Economy: The Growth Plan 2022

Lord Sikka Excerpts

Monday 10th October 2022 Lords Chamber

[The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy (Lord Callanan) (Con)]

My Lords, I begin by joining my noble friend Lady Neville-Rolfe in welcoming the noble Baroness, Lady Gohir, and congratulating her on her maiden speech, which I listened to with great interest, although I do not think she is in her place any longer. The noble Baroness, Lady Hayman, said that she is full of fire and passion, evidence that she will be an eloquent voice for women. She is no doubt delighted to discover that we are now on our third woman Conservative Prime Minister, and I am sure we are all looking forward to hearing her future contributions.

Today is clearly a day for our second city. I thank the right reverend Prelate the Bishop of Birmingham for the contribution he has made to this House over the years. He joked about my noble friend Lady Neville-Rolfe’s reference to his “mature” and “sensible” contributions, and then proved how right she had been to say it. The right reverend Prelate made many noteworthy points in the few minutes allotted to him, not least about the importance of the need for the devolution of power and influence. He asked about “wealth created for whom”, an important question which I am sure we will be debating for many weeks to come, sadly without his presence.

It is a privilege to close this debate on behalf of the Government and I thank noble Lords for their many contributions. We have heard about and debated the many steps the Government are taking to achieve economic growth: a series of bold initiatives which we believe will, together, reboot this country’s long-term prospects. It is an agenda which protects and reassures now in the form of our plans to cut energy bills at a time of global uncertainty for our people, and an agenda which lays the foundations for a future about which we all can and should feel optimistic. In her introduction, my noble friend Lady Neville-Rolfe rightly said that we need to do things differently and we need to do them better. This Government are making growth their guiding mission, which I am sure many of us agree it needs to be.

I shall address in turn the different aspects of the Government’s plans that were raised in the debate. I start with plans to reduce millions of energy bills, an issue raised by many speakers, including the noble Baroness, Lady Smith of Basildon, the noble Lords, Lord Fox and Lord Burns, my noble friends Lord Forsyth of Drumlean and Lord Lamont, and others. The Government had previously announced £37 billion of support, meaning 8 million of the most vulnerable households receiving £1,200 of support and others receiving £400. Last month, the Government built on that and announced the energy price guarantee to limit the energy bills of typical households to £2,500 a year for the next two years—that is an average, of course. In turn, another benefit of that is significantly reducing the rate of inflation.

As many noble Lords observed, there are no cost-free options. The Government must now intervene to guard against the worst economic outcomes going forward, and that intervention will therefore initially be funded by the Exchequer.

The noble Lord, Lord Fox, asked about the case of fixed-rate contracts that were agreed before 1 April this year. I can confirm to him that the Government will be revising the cut-off date such that only contracts taken out before 1 December 2021 are excluded from the non-domestic energy scheme. This means that all fixed-rate contracts taken out when the wholesale prices were above the government-supported price will be eligible for relief under the scheme. I am sure that that will be welcomed by the whole House and in particular by the noble Lord; I thank him for asking the question which gave me the opportunity to say that.

The noble Baroness, Lady Brinton, argued that business energy bill support is needed for more than six months. I am also pleased to be able to tell her that after the initial six-month period we will provide further support for vulnerable sectors. We will publish a review of the energy bills support scheme after three months to assess effectiveness and how the scheme might be extended, further targeted or revised beyond the six-month period for vulnerable non-domestic customers. Continuing support to those deemed eligible would begin at the end of the initial six-month support scheme without any gap.

The right reverend Prelate the Bishop of Edmundsbury and Ipswich—he must have the longest title in the House—also raised the important subject of energy poverty. In addition to the extensive support I have just mentioned to support people who need additional help on top of the warm homes discount, the Government are also providing an extra £500 million of local support via the household support fund, which will be extended from this October to March 2023. The household support fund helps those in most need with payments towards the rising cost of food, energy and water bills.

The Government are also aware—again, this point was raised by many Members—that the energy price guarantee will leave those households currently with unregulated energy sources, such as those living off the gas grid, with uncapped bills this winter. However, our objective is that all households, regardless of their heating source, will be no worse off than an equivalent domestic gas household under the energy price guarantee.

As the noble Baronesses, Lady Hayman and Lady Walmsley, and again, the right reverend Prelate the Bishop of Edmundsbury and Ipswich, noted, there is more at stake here, and there is a need for a more holistic approach. That is why the Government are investing more than £6.6 billion over this Parliament to improve energy efficiency and decarbonise heating. Despite the comments of some Members, we are making good, steady progress on this issue. In 2008, 9% of homes had an energy performance certificate of C or above, and that figure is now 46%. Meanwhile, the energy company obligation, or ECO, has been extended from 2022 to 2026, boosting its value from £640 million to £1 billion a year, which will help about 450,000 families with green measures such as insulation. I am sure that it did not escape the attention of Members that last week the Chancellor announced an additional £1 billion investment over three years in the ECO-plus energy efficiency scheme—something I am sure we will return to in this House when we bring the legislation forward to implement it.

The noble Baronesses, Lady Smith of Basildon and Lady Kramer, and the noble Lords, Lord Burns and Lord Razzall, and other noble Lords, all raised the issue of a windfall tax on energy companies. We already have a tax on energy companies. The energy profits levy was introduced on 26 May 2022. It is an additional 25% tax on UK oil and gas profits on top of the 40% headline rate of tax that they already pay, which takes the combined rate of tax on profits to 65%. I do not know how much further Labour and the Liberal Democrats want to increase that tax, but it already appears to be at a very high level.

[Lord Sikka (Lab)]

My Lords—

[Lord Callanan (Con)]

If the noble Lord will have patience, I will finish my paragraph and then he can intervene.

It applies to profits earned by companies from the production of oil and gas in the UK and on the UK continental shelf.

[Lord Sikka (Lab)]

My Lords, the net impact of the windfall tax the Minister referred to is only 2% of the earnings before interest, tax, depreciation and amortisation of BP’s profits and only 1.5% of Shell’s. It excludes profits made in the forecourts, from refineries and by trading, which is the biggest source of profits for oil and gas companies. Surely that tax was just a joke and a sop, because a large amount of it is then handed back through accelerated investment allowance.

[Lord Callanan (Con)]

I know that there has never been a tax that the noble Lord does not want to increase even further, but it is already a very high level of tax. I think I saw a figure of £170 billion mentioned by the Opposition. That is worldwide profits. The UK cannot tax profits made in other jurisdictions; we can tax those that are made in our country, that we have control of. I remind the noble Lord that we also want those companies to invest in renewables, as they are doing. There are many renewable projects—offshore wind projects, hydroelectric projects, et cetera—in which we need additional investment. So the calculation made by the Treasury, which I have never seen to be shy of raising taxes in the past when it could, is that, on the one hand, of course we want to secure a fair return for taxpayers, but we also want to make sure that the profits are there to enable the massive sums that we need to invest if we want to move to a green transition in future.

On the suggestion of the noble Lord, Lord Vaux of Harrowden, of a briefing on energy markets for interested Peers, I say to the noble Lord that, as he knows, this is a complicated subject. Exactly who is making the excess profits under which particular regime is a complicated issue. He will be pleased to hear that we will shortly be debating the legislation to implement the support policies I have mentioned, and I am sure that these matters will be raised further in the debate during the passage of that legislation. I look forward to discussing it further with him then.

The noble Lord, Lord Liddle, made the point that we need to get onshore wind moving—a matter I know is dear to the heart of the noble Baroness, Lady Hayman, and she will no doubt agree. The British Energy Security Strategy recognises the range of views on onshore wind across the country and, as I said before, we will be consulting on developing partnerships with a number of supportive communities that wish to host new onshore wind infrastructure, perhaps in return for guaranteed lower energy bills. The growth plan went further, with specific changes to accelerate delivery of infrastructure, including bringing onshore wind planning policy in line with other infrastructure policies to allow it to be deployed more easily in England. The noble Baroness, Lady Walmsley, has asked many times about that; I am sure she will be pleased to hear that.

The noble Baroness, Lady Fox of Buckley, meanwhile noted the need for green innovative growth. We have indeed established a Green Jobs Delivery Group, headed by Ministers and business leaders, to act as a central forum for driving forward action on green jobs and skills. Our plans for net zero and energy security are driving an unprecedented £100 billion-worth of private sector investment by 2030 into new British industries, supporting about 480,000 green jobs by the end of the decade. To return to my earlier point, many of the companies investing in the UK are those that the Opposition wish to tax to death.

The noble Lords, Lord Bilimoria, Lord Eatwell and Lord Fox, alongside my noble friends Lord Lamont, Lord Lilley and Lord Bridges of Headley, all commented on the Government’s plans regarding taxes. The plain truth is that the Prime Minister promised that this would be a tax-cutting Government and we are keeping that promise.

A number of noble Lords also raised the overall approach of the growth plan.