18:55 The Financial Secretary to the Treasury (Lucy Frazer)

I want to make clear what the investment allowance will apply to. First, the allowance will be calculated in the same way as the investment allowance for the existing supplementary charge. Therefore, if capital or operating expenditure qualifies for the supplementary charge allowance, it will qualify for the energy profits levy allowance, but unlike the supplementary charge, it will be available to companies at the point of investment. This makes it both more immediate and more generous. As the levy is targeted at the extraordinary profits from oil and gas upstream activities, it makes sense that any relief for investment must also be related to oil and gas upstream activities. Such spending can be used to decarbonise oil and gas production—for example, through electrification—so any capital expenditure on electrification, as long as it relates to specific oil activities within the ringfence, will qualify for the allowance. Examples of activity that may be carried out for specific oil activities include expenditure on plant and machinery such as generators, which includes wind turbines, transformers and wiring.

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19:01 James Murray (Labour)

It is a subsidy that even oil executives do not seem to think necessary. It will subsidise projects that would almost certainly have happened anyway, and it will see 20 times more being given in taxpayer incentives to oil and gas producers than to firms investing in the renewable energy of the future, yet the Government seem determined to push ahead with their tax break. When we consider the Bill next Monday, we will urge Ministers to think again about that unnecessary tax break for oil producers, which will undermine both the impact of the windfall tax and our country’s wider efforts to tackle the climate crisis.

We are relieved that the Government are finally proceeding with a windfall tax, and we will support the motion, but the Conservatives’ whole approach has shown so much of what is wrong with the way they conduct themselves in power. When we called for a windfall tax, they spent months opposing it as strongly as they could. They dismissed a fair and common-sense way, which was staring them straight in the face, to help people who face soaring energy bills. Then they changed course, not because it was the right thing to do, but because they needed a new headline to take attention away from the Prime Minister’s lack of integrity in office. Now, as they finally reveal the detail of their windfall tax proposals, they immediately undermine its effectiveness, and any wider efforts to tackle climate change, with a new tax break for oil producers. Their instincts are wrong. Their priorities are wrong. The way they run our country is wrong. With the windfall tax, we have shown that Labour is winning the battle of ideas in Britain, and that Labour will provide the leadership that our country needs.

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19:07 Sir Robert Syms (Poole) (Con)

The North sea is quite mature now. Although the rise in prices is unwelcome for motorists, it certainly gives the opportunity to extend the life of some fields and makes other oil fields with more marginal prospects more viable. If we are looking for a resilient future for our country, getting the best out of our natural resources in the transition to net zero, I think we ought to have a stable tax network, not act like a Venezuelan junta by jumping in and trying to take money away from oil companies. And what are oil companies? They are normally vehicles for pension funds for lots of elderly people living up and down the country who rely on that income to pay their cost of living bills. There is no such thing as a painless tax rise. There is no magic money tree if we go and punch the oil and gas companies in the mouth. I think this is a very short-sighted policy. It may raise money, but the consequences are long term, and it may have an impact on investment.

Apart from the creation of an oil industry, there are thousands of jobs in oil services in and around Aberdeen, in many other parts of the United Kingdom and, now, worldwide. I think we ought to be proud of what this country has achieved, and we ought to be doing what we can to support those well-paid and important jobs as we go towards net zero.

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19:13 Alison Thewliss (Glasgow Central) (SNP)

Today we see Scotland’s oil and gas resources being used yet again to bail out the UK Treasury. The Tories have made a very specific choice to focus their raids on super-profits not just on Scotland but on one particular part of Scotland: the north-east. Aberdeen and the towns around it have contributed significantly—over £300 billion—to the UK balance sheet, yet when it comes to carbon capture and storage or the Scottish cluster, that area is left on the subs bench, waiting on a list instead of leading a just transition. The UK Government will not even match the Scottish Government’s commitment to the just transition fund.

What of the environment and the promises made at COP26? The new investment allowance is, in the Treasury’s own words, an

It is as though the Treasury has forgotten that COP26 happened at all. This is clearly contrary to the Scottish and UK Governments’ climate objectives and to the commitments they made to the world last November. The UK Committee on Climate Change has stated:

Where stands that commitment now? We on the SNP Benches welcome investment, but any incentives must be balanced across sectors and encourage sustainable investment towards a just transition and into renewables, rather than the short-term, carbon heavy investment that the former Chancellor was encouraging. We also know that any investments from this are unlikely to have an impact on our household energy bills anytime soon, but that is where this crisis lies.

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19:21 Caroline Lucas (Brighton, Pavilion) (Green)

Secondly, we must consider the impact of the proposed investment allowance on not just domestic but global emissions. I know that the Treasury does not even recognise the idea of subsidies in the fossil fuel sector, but that does not change the reality. Make no mistake: this is a subsidy. It is reckless, and its climate impacts make a mockery of the Government’s claim to global climate leadership.

Secondly, this allowance dangerously undermines our climate targets by actively encouraging new fossil fuel projects. Indeed, up to 39 fossil fuel projects are eligible for this “super-deduction” and could be developed in the next three years. Together, those could emit as much as 899 million tonnes of greenhouse gases, which is more than double the UK’s estimated net emissions in 2020. The International Energy Agency and the Intergovernmental Panel on Climate Change are clear that new fossil fuel developments are simply not compatible with limiting global temperatures to 1.5°. The most recent IPCC report in April was unequivocal that

“further installation of unabated fossil fuel infrastructure will ‘lock in’ GHG emissions and put 1.5°C out of reach”.

It could not be clearer. Alignment with 1.5° is not just some kind of “nice to have” benefit; it is literally critical to avoiding climate catastrophe.

to invest in projects that are incompatible with net zero. I very much hope that the new Chancellor, whoever they may be, will heed that warning and reform this Bill before it comes to Parliament next week.

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