18:00 Alan Brown

We would also like to know what judgment those people have made about the Government’s decision to undermine the levy by shamefully giving a third or more of any money raised straight back to the oil producers through the new tax break introduced by clauses 2 to 7. This new tax break offers oil and gas producers an unprecedented subsidy for their spending on oil-related activities. As we made clear on Second Reading, for every £100 an oil and gas producer invests in the North sea, they will receive £91.25 from the taxpayer. That is an astonishing 20 times the £4.50 that companies investing in renewable energy will receive from April next year.

Yet despite even oil executives questioning its worth, the Government are pushing ahead with this tax break. Our analysis has shown that that means a third or more of any revenue from the new levy could be handed straight back to oil and gas producers. That money will subsidise projects that almost certainly would have happened anyway, as there is no requirement in the Bill for investment to be additional to what was already planned, and this move stands totally at odds with the paramount need to invest in renewable energy sources.

It is critically important and urgent for us to invest in renewable energy to strengthen our energy security while bringing down people’s bills and tackling the climate crisis. We have set out Labour’s plan to do just that. Alongside insulating 19 million homes over 10 years to cut people’s bills, we would strengthen our energy security and reduce our carbon emissions by doubling our onshore wind capacity, tripling solar power, backing tidal power and nuclear power, and further investing in hydrogen. Yet the Government are today introducing a tax break that seems to fly in the face of tackling the climate crisis.

That is why we have tabled new clause 2, which would force the Government to come clean about the impact of their unnecessary tax giveaway to oil producers on our country’s net zero obligations, energy security and renewable energy supplies. This new clause also asks the Government to spell out what impact their tax break will have on fracking, given the deeply concerning reports in the media that legal advice provided to the campaigning group Uplift suggests that fracking companies would also be eligible for this tax break, based on the way the Bill has been written. I urge the Government to accept new clause 2, to make it clear what impact the tax break in the Bill will have on fracking. If the Minister refuses to do that, will she at least come clean today and confirm or deny whether this tax break could lead to public money being channelled toward dangerous, unpopular and expensive fracking projects?

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18:15 Craig Mackinlay (South Thanet) (Con)

We are not only asking the companies to undertake new investment in the North sea. We are asking them to undertake some rather fresh thinking and research, with unknown outcomes, on the net zero pathway. I know for a fact that BP is doing a lot of work in this field—its people have been in one of the dining rooms of this House—and good luck to it, but as has been highlighted by the Labour Front Benchers, there is nothing in the Bill that nudges such investment in the net zero field.

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18:30 Alan Brown (Banff and Buchan) (Con)

Let me take a couple of those points. The hon. Lady makes the point that tax rates on the oil and gas industry are higher elsewhere in the world. Well, that may be the case. I know that some will be fundamentally opposed to the whole concept of being energy secure in the UK. Gas, in my view, is part of an interim solution as we get on the path to net zero, but it is a fact of life. I do not have an awful lot of time for the output of the Climate Change Committee, but even it is saying very clearly that we will be using gas and oil up to 2050 and probably beyond. My view is that that gas and oil should be sourced in the UK. Hence my support for the nudge part of this legislation, which may encourage businesses to stay here and invest here.

I am so delighted that the hon. Lady has expanded this debate. This is not somewhere that I wanted to go, Dame Rosie, but I think it is my duty to respond to the intervention. Surely it is obvious, no matter where on the spectrum on net zero we are—I am obviously on the rather more critical part of that spectrum—that we will be having gas in this country. We have a choice: do we import it halfway across the world on a liquefied natural gas ship, with the CO 2 cost of chilling it, transporting it and regasifying it, or do we try to do that domestically?

Amendment 9 relates directly to the electrification of North sea assets. We have heard comforting words about that from two Ministers now. I am sure the Minister for Energy, Clean Growth and Climate Change, now sitting beside the Financial Secretary to the Treasury, would agree that it will be in guidance that the electrification of assets will be able to get the taxation incentives. We cannot escape the fact that Ministers come and go, as we have seen so clearly in this place over the course of recent times, but what industry needs in relation to this issue is certainty. The best way—the only way—to provide certainty on the electrification of grids is to put that on the face of the Bill.

I agree with the hon. Member for South Thanet (Craig Mackinlay) on one point he made: it is deeply disappointing that there is not additional scope for the wider renewable sector to get these incentives. If the Government were serious about combating climate change and reaching their net zero ambitions, they would have extended those incentives to that industry.

That takes me on to new clause 6, again in my name and those of my hon. Friends, which aptly relates to net zero. The Government have rightly promoted, and will continue to promote, climate compatibility checks. I think we all in this place agree about those. What we need to be clear about, however, is the implications of this Bill for reaching net zero. The easiest, indeed the obvious, way to do that is to ensure that those climate compatibility environmental checks take place in relation to any investments. I thought that would be a very straightforward thing for the Government to agree with, and I hope they will do so.

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18:45 Christian Matheson (City of Chester) (Lab)

On the Government’s major loophole that I referred to, which gives a 91p tax saving for every £1 invested by the oil and gas companies, we need to be clear that it is a subsidy to oil and gas giants. It takes money away from supporting families and encourages further fossil fuel production when we need to be ending all new oil and gas production to avoid climate catastrophe.

To date, the Government have spent £37 billion on short-term financial support. Although that support is of course very welcome, gas prices are likely to remain high for several years, and a more long-term approach is necessary, especially when the CEO of Ofgem is warning that the number of households in fuel poverty could reach 12 million in October when the energy price cap rises again. The think-tank E3G estimates that the average household with an energy performance certificate of D or lower will be paying what it calls an inefficiency penalty of £916 per year for adequate heating compared with households with an EPC of C or higher. Investment to kick-start a local-authority-led, street-by-street home insulation programme would save cash-strapped families money not just this year but every year. It would also rectify a glaring omission in the Government’s approach so far, with the Climate Change Committee saying clearly in its 2022 progress report to Parliament:

The subsidy in the Bill is unfortunately entirely consistent with the Government’s approach to subsidising the fossil fuel sector overall. While they refuse to acknowledge that tax reliefs are indeed subsidies and prefer to use the very narrow International Energy Agency definition of a subsidy, Ministers and colleagues will know well that there are much wider definitions in use, including that developed by the World Trade Organisation, which would very definitely include the investment allowance. If the Government go ahead with this subsidy, it will come on top of countless other tax reliefs from which the sector benefits, including those for exploration for new fields, for R&D, and for decommissioning. The latter, for decommissioning, has an especially egregious element in the form of decommissioning relief deeds that guarantee future tax reliefs for oil and gas companies at a given rate. Imagine any other sector being guaranteed tax reliefs in perpetuity with future Governments unable to make changes to that! Companies should pay decommissioning costs, with decommissioning plans required to ensure a just transition for workers. That is the only fair approach. The measures in the Bill will add to the decommissioning tax relief burden faced by the public purse going forward, to say nothing of the impact on fossil fuel extraction.

the Climate Change Committee said that the Treasury should initiate a review of the role of tax policy in delivering net zero, and was very clear that no fossil fuel subsidy should be considered efficient in the UK. Will the new Chancellor now commit to that review, listen to his own Climate Change Committee, and take its advice?

New clause 10 would require the Government to produce an assessment of the impact of the investment allowance on achieving net zero and on limiting the global temperature increase to 1.5°. It is frankly astounding that the Government need to be reminded yet again that the IEA has been clear that limiting global temperatures to 1.5° necessitates

as from last year. Yet according to the United Nations Environment Programme, the level of fossil fuel production planned and projected worldwide by Governments in 2030 is more than twice the levels consistent with that goal. The UK has given North sea oil and gas companies almost £14 billion in subsidies since signing the Paris agreement in 2015 alone. This Bill was an opportunity for the Government to change course, but instead they have chosen to double down and to play with fire by bringing forward a Bill that is plainly incompatible with a safe future.

It is patently obvious that the Government should amend the Bill to ensure that oil and gas profits are taxed properly, but I believe fundamentally that that should pave the way for a much wider overhaul of our tax system. We need a carbon tax, which, if implemented properly with a dividend to shield low-income households, could be pivotal in driving the change we need in order to decarbonise our economy fairly. That tax—it has long been Green party policy—would target the big polluters such as oil and gas companies. It is estimated that, starting at a rate of about £100 per tonne of CO 2 , it could generate up to £80 billion to fund the transformation necessary to achieve our climate goals. That is the kind of innovative policy we need right now to save ourselves from the climate emergency that is only growing deeper.

New clauses 2, 6 and 10 would require reviews or assessments of the impact of the investment allowance on the energy market, climate change commitments and exploration activity. The Government oppose these amendments on the basis that the Treasury already carefully considers the impact of all measures on the energy market and our climate change commitments as a matter of course.

Finally, new clause 7 would require the Government to publish regular reviews of the oil and gas market, including assessments of the need for the levy and whether it should be continued to promote further decarbonisation of upstream oil and gas activities. That is also unnecessary, since the Government already monitor the UK oil and gas sector, and data is published on gov.uk on a monthly and quarterly basis.

“, which may include electrification investment that decarbonises upstream oil and gas activities”.— (Stephen Flynn.)

This amendment would put on the face of the bill that electrification investment which decarbonises upstream oil and gas activities is eligible for relief.

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