Finance (No. 2) Bill

Rosie Winterton 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.

[Tulip Siddiq (Hampstead and Kilburn) (Lab)]

As my hon. Friend the Member for Ealing North (James Murray) set out in his opening speech, this Finance Bill and last month’s Budget are nothing but the last gasps of a dying, desperate Government. Neither does anything to address 14 years of Conservative economic failure, and as always with this Government, it is working people who pay the price, because taxes are still rising. The British people, already facing the highest tax burden in 70 years, will see tax rises in every single year of the forecast period. As much as the Government try, they simply cannot hide from that record: after a decade and a half of Conservative rule, people have less money in their pockets.

Unable to defend his own Government’s record, and unable to offer any plan to get the country out of the economic mess that his party has created, this Chancellor has resorted to undeliverable promises. The Chancellor ended his Budget last month with a £46 billion unfunded tax plan to abolish national insurance, which would put our economic stability at risk. That is even bigger than the unfunded tax cuts announced by the right hon. Member for South West Norfolk (Elizabeth Truss) in her Budget, which added hundreds of pounds to people’s mortgages.

In contrast, the Labour party has consistently said that we would reduce the tax burden on families. That is why we opposed the current Prime Minister when he wanted to increase national insurance two years ago, and it is why we supported the measures announced last month to bring national insurance down by an additional 2p.

Although on the surface this Bill leaves the basic and higher rates of income tax unchanged, let us be clear: this is a Government who have raised the tax burden to record levels, and taxes are continuing to rise. Because of the tax choices that this Chancellor has made, households will be, on average, £870 worse off. His decision to freeze tax thresholds will create 3.2 million new taxpayers by 2028, and 2.6 million more people will be paying higher rates. For every £5 that the Government are giving back to families, they will be taking an average of £10 in higher taxes under their plans, and they expect the British public to thank them for it.

While we will always call out the Conservatives for pickpocketing the British taxpayer, we do welcome their recent pickpocketing of Labour policies. Labour has long argued that if people make Britain their home, they should pay their taxes here too. However, the Prime Minister himself has said that scrapping the non-dom tax status would somehow end up costing Britain money, and the Chancellor previously tried to argue that the non-dom status supports jobs and that reforming it would damage long-term growth. I am delighted to say that the Prime Minister and the Chancellor have finally come around to the Labour party’s way of thinking, but it is not quite what it seems. I am not denying that Conservative Members have come a long way after years of opposing our plan to scrap the non-dom status, but there are still some gaping loopholes in the Government’s plans.

The discount in year 1 is unnecessary and unjustified, and particularly concerning is the loophole that will allow non-doms to exploit offshore trusts so that they can avoid inheritance tax. As my hon. Friend the Member for Ealing North made clear, these loopholes must be closed. I hope that the Minister, when he responds, will commit to closing these loopholes, so I wait with bated breath to hear what he has to say on this policy. If not, will he accept that the Conservatives are once again putting the interests of non-doms before those of ordinary British taxpayers and British businesses?

Let us take corporation tax, which clause 12 sets at 25%. All this Chancellor has had to offer British businesses is uncertainty. Despite promising to cut corporation tax from 19% to 15% in his 2022 leadership bid, he has increased it from 19% to 25%. In contrast, our shadow Chancellor has committed to capping the headline rate of corporation tax at its current rate for the whole of the next Parliament, and we would take action if tax changes in other advanced economies threatened to undermine UK competitiveness.

The Opposition will be supporting the energy security investment mechanism in clause 19 of the Bill before us, as it will help investors get the confidence they need. Likewise, we are committed both to strengthening the windfall tax to raise more revenue to support our country’s energy transition, and to giving as much certainty as possible to the companies affected. That is why our shadow Chancellor has made it clear that, under Labour, our one-off, time-limited energy profits levy will cease to apply by the end of the next Parliament.

We will not be opposing the Bill today, but we will be looking closely at the detail in the specific clauses in the coming weeks. However, let us be under no illusions: this is an exhausted and directionless Conservative Government who are out of ideas and out of time. All they have to offer are U-turns, unfunded promises and an ever-growing tax burden on working people and our constituents. In contrast, the Labour party’s offer to the country will be carefully costed and fully funded, and we will always put working people and British businesses first.

The Government have failed to reduce the tax burden, failed to boost business investment, and delivered only stagnation and chaos, whereas our economic plan is built on the pillars of stability, investment and reform: stability brought about by iron discipline, and guarded by strong fiscal rules, robust economic institutions and certainty on corporation tax; investment, working with the private sector, so that we can lead the industries of the future and make work pay; and reform, starting with our planning system, to tackle vested interests. The British people deserve better than this. The British people deserve change. I hope the Minister will agree with me that it is now time to call a general election as soon as possible.

[Madam Deputy Speaker (Dame Rosie Winterton)]

I call the Minister.