Finance Bill

Debate between Victoria Atkins and Caroline Lucas

Committee stage
Wednesday 30th November 2022 Commons Chamber

[Victoria Atkins]

I will happily do so. My hon. Friend will know the definition of “extraordinary” in relation to the electricity generators levy. We will come to the profits levy in due course.

The Government are raising the rate of the levy from 25% to 35% from 1 January next year, bringing the headline tax rate for the sector to 75%. That is because commodity prices—particularly gas—are expected to remain above their long-term average for the foreseeable future. However, the Government want the oil and gas sector to reinvest its profits to support the economy, jobs and the UK’s energy security, which is why the levy has an investment allowance that means that businesses overall get a 91p tax saving for every pound that they invest, providing them with an additional, immediate incentive to invest.

Clause 2 makes changes to the rate of the investment allowance within the levy to ensure that the total tax relief remains broadly the same following the increase in rate to 35%. Specifically, the clause reduces the rate of the investment allowance from 80% to 29%, effective, again, from 1 January next year. That will maintain the overall cumulative value of investment reliefs, which means that a company investing £100 will be able to claim £91.40 back in tax relief. To be clear, the investment allowance will remain at 80% for investment expenditure on upstream decarbonisation, so that we continue to support the transition to low-carbon electricity production. That will be legislated for in the spring Finance Bill, following further detailed technical work and consultation with interested parties.

[Caroline Lucas (Brighton, Pavilion) (Green)]

The Minister will know that oil and gas companies are raking in obscene levels of profit. Why does she think it is reasonable to give incentives—through taxpayers’ money—to companies that are already raking in huge profits at a time when a cost of living crisis is driving so many families into real hardship?

[Victoria Atkins]

Certainly. I hope the hon. Lady will agree that we all want to see more decarbonisation, which is precisely why we have set the net zero landmark achievement for 2050, as she knows. In relation to energy security, we have to be realistic about where we are. Much as some campaigners would like it, we cannot stop using oil tomorrow. We have to find reasonable and methodical ways of decarbonising, which is precisely what the investment allowances aim to do, while encouraging different businesses, and indeed those businesses, to invest in carbon-free and low-carbon forms of energy production.

Clause 3 will extend the levy so that it ends on 31 March 2028 rather than in 2025. Although the levy remains a temporary measure, the change simply reflects the fact that global factors are now expected to keep commodity prices, particularly gas prices, elevated for longer than was first anticipated. At the same time, the Government recognise that certainty is key for oil and gas investments. There will therefore no longer be an early phase-out of the levy ahead of the new March 2028 end date, according to prices.

Together, the changes introduced in clauses 1 to 3 will raise approximately £20 billion over the next six years. The total revenue now expected from the levy is just over £40 billion over the same period.

Clause 4 relates to rates of research and development tax credits. The changes it makes will ensure that taxpayers’ money is spent as effectively as possible. Despite the UK spending the most in the OECD on R&D tax reliefs, the current system does not provide good enough value for taxpayers. The cash value of the scheme that looks after small and medium-sized enterprises is currently three times that of the research and development expenditure credit. The corporation rate change due from April next year will make the issue worse by incentivising less R&D per £1 of taxpayer support. Sadly, the SME scheme’s generosity has also made it a target for fraud.

The clause will therefore rebalance the generosity between RDEC and the SME scheme, specifically by increasing the RDEC rate from 13% to 20%, decreasing the SME enhanced deduction from 130% to 86%, and decreasing the SME credit rate from 14.5% to 10%. The changes that the clause will introduce are also a step towards a possible simplified single RDEC-like scheme for all.

Despite raising revenue, this reform is forecast to leave the level of R&D investment in the economy unchanged. More broadly, the Government have recommitted to increasing R&D spending to £20 billion by 2024-25. Ahead of the spring Budget, we will work with industry to understand whether further support is necessary for R&D-intensive SMEs. I know that is the point that most concerns several colleagues; I suspect that we will hear more about it in due course.

Clauses 5 and 6 relate to income tax thresholds. As the autumn statement sets out, the path to fiscal sustainability requires us to ask everyone to contribute a little more towards our public finances, but we are doing so in a fair way: those with more are being asked to contribute more.

Clause 5 will set the personal allowance at £12,570 and the basic rate limit at £37,700 for 2026-27 and 2027-28. Those thresholds, which have already been fixed at the current levels until April 2026, will be maintained for a further two years until April 2028. I hope hon. Members will note that the personal allowance is still the most generous tax-free personal allowance of any G7 country. Thanks to previous significant real-terms increases, it will still be more than £2,000 higher by April 2028 than if it had been uprated by inflation since 2010, with an estimated 1.6 million more people taken out of paying tax. Approximately 30% of people do not pay tax as a result of the personal allowance. I hope Government Members are proud that we have achieved that.

This Government also enacted the largest ever increase to a personal tax starting threshold in July this year by raising the national insurance starting threshold to £12,570, ensuring that some of the lowest earners do not pay any tax. That means that in 2028 someone on the average salary of £28,000 will still pay almost £900 less in tax than if tax thresholds had gone up with inflation since 2010. The income tax higher rate threshold is still high enough to protect the vast majority of people from paying the higher rate of income tax; approximately 80% of taxpayers pay tax at the basic rate.

Clause 6 will deal with those at the higher end of the income scale, to ensure that our return to sustainable public finances happens in a fair way. It will lower the additional rate threshold from £150,000 to £125,140 from April next year, meaning that income above that level will be taxed at 45%. Only the top 2% of taxpayers will be affected by this measure, which is expected to raise £800 million per year by 2024-25, with the vast majority of revenue—more than 80%—coming from those who earn more than £150,000.

--- Later in debate ---

[Caroline Lucas]

I certainly agree with the hon. Gentleman. If I had to make a suggestion about where the Government should look next, it would be the distribution network operators—the companies that run the grids. There has been no spotlight on them at all even though they are making massive profits right now.

The hole at the heart of the windfall tax has led Shell—the UK’s fourth largest oil and gas producer—to pay no windfall tax or, indeed, any normal oil and gas tax at all. Indeed, oil and gas companies, which have made frankly grotesque profits, will still be able to claim £91.40 in tax relief for every £100 invested in oil and gas infrastructure. What is more, from January 1 a company spending £100 on upstream decarbonisation—which essentially translates as reducing emissions from the process of extracting oil and gas that goes on to be burned—will now be eligible for £109 relief. In other words, the taxpayer is actually paying the oil companies, which are already raking in massive profits—not the other way around.

The Government plan to make real-terms cuts to Departments that have already been starved of funding. They talk about “sacrifices” and “difficult decisions”, as the Chancellor has. Charities warn of a humanitarian crisis, and new research published this weekend shows that almost 200,000 additional young families will be pushed into fuel poverty come April when the energy price guarantee rises to £3,000. In that context, how can the Government possibly justify a situation in which taxpayers are supporting oil and gas companies, whose profits have absolutely ballooned, to fulfil obligations that they can perfectly well afford to pay for themselves.

It is also worth comparing this tax with the one on low-carbon electricity generators, which will be subject to a windfall tax of 45% for revenues above £75 per MWh, yet will not be eligible for investment relief at all. That leads to a ludicrous situation whereby companies will get a bigger tax break for building a wind turbine to power an oil rig than for building one that generates power for the energy grid. I simply cannot see how that is defensible in any shape or form.

The autumn statement should have been the moment where the Chancellor launched a transformation of our economy, powered by abundant renewable energy and with good green jobs. Instead, we had continued support for a costly and slow nuclear white elephant, and for the fossil fuels choking our planet. The so-called investment allowance—it is better termed “obscene subsidy”—is, frankly, a disgrace that fails to tax oil and gas companies properly and comes at huge cost to the public purse. Indeed, it has been estimated that if Rosebank—the UKs largest undeveloped oilfield—is developed, its owners would effectively receive more than £500 million in taxpayer subsidies.

To put that figure into context, it would be enough to extend free school meals to every child whose family receives universal credit, to pay the annual salaries of more than 14,000 nurses, or to build one new medium-sized hospital. Choosing between genuinely improving our society or subsidising a climate-wrecking project—Rosebank, in this case, which would produce more emissions than 28 low-income countries combined—should not be a difficult choice.

Make no mistake, it is a subsidy—including, it would appear, according to the Government’s own definition in the Subsidy Control Act 2022. I am sure the Government will deny that, but perhaps they will be more inclined to take note of the Institute for Fiscal Studies, which has stated that the investment allowance

“means that North Sea investment will be massively subsidised”,

through which loss-making investments could be rendered commercial.

Put simply, my new clause would require the Government to publish an assessment of the impact of the investment allowance on revenue raised by the windfall tax. The Government estimate that the oil and gas sector will pay around £80 billion in tax over the next six years, but it is essential that we have greater transparency on how much revenue will be forgone. That revenue could help to finance a real retrofit revolution to upgrade the UK’s leaky homes so that we get off gas for good.

Of course, I welcome the £6 billion investment in energy efficiency from 2025, but that will be of little comfort to households that are struggling to heat their homes right now. Crucially, my amendment would also require the Government’s assessment to cover the impact of the investment allowance on the UK’s ability to meet its domestic and international climate targets. The Glasgow climate pact, which the UK presided over, includes the commitment to pursue efforts to limit global heating to 1.5°C degrees, but the UN has made it clear that Governments plan to produce more than double the amount of fossil fuels in 2030 than would be consistent with staying below that critical threshold. I am aware that a number of amendments seek that kind of assessment of the investment allowance, and I welcome them, but I believe mine goes further because it would require the assessment to consider the impact on the 1.5° target, in addition to net zero and the UK’s carbon budgets.

It is no longer acceptable for the Government to look at its policies in isolation from our planet’s shared carbon budget. Not only does oil and gas extracted in the UK add to global emissions regardless of where it is burned, but, as the Committee on Climate Change has acknowledged, further extraction

“will support a larger global market overall”—

I remind hon. Members that that global market already has more oil and gas planned than we can possibly burn in keeping below 1.5°, and that is before we start extracting more. I therefore urge the Government not only to accept my new clause but to scrap the investment allowance once and for all, for the sake of our climate and the lives of so many people who are struggling with the cost of living crisis.

[Victoria Atkins]

I thank hon. Members for their thoughtful contributions to today’s Committee of the whole House. I will take a few moments to set out our views on the proposed amendments and the reasons why we will not support them.

I will deal first with amendments 3 and 4 and new clauses 1, 2 and 9, which relate to the energy profits levy clauses in the Bill. Starting with the amendments, my hon. Friend the Member for Poole (Sir Robert Syms) asked how “extraordinary” profits are defined, and we have not had a chance to draw that out in the course of the debate so far. The definition for the energy profits levy applies only to the profits that companies make from producing oil and gas in the UK and on the UK continental shelf. That is why we see reports in the newspaper about certain companies not contributing to the levy this year. I am not allowed to speak about individual taxpayers, but we have had to specifically focus it on UK business because we are raising taxes for the UK Treasury. That is how we are defining it.

My hon. Friend expressed concern, it is fair to say, about what will happen with the levy if prices go down, as we sincerely hope they will. Through this difficult announcement in the autumn statement, we are expanding the time in which the levy will operate until March 2028. We have done that to provide companies with certainty, because the latest OBR autumn statement price expectations for oil and gas across the forecast horizon exceed average predictions when the levy was first introduced. Commodity prices, particularly for gas, are expected to remain above their long-term average for the foreseeable future, but we will continue to keep the levy under review, as we do with all forms of taxation, while it is in place.

Moving on to amendment 3, the Government reject the premise that the levy should have been in place earlier. In the early months of this year, three significant things changed: first, there was a new war driven by Putin in Ukraine, which introduced significant instability to global energy markets; secondly, inflation was considerably higher than was previously expected; and thirdly, the Government had concrete information on the autumn and winter energy price cap. We therefore introduced the levy in response to these fast-moving conditions.

I welcome to her place the hon. Member for North Shropshire (Helen Morgan), whom I have not had the pleasure of seeing across the Chamber, if she can look up from her phone. Just to give a little context to the statistics, before covid the British economy spent £40 billion a year on energy costs. Today, the annual figure is closer to £200 billion. That means the British economy has to pay an additional £160 billion a year on energy. That is like withstanding a pressure equivalent to an entire second NHS. That is why we have had to make many of these very difficult decisions in the autumn statement, but in particular we introduced the energy profits levy and are now increasing it because of this difficult financial situation.

Amendment 4 and new clause 1 would require the Government to report on how much additional revenue would have been generated without the investment allowance. We have always been clear that we want to see significant investment from the sector to help protect our energy security. The North sea will continue to be a foundation of our energy security, so it is right that we continue to encourage investment in oil and gas. The levy will raise substantial revenues following the changes introduced by this Bill—more than £40 billion over the next six years. That takes into account the tax relief available through the investment allowance. Figures on the amount of tax raised through the levy will be published periodically, in line with other taxes, and His Majesty’s Revenue and Customs also publishes data on the costs of reliefs, and that is likely to include the investment allowance once data is available.

Although it is important to note that many companies already publish tax data through voluntary transparency schemes, the Government respect the commercial confidentiality of taxpayers. Companies within scope of the levy will be reporting information on their taxable profits in their tax returns. New clause 1 also refers to the impact of the investment allowance on the UK’s climate commitments, as does new clause 9. Supporting our domestic oil and gas sector to boost energy independence is not incompatible with these commitments, as we will need these fuels for decades to come as we transition to clean energy.

Our domestically produced gas generates lower emissions than imported seaborne liquefied natural gas, so supporting home-grown hydrocarbons helps to reduce emissions overall. When the upstream industry has reduced its overall emissions by 11% since 2018, it would not make sense to remove support towards further progress. The industry has agreed with the Government’s stretching targets towards 2030, and the investment allowance will provide additional relief to support that.

Afghan Citizens Resettlement Scheme

Debate between Victoria Atkins and Caroline Lucas

Monday 25th October 2021 Commons Chamber

[Caroline Lucas (Brighton, Pavilion) (Green)]

(Urgent Question): To ask the Home Secretary to make a statement on the Afghan citizens resettlement scheme.

[The Minister for Afghan Resettlement (Victoria Atkins)]

I promised in my statement to the House on 13 September that I would update the House regularly on Operation Warm Welcome. I am in the process of drafting a “Dear colleague” letter, which will be sent to colleagues later this week, but the hon. Lady has beaten me to it. I am, of course, pleased to appear before the House today in the meantime.

The Government worked at pace to facilitate the largest and most complex evacuation in living memory, assisting the Ministry of Defence and the Foreign, Commonwealth and Development Office to help more than 15,000 people from Afghanistan to safety in the United Kingdom. A huge programme of work is now under way across Government to ensure Afghans brought to the United Kingdom receive a warm welcome and the vital support they need to build bright futures in our country. That work spans across Government, charities, other organisations, local authorities and communities. The aim is to give Afghans arriving here the best possible start to life in the United Kingdom, while also making sure that local services can work effectively to support people.

On 13 September, I made a statement, and the Home Office published a comprehensive policy statement, confirming that the Government have committed to take around 5,000 people in the first year and a total of up to 20,000 people over the coming years under the Afghan citizens resettlement scheme. The statement also set out who would be eligible and who would be prioritised, and how we will work with the United Nations High Commissioner for Refugees and other organisations to ensure the ACRS provides a safe route for vulnerable people at risk. While we appreciate the need to act quickly, it is also important that we do this properly and ensure that any scheme meets the needs of those it is being set up to support.

Our work to support Afghan citizens has not paused while the resettlement scheme is being developed. The Home Office is continuing to work with partners across Government, including in the Department for Levelling Up, Housing and Communities, given that many of those requiring support are in fact British nationals, to provide permanent housing for the thousands already relocated here. Some of the people evacuated will form the first part of the 5,000 people being resettled.

I am pleased to tell the House that over 200 councils have agreed to house those who have been evacuated. I am extremely grateful for that and, as always, I continue to encourage councils that have not felt able to make offers or those that can perhaps offer more places of housing to do so. This is a national effort. We are all determined to give Afghan people a warm welcome in this country, and I look forward to working with colleagues across the House to achieve this.

[Caroline Lucas]

I am grateful to the Minister for her response. She says the Government are working “at pace”, but I can promise her it does not feel like that for the Afghans still stuck in Afghanistan with no idea if and how they will be able to get to safety or if and how the Government will deliver on their promises. It certainly does not feel like that to hon. Members who have been writing emails and making phone calls, desperate to get some kind of response from the Home Office and the Foreign Office, and who again and again, frankly, have just been fobbed off with standard, formulaic emails that do not address the problems we are raising with them on a daily basis.

The Afghan citizens resettlement scheme was announced on 18 August, and on 6 September the Prime Minister told the House that the scheme was

“upholding Britain’s finest tradition of welcoming those in need.”—[Official Report, 6 September 2021; Vol. 700, c. 21.]

Yet two months on and counting, we have still heard nothing. That is utterly shameful: lives depend on that scheme—not just those who are at risk from the Taliban, but she will know of the deep and growing humanitarian crisis gripping Afghanistan, with about half the population starving.

Can the Minister tell us how much longer do we have to wait until the resettlement scheme opens? If the scheme is going to be by referral, when will those at risk get information about how their cases can be referred and assessed? Has the Government’s derisory 5,000-person cap on how many Afghan nationals will be helped in the first year already been reached or exceeded before the scheme is even open? Will the Minister tell us, on behalf of all those desperate for safety, including former BBC staff and freelance journalists, how many places have already been allocated and how many are left?

Ministerial promises need to be kept, especially to Chevening families and alumni, so when will the scholars at Sussex University and others elsewhere be told if they are to be included in the ACRS? Will former Chevening scholars and their families get the help they are owed? Those who have been very high profile in their support of Government programmes, especially the president and vice-president of the Chevening alumni, live in daily fear. Why have they not been prioritised, and why have some current scholars been allowed to bring their wider families to the UK, and others not?

Local authorities such as Brighton and Hove, a city of sanctuary, want to know: when will they get firm written assurances that they will receive the promised package of financial support?

Lastly, will the Minister stop sending Afghan family members of British citizens still in Afghanistan into Kafkaesque nightmare situations with referrals to a visa process that the Home Office itself admits is not currently possible from within Afghanistan? Will it instead issue the visa waivers and the emergency travel documents that will help people get the safety they so desperately need?

[Victoria Atkins]

In answer to the hon. Lady’s many questions, she may recall that, in the course of the oral statement on 13 September and indeed in the “Dear colleague” letter that accompanied it, I had to be frank with the House in relation to the emails Members of Parliament had been sending—about people in Afghanistan who are not constituents, but whose safety they understandably want to ensure if they have emailed been and contacted by them—that due to the new situation as it then was in Afghanistan, we would not be able to work those cases as we would expect to in other casework scenarios.

Regrettably, the situation in Afghanistan has not changed since I last addressed the House. We do not have a British Army presence in Afghanistan and we do not have a British consular presence. There are, of course, many members of staff in countries around Afghanistan who are doing their absolute best to work with those who have made the journey into surrounding countries, but we must be realistic about the situation in country. We are working with international partners to find ways and routes out of Afghanistan, but we must do so with the international community.

The hon. Lady mentions the ambitious target of 5,000 that the Prime Minister set for the first year of the Afghan citizens resettlement scheme, and that is in addition to the Afghan relocations and assistance policy, under which many thousands of people were evacuated both before and during Operation Pitting. The majority of Chevening scholars were evacuated, and we are working with international partners to try to find ways for those who remain. The foundation on which the Government are working is to try to do things in what are difficult and fast-evolving circumstances, and to do what is right for people who have already been evacuated here, and those we wish to evacuate in future. I am afraid these things take time, but I hope I have the support of the House in creating the scheme in a way that best serves the interests of Afghans. I understand why the hon. Lady secured this urgent question, but I suggest we will achieve this through day-to-day work and by working together to ensure that the scheme addresses the concerns she raised.

Afghanistan Policy

Debate between Victoria Atkins and Caroline Lucas

Monday 13th September 2021 Commons Chamber

[Victoria Atkins]

I have already met the UNHCR to discuss with it that element of the scheme and how it can help with other parts of the scheme. Conversations with other NGOs are, of course, ongoing, and I will keep the House updated as progress is made.

[Caroline Lucas (Brighton, Pavilion) (Green)]

One of the urgent cases I am dealing with is that of a former Chevening scholar trapped in Kabul, who is very worried that he is not on the appropriate Government list because, strangely, he did not receive a call forward to the airport in the early days of the evacuation. Can the Minister assure me that she is talking to the FCDO about Chevening scholars and that, from the Home Office perspective, all former and current Chevening scholars will be supported by the Government? In particular, will the right paperwork be issued to him, so that if he does make the decision to go with his family to the border, he will know that he will be safe once he gets there?

[Victoria Atkins]

Yes, the Home Secretary has already, I think, addressed the House about Chevening scholarships. They will be honoured, and we are trying to make that happen, albeit with the practicalities the hon. Member has outlined if people are in Afghanistan.