Energy (Oil and Gas) Profits Levy Bill

Debate between Simon Clarke and Alan Brown

2nd reading
Monday 11th July 2022 Commons Chamber

[Alan Brown (Kilmarnock and Loudoun) (SNP)]

Will the Minister give way once more?

[Mr Clarke]

No, I will not; I am going to make some progress.

As set out in the energy security strategy, the North sea will still be a foundation of our energy security for years to come. Currently, about half our demand for gas is met through domestic supplies. In meeting net zero by 2050, we have to be realistic; we will still be using about a quarter of the gas that we use now. It is therefore necessary to incentivise investment in oil and gas, and to encourage companies to reinvest their profits to support the economy, jobs, and our energy and security, but it is possible to tax extraordinary profits fairly and to incentivise investment. That is why, within the energy profits levy, a new “super-deduction” style relief has been introduced to encourage firms to invest in oil and gas extraction in the UK. We expect that the energy profits levy, with its investment allowance, will lead to an overall increase in investment. Indeed, one oil and gas company has already said that the immediate investment allowance should spark further investment in the North sea. The new 80% investment allowance will mean that, overall, businesses will get a 91p tax saving for every £1 they invest, providing them with a clear incentive to do so. This nearly doubles the tax relief available and means that the more investment a firm makes, the less tax it will pay. Unlike Labour’s windfall tax in 1997, this levy both incentivises investment and raises more revenue.

The energy profits levy contains an investment allowance that doubles the overall investment relief for oil and gas companies, unlike Labour’s proposal of a few weeks ago. Our levy raises around £5 billion over the next 12 months against Labour’s estimate of around £2 billion for its proposals. Its windfall tax would raise less than £70 per household, not £600 as it claimed. In fact, the Opposition’s regressive VAT plans would give millionaires in mansions more off their bills than those in need. They are now caveating their windfall tax costings by stating that their £600 per household support will be supported by “other measures”. By that I presume they mean more public spending and a higher rate of taxation for hard-working people across this country. As usual with Labour, the sums sadly do not add up.

The new tax we are introducing today ensures that the extraordinary and unexpected profits from which oil and gas companies have benefited are taxed fairly and provide a significant investment incentive. This is a sensible considered move and one that will be warmly welcomed across the House.

Our plans mean that the oil and gas producers can claim the allowance when their spending on investment is actually incurred. This is unlike the allowance under the existing permanent tax regime for oil and gas companies, which can be claimed only once income is received from the field, subject to the investment, and, as some Members of the House will know, that can take several years.

I want to make it clear what the investment allowance will apply to. First, if capital or operating expenditure qualifies for supplementary charge allowance, it will qualify for the energy profits levy allowance. As the levy is targeted at the extraordinary profits from oil and gas upstream activities—that is the profits that came about owing to global price increases—it makes sense that any relief for investment must also be related to oil and gas upstream activities.

Secondly, such spending can be used to decarbonise the oil and gas production, for example through electrification. Therefore, any capital expenditure on electrification, as long as it relates to specific oil-related activities within the ringfence, will qualify for the allowance.

Cost of Living Increases

Debate between Simon Clarke and Alan Brown

Monday 24th January 2022 Commons Chamber

[Mr Clarke]

If we look at the Office for Budget Responsibility forecasts, we see that they are for 6.5% growth in 2021 and 6% growth in 2022. That is an incredibly strong economic recovery, and one of which we should be very proud. With regard to the Kickstart scheme, we obviously always want to encourage maximum uptake and we continue to work to refine that scheme and make sure it works to best effect, but it must be considered in the context of an unemployment rate that is now only just over 4%. We have a very tight labour market, and that very success is leading to some of the challenges that we face in getting people through every different scheme.

[Alan Brown (Kilmarnock and Loudoun) (SNP)]

Given the increases in energy costs, can the Chief Secretary tell us how much extra VAT the Treasury is taking, what extra oil and gas revenues are coming in and how much extra is coming in from the increased price of petrol at the pumps? Why are the Government not using that money to mitigate costs for the 6 million households that will be plunged into fuel poverty when the cap rise kicks in in April?

Household Energy Bills: VAT

Debate between Simon Clarke and Alan Brown

Tuesday 11th January 2022 Commons Chamber

[Mr Clarke]

Well, this is the Government who have introduced the £500 million household support fund, which is designed to help the most vulnerable households during the course of this winter. This is the Government who are making sure that we are delivering through our action on universal credit and on the national living wage, the rise in which will come into effect in April, and through the wider package of support, which I will come on to in a moment, including the warm home discount, cold weather payments—all the things that are designed to ensure that we give targeted support to people like Gillian who need it. I would remind the hon. Gentleman that Teesside is one of the best examples of levelling up that we have had anywhere in this country. One only needs to look at the response of the Teesside public to what is happening in our area to see the difference that a Conservative Government are making for our community.

Our record of investment in renewable energy is, of course, in great contrast to that of the last Labour Government. Labour’s 1997 manifesto specifically stated:

“We see no economic case for the building of any new nuclear power stations.”

The legacy of that is now seen today. While in government Labour failed to diversify our energy supply, with renewables making up just 7% of our energy mix, compared with 43% today.

While the up-front costs of certain technologies may be high in the early years of their deployment, they are falling over time. We have already seen the cost of offshore wind fall dramatically, together with that of solar panels and batteries. Our heat and buildings strategy set a clear ambition of working with industry to reduce heat pump costs by at least 25% to 50% by 2025, and to parity with gas boilers by 2030.

On the specifics of this debate, as I alluded to a moment ago, we have already introduced measures to support vulnerable households with the costs of energy, including increasing the warm home discount, winter fuel payments and cold weather payments, which together provided almost £2.5 billion in support to households last winter.

[Alan Brown (Kilmarnock and Loudoun) (SNP)]

Can the Minister tell me how much the Government pay for the warm home discount?

[Mr Clarke]

I am sorry, could the hon. Gentleman repeat that?

--- Later in debate ---

[Alan Brown]

Can the Minister tell me how much funding the Government put into the warm home discount that he is bragging about?

[Mr Clarke]

The share of our support is going up. We are also increasing the number of people who are likely to be in scope. We are consulting on increasing the number of people for whom that discount provides a benefit by 780,000. It will also likely rise in value from £140 to £160, so it is an expanding benefit.

Vulnerable households will also be supported with the cost of essentials through the £500 million household support fund. That funding has been made available to local councils across England to support their residents this winter. Importantly, in recognition of the fact that families should not have to bear all the VAT costs they incur to meet their needs, domestic fuels such as gas and electricity are already subject to a reduced VAT rate of 5%. In response to the Opposition’s calls to go further on VAT costs, I would note that that would mean our spending a significant amount on subsidising the fuel consumption of some of the wealthiest. When we look at our response to all these challenges, we need to ensure that we spend taxpayers’ money on the most effective possible interventions to support the households struggling the most with the cost of living.

The cost of living is not about any single bill or expense. That is why, at the autumn Budget, the Government put in place a host of measures to help families with the cost of living.

Oral Answers to Questions

Debate between Simon Clarke and Alan Brown

Tuesday 2nd November 2021 Commons Chamber

[Mr Clarke]

The hon. Gentleman is right to champion the university sector. We in this country are fortunate in having such a fantastic set of universities, and it is important for young people to have the opportunity to enrol on courses that will meaningfully improve their life chances and career prospects. However, it is also important to balance a strong offer for the university sector with an equally strong vocational offer, and we are keen to strike that balance through the new T-levels and our investment in skills—which was a defining theme of this Budget and spending review—so that whatever young people decide to do, they have a strong and credible route to employment and success.

[Alan Brown (Kilmarnock and Loudoun) (SNP)]

Scotland leads the world in the development of wave and tidal technologies. The expansion of that sector could create fantastic chances for more young people to secure more highly skilled jobs, and could set them up for possible worldwide opportunities. However, if the sector is to expand, it will need a ring-fenced pot of money in the forthcoming contracts for difference auction. It is believed that the Treasury blocked that concept. Will the Chief Secretary meet me to discuss how changes could be made that would allow the sector to bid and be successful in scaling itself up?

[Mr Clarke]

The hon. Gentleman has referred to the contracts for difference mechanism, which has been hugely successful in helping to drive the improved economics of technologies including offshore wind. I think that we as a country should be very proud of that, especially in the week of COP.

There is no doubt that there are exciting opportunities for young people. I think that the Department with which the hon. Gentleman would do best to engage on that is the Department for Business, Energy and Industrial Strategy, but I am always happy to have any conversations that would be useful in this regard.

Working People’s Finances: Government Policy

Debate between Simon Clarke and Alan Brown

Tuesday 21st September 2021 Commons Chamber

[Mr Clarke]

I absolutely agree: it is very important that we invest in skills. The plan for jobs is not just about getting people into work or keeping them in work; it is about making sure they grow their skills during their working lives, which is why we have a focus on more skills for school leavers and generous apprenticeship hiring incentives. We are also tripling the number of traineeships for 16 to 24-year-olds, and we have the pioneering lifetime skills guarantee. These are all the sorts of things that will make a difference in Staffordshire as they will across the rest of the UK, and we should be incredibly proud of that.

[Alan Brown (Kilmarnock and Loudoun) (SNP)]

On the previous intervention about there being a limited amount of money that can only go so far, did the £1.6 billion allocated for a nil rate stamp duty on houses worth up to £500,000 help the poorest, the richest, or a combination of the richest and the housebuilders’ profits?

[Mr Clarke]

The hon. Gentleman asks us to apologise for keeping the housing market moving in the teeth of the pandemic and I make absolutely no apology for that; it was absolutely the right thing to do to make sure we did not see a collapse of that market.

It is important to recognise that supplying, protecting and creating employment opportunities is the right way forward both economically and politically for our country. That is why we have made a deliberate choice to invest in our plan for jobs, which we launched over a year ago to create work opportunities and assist workers to develop the right skills for the future.

Our plan is helping young people—a group disproportionately affected by the pandemic—through the £2 billion kickstart scheme. At lunch, I was talking to the Under-Secretary of State for Work and Pensions, my hon. Friend the Member for Mid Sussex (Mims Davies), about the impact of these programmes on young people, creating and fully funding hundreds of thousands of jobs for those at risk of long-term unemployment. I am proud that so far over 63,000 young people have had the chance to begin a kickstart job, with the numbers growing by more than 2,000 every week. Our plan will support more than 1 million unemployed people, many of whom are aged over 50, helping them find work through our three-year-long £2.9 billion restart programme, and providing jobseekers with the personalised, intensive support that will make a real difference to their prospects.

Oral Answers to Questions

Debate between Simon Clarke and Alan Brown

Tuesday 7th January 2020 Commons Chamber

[Alan Brown (Kilmarnock and Loudoun) (SNP)]

As always, the Scottish Government are ahead of the UK Government when it comes to climate change and taking steps to tackle this. The Minister rightly acknowledged that the UK Government have to do a lot more. Does he agree that they need to take away the subsidies to nuclear and actually reinvest in onshore wind in Scotland, and allow greater offshore deployment as well?

[Mr Clarke]

The whole United Kingdom needs to work together to make sure that we deliver on our climate goals. We clearly need a diverse energy mix to help to deliver on that, and nuclear has a clear role to play within that settlement. We are very clear that we obviously monitor all projects to make sure they deliver maximum value for money, but we do need some baseload power.