Oil and Gas Producers: Windfall Tax

Wera Hobhouse Excerpts

Tuesday 1st February 2022 Commons Chamber

[Wera Hobhouse (Bath) (LD)]

I support the motion for a windfall tax on the profits of oil and gas companies. Household utility bills will rise by an estimated £50 a month in April, and we have heard many moving stories today about how struggling households will have to make very difficult and awful choices. Millions of people will be turning down their heating, or turning it off altogether, so that they can keep eating, and millions more will feel the pinch, including many of my families in Bath.

I will focus on how we got here, how our dependence on volatile gas supplies from abroad could be avoided in future and why more has not be done. Two things have shocked me. First, I am shocked by how dependent we still are on gas when we must dramatically change our fossil fuel consumption if we want to stand a fighting chance of reaching net zero in 10 years’ time. Secondly, I am shocked that consumers who have switched to renewable electricity companies will foot the extra bill for gas, although they do not use any gas at all—I made that point in another debate, as the Minister knows.

Ideally, all power should come from renewables: onshore and offshore wind, solar and marine. There are few countries as well situated as the UK for wind and marine. Not only should we be generating all our power renewably but we should be exporting it across Europe. This is a perfect opportunity to be a global leader.

The cost of wind power is coming down year on year, and it will soon be a mature market with steady costs. Once a wind farm is built, apart from small overhead and maintenance costs, the electricity cost is almost nothing. That is the beauty of all renewables, and it was the idea behind the contracts for difference introduced by the Liberal Democrats in government when my right hon. Friend the Member for Kingston and Surbiton (Ed Davey) was Secretary of State for Energy and Climate Change. Contracts for difference are best described as fixed-term contracts for the electricity produced over a 20-year period. Once they are out of contract, electricity from these installations should be extremely cheap, which is perfect for consumers.

A lot more should have been done over the last seven years, when the Tories have been in government on their own. The Government quadrupled the number of contracts for difference offered in the last auction round, but that is not enough. Why limit the number at all, as it slows the roll-out of renewables?

So far, the Tory Government have allowed renewables to grow, but only slowly to maintain the fossil fuel and renewable industries alongside each other. As businesses and residential customers shift from gas to electricity, limiting the growth of renewables by restricting the number of contracts for difference keeps the fossil fuel industry in the game.

That brings me back to the millions of consumers who are committed to climate action and have switched to a renewable electricity supplier. In April they will find they are paying more for their electricity, even though they are not buying any electricity generated from gas. This is a clear example of the market being regulated for the benefit of the gas companies. Renewable electricity prices are approximately the same now as they will be in six months’ time, so why should such customers have to pay higher bills?

The Government need to fix this unfairness as a matter of urgency. Although it would not fix the energy crisis for everybody, it would at least reward customers who are doing the right thing on climate action. It would incentivise more people to switch and, in turn, drive climate action, but a windfall tax on the profits of the oil and gas companies is needed immediately.

--- Later in debate ---

[Greg Hands]

I have been clear that matters of taxation are for the Chancellor, but of course the Government continue to monitor the situation very closely. I was answering a specific point about what support is already available for consumers.

I did not hear a word from any of the Opposition parties in support of our incredible North sea transition deal, concluded just last March, between the UK Government and the oil and gas sector. It will support workers, businesses and the supply chain through this transition by harnessing the industry’s existing capabilities, infrastructure and private investment potential to exploit new and emerging technologies such as hydrogen production, carbon capture, usage and storage, offshore wind, and decommissioning.

[Wera Hobhouse]

rose—

[Greg Hands]

I will make a bit more progress.

We will see commitments from industry that will achieve a 60 megatonne reduction in UK greenhouse gas emissions, including 15 megatonnes through the progressive decarbonisation of UK production over the period to 2030, which puts the sector on a path to deliver a net zero basin by 2050.

I turn to the contributions in the debate itself. My right hon. Friend the Member for Wokingham (John Redwood) made an excellent speech. He said: please can we burn our own gas, rather than importing it? That is a really strong point, not just in terms of jobs in this country but for our energy security as well. It makes no sense for us to be importing, beyond what we have to, expensive volatilely priced foreign hydrocarbons—hydrocarbons that come with a significantly increased emissions content. LNG has up to two and half times the emissions content compared with natural gas produced in the UK. He also made strong points about tax revenues.

My hon. Friend the Member for Banff and Buchan (David Duguid) knows oil and gas better than anybody in the House. The sector is hugely important for his constituency, as I saw when I visited in December. He talked about the punitive intervention that Labour is proposing. He also rightly pointed out that renewables have increased by four times under Conservative Governments since the right hon. Member for Doncaster North was Secretary of State.

My hon. Friend the Member for Waveney (Peter Aldous) talked about the unintended consequences. He is right that in the transition we need the oil and gas sector to co-operate with the offshore wind and hydrogen sectors. He is the living embodiment of transition, representing both the older and newer energy industries.

My hon. Friend the Member for West Aberdeenshire and Kincardine (Andrew Bowie) made an excellent speech. He praised British business and discussed how Labour is giving up on Aberdeen. Mr Deputy Speaker, you, the right hon. Member for Doncaster North, the Labour Chief Whip, the right hon. Member for Tynemouth (Sir Alan Campbell), and I were here in the days when Labour had two Members of Parliament for Aberdeen. It has now totally given up on the North sea and the North sea transition deal, and the jobs that it represents. My hon. Friend’s excellent speech was about how Labour is giving up on Scotland. We have seen the right hon. and learned Member for Holborn and St Pancras (Keir Starmer) implicitly doing a deal with the SNP—it was implicit in one of his rare visits to Scotland just this last week.

My hon. Friend the Member for Poole (Sir Robert Syms) made another excellent speech, rightly pointing out that energy prices are rising due to world economic recovery and praising the work of this Government on job numbers and economic recovery. I agree with him. The North sea is a great British success story. He also made a really strong point about nuclear energy.

I want to correct a few points made by Labour Back Benchers. The hon. Member for Birmingham, Hall Green (Tahir Ali) made an extraordinary speech. He seemed to be saying that companies cannot make a loss without going bust. That is extraordinary: of course companies can make a loss without going bust. The hon. Member for Sunderland Central (Julie Elliott) made some important points about the supplier of last resort processes. If she has constituents whose credit balances are not being transferred from their previous suppliers to their new suppliers, could she write to me—or even better, to Ofgem—with details? I am sure we could look at that.

The right hon. Member for Leeds Central (Hilary Benn) made his usual quality speech. He said that there are not enough heat pumps—of course there are not. The role of the Government, though, is not to provide a heat pump for every home but to stimulate the private sector heat pump market, so that it can provide that solution. He asked where our plan was for 10, 15 or 20 years’ time. The answer is the net zero strategy, which we published back in October and which the Climate Change Committee says is a leader in the world.

We then heard from the SNP spokesman, the hon. Member for Aberdeen South (Stephen Flynn). I am afraid his nice words about oil and gas are at odds with his party overall, which has a nonsensical energy policy. The people of Scotland will be relieved that energy policy is reserved.

Not only is the SNP anti-nuclear, cheering the closure of plants such as Hunterston and Chapelcross and reportedly telling Rolls-Royce that its small modular reactors are not welcome in Scotland, but the hon. Gentleman’s colleagues and the Scottish First Minister seem to be opposed to new gas licences off the Scottish coast. They want to close oil and gas down. They say they want a windfall tax—just not the same windfall tax that Labour wants. They are still on a mission of trying to close down the industry. The SNP is against Scottish energy consumers, it is against Scottish energy jobs and it is against Scotland’s energy transition.

To finish off, Labour is still in a state of confusion. This time, the motion is not four pages. It has been shortened to around 100 words—or perhaps 280 characters; I am not quite sure. Where Labour has cut the words, however, it has not made up for them with any numbers. The motion includes no costings. There are no numbers in it at all. We have no information about this windfall tax and no information on the package of support for families and businesses. There is no detail there, but still a lot of confusion. There are no impact assessments on the taxes raised, on jobs—there are 40,000 jobs in north-east Scotland and 195,000 jobs in all—on fuel bills or on gas production.

Labour has split energy from climate change; the right hon. Member for Doncaster North is the person who combined them, and now the Labour Front Bench has split them, which means inevitably it is following a policy of hammering business. Labour is not the party of business; it is the party against business. The hon. Member for Kilmarnock and Loudoun (Alan Brown), who often makes quite acerbic interventions on other Opposition parties’ policies—I sometimes wish he would probe his own party’s policies as well as he probes those of others—asked whether the Labour Front Bench had spoken to anybody in the sector, and there was no answer. We did not hear anything about whether it had engaged with anybody in the sector.

Does Labour agree with our ground-breaking North sea transition deal? No answer. Its solution is, again, to hammer domestic UK continental shelf production and increase imports, reducing our energy security and increasing our emissions at the same time. Labour’s approach is confused and misguided. It is not a plan, it is a motion for less energy security, higher emissions and higher fuel bills. I urge the House to stick with our approach: North sea transition, support for households and the UK’s remaining open for business.