, and it is the direct result of their ideologically driven austerity cuts targeted at some of society’s most vulnerable. It means that in places such as Bradford, nearly half of all children continue to live in poverty, working families continue to be forced to use food banks and destitution continues to spread like a cancer.

The cost of living crisis is not of the making of my constituents in Bradford or, indeed, of the constituents of any Member in this House, but they are the ones literally having to pay the price. Now this Government’s failures to get a grip on soaring energy bills mean a further attack on the most vulnerable, as the needs of greedy energy companies and their profits are put before the needs of our constituents. That is frankly scandalous, and people struggling to make ends meet in Bradford and across the country deserve much better. They deserve better than a Conservative Government who delay taking action on this cost of living crisis to spend time trying to save their doomed Prime Minister. We have to be clear: when people are struggling to put food on the table, to heat their homes and to keep a roof over their head, it is not the time for dithering or for political games; it is the time for leadership and immediate action—something that is lacking from those on the Government Benches.

[Jonathan Edwards]

Does the hon. Member agree that there is an incentive for the Government to act, because people living in cold homes are far more likely to get ill with respiratory diseases? That then leads to a huge hit on health budgets and social care budgets. It is a false prophecy to let market forces rip. We have to act quickly and we have to act now.

[Imran Hussain]

I absolutely agree with the hon. Gentleman, but the reality remains, as I stated earlier, that this tragedy has not just started now. The last decade under this Government has seen some of the biggest ideological austerity cuts in places such as my constituency in Bradford and in many other places across the country. The reality remains that it is ideological, and the Government know the impact. That is the worst thing: they know the impact of what they do.

Not once in the Minister’s speech did he talk about the impact on ordinary people up and down the country. He could not bring himself to talk about the fact that today, children in our constituencies will go hungry. He could not bring himself to discuss the fact that many people go days on end without a hot meal. He could not bring the words to his mouth to say that destitution is now rife in our country, or that we now have international reports that say that we—the fifth largest economy in the world—are not providing for the public. He does not mention any of that. I am not sure he was in the right debate. He is a new Minister, so perhaps he was in the wrong debate, and I forgive him if so.

Those things are why, as the shadow Secretary of State, my right hon. Friend the Member for Doncaster North (Edward Miliband) stated clearly, a Labour Government would scrap VAT on domestic energy bills, expand and increase the warm home discount, and impose a windfall tax on greedy energy companies that are taking people for a ride.

The reality is that, even as people in Bradford continue to suffer and even as the plan set out by the Opposition stares them in the face, the Government have no answers, no solution and no offer for my constituents. Frankly, it seems that they could not care less if the most vulnerable places in the country, such as Bradford, are plunged into further poverty and deprivation. I assure them that the longer they take people in Bradford and across the country for fools and the longer they delay in taking the action that ordinary people need to save them from the cost of living crisis, the more that those people will repay them with interest in the ballot box at the next election.

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[Peter Aldous (Waveney) (Con)]

I recognise the enormous challenges that many households are facing in struggling to pay their energy bills currently, but unintended negative consequences would arise from such a tax rise, and I shall briefly outline what they are. I make these observations as an MP representing a constituency where many people work in the oil and gas sector, as chair of the British offshore oil and gas industry all-party parliamentary group, and as a supporter of offshore wind—a technology with which the oil and gas sector is increasingly collaborating.

First, it is necessary to set the context. Extraction of oil and gas on the UK continental shelf over the past 55 years has brought an enormous dividend for the UK. It has provided heat for our homes and businesses. It has created hundreds of thousands of well-paid and highly skilled jobs—expertise that we have exported around the world—and, importantly for successive Chancellors, much-needed revenue.

Extracting oil and gas in the North sea is not straightforward. It is a difficult basin in which to work. It needs a stable fiscal regime to attract investment, which is globally footloose. Some might say that, as we move towards a zero-carbon economy, that matters less, and that we should not be promoting further investment in the North sea. The response is that we need that investment as we will continue to use oil and gas, albeit in lesser amounts, for some time, and that funding is required to secure a just and optimum transition to a zero-carbon economy, where we can add to and enhance the skills and expertise built up over the last half-century.

It is necessary to highlight that the existing tax system is working well without the need for a windfall tax. The UK oil and gas industry will pay about £3 billion in extra corporation tax as a result of the global rise in gas prices.

It is appropriate to look at the consequences of previous windfall taxes—most recently, that of the coalition Government in 2011. After all such previous increases, the Treasury has had to offer incentives to claw back investment into the UKCS. That additional fiscal risk puts a cost premium on investments compared with the cost in most other nations, in particular Norway, which is experiencing an economic surge and is well ahead of the field in the race to zero carbon.

The North sea oil and gas industry has a key role to play in the drive towards a zero-carbon economy. That is evidenced in the North Sea transition deal from last March.

[Jonathan Edwards]

Will the hon. Gentleman reflect on the point raised by the hon. Member for Aberdeen South (Stephen Flynn)—that it was a huge mistake not to create a sovereign wealth fund in order to reinvest in the transition that we now face?

[Peter Aldous]

I thank the hon. Gentleman for that intervention. He may well be right, but that decision was made 55 years ago. Norway has, I think, far bigger resources than we do, and of course it is a much, much smaller population and country. So that is a debate for another time. I understand where he is coming from, but there is another side to that argument.