Oil and Gas Producers: Windfall Tax — House of Commons, 2022-02-01
Topic: Energy
David James Duguid (Conservative, Centre-right): The hon. Member may have some data to back up his claim, but the decision, as was voted for in this House, was to apply the energy cap Another scheme is the winter fuel payment, which delivers an annual tax-free payment of between £100 and £300 to help to meet heating costs. The £25 cold weather payment was also awarded to 4 million vulnerable households in England, Wales and Scotland in the last financial year The Opposition have proposed a cut in fuel VAT, which is already at a reduced rate of 5%. That was not included in today’s motion, although it was mentioned by the shadow Secretary of State, the right hon. Member for Doncaster North (Edward Miliband). The fundamental flaw with that approach is that, unlike the measures I mentioned earlier, such a cut would disproportionately benefit wealthier people with larger houses and higher fuel costs. It is far better to focus support on the most vulnerable who need it most, which is what the Government’s measures do, such as the £500 million household support fund. That includes £41 million for the Scottish Government, which I am pleased they are passing on as the winter support fund As well as support for energy bills, the Government have a great record on improving support in general for those on low incomes or looking for work. The national living wage increases to £9.50 later this year. The reduction in the universal credit taper means that workers on low incomes keep 8% more of what they earn. The double lock on pension increases means that state pensions will increase by 3.1%. This morning in Treasury questions, the Chancellor reminded us that since 2010, 1 million fewer people across the UK are in poverty I welcome the Government’s action on reducing the reliance on hydrocarbons and on growing renewable and low-carbon sources of energy, heat and transport. Renewable energy has quadrupled since 2010 and coal is due to be phased out completely by 2024. The energy transition to net zero is already under way—it has been for a long time; I saw evidence of it when I was still working in the industry—but we are not there yet. There is still a demand for oil and in particular gas to meet our energy, heat and transport needs, and we must do what we can to ensure that as much as possible of that demand, albeit declining, is supplied from our own local sources Nearly three quarters of the UK’s energy currently comes from oil and gas, of which production from the UK continental shelf—UKCS—was equal to around 70% of demand in 2020. Even as we transition to a net zero future, the work of the Climate Change Committee shows that around half of the UK’s cumulative energy requirements between now and 2050 will be met by oil and gas. Almost 200,000 jobs are supported in the industry, not just in Scotland but right across the United Kingdom. Those jobs, which the motion puts at risk, are a key part of driving the energy transition, as I have mentioned previously British companies such as BP and Shell, as well as Total, Equinor and other international energy companies, already have access to the skills, expertise, technology and capital to help deliver net zero. The current offshore oil and gas tax system is one of the most competitive and progressive regimes globally; through it, the sector will pay an additional amount of at least £3 billion over two tax years. That is due to the automatic mechanisms that are part of the specially designed tax regime by which the oil and gas sector already pays a total of 40%, made up of 30% in corporation tax and an additional supplementary charge of 10% The current tax regime was developed as a result of lessons learned from three previous significant increases in UKCS corporation tax. After each increase, as has already been mentioned, a range of incentives was needed to win back investment into the UKCS that had been lost as a result of the increase. Windfall taxes such as the one proposed today have been tried before; although they were intended to increase returns to the Treasury, tax revenues actually fell As I said earlier, the oil and gas industry already plays a key part in efforts to deliver the UK’s climate change objectives; it was actually one of the first sectors to come out in support of those goals. The industry’s own "Roadmap 2035" is underpinned by the groundbreaking North sea transition deal between the sector and the UK Government. I know from my background in the industry and my ongoing engagement with stakeholders that they remain committed to providing that reliable home-grown source of energy for consumers, including in renewable energies such as offshore wind and in much-needed low-carbon technologies such as carbon capture and storage and hydrogen, to name a few A one-off windfall tax on oil and gas companies would significantly undermine the sector’s ability to sustain its investment in the oil and gas industry, make us more dependent on foreign imports of hydrocarbons—which are not just used for fuel, by the way; they are also used for manufactured products such as recycled plastics, detergents, and even medicines and personal protective equipment—and put security of supply, as well as thousands of jobs, at risk The main factor against this windfall tax—alongside the uncertainty that it would bring to the industry, its investors and the workers whose families have the very same cost of living worries that have been discussed in this debate—is the restrictions that it would place on the oil and gas industry’s vital contribution to driving forward the energy transition to net zero.