Energy (oil and gas) profits levy

Peter Dowd Excerpts

Tuesday 22nd November 2022 Commons Chamber

[The Exchequer Secretary to the Treasury (James Cartlidge)]

It is a privilege to open the second day of debate on the autumn statement for the Government. Last Thursday, my right hon. Friend the Chancellor presented this House with a plan to tackle the cost of living crisis and rebuild our economy—a statement that was honest about the challenges we face and fair in its response. His three priorities, and the priorities of this Government, are simple: stability, growth and public services. The people of this country need us to take the difficult decisions on their behalf, and that is what we will do.

In yesterday’s debate, we heard how our plan leads, among other things, to lower energy bills, higher long-term growth and a stronger NHS and education system. The subject of today’s debate is sustainable public finances and taxation, and the House will understand if I focus my remarks on those aspects of the statement.

For the record, and as the Chancellor revealed, the Office for Budget Responsibility judges that the UK, like other countries, is now in recession. Overall this year, the economy is still forecast to grow by 4.2%. GDP then falls in 2023 by 1.4%, before rising by 1.3%, 2.6% and 2.7% in the following three years. The OBR says that higher energy prices explain the majority of the downward revision in cumulative growth since March. It also expects a rise in unemployment from 3.6% today to 4.9% in 2024, before it falls to 4.1%.

One of the most salient points, and an issue we cannot and will not ignore, is inflation. Last week, the Chancellor called inflation “the enemy of stability”, noting its impact on mortgages, household bills, businesses and unemployment. We are experiencing very high levels of inflation, the primary cause of which, according to the OBR, is global factors. Those who question that should remember the following: yes, inflation is high in the United Kingdom, but it is higher in Germany, at 11.6%, in Italy, at 12.6%, and in the Netherlands, at 16.8%. The reality is that the pandemic is still casting an economic shadow, with the lasting impact on supply chains having made goods more expensive. As Members will understand, this has been significantly exacerbated by Putin’s illegal invasion of Ukraine.

The OBR forecast the UK’s inflation rate to be 9.1% this year and 7.4% next year, although I note that the OBR has said that actions taken as part of the autumn statement will help inflation to fall sharply from the middle of next year. Tackling high inflation needs fiscal and monetary policy to work together, with the Government and the independent Bank of England acting hand in glove. It also needs the world to believe that this country will always pay what it owes. Thanks to the decisions this Government have already taken, the OBR has said that the peak of interest rates is likely to be lower than it would otherwise have been, in turn benefiting our economy and public finances.

But we cannot be complacent. That is why we are committed to rebuilding the public finances. The decisions the Chancellor made last week will mean that over the next five years, borrowing is more than halved. This year, we are forecast to borrow 7.1% of GDP, or £177 billion. Next year, it is 5.5% of GDP, or £140 billion, then by 2027-28, it falls to 2.4% of GDP, or £69 billion.

The Chancellor also confirmed two new fiscal rules. The first is that underlying debt must fall as a percentage of GDP by the fifth year of a rolling five-year period. The second is that public sector borrowing over the same period must be below 3% of GDP.

[Peter Dowd (Bootle) (Lab)]

Given that the Government since 2012 have broken virtually every fiscal rule they have set themselves, why should we pay a blind bit of attention to this new fiscal rule? Why would we believe anything that those on the Tory Front Bench say about their fiscal rules, which are brushed aside as and when they feel like it?

[James Cartlidge]

I always enjoyed intervening on the hon. Gentleman when he was a shadow Minister and I was a Back Bencher, and I have great respect for him. The Opposition may want to airbrush from history the extraordinary events of recent years—the pandemic and now the invasion of Ukraine—but any Government would have to adjust to those circumstances. These were not minor events; they were once-in-a-generation events, and they have had a huge impact.

Overall, the autumn statement delivers a consolidation of £55 billion, with just under half from higher taxation and just over half from spending reductions. The consolidation ensures that excessive borrowing does not add to inflationary pressures and push interest rates up further. In the short term, we are taking difficult decisions to make sure that fiscal policy keeps inflation in check, but doing it in a compassionate way that still provides support to the most vulnerable.

--- Later in debate ---

[Tulip Siddiq]

May I remind the hon. Gentleman that the Tories have been in government for 12 years now and may I remind him about everything that happened during covid, including burning personal protective equipment? Maybe he has forgotten about that, and maybe he has forgotten about the amount of fraud that took place during covid. I can send him the details because he looks incredulous. Maybe he does not know how much fraud there was during covid, but we will send that to him. I also remind the hon. Gentleman that, after 12 years of economic mismanagement by this Conservative Government, the UK is forecast to have the lowest growth in the G7 over the next two years, with growth stagnant over 2023 and 2024. That is not a record the Government should be proud of.

Let me return to the energy companies, because even they admit that they do not know what to do with their excessive profits. The Chancellor chose to protect that tax break for the energy giants and let the cost land on working people. He also chose to ignore Labour’s calls to scrap non-dom status, which is currently costing us more than £3 billion a year. Why will the Government not undertake that policy? If Labour was in government, we would be stretching every sinew to generate revenue for the hard-working people of our country.

[Peter Dowd]

When the Tories came to power in 2010, national debt was just under £1 trillion, yet I remind Conservative Members that it is now £2.4 trillion—so much for the party of sound finance.

[Tulip Siddiq]

As always, my hon. Friend is right, as is his point about how every time the Conservatives bring in a fiscal rule about lowering debt, they end up breaking it.