Energy (Oil and Gas) Profits Levy Bill

Richard Burgon Excerpts

Committee stage
Monday 11th July 2022 Commons Chamber

[Stephen Flynn]

I will not give way to the hon. Gentleman. That has nothing to do with this Committee stage, and I would hate to get diverted, as some others did earlier.

What we and the industry need to be clear about is what price the Government regard as normal. If we are to have serious legislation, we need serious answers to the most basic of questions.

[Richard Burgon (Leeds East) (Lab)]

I wish to speak in favour of my new clause 1, new clauses 8 to 10, which I have signed, and of course the amendments from the Labour Front Benchers.

Away from the drama among Government Members over who will be their next leader, the cost of living emergency out there is biting ever harder. Experts now warn that the energy price cap will surge by another 64% in October to more than £3,200 a year—up £2,000 in just a few months. Millions of people will be thrown even further into crisis. We urgently need further Government interventions to help them, and my new clause offers a way to do that.

In May, after political pressure from the Labour Benches, the Government were forced into imposing a windfall tax on the North sea oil and gas producers’ excess profits. Such a tax is certainly needed. The Government’s own figures suggest that North sea oil and gas companies will make pre-tax profits of £21.4 billion this year—a staggering increase from the £2.5 billion average over the past five years. We have gone from a £2.5 billion average to £21.4 billion this year.

Let us be clear: these excess profits are not the result of extra investment. They are not the result of innovation. They are an undeserved and unexpected windfall, mainly resulting from Russia’s horrific war on Ukraine. They are vast super-profits made on the backs of higher bills for ordinary people. We have a clear choice. Either we allow the oil and gas giants to hoard those excess profits, or we use the funds to help to bail out the vast majority of people hit hard by soaring energy bills.

My new clause 1 calls on the Government to look at setting the windfall tax at 45% on top of normal tax rates, not the current proposed 25%. The aim is to ensure that nearly all of the windfall—the undeserved, unmerited excess profit—goes to supporting families instead of boosting the profits of oil and gas giants.

The windfall tax as it stands will raise £5 billion. The higher windfall tax that my new clause addresses would raise another £4 billion in tax revenues this year alone, which could provide an extra £1,000 payment to the most vulnerable 4 million households. Surely that is more important than boosting oil and gas company profits. North sea oil and gas companies’ revenues have risen so much that even with this higher tax they would still make £3 billion in profits this year, which is above their recent average.

--- Later in debate ---

[Christian Matheson (City of Chester) (Lab)]

My hon. Friend has obviously given real thought to his proposals. Does he agree that the vast profits that the oil and gas companies make do not stay with those companies but go to their ultimate owners, the big City institutions which, in my view, the Conservative party represents these days?

[Richard Burgon]

That is an important point well made by my hon. Friend. That is what this is really about. It is a political choice that we are discussing.

On the Government’s major loophole that I referred to, which gives a 91p tax saving for every £1 invested by the oil and gas companies, we need to be clear that it is a subsidy to oil and gas giants. It takes money away from supporting families and encourages further fossil fuel production when we need to be ending all new oil and gas production to avoid climate catastrophe.

With another huge spike in energy prices now expected, much more needs to be done to help families. The Government should start by accepting my amendment and others that would see less going into profits for oil and gas firms, and more into bailing out people facing the biggest crisis in living memory.

[Caroline Lucas]

It is a pleasure to follow the hon. Member for Leeds East (Richard Burgon), whose new clause 1 I am happy to support. I rise to speak in favour of new clauses 8 to 10 tabled in my name.

First, new clause 8 would require the Government to produce an assessment of the revenue that would be generated if the level of taxation on oil and gas companies were permanently raised to the global average of 70%. That is 5% higher than the total level of taxation with the addition of the Government’s levy, but it would be permanent.

I know the new Chancellor may be disinclined to increase taxation on the oil and gas industry, given that he has benefited so handsomely from it in the past, previously earning £1.3 million from his executive position at Gulf Keystone Petroleum, including a whopping £285,000 settlement payment when he stepped down from that role in 2018 after becoming a Minister. However, it is important to understand that the level of taxation that this new clause proposes on oil and gas would simply bring the UK into line with countries such as Angola and Trinidad and is backed by 63% of the public. By way of comparison, it may be interesting to note that the UK’s North sea neighbour, Norway, has a taxation rate of 78%, and that does not seem to have done it any harm. I therefore hope that the Government will recognise that this is a very reasonable amendment that it should be easy for them to support.

The reason I am proposing a permanent taxation level is that the UK currently has the lowest tax take in the world from an offshore oil and gas regime. That is not a badge of honour; it should be a badge of shame. Indeed, Norway’s tax take from a barrel of oil in 2019 was over 10 times the equivalent here in the UK. The amendment would simply require the Government to assess the impact of ending that shameful state of affairs. Greenpeace estimates that a tax at that level would generate an additional £13.4 billion for the Exchequer in comparison with the status quo—money that, in addition to providing immediate support to households to cope with the cost of living scandal, could be used to invest in much-needed energy efficiency, quite literally insulating households from escalating costs.

To date, the Government have spent £37 billion on short-term financial support. Although that support is of course very welcome, gas prices are likely to remain high for several years, and a more long-term approach is necessary, especially when the CEO of Ofgem is warning that the number of households in fuel poverty could reach 12 million in October when the energy price cap rises again. The think-tank E3G estimates that the average household with an energy performance certificate of D or lower will be paying what it calls an inefficiency penalty of £916 per year for adequate heating compared with households with an EPC of C or higher. Investment to kick-start a local-authority-led, street-by-street home insulation programme would save cash-strapped families money not just this year but every year. It would also rectify a glaring omission in the Government’s approach so far, with the Climate Change Committee saying clearly in its 2022 progress report to Parliament:

“Given soaring energy bills, there is a shocking gap in policy for better insulated homes.”

New clause 9 would require the Government to produce an assessment of how much revenue would be generated by the energy profits levy if the investment allowance were removed. I also support the Labour Front-Bench amendment that would simply delete the clause on the investment allowance, which is nothing less than a scandal. As the Chancellor and his team very well know, it will come at huge cost to the taxpayer. Analysis by the New Economics Foundation suggests that the investment allowance will cost £1.9 billion a year because any subsidised oil and gas projects will not start to return a profit until after 2025—the date of the sunset clause in the Bill.