Oil and Gas Producers: Windfall Tax

Stephen Flynn Excerpts

Tuesday 1st February 2022 Commons Chamber

[Stephen Flynn (Aberdeen South) (SNP)]

First, reflecting on the Minister’s response to the shadow Secretary of State’s contribution, I am a little perplexed, because we continually find ourselves in this situation, where the Tories portray themselves as the defenders of the North sea oil and gas sector, and that is the best that they can provide to do that. It is simply not good enough and it will not wash with people in the north-east of Scotland whatsoever.

The situation facing families in my constituency, up and down Scotland and indeed across the entire United Kingdom is devastating. I, like every other person in the Chamber, will be receiving emails from constituents who are having to choose between heating their homes or feeding their families. It is intolerable. It is simply not justifiable. It is simply not acceptable. What I really struggle with the Government about on this is that, irrespective of the fact that food prices are rising, clothing prices are rising, fuel prices are rising—

[Imran Hussain (Bradford East) (Lab)]

Not once in the Minister’s response did he talk about those ordinary people that are having to choose between heating and eating. That is the real debate. Does the hon. Gentleman agree?

[Stephen Flynn]

Yes, absolutely I agree. Over a number of months, irrespective of the challenges that families are facing, this Conservative Government have consistently not come forward with any new support. The price cap increase is imminent, yet there is still nothing on the table for families up and down the country. That needs to end.

SNP Members do not have a monopoly of knowledge of how to solve those problems, but we have consistently put forward suggestions to the Government, some of which, I think, would gain the support of many of their own Back Benchers. The situation in relation to VAT has been talked about at great length. I see Conservative Members nodding. The deplorable decision to take £20 away from those on universal credit could be reversed—I think we would probably get significant agreement on that as well. The UK Government could match the Scottish Government by introducing a £20 child payment to assist those in the most difficult situations. We are putting forward these proposals to try to be constructive, but unfortunately the Government are not responding in any way, shape or form.

The Government will say, “How do we pay for new measures to support people?” The Labour party has come forward with its proposal, which I will come to in due course. I sometimes struggle in this place with this argument about where the money is going to come from. We have just had a debate about £4 billion that has been squaffed away to fraudsters. This afternoon we have seen a release from the Department of Health saying that there has been a loss of £8.3 billion in the value of PPE that has been purchased. There is going to be £3 billion of additional income to the Treasury, notwithstanding the windfall tax, from the North sea oil and gas sector. They can find half a million pounds to fly the Foreign Secretary to Australia. Of course—this is also true of the Labour party—they can always find tens if not hundreds of millions of pounds for nuclear weapons on the Clyde. So I will not take any lessons from them about where the money is going to come from. In relation to the specific proposal for a windfall tax put forward by the Labour party, what was missing from the contribution of the shadow Secretary of State and the Minister himself was the workers. What impact would it have on the workers?

The shadow Secretary of State rightly, as he sees it, challenged the notion that the money that oil and gas companies are receiving is going directly into investment in renewable technologies and the pathway to net zero. He made that argument with a great deal of passion, but he failed to recognise that the last time the UK Government implemented a windfall tax, 10 years or so ago, investment in the North sea oil and gas sector plummeted. It fell off a cliff; in fact, it has never got back to where it was.

If that happens again, what does it mean? It means that my constituents will lose their jobs. Some 35,000 jobs have gone in the past couple of years alone. The price of oil was barely scraping zero last year, yet the Opposition come forward to tell us that this tax is the right thing to do, notwithstanding any concerns about the impact it might have on investment in the North sea.

[Clive Lewis]

Is the hon. Gentleman not making an excellent case for a just transition, where taxes such as this, on those who have made billions—perhaps trillions—over the past century from sucking our resources out of the ground and making excessive profits, are invested to ensure that his constituents and the workers in those oilfields are entitled to a decent, sustainable, well-paid job?

[Stephen Flynn]

A just transition is at the forefront of my thoughts almost every day, because I see first-hand the impact of the decisions taken in this place on oil and gas. My own constituency contributes £14.4 billion of gross value added to the economy. How many other people’s constituencies can say that? However, I am aware of the poverty that exists notwithstanding that.

We need to see a just transition, which is why we have tabled our amendment today, but I must repeat that I have concerns about Labour’s proposal. Without their detailing what they believe the impact on investment would be and what the subsequent impact of that would be on workers, it is a proposal I simply find difficult to support in its current form.

That is not to say that the Government should be let off the hook, because the just transition, as has been said, is incredibly important. It is important to my constituents and to the constituents of Government Members, because there will be a change in the coming years and a transition to net zero. From the Scottish Government, we have seen a £500 million just transition fund put in place, with £80 million put towards the Acorn project, which the UK Government continue to drag their heels over supporting.

[David Duguid (Banff and Buchan) (Con)]

I welcome many of the comments the hon. Gentleman makes, representing as he does the southern half of Aberdeen, the oil capital of Europe, but he also refers to the so-called just transition fund of £500 million and the £80 million that has been announced as being on the table for the Acorn project. Does he or the SNP have any detail yet on precisely what any of that money would be spent on?

[Stephen Flynn]

Yes, it is £580 million more than the UK Government are putting in place. That does not start and stop with—[Interruption.] I am sure the hon. Gentleman can make his contribution in his own way later on. There is also the £62 million energy transition fund and the £30 million that has just been given to Aberdeen’s south harbour, specifically to ensure that we can meet our net zero future.

Notwithstanding the just transition and the windfall tax, what irks me more than anything is the lack of an oil fund in this country, mentioned by the hon. Member for Warwick and Leamington (Matt Western) and by my hon. Friend the Member for Kilmarnock and Loudoun (Alan Brown). If we look across the North sea at Norway, £1 trillion is sitting in a bank account because the Norwegians invested in their future. With that money, they are able to shield their public from the shocks that all our constituents face at this moment in time.

Why did Norway do that and this place not do that? Why did this place choose to squander Scotland’s wealth? It is simply unforgivable. When I have discussions with my constituents about the challenges they face, I simply hope the Government will not repeat the mistakes of the past.

--- Later in debate ---

[Greg Hands]

We have ourselves raised more than £375 billion-worth of production taxes. North sea oil and gas have been a big success story for this country, and also for our Exchequer. As a former Treasury Minister, I can repeat that of course all taxes are kept under review by the Treasury, and any changes are considered and announced by the Chancellor.

[Stephen Flynn]

Will the Minister give way?

[Greg Hands]

No, I am going to make a bit more progress.

The oil and gas industry and its supply chain are supporting more than 195,000 jobs, but investment in 2020-21 was at an all-time low of £3.5 billion. Meanwhile, there are £11 billion-worth of opportunities awaiting investment. We would be cautious about the potential implications that any change in the tax regime could have on investment, not just in oil and gas developments but in the development of cleaner-energy technologies. Moreover, continuing investment in the UK continental shelf is needed to support production and our security of supply. That is particularly important this winter, but it is also important in the longer term, because UKCS production can help to mitigate potential supply issues.

When it comes to the sector itself, I heard nothing from any of the Opposition Front Benchers about whether they supported our world-leading North sea transition deal. However, we want to support up to 40,000 high-quality direct and indirect supply chain jobs, including jobs in Scotland and our industrial heartlands in the north-east and east of England, generating up to £14 billion to 16 billion of investment to 2030 and delivering new business and trade opportunities to assist our transition to a low-carbon future.

For the longer term, the Government are looking at how policy costs, which help to fund low-carbon energy infrastructure, support vulnerable consumers and ensure security of supply, are distributed between gas and electricity. Investment in renewable and nuclear energy will be key to achieving that, and we have made and are continuing to make massive progress in both those areas since 2010. As of 2020, renewables contributed 43% of our electricity mix, more than six times the percentage in 2010, when the right hon. Member for Doncaster North (Edward Miliband) was Secretary of State. On 13 December, we launched the latest round of our flagship renewable energy deployment scheme, contracts for difference.