Finance (No. 3) Bill

Lindsay Hoyle Excerpts

Tuesday 3rd May 2011 Commons Chamber

[The Chairman of Ways and Means (Mr Lindsay Hoyle)]

Order. As we know, we are debating the bank levy. There has been some stretching of the debate already, and we are in danger of stretching it even further. We have had a good debate so far, and I am sure that the hon. Gentleman will want to keep to the amendment.

[Mr Love]

I bow to your advice, Mr Hoyle. I will conclude my remarks about the lack of a growth strategy by saying that as an optimist, I believe that it is never too late. I hope the Government will think carefully and recognise that the growth strategy they produced on paper simply does not respond to the real needs of the economy.

I finish where I started, by commending the amendment to the Government. It poses no threat to them; it simply seeks to review the bank levy system that they are introducing. They will know, because they have spent a great deal of time on this, just how important the public think the role of the banks in getting our economy sorted out is. After all, it is widely perceived that the banks were the main cause of the problem in the first place, so people are looking to them to help our economy in a meaningful way. For the reasons that I have stated, the amendment will address some of those issues and provide an opportunity to examine how the levy is working in December. I hope that it will provide us with an opportunity to straighten out and ensure that the levy really addresses the needs of our country.

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[Chris Leslie]

On a point of order, Mr Hoyle. I understood that this was a Committee stage, and that we were considering the Bill in detail. Is it usual practice for a Minister responding to a debate not at least to give way and allow a dialogue on the clause in question?

[The Chairman of Ways and Means (Mr Lindsay Hoyle)]

That is not a point of order. It is up to the Minister to decide whether to give way, and I am sure that he heard the cries for him to do so.

[Mr Hoban]

Subsection (2)(a) of the amendment requires a report on

“the Government’s analysis behind the rate and threshold chosen for the bank levy”.

It might help Opposition Members if I explained how we designed the levy, and why we set the rate and threshold as we did. The levy is intended to ensure that the banking sector makes a fair and substantial contribution, reflecting the risks that it poses to the financial system and the wider economy. It is intended to encourage banks to move away from risky funding models, and complements the wider regulatory agenda to improve standards and enhance financial stability. During the crisis, it became clear that some banks had become over-reliant on short-term funding for long-term lending. When financial markets seized up, those banks were exposed.

I must emphasise that the levy is based on the liabilities of a bank, not on its assets. It is based on the bank’s deposits, its share capital and loans made to it, not on loans made by it. It applies to the global balance sheets of UK banks, building societies and banking and building society groups, and to the UK operations of banks from other countries.

In determining the scope of the levy, we concluded that foreign banks operating in the UK also posed potential risks to the UK financial system and the wider economy, whether they operated as branches or as subsidiaries. It therefore follows that they should contribute on the same basis, and branches and subsidiaries of foreign banking groups are included to ensure that they cannot avoid the levy by group restructuring. That will ensure the provision of a level playing field for all banks operating in the UK.

The levy will be paid by between 30 and 40 building societies and banking groups, and we have made it clear that we expect it to yield about £2.5 billion of revenues each year in its steady state. That appropriate contribution balances fairness with competitiveness, and the rates of the levy were chosen to allow it. We initially announced that a reduced rate would apply for 2011, recognising the uncertain market conditions prevailing at the time, but we no longer consider that to be necessary.

In December the Bank of England noted that the near-term outlook and resilience of the UK banking sector had improved. Markets also now have greater certainty about the timing and direction of regulatory change, with the Basel III regulatory reforms being introduced in 2013 and transition periods being extended to 2015. We therefore decided that from 1 March this year, the full rate of the levy should be introduced for 2011. The levy will now yield £2.5 billion in that year. The steady state target yield was set out last year, when we also announced our intention to make significant cuts in the main rate of corporation tax.

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[Mr Lammy]

On a point of order, Mr Hoyle. In Committee, when Ministers have not answered questions from Back Benchers, is it normal for them not even to give way? Surely the Financial Secretary could simply photocopy what he is reading out, and send that to all of us so we can go home?

[The Chairman]

That is not a point of order. It is up to the Minister to decide how he wishes to reply to the debate.

[Mr Hoban]

I think that is the best suggestion the right hon. Gentleman has so far made in this debate. I shall send a copy of my speech to all hon. Members who are interested in it, so they can then go home.

The levy is a permanent tax, and is part of our wider package of far-reaching reforms. It is designed to be consistent with global regulatory practices, drawing on proposals from the International Monetary Fund and reflecting emerging proposals from the Basel committee. Excessive risk taking in the financial sector was a significant contributory factor in the recent financial crisis. As I said earlier, the levy is intended to encourage banks to move away from riskier funding.

The levy should not be seen in isolation from other reforms to the banking system. Domestic, European and international banking reforms will change the landscape of banking. For example, Basel III will lead to higher capital levels, and its liquidity reforms will change the funding profiles of banks. There is a vigorous debate within the EU and the G20 about whether the holders of bank debt should be required to contribute to the recovery or resolution of banks, for example through the conversion of debt to equity. As I said earlier, we have established an independent commission on banking to consider structural and related non-structural reforms.

The hon. Member for Edmonton (Mr Love) raised issues to do with the implicit guarantee, to make sure the right reforms are in place so banks are not dependent on the guarantee from the taxpayer. We have tackled that issue, whereas when his party was in government, it failed to do so. I wish he would give us some credit for the action we have taken to reform the regulation of the banking system during the year in which this Government have been in office.

The final element of the report calls for information on the total tax revenues expected from banks in each year to 2016-17. We have been clear that we expect the levy to raise about £2.5 billion each year. We have also taken other steps to ensure that banks pay their fair share. The previous Government introduced the code of practice on taxation for banks, but they utterly failed to get banks to sign up to it. They talk tough now, but they failed when in government; only four of our leading 15 banks actually signed up to that code of practice when they were in office. By the end of November, however, all the top banks had signed up to the code, and by March 2011 some 200 banks had adopted it. We therefore need take no lessons from the Labour party about getting the banks to sign up to codes.

We are very clear that banks should make a contribution reflecting the risks they pose to the UK financial system and wider economy. While amendment 9 calls for a report, this Government are delivering action. We have already set out the reason for the rates chosen and the decision to set an allowance at £20 billion. We have been clear on how the bank levy fits with and complements our wider reform package and we have been clear that we expect revenues from banks to grow as the economy recovers. We have also secured agreement from the top banks on the tax revenues they expect to pay over the spending review period. We are raising more in this levy than the previous Government raised through their one-off bank payroll tax. Labour Members refused to introduce a bank levy when they were in government. We backed it where they have failed to act and I ask hon. Members to support the clause.

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[The Parliamentary Secretary to the Treasury (Mr Patrick McLoughlin)]

claimed to move the closure (Standing Order No. 36).

[The Chairman]

Order. I think it would be of interest to the House to hear from the hon. Member for Nottingham East (Chris Leslie), and I am sure that he will not take too long.

[Chris Leslie]

Thank you, Mr Hoyle. The Chief Whip really needs to take a breath and perhaps calm down for a moment. [Interruption.] I did not quite put it in the way that the Prime Minister might.

The Financial Secretary to the Treasury usually does act honourably by trying to respond to the debate, and probably he secretly would have done so today. Our debate was wide ranging and we covered a number of specific points on the detailed design of the bank levy, with which he entirely refused to engage. He refused to give way in this Committee stage of the Finance Bill, which shows the Government’s thinly veiled contempt for the parliamentary process. No debate, no scrutiny and no contributions came from those on the Government Benches, other than the speech by the right hon. Member for Wokingham (Mr Redwood). They have accepted absolutely no challenge and no scrutiny. They have put their heads down and ploughed on—the Lansley strategy of policy making in action.

The Financial Secretary gave no explanation of why the Government set the banking levy at this puny £2.6 billion or why they have given a very generous tax-free allowance of £20 billion to the banks. Their original design, as set out in June, could have netted £3.9 billion, but when the banks complained the figure went back down to £2.6 billion. He says that we should not criticise the levy for being set at such a low rate because the French levy will raise less, but of course it will because the French banking sector is smaller. The fact is that our banking levy is being set at a third of the rate that the French are pursuing. He did not answer any questions on the netting of derivatives, the double taxation treaties or what would happen in terms of accounting practice. He certainly did not address the outrage in the country, never mind in the House, about the continuing appalling abuse of bonuses in the banking system. That is an obscene ongoing process and although bonuses might reduce slightly in one year, that is offset by the increase in the salaries that those bankers are enjoying. He did not even address the new loophole he is introducing in the Bill so that those enjoying deferred bonuses will now be able to pay the tax rates in future years, thus perhaps avoiding the 50% income tax rate when eventually the Government scale back from that.

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[Kerry McCarthy (Bristol East) (Lab)]

I beg to move amendment 7, page 12, line 36, at end add—

‘(8) The Chancellor shall publish, within 3 months of the passing of this Act, an assessment of the impact of taxation on fuel prices.’.

[The Chairman of Ways and Means (Mr Lindsay Hoyle)]

With this it will be convenient to discuss clause stand part.

[Kerry McCarthy]

The backdrop to today’s debate is an economy that is flat-lining, as the Chief Secretary to the Treasury admitted last week. Since the Chancellor’s spending review, we have had no economic growth, and it is ordinary people who are hardest hit by that stagnation, with 2.5 million people out of work, including nearly 1 million young people—one in five 16 to 24-year-olds. An increasing number of people have been jobless for more than a year—nearly 850,000 and rising. This year, as the Government’s cuts start to bite, hundreds of thousands more people could lose their jobs. I believe that that is what the Minister of State at the Cabinet Office called an

“immediate national crisis in the form of less growth and jobs than we need.”

Apparently, it is what the Chancellor describes as “good news” and a sign that the economy is on the right track. Families are feeling the effects of the crisis in their pockets. Prices are still rising by more than 5% on the retail prices index, while earnings are growing at just 2% a year.

Rising fuel prices are a big part of this squeeze. According to the Office for National Statistics, fuel prices are currently one of the most significant contributors to consumer price inflation. According to this week’s figures from the Department of Energy and Climate Change, the average UK pump price is now £1.36 for a litre of petrol and £1.42 for a litre of diesel. I am sure that many Members will be aware that at their local petrol pumps prices are even higher. That means that petrol is more than 3p a litre more expensive than it was last month, or 15p more than this time last year, and that diesel is 3p more expensive than last month, or nearly 20p more than last year. Unfortunately, the 1p saving we got from the Chancellor’s cut in fuel duty lasted barely a week before price rises at the pumps wiped it out.

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[Mr Kevan Jones]

On a point of order, Mr Hoyle. You have many attributes, but you do not have eyes in the back of your head. Would it be possible for you to ask those Members behind the Chair to leave the Chamber in order to reduce the noise level, so that others can follow the debate?

[The Chairman]

I must admit that, if there was noise interference, I did not know where it was coming from and could not hear it in front of the Chair. I am sure that Members will be quieter in future.

[Kerry McCarthy]

I thank my hon. Friend the Member for North Durham (Mr Jones) for that, because it certainly seemed quite noisy from where I was standing.

As I was saying, as real incomes fall, spending on basic items such as food, energy and fuel makes up an increasing proportion of the average family’s weekly spend, as the Office for National Statistics acknowledged in March when it changed the make-up of its retail prices index basket. That means that families are increasingly vulnerable when prices rise quickly.

The Opposition accept that no Government can control the price of oil, which the global markets set, and that the situation in the middle east is affecting people in countries throughout the world, to which the UK is of course no exception, but the Government have control over fuel taxation, and that has a significant effect on pump prices. When so many people are out of work and real wages are falling, the Chancellor has a responsibility to do all he can to help business and to promote economic growth and jobs; and when ordinary working people are struggling to make ends meet, he has a responsibility to do everything possible to help them get on.

That is why we tabled amendment 7. It is important that Parliament has the opportunity to scrutinise the Government’s policies on fuel taxation and their total effect on fuel prices at the pump, because the Chancellor’s cut in fuel duty, as set out in clause 19, is not all that it seems. In January the Government decided to increase VAT on fuel from 17.5% to 20%, even though the Prime Minister told voters just before the election that he had “no plans” to increase VAT. Without that VAT rise, petrol would be almost 3p cheaper now, swamping the 1p cut that the Bill brings in.

The Federation of Small Businesses said that the UK’s small and medium-sized enterprises would be “severely affected” by that hike in fuel tax. A survey of its members in January pointed to the increase as the single biggest threat to their business—something that will resonate with Government Members, who I am sure have been lobbied by the FSB on that point. Some 89% of businesses that responded thought that the Government’s measures would add £2,000 to their costs over six months. A spokesperson for the FSB said in response to the January rise in fuel tax:

“The Government have said it is putting its faith in the private sector to put the economy on a firm footing, yet 36% said they will have to reduce investment in new products and services and 78% said their profitability will be reduced—hardly conducive to growth.”

Many small business people in my constituency are struggling to stay afloat, particularly in the face of cash-flow difficulties. The VAT increase at the beginning of this year was expected to put severe strain on their cash flow, so the Chancellor’s 1p reduction in fuel duty has to be seen in that context.

Some people will be able to cut down on their use of fuel or even stop using petrol all together. Some people are switching to cycling or to public transport, and for those who are able to do so that is a good thing. As an MP for Bristol, which saw investment from the previous Labour Government so that it could become the UK’s first cycling city, I welcome people taking up cycling.

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[Mr Chuka Umunna (Streatham) (Lab)]

Has my hon. Friend noticed the projections for the increase in household debt under this Government? The Office for Budget Responsibility is projecting that it will increase by more than £500 billion this year and over the next five years, and it is also saying that the reason for this is not only inflation but the comprehensive spending review and the Budget.

[The Chairman]

Order. We must keep questions to the subject of the amendment that we are dealing with.

[Kerry McCarthy]

Before the election, the Economic Secretary said in this House during a debate on fuel duty:

“What people want from the Government today is a helping hand to get them out of their financial troubles. Instead, what they see from the Government is no help at all. Far from providing a hand to pull them out of their troubles, the Government are pushing them further down into them.”—[Official Report, 16 July 2008; Vol. 479, c. 359.]

How astonishing, then, to find that that is exactly what she and her Government are doing. They may have made a show of helping people up with a small fuel duty cut, but that is after they have given them a much bigger push down with their VAT rise on fuel. Before the Chancellor gave his Budget statement, Labour Members called for him to look again at the fuel duty escalator, which I think the Economic Secretary is muttering about from a sedentary position. In previous Budgets, we cancelled or postponed fuel duty rises when pump prices were rising quickly. In the 2010 Budget, the then Labour Chancellor phased in the increase for that year in three stages to ease pressure on business and household incomes. In the 2008 Budget, the previous Government postponed the increase in fuel duty for six months, again to support the economy and help businesses and families. We therefore welcome the fact that the Chancellor has done so again in this Finance Bill. However, when that cut is put in context, we see that families and businesses are facing more pressure than before as a result of the Government’s policies on fuel tax.

This is not the only policy in the Bill that is not all that it seems when it is put in context. The Government have made much of their increase in the personal allowance for income tax. The Chancellor said:

“The increase in the personal tax allowance already announced will vastly exceed anything lost through employee NICs uprating”.—[Official Report, 23 March 2011; Vol. 525, c. 954.]

However, he failed to mention that the rise in the allowance is swamped by his VAT rise, which will take £450 a year, on average, from the pockets of families with children. Families earning as little as £31,000 could lose their child tax credits as the Government take £400 million out of the system, while the Government’s Welfare Reform Bill creates uncertainty for families over whether they will keep their child care support and free school meals. In a couple of years, a family with two children with a single earner earning just £44,000 could find that the Government have taken £1,750 a year away from them in child benefit. It is no wonder that the Institute for Fiscal Studies said that the Chancellor was

“giving with one hand…and taking away with lots and lots of other hands.”

Nor is it surprising that the economist Roger Bootle said today that household incomes were “all but certain” to fall.

All this comes at a time when Government cuts mean front-line cuts in services that people rely on—schools, the NHS, social care, even the police—and workers in those vital public sector jobs are facing redundancies. The Government may say that some factors are outside their control. When we were in government, oil prices rose substantially, as we are seeing now, but we left government with a proportional tax take on fuel lower than when we came into government—down from 75% to less than 65% on petrol and down from 74% to 64% on diesel. It is no coincidence that under the last Conservative Government fuel taxation shot up from 66% of the price of petrol in 1992 to 75% in 1997, and from 66% to 74% for diesel.

The Minister of State for International Development made the front pages in March, saying:

“if this does go wrong”,

referring to the Budget,

“£1.30 at the pump could look like a luxury, $200 a barrel is on the cards”.

He can hardly have expected that remark to put a stop to speculation in the oil markets.

Rather than helping people through the tough times, the Government seem to want to make things worse. There was an alternative for the Government. Before the Budget, we called on the Chancellor to scrap the hike in VAT on fuel. That would have been of genuine help to families and businesses.

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[Stewart Hosie]

On a point of order, Mr Hoyle. It is entirely up to the hon. Lady to give way as she sees fit, but when the Scottish National party moved to strike out the VAT rise, Labour most certainly did not vote for it. Could she correct herself—

[The Chairman]

Order. As Mr Hosie knows, that is not a point of order.

[Alison McGovern]

Thank you, Mr Hoyle. It would be testing your patience not to stick to the amendment, as I shall endeavour to do for the rest of my remarks.

All Members will realise that the average family, the average couple and the average pensioner are facing a more and more difficult situation as the money coming in has to be stretched even further, and with prices going up in the shops. That is people’s experience. The impact of taxation on fuel prices and its role in driving up inflation and driving down living standards requires investigation and careful thought. This is not just my view or that of just some economist: when I looked into the possible causes of rising inflation in the UK, the first person I thought might have the answer was the Governor of the Bank of England, who, in his letter to the Chancellor about why the Bank had not met the inflation target, cited the VAT rise as one of the inflationary pressures facing the country.

As I said, I am not some inflation hawk who holds to a 1980s antediluvian economic philosophy that inflation is necessarily bad. Some countries have had relatively high inflation as well as growth. However, the important thing about taxation and fuel prices, and their role in inflation, is that it is possible to build in inflationary expectations in the long term through some of these measures. I wonder whether the Government have really thought about what they are doing in not combating some of the issues related to rising prices that we have seen.

There is also an obvious link with people’s worry about the lack of investment at this time. There is no doubt that investment means jobs today and productivity tomorrow, and therefore a more effective economy that enables people to have a better standard of living at less cost. That has to be the aim. At the moment, the Government are balancing the books using VAT and extremely flat taxes that do not pay regard to people’s income. They are asking people in my constituency on relatively modest incomes to pay the same higher prices at the fuel pumps as people in the Chancellor’s constituency down the road in Tatton, who by and large—not universally—are a bit wealthier. That is not fair.

We have to consider carefully whether the increased taxation on fuel resulting from the VAT rise is having a negative impact on the economy in a wide-ranging sense. It is not only about whether fuel prices are up—obviously that could be the result of several things—but, most especially, about what that is doing to inflationary expectations. We need to consider whether it is having a damaging impact on the broader economy, and whether it is a disincentive to growth and productivity improvements in the UK. We also need to consider what it is doing to the living standards of people such as those whom I represent in Wirral and Merseyside who have seen living standards fall severely in the past two years.

[Steve Rotheram (Liverpool, Walton) (Lab)]

I am sure that my hon. Friend would agree with the old adage, “You can’t fool all the people all the time”, but that is exactly what the Chancellor tried to do with his 1p tax cut to fuel duty. However, is it not the case that since the Budget, petrol prices have gone up several times more than that 1p tax bribe, and that the VAT increase in fuel duty is causing damage to motorists and businesses—

[The Chairman]

Order. Interventions must be short.

[Steve Rotheram]

It was short.

[The Chairman]

Order. I am ruling that interventions must be short and letting the Committee know that we will be taking only short interventions.

[Alison McGovern]

My hon. Friend makes an important, if a little lengthy point. People will not be fooled, because they will see fuel prices going up and ask themselves what the Government have done to help. People are connecting the impact on prices across the board with what happens when they fill up the tank. When they go to the shop, they see higher prices all around them and they wonder where they are coming from. There is one clear answer: No. 11 Downing street. The Chancellor has decided that people will have to pay more in the shops. Let us not imagine that he has said, “Well, I’m sorry everyone. These are tough times—we’re going to ask you to put your hands in your pockets until we can lower VAT again.” Rather, this is a permanent rise that will build in higher prices for the long term. Given the downward pressure on wages, the really worrying thing is that the rise is building in not only a reduction in quality of life, but inequality, which is very worrying and will hurt for many years to come.

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[Geoffrey Clifton-Brown (The Cotswolds) (Con)]

On a point of order, Mr Hoyle. The amendment is very narrowly drawn. I have listened to the debate very carefully. Can you tell the Committee whether it is in order to discuss the matters that have been raised in it, ranging from the abolition of child benefit to the widening of the A1 and, now, the abuse of red diesel?

[The Chairman]

The Chair will decide that. I find it strange that the hon. Gentleman, who is a very senior Member of the House, is questioning the judgment of the Chair.

[Mike Gapes]

Red diesel is taxed at a lower level than other diesel. We are discussing the taxation of fuel and the need for a review of fuel taxation. Surely that is extremely pertinent to the terms of the amendment.

[Mike Gapes]

I entirely agree.

I believe that one of the difficulties in our economy, which affects our haulage industry, arises from our tax levels compared with levels in other European Union countries. We all know that if we drive across to France and fill a tank with diesel, or “gas oil” as they call it, it is possible to pay—depending on where we are—40%, 50% or 60% of the amount that we would pay in the United Kingdom. The haulage industry based on the other side of the channel therefore has a competitive advantage. The great lorries with Polish and other countries’ number plates that we see bringing goods into this country have a competitive advantage over those of our own haulage industry.

We need to look at these matters. I have to say that I think the Liberal Democrats were right. [Interruption.] Yes, occasionally they are right, and I think they were right when they said we need to look at road pricing. Unfortunately, the only person who has done anything serious about road pricing is, of course, the former Mayor of London, Ken Livingstone, who introduced the congestion charge, which the Conservatives have now accepted even though they opposed it when it was first introduced.

[The Chairman]

Order. I think we are now beginning to stray a little from the subject under discussion. I am sure we will return to the topic of the fuel levy.

[Geoffrey Clifton-Brown]

Hear, hear.

[The Chairman]

I do not think we really need to hear from the hon. Gentleman at this stage.

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[Mr James Gray (North Wiltshire) (Con)]

On a point of order, Mr Hoyle. I should apologise to you and the Committee for an inadvertent breach of the conventions of the House, namely that having chaired the Committee earlier this evening, I inadvertently forgot the convention that I should not vote. I have, in fact, voted twice in Divisions since then. I apologise for that oversight.

[The Chairman of Ways and Means (Mr Lindsay Hoyle)]

The Committee is grateful for that explanation.

Clause 7

Increase in rate of supplementary charge

[Malcolm Bruce (Gordon) (LD)]

I beg to move amendment 13, page 2, line 36, leave out ‘for “20%” substitute “32%”’, and insert

‘after “a sum equal to 20% of its adjusted ring fence profits for that period”, insert “increasing by 1 per cent. for every $5 by which the reference hydrocarbon price exceeds $75 subject to a maximum rate of 32%”.’.

[The Chairman]

With this it will be convenient to discuss the following: amendment 14, page 2, line 36, at end insert—

‘(1A) A reference price will be determined by an independent arbiter agreed jointly between the Government and Oil and Gas UK and will determine separate prices for oil, gas and condensates.’.

Amendment 15, page 2, line 36, at end insert—

‘(1B) The increased charge shall not apply to fields producing more than 90 per cent. gas. Where a field produces oil and gas the charge will be based on the price of oil equivalent taking into account the ratios of oil to gas produced.’.

Amendment 16, page 2, line 36, at end insert—

‘(1C) The supplementary charge may be abated or offset against the cost of investment to increase production.’.

Amendment 2, page 3, line 2, leave out ‘24 March 2011’ and insert ‘30 September 2011’.

Amendment 17, page 3, line 2, after ‘2011’, insert

‘and before 30 September 2012’.

Amendment 3, page 3, line 4, leave out ‘24 March 2011’ and insert ‘30 September 2011’.

Amendment 18, page 3, line 4, after ‘2011’, insert ‘or 30 September 2012’.

Amendment 4, page 3, line 8, leave out ‘24 March 2011’ and insert ‘30 September 2011’.

Amendment 19, page 3, line 8, after ‘2011’, insert ‘or 30 September 2012’.

Government amendments 11 and 12.

Amendment 5, page 3, line 27, leave out ‘24 March 2011’ and insert ‘30 September 2011’.

Amendment 20, page 3, line 28, after ‘2011’, insert ‘or 30 September 2012’.

Amendment 10, page 4, line 7, at end add—

‘(11) The Chancellor shall produce, before 30 September 2011, an assessment of the impact of taxation of ring fence profits on business investment and growth including an assessment of the long-term sustainability of oil and gas exploration in the North Sea.’.

Clause stand part.

[Malcolm Bruce]

The purpose of this group of amendments is to persuade the Government to engage with the oil and gas industry to ensure that no major new investment opportunities are lost. I will explain the purpose of the main amendments, and I very much hope that Ministers will respond in a constructive way, because these are intended to be constructive proposals.

The Government are on record as saying that they understand the need for stability in the fiscal regime, and the Chancellor has described this as a Budget for growth. It is worth saying, however, that in contrast to the cautious way in which the Government have applied new taxes to banks, which have squandered our resources to the extent that many of them had to be nationalised, it is quite harsh to apply a marginal rate of tax of 82% to our single biggest industry. It is an industry that invests in real infrastructure and real engineering, and it takes risks in regard to weather, geology, exchange rates and cost unpredictability, as well as taxation.

I accept that the current spot price of Brent crude, at $125 a barrel, allows for unforeseen profits, at least for some fields. However, that does not apply to gas fields or to fields with large quantities of associated gas and, as Ministers will know, that is not the price that many operators actually realise, as they often contract their production at an average well below the spot peak.

I say in passing that the link between the oil tax changes and the fair fuel stabiliser are tenuous. Many of the companies operating in the North sea have no retail division, and there is no direct connection between their returns and the pump price. Also, the Government are themselves the recipient of a windfall. According to the Library brief and, I think, the Red Book, North sea profits are running at between £1.5 billion and £1.9 billion per annum over the next four years. That is additional revenue that was not anticipated in the pre-Budget statement in November. The Government have also received a VAT windfall on pump prices, averaging about 6p a litre. However, my point is not that there is no case for additional contributions from North sea operators and field shareholders. I do not take issue with the Government about that. My point is that this should be done after proper consultation and taking due account of the complex character of the mature North sea industry.

I have monitored the industry for 40 years. Indeed, 40 years ago this September, I started work as research and information officer for the North East Scotland Development Authority. Towards the end of that year, 1971, BP announced the successful commercial test of a well, which turned out to be the discovery of the Forties field. However, it is interesting to note that, believing that it had reached the end of its useful life, BP sold the Forties field to Apache in 2003. Since its acquisition of the field, Apache has greatly enhanced recovery from Forties and sees long-term potential for its development. It is worth noting that Apache has been one of the most vigorous critics of the Government’s policies, and that it questions whether its investment will be fully committed or realised.

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[The Chairman of Ways and Means]

Order. We are straying from the amendments if we start talking about job losses. Let us try to keep as close as we can to the amendments before us.

[Helen Goodman]

I entirely accept your guidance, Mr Hoyle.

There is obviously a supply chain for the oil and gas sector. Equally obviously, if we damage the financial viability of the oil and gas companies, there will be an impact further down the supply chain. It is worrying that the industry is predicting that 40,000 jobs will be lost. Those are 40,000 jobs that we can ill afford to lose at this time. This is absolutely typical of the measures being taken by the Government that, across the board, are not being thought through. The statement by Statoil that it is going to put on hold a $10 billion investment is very worrying.

We also need to pay attention to the fact that the North sea province is different. It is not only a mature province—we all understand what that means—but it is in a very competitive arena. The Government do not appear to understand what being in a competitive arena means, or that those companies have a choice about where they invest.

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[Helen Goodman]

There is also—

[The Chairman of Ways and Means (Mr Lindsay Hoyle)]

Order. Can you face the Chair, please? Thank you.

[Helen Goodman]

There is also a problem with partnerships between the private sector and the universities.