Oil and Gas Producers: Windfall Tax

Jonathan Reynolds Excerpts

Tuesday 1st February 2022 Commons Chamber

[Jonathan Reynolds (Stalybridge and Hyde) (Lab/Co-op)]

Thank you for calling me to close today’s debate, Mr Deputy Speaker. Throughout the debate, there has been at least one area where we have had clear agreement: no one has disputed the fact that we are living through a cost of living crisis. Prices are up, real wages are down, taxes are being hiked and growth is stalling. No one has denied that the looming spectre of eye-watering energy bills is now hanging over households and businesses. That is precisely what the motion today seeks to address, with real solutions to the problems people are facing. Many Members across the House have shared examples of the hard choices their constituents are already making, and I am extremely grateful to them for that.

In responding to the debate, I have to begin with the scale of the problem. My hon. Friends are right to say that people are struggling now. I am sure we have all spoken to constituents who are genuinely scared about the impact of sky-high bills. Those people are feeling the pinch now when they go to the shops or fill up their car, but that is mild compared with the storm that is about to hit households this April. If the average energy bill hits close to £2,000, most people I know will feel it very much, and some will not be able to pay.

In closing this debate, I want to respond to the points that have been raised and to say why I believe the interventions that we have put forward and the windfall tax we would use to pay for them are fair, proportionate and necessary. Many Members have lamented the fact that we were in this position to begin with, and I acknowledge that. A decade of poor Government decisions has left us particularly exposed to global gas prices. This Conservative Government were wrong to reduce our gas storage capacity, they were wrong not to proceed with their original plans for better home energy insulation and they were wrong to prevent the further development of some of the most cost-effective renewables, such as onshore wind.

It is also down to this Government that families are having to consider the prospect of rising energy bills alongside other things that will hit their household budgets hard, particularly the very large rise in national insurance scheduled for April this year. Let us not forget that this tax rise will see the poorest subsidising the wealthiest, the north subsidising the south and the young subsidising the old. So with inflation soaring and energy inflation of particular concern, I put it simply to Conservative and SNP colleagues that action is essential. Despite the unholy alliance of Conservative and SNP Members ranged against the motion today, I put it to them that it is a question of how, not if, the Government should intervene.

The Labour plan would save everybody at least £200 off their energy bills. Those who are most vulnerable would receive £600. That most vulnerable group would include all working families with children claiming universal credit and all pensioners in the savings credit group of pension credit. We would pay for that by levying a windfall tax for 12 months on profits from North sea oil and gas companies. We can do this, and we need to do this because, as my right hon. Friend the Member for Doncaster North (Edward Miliband) said in opening the debate, given the scale of the challenge, we need to maximise the resources available to alleviate it. In today’s debate we have heard an overwhelming case for that, including in the speeches from my hon. Friends behind me.

We are advocating a one-off, proportionate tax on firms that are experiencing record profits directly as a result of this crisis, to help customers and other businesses secure our economy for the long term. The North sea will continue to be one of the most profitable and attractive places to extract oil and gas from. It will also continue to provide a substantial amount of our domestic supply. No evidence has been put forward today that a windfall tax on those profits, which were never expected or anticipated, would reduce investment or have a negative impact on jobs. It has been done before, by Labour and Conservative Governments, and we can do it again.

I want to give three explicit reasons why such a tax would be in the interests of businesses and the economy as a whole. First, despite the unprecedented squeeze on household budgets, consumer spending is still forecast to grow this year. That is because some households saw a considerable increase in their savings during the pandemic, but if concerns about energy bills and other pressures were to result in consumer spending not growing as expected, we would be in a very difficult position indeed. I think the right hon. Member for Wokingham (John Redwood) made a similar point in his speech.

Secondly, inflation is high. It is currently being written into contracts as businesses try to protect themselves against future price rises, which means that even if global inflationary pressures diminish, inflation will be baked into our economy for some time. A rise in energy bills of the kind that the Government contemplate would add as much as two additional percentage points to inflation and would have a significant spending cost for the Government.

Thirdly, under our plans, the windfall tax would give us a contingency fund of £600 million to help energy-intensive businesses through the energy crisis. I recently visited Pilkington Glass in St Helens, where the rise in energy prices means millions of pounds in additional costs. If Conservative Members are worried about the impact of a windfall tax on investment, will they think about the cost of not acting for investment in jobs, growth and the future of energy-intensive industries?

I was surprised to hear Conservative Members arguing against the case for cutting VAT on energy bills, given that in many cases they themselves advocated the same policy. The argument that cutting VAT does not help those most in need simply does not hold water. Crucially, cutting VAT is a step that we could take now. Labour’s policy, which would give every household some relief from sky-high bills, would also mean extending the warm home discount, saving those most affected, such as pensioners and low earners, nearly £600. Many Conservative Members are on the record as supporting the measure precisely because of the arguments made in this debate. Claims that cutting VAT is unprogressive and would benefit only the wealthiest simply do not take Labour’s motion and our policy in the round; they are as disingenuous as they are insulting to constituents who are crying out for some help.

The reality is that the Conservatives cannot fix the cost of living crisis, because they are the crisis. They have become the high tax party because they are a low-growth Government. Some of the defences that I have heard today of voting against the motion are as thin as the Prime Minister’s excuses for flouting his own lockdown rules. Labour has shown the leadership that our country needs and delivered a plan to tackle the energy crisis that would take £200 off the average household bill, offer up to £600 for the most vulnerable in the current crisis, including low earners and pensioners, and provide funding to help the energy-intensive businesses worst hit by energy spikes—all fully costed, with a windfall tax on the North sea oil and gas producers that have profited from the price rises.

It is so telling that at no point today have I heard any Government representative outline an alternative or offer a coherent explanation of how the Government will help families. Labour laid out our plan to address the cost of living crisis two months ago, and still the Government have failed to rise to the challenge. We know why: they are too mired in their own scandal to take the action required. They are more focused on saving the Prime Minister than on serving the public.

The performance of this country’s Prime Minister at the Dispatch Box yesterday was quite frankly shameful. The continued dereliction of duty in not facing up to the big challenges of the day, such as the cost of living crisis, compounds that shame. The Government are out of ideas, out of energy and out of time. The sooner they all go, the better.