North Sea Oil and Gas Producers: Investment Allowances

Lord Teverson Excerpts

Tuesday 7th June 2022 Lords Chamber

[Baroness Penn (Con)]

My Lords, the energy profits levy is expected to raise around £5 billion in the first 12 months, and that factors in the investment allowance designed into it. The Government will publish a tax information and impact note alongside legislation to introduce the levy, which will come before Parliament shortly, and the OBR will take account of the levy, including the allowance, at its next forecast.

On the noble Lord’s point about renewables, no, they will not benefit from the investment allowance, because they are not subject to the additional levy, but I reassure noble Lords that we are absolutely committed to increasing investment in renewables. We have R&D tax credits, the super-deduction and a number of other schemes in place to support them.

[Lord Teverson (LD)]

My Lords, at Glasgow COP 26, it was agreed that there should be a continued deceleration and decrease in public subsidy of fossil fuels. In February this year, our own Climate Change Committee wrote to the Government saying:

“An end to UK exploration would send a clear signal to investors … that the UK is committed to the 1.5°C … temperature goal.”


How does the Minister reconcile this announcement about investment incentives, which will not in any way improve energy supply in the medium term, with COP 26—of which we are still the president?

[Baroness Penn (Con)]

My Lords, the Government’s position on not having fossil fuel subsidies remains the same, and we use the IEA’s definition of subsidies in assessing that. Of course, the investment allowance is part of the energy profits levy, an additional levy on oil and gas producers which are experiencing extraordinary profits at this time. In terms of investment in North Sea oil, we have set out in our energy security strategy that the North Sea will still be a foundation of our energy security. It is right that we continue to encourage investment in oil and gas; this is consistent with our transition to net zero. The noble Lord will know that we have gone the furthest and fastest so far in the G7 on decarbonising our economy; I am sure that this is a record on which we will continue to build.