Finance (No. 2) Bill

Peter Aldous Excerpts

2nd reading
Wednesday 17th April 2024 Commons Chamber

[Peter Aldous (Waveney) (Con)]

I am interested in clause 19, which sets out how the energy security investment mechanism will operate: the energy profits levy will cease if the six-month average prices for both oil and gas fall below certain thresholds. That provision follows on from the Chancellor’s announcement in his spring Budget that the energy profits levy would be extended to 2029, though it would be disapplied when energy prices return to normal. My interest in the issue stems from my role as a constituency MP—activity in the North sea energy sector is vital to the local economy—and from chairing the British offshore oil and gas industry all-party parliamentary group. I have no particular issue with the mechanisms in clause 19, though I am worried that the current short-term approach to fiscal policy for the oil and gas sector undermines other Government objectives—in particular, the objective of enhancing the UK’s energy security, which would bring new, well-paid jobs to coastal communities such as Lowestoft, and the objective of delivering our net-zero targets.

I acknowledge that the Chancellor has an unenviable role and faces a significant dilemma. He is, in many respects, between a rock and a hard place. He needs to balance the books, and to support those families who continue to struggle with the cost of living crisis. It is thus understandable that he looks to energy companies to pay more as oil and gas prices have risen. They have been at very high levels; however, it should be pointed out that they have now fallen back to long-term averages. There is a significant risk that in pursuing such a course, he could imperil the inward investment that is needed to create long-term, sustainable jobs in coastal communities for those very people who are struggling to make ends meet.

The North sea has been the UK’s economic saviour for nearly 60 years. Some might say that we are nearing the end of that particular story. That is not the case. The North sea is transitioning from being a source of fossil fuels to the long-term home of renewables. That transition needs to take place as quickly as possible, but in a smooth and seamless way. It requires a stable and long-term fiscal policy, which I am afraid we do not have at present. The decision to extend the levy for a further year was unexpected by industry and presents a significant further challenge to investor confidence.

Energy companies are making investment decisions on projects that quite often have timescales of the order of 40 to 50 years. The fact that in the UK there have been four fiscal changes in the past two years deters investment and deflects it elsewhere. Such businesses are globally footloose, and they will go to countries where the fiscal regime is favourable and has a large degree of certainty about it. In the past, the UK has ticked that particular box, but we are not doing so at present. It should also be emphasised that, as well as operating worldwide, those businesses have interests in a wide variety of energy technologies—not just oil and gas, but the low-carbon businesses of today and tomorrow: offshore wind, hydrogen, and carbon capture, usage and storage. If they find the fiscal regime unfavourable for oil and gas, they will invariably not invest in those renewables, which are so vital for our future.

The initial feedback following last month’s Budget is that those concerns are well founded: investment decisions are being delayed and funds could well be diverted elsewhere. Offshore Energies UK, which provides the secretariat for the British offshore oil and gas industry APPG, has identified that £200 billion of investment that was awaiting the green light may not now happen. Cornwall Insight concludes that prolonging the levy

“could weaken investor confidence, at a time when the UK is seeking record levels of investment to deliver the transition to net zero.”

We are at risk of imperilling the next chapter of the North sea—an ongoing story that can not only deliver economic regeneration, but provide over the remainder of this decade 50 GW of offshore wind, 10 GW of hydrogen, and four carbon capture, usage and storage clusters, as well as supporting the home-grown oil and gas industry and helping us to meet our decommissioning commitments. In short, it could unleash an enormous amount of economic activity that can cascade right around the UK. To be fair to the Government, clause 19 does seek to address those concerns, but I urge them to map out a long-term strategy for offshore energy, building on the success of the 2021 North sea transition deal. They are now adopting a similar course in the nuclear sector. We need to get back to doing the same in the North sea.

It is appropriate to comment on the Opposition’s alternative proposal to extend the windfall tax. There is a real worry in the energy industry that that could exacerbate the worries that I have underlined. Offshore Energies UK has highlighted that those proposals could lead to the loss of 42,000 jobs and the wiping out of £26 billion-worth of economic activity. A concern that I hope the Opposition will allay is that they are looking at removing the capital and investment allowances that are vital to securing inward investment.

We are where we are, and I fear that some damage has been done. However, there is work to do to rebuild the UK’s reputation as a prime destination for investment in the energy sector, and we need to get on with that task without delay. The industry has noted the Government’s commitment to honour the sunset clause, and I urge the two Ministers on the Front Bench—my hon. Friends the Members for Mid Worcestershire (Nigel Huddleston) and for Grantham and Stamford (Gareth Davies)—to provide the further reassurances that are needed to reinforce that message, both this afternoon in their responses and as the Bill progresses through Parliament.

The importance of ongoing and meaningful dialogue between the Government and industry cannot be overemphasised. In the period from 2012, after the last windfall tax, up to 2021, when the North sea transition deal was agreed, that interaction was very much taking place. It has been lost over the past three very eventful years, but it needs to be restored as quickly as possible. If it is, we can still embark on a new golden era for the North sea: an era of home-grown energy transition, not an outsourced one; of reindustrialisation, not deindustrialisation; and of enhanced energy security and economic prosperity.

[Madam Deputy Speaker (Dame Rosie Winterton)]

I call the shadow Minister.

Finance (No.2) Bill

Peter Aldous Excerpts

3rd reading
Thursday 23rd May 2024 Commons Chamber

[Peter Aldous (Waveney) (Con)]

May I start by paying tribute to you, Madam Deputy Speaker? The best type of umpire or referee is one who is formidable but fair and greatly respected, and you tick all three boxes. I am most grateful to you for calling me to speak. I do so as I have some concerns about unintended consequences arising from clause 7, which is on the abolition of multiple dwellings relief for stamp duty land tax. My hon. Friend the Minister set out some of the reasons for abolishing it. I wish to go a little further and perhaps pry a little more response out of him to allay those concerns.

I make these observations as a former chartered surveyor, as the MP for a constituency that might be adversely affected and having received representations from the British Property Federation. I am aware that a number of pension funds, investors, builders and professional advisers have written to my right hon. Friend the Chancellor of the Exchequer expressing their concerns.

The build-to-rent sector rose from a combination of the introduction of stamp duty land tax multiple dwellings relief in 2011 and the implementation of some of the Montague review’s recommendations in 2012. Subsequently, it has been extremely successful. Some £40 million has been invested in the build-to-rent sector, resulting in 100,300 additional homes being completed, with a further 166,000 in the planning and delivery pipeline. The sector still represents a relatively small proportion of the delivery of new homes, but it is growing rapidly. The number of completed build-to-rent homes increased by 17% year-on-year in the fourth quarter last year. Investors and developers initially focused on London, then the larger cities such as Manchester, Birmingham and Leeds. Now, their interest is rippling right out across the UK.

Build to rent acts as an anchor in large development schemes. It helps get homes of other tenures built, and multiple dwellings relief enables much-needed homes to be built outside London and the south-east in areas where there are lower property values and development otherwise would not be financially viable. My concern is that the abolition of multiple dwellings relief in the form proposed could have a variety of unintended consequences, which I will go through briefly. First, as I know from my own inbox and postbag, which I anticipate is the case for all colleagues, we need to build more homes to rent. The Bill potentially removes one of the ways of doing that. Secondly, it will have an impact on specialist sectors—student accommodation and sheltered housing—where, in response to demand, developers are increasingly looking to provide units to let.

Thirdly, the relief is most needed in areas where the property market is weaker—outside London and the south-east—and often in areas where the need for more housing is most acute. Fourthly, we have a problem in the UK of too few house builders. The small and medium-sized house builder is an increasingly endangered species. Clause 7 could undermine an alternative means of housing delivery.

Finally, I am mindful of the enormous task of urban regeneration and town centre renewal that we face right across the UK—in other words levelling up, which has been the theme of much of this Parliament. This task is enormous and incredibly expensive. It is neither practical nor possible for the state to do that heavy lifting on its own. Private finance must be leveraged in from pensions funds and investors. Multiple dwellings relief is a means of doing that. Some might say it is a small thing, but its abolition could send a negative message that there is no place for the public and private sectors to work together.

We could amend clause 7 to retain the multiple dwellings relief for transactions of six or more dwellings, on the basis that it would underpin the development proposals of large rented housing schemes, and would result in significantly more rental homes being built than if the relief were completely abolished. The threshold of six mirrors the existing rule that purchases of six or more dwellings can be treated as a commercial property transaction for stamp duty land tax purposes, and is at a level at which multiple dwellings relief is hard to abuse.

I would be grateful if my hon. Friend the Financial Secretary to the Treasury, who has been incredibly patient listening to my various concerns about this Bill during its course, could comment a little more and seek to allay my genuinely held concerns.