North Sea Oil and Gas Producers: Investment Allowances - 6th June 2022

Rachel Reeves (Labour)

All in all, we calculate that a third or more of any revenue from the new levy might be handed straight back in tax breaks. This cashback policy is typical of the sleight of hand that we have come to expect from this Conservative Government, so can I ask the Minister how much these tax breaks will cost? When will the Government have the courtesy of sharing that analysis with the House? How can the Minister be sure how much this new levy will raise when the Chancellor has added this gigantic get-out clause? Why are the Government incentivising investment in fossil fuels over investment in home-grown renewables, which do not benefit from the tax breaks in this announcement? Have the Government even bothered to check what this means for our country’s net zero target and climate commitments?

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15:35 Lucy Frazer

Let me respond to two other points that the hon. Lady made. First, she will remember that when the policy was announced, we said we had estimated that it would raise £5 billion for the package of measures that we had put forward to support people with the cost of living—as she said, that is what we are talking about today. Secondly, she mentioned the importance of reaching our net zero targets. She will know that the UK, under this Government, has already decarbonised faster than any G7 economy, and that there are many other tax levers for green energy, including the super deduction and research and development tax reliefs. She will know that we are consulting on broadening the emissions trading scheme and that we have committed £1 billion to a carbon capture and storage infrastructure fund, as well as £140 million to the industrial decarbonisation and hydrogen revenue support fund. We are ensuring that we tax extraordinary profits at the same time as protecting those who are struggling with the cost of living.

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15:41 Lucy Frazer

On the hon. Gentleman’s point about decarbonisation and the oil and gas sector, I point out that capital allowances will be available for capital expenditure from the oil and gas sector that makes the production of oil and gas less carbon-intensive, which could include electrification.

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15:41 Richard Burgon (Labour)

The additional tax breaks given to oil and gas firms mean that the Government are handing billions over to the very companies that are driving up people’s bills and fuelling climate change. That is money that could have been used to insulate 2 million homes, saving each household £340 every year. Are these tax breaks for more fossil fuel producers not the very opposite of what is needed to protect the planet, end our reliance on expensive gas and, crucially, invest in insulation that could get bills down?

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15:41 Caroline Lucas (Brighton, Pavilion) (Green)

Just six short months ago, the UK hosted COP26, and it remains its president—not that we would know that from this appalling policy from this Government. The Glasgow climate pact, which the UK signed, commits to the

so can the Financial Secretary explain on what grounds handing an 80% tax break to the dirty, dangerous and outdated energy of the past could possibly be considered efficient, especially when new fossil fuel production will do nothing to help with energy security or affordability? It will simply be sold at global prices on international markets. How is that climate leadership?

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Lucy Frazer

The hon. Lady makes a very important point about our leadership at COP. We led the world. We were the first country to introduce net zero targets; many others followed. The Chancellor set out packages to ensure private sector investment and Government support for transitioning, and that is what this Government are doing.

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15:44 Clive Efford (Labour)

I welcome the fact that the Government have adopted Labour’s policy and introduced a windfall tax on these profits. They have had to be dragged kicking and screaming— [Interruption.] I am sorry; should I give way to the Minister for Energy, Clean Growth and Climate Change?

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15:46 Darren Jones (Labour)

Clearly any additional tax cuts for the oil and gas sector should have been targeted at renewable energy generation rather than further drilling for fossil fuels. The Minister will know that the Government intend to introduce a climate compatibility checkpoint to ensure that all future decisions are in line with our climate change commitments. Can she confirm that if there is an overlap with the ongoing tax break for investment in fossil fuel drilling, it will be checked against the compatibility checkpoint?

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15:48 Alan Brown (Kilmarnock and Loudoun) (SNP)

This policy confirms that we are seeing more take, take, take from Scotland’s North sea oil and gas. The Government are taking resources and taking money. Norway has the biggest sovereign wealth fund in the world, but Westminster squandered all the income from oil and gas from the North sea. At the very least, will the Government reverse their decision and support the Scottish carbon capture and storage cluster and make it a track 1 cluster, and will they consider matching the Scottish Government’s £500 million just transition fund?

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15:48 Lucy Frazer

I think the hon. Member is aware that the Scottish CCS is a reserve. [Interruption.] I am grateful to the hon. Member for confirming that he is aware of that.

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