15:54 Ed Miliband (Labour)

The right hon. Gentleman is setting out the problem, but the trouble is that his solutions do not add up. Does he acknowledge that last year Shell and BP, the two largest oil and gas producers, posted a £26.9 billion and £22.5 billion loss respectively? How much would his windfall tax get from those situations? Does he also acknowledge that the biggest investments in renewable energy—not least hydrogen, into which hundreds of billions are being invested—come from companies such as BP and Shell, which we need to continue investing in alternative non-fossil fuels?

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16:08 The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Lee Rowley)

The right hon. Member for Doncaster North needs to be clear whether this is a money source. If it is, he will need to maximise the amount of oil and gas coming out of the ground. That exact principle of maximising economic recovery has been the building block of the approach to the North sea over many decades. If that is the case, the Labour party should be clear about that—we will welcome it to the reality-based community—and that the transition to net zero will take time and will require the use of conventional energy to get there. The right hon. Gentleman needs to understand the logic of his position.

The Labour party’s position is to immediately and artificially retard the amount of oil and gas that we produce domestically through penalty taxation, not necessarily because a windfall is needed, for aims that should or should not be laudable, but because reducing production is the ultimate objective. If the Labour party wants to reject the notion that getting to net zero requires a transition period, let it be clear about that. Let it highlight the fantastical world that Labour Members live in, shorn of the reality that we are on a journey over a generation.

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16:25 Stephen Flynn (SNP)

The shadow Secretary of State rightly, as he sees it, challenged the notion that the money that oil and gas companies are receiving is going directly into investment in renewable technologies and the pathway to net zero. He made that argument with a great deal of passion, but he failed to recognise that the last time the UK Government implemented a windfall tax, 10 years or so ago, investment in the North sea oil and gas sector plummeted. It fell off a cliff; in fact, it has never got back to where it was.

Is the hon. Gentleman not making an excellent case for a just transition, where taxes such as this, on those who have made billions—perhaps trillions—over the past century from sucking our resources out of the ground and making excessive profits, are invested to ensure that his constituents and the workers in those oilfields are entitled to a decent, sustainable, well-paid job?

A just transition is at the forefront of my thoughts almost every day, because I see first-hand the impact of the decisions taken in this place on oil and gas. My own constituency contributes £14.4 billion of gross value added to the economy. How many other people’s constituencies can say that? However, I am aware of the poverty that exists notwithstanding that.

We need to see a just transition, which is why we have tabled our amendment today, but I must repeat that I have concerns about Labour’s proposal. Without their detailing what they believe the impact on investment would be and what the subsequent impact of that would be on workers, it is a proposal I simply find difficult to support in its current form.

That is not to say that the Government should be let off the hook, because the just transition, as has been said, is incredibly important. It is important to my constituents and to the constituents of Government Members, because there will be a change in the coming years and a transition to net zero. From the Scottish Government, we have seen a £500 million just transition fund put in place, with £80 million put towards the Acorn project, which the UK Government continue to drag their heels over supporting.

I welcome many of the comments the hon. Gentleman makes, representing as he does the southern half of Aberdeen, the oil capital of Europe, but he also refers to the so-called just transition fund of £500 million and the £80 million that has been announced as being on the table for the Acorn project. Does he or the SNP have any detail yet on precisely what any of that money would be spent on?

Yes, it is £580 million more than the UK Government are putting in place. That does not start and stop with— [ Interruption. ] I am sure the hon. Gentleman can make his contribution in his own way later on. There is also the £62 million energy transition fund and the £30 million that has just been given to Aberdeen’s south harbour, specifically to ensure that we can meet our net zero future.

Notwithstanding the just transition and the windfall tax, what irks me more than anything is the lack of an oil fund in this country, mentioned by the hon. Member for Warwick and Leamington (Matt Western) and by my hon. Friend the Member for Kilmarnock and Loudoun (Alan Brown). If we look across the North sea at Norway, £1 trillion is sitting in a bank account because the Norwegians invested in their future. With that money, they are able to shield their public from the shocks that all our constituents face at this moment in time.

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16:35 John Redwood (Wokingham) (Con)

The proper subject of this debate is our energy markets. If we compare the two sides of the Atlantic, we see in Biden’s America, where he inherited a period of successful exploration and development of domestic gas, a market that can more than supply its own needs and has kept prices considerably lower than the damaged European market. President Biden, while clearly putting his country on the road to net zero at COP26, returned home to authorise more exploration and development of both oil and gas wells, and to license more territory in the gulf of Mexico. He took the view that we will have a transition need for gas for this decade or more, and he needs to keep the American market properly supplied.

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16:50 David Duguid (Banff and Buchan) (Con)

On behalf of my constituents, many of whom are employed in the oil and gas industry, I will focus my remarks mostly on Labour’s proposal for a windfall tax on oil and gas businesses and the harm that it would do not just to the north-east of Scotland economy but to that of the wider United Kingdom. I will also remark on why such a punitive intervention will have the opposite of the desired effect and put at risk the success of the country’s energy transition to net zero.

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%.

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.

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.

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16:58 Nia Griffith (Labour)

The gas price hike should be a wake-up call to the Government to make up for lost time and accelerate the development of renewables. We must reduce our reliance on gas, both to reduce our carbon emissions and to increase our resilience. If we want to have a hope of making the transition to electric vehicles and decarbonising the heat in people’s homes, not to mention meeting the needs of business and industry, the development of renewables must be a priority for Government.

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17:15 Andrew Bowie (Conservative)

More than that, the measure would be bad for the environment. It would almost certainly cause companies to cease or pause investment in what is already one of the cleanest basins in the world, which will be net zero by 2050, with the vision being 2035. As all eyes are trained on Ukraine, the Labour party’s policy would lead Britain to a place where we were less secure in our energy supply and more reliant on Vladimir Putin of Russia and countries in the middle east. That is why the Labour party should think again before it comes in here with headline-grabbing stunts, instead of well-thought-through policy, when it has no idea about how those stunts would impact on the working people of this country.

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17:25 Sir Robert Syms (Poole) (Con)

One of the things the last Labour Government did not do was develop the nuclear industry, which will be vital if we are to get to net zero. Hinkley Point C is being built, and I hope we will soon sign off Sizewell C. Rolls-Royce’s proposal for small nuclear reactors is excellent. The Nuclear Energy (Financing) Bill, introduced by the Minister for Energy, Clean Growth and Climate Change, allows more sustainable financing for these companies, and I think it will be a game changer.

The only way that we will get to net zero is with a vibrant industry. Let us not forget that all the Magnox stations will close down over the next 10 or 15 years and we will have to replace that capacity. The solution to our problems is to have a balanced energy policy, with renewables, nuclear and the use of gas. If we have that, and if we do all we should to insulate homes and make people’s use of energy more efficient, we have a good policy. The Government have an excellent policy; I think they should say more about it.

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17:30 Peter Dowd (Labour)

One of our constituents’ most immediate concerns, of course, is the increase in their energy bills, which amounts to an energy crisis for millions of people. As we have heard, rising wholesale gas prices are threatening to drive energy bills up by almost a third—a huge £700 increase to £2,000 a year. As for getting things done, delivering on people’s priorities or levelling up, the situation is worth a perusal. What did the Government get done on energy infrastructure? Not a lot. They have refused to invest in the infrastructure necessary to decarbonise our energy supplies and reduce our reliance on external providers. Instead, the British public have been left at the whim of oil and gas companies.

Households will continue to struggle unless the Government get a grip. The behaviour of the oil and gas companies only goes to show that we cannot rely on the sector alone to deliver net zero in the time available. We need to take action. The Government really do need to take action. They need to get a grip on this issue, because people out there—our constituents—are struggling and challenged.

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17:35 Nadia Whittome (Labour)

In the short term, the proposed tax will lessen the burden on families; in the longer term, we desperately need to reduce our reliance on gas, seriously invest in renewables, and create a national programme to insulate homes. We must also acknowledge that the privatisation of our energy system has failed. Competition has not driven down bills; in fact, gas bills have risen by 50% since 1996, and private companies have failed to switch to the sustainable energy sources that we need in order to tackle the climate crisis. Public ownership of our energy system could have helped us to withstand the current turbulence in the energy market, and the public support it: in 2019, 52% of people polled were in favour of it.

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17:38 Hilary Benn (Labour)

The second crisis is also coming, because we know we will have to change the way in which we heat our homes in order to meet the net zero challenge. Since we are talking about home heating, what about the 23 million homes that currently have gas boilers? All of those will eventually have to go, because we will not be able to use gas any more. What will replace them? There are two basic choices, as we know: heat pumps or electric boilers on the one hand, and possibly heating our homes with hydrogen on the other. There is a lot to be worked through to make this work.

But how will we pay for that change? How will my constituents, our constituents, pay for that change? This is really important. As we touched on earlier, the transition to net zero has to be just and fair, and people have to be able to deal with the costs involved. Back in October, the Government announced plans for £5,000 grants to help install heat pumps in homes. In so far as it goes—not very far—I welcome that, but under that plan, only 90,000 homes will be eligible. Given that the Government’s target is to install 600,000 heat pumps per year later this decade, that is clearly nowhere near enough. I hope, of course, as do the Government, that in time the cost of alternative forms of heating will fall, and I hope that the technology will develop.

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17:42 Dan Carden (Labour)

To manage security of supply when gas is being used as a geopolitical tool is bigger than an economic issue. To decarbonise energy is also bigger than the forces of supply and demand, and to stop energy bills wiping out the income and savings of families up and down the country is a matter of social justice. The market provides no solutions to those problems. The only way to resolve those issues is to have a Government with the will to act and to put the interests of the people we in this House are supposed to represent above the interests of big energy companies and their shareholders. Sadly, that seems a long way off.

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17:46 Kerry McCarthy (Labour)

The current regime just cannot be reconciled with our climate commitments. The long-term solution to this crisis is not churning out more fossil fuels, but switching to sustainable energy sources to avoid a reliance on volatile gas markets. That means investing now in renewable energy, insulation of homes and installation of heat pumps, rather than kicking the can down the road, as this Government have done with their net zero strategy.

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17:50 Sarah Olney (Liberal Democrat)

There is no doubt—I think there has been some unanimity on this—that we are where we are with oil and gas, but we really need to move towards renewable forms of energy, with a long-term plan in order to make that happen. The Government keep talking about their plans for net zero but we do not see those plans. We do not know what the Government are planning to do to move us from our dependence on oil and gas towards our net zero future. I commend the hon. Member for Aberdeen South (Stephen Flynn) for everything he said about the impact on his community. I think he agrees with us and with many other Members that we need a plan for that transition.

I have read the Prime Minister’s 10-point plan for a green industrial revolution, and it gives no detail as to how we are actually going to transition from a dependence on oil and gas towards net zero.

One thing we could be doing much more is reducing the demand for domestic electricity and gas. We have seen that come down over the past 10 years, but we could do much more if we could commit to a programme of proper insulation of homes. Since the dismal failure of the green homes grant, we have not seen enough action from the Government on how we are going to do that. We are not seeing action on standards for buildings to make them net zero in future. There is so much more that the Government could be doing to insulate our homes properly, particularly for the poorest.

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17:55 Alan Brown (Kilmarnock and Loudoun) (SNP)

The motion also illustrates that Westminster always views Scotland’s oil and gas as a cash cow. There is no strategic planning whatsoever; it is another cut and run move. If we are talking about excessive profits, why just the oil and gas industry? Where is the line drawn for sectors in profit, given that many companies did very well out of covid? Should we debate that and target their profits as well? What discussions has Labour had with the oil and gas industry about this matter? What assessment has been made about levels of investment—investment that could be part of a decarbonisation agenda—that might be rowed back? As others have said, the harsh reality is that every previous windfall tax has led to a drop in investment.

There is clearly room for a sensible debate about long-term tax policies, particularly carbon taxes, and we must do that. I get uneasy when I hear about companies such as Shell not having paid corporation tax for a couple of years, or BP talking about its company being a cash machine. We must have a serious debate about this, but policy on the hoof is not the answer.

The North sea has contributed £375 billion in revenues over the years, but as we have heard, unlike Norway’s $1.3 trillion oil and gas fund—the largest sovereign wealth fund in the world—we have no legacy from that money. As well as having that fund, Norway has used its money to invest in renewable energy such as hydro, to create a much greater uptake of electric vehicle ownership. More importantly, it has created a much fairer, equitable and happier society. Meanwhile, in Scotland we are tied to Westminster, and we are getting blocked with pump storage hydro, the Acorn CCS project is still a reserve, and we could have had higher levels of investment in tidal stream.

Unlike Norway, here in the UK there are much greater levels of fuel poverty. We have heard about the 6 million fuel poor, when the energy price cap rises to £2,000 in April. Again, that is due to a lack of long-term strategic thinking. Earlier I pointed out that, under Labour’s watch, we saw the price of oil bottom out at $12 per barrel, rising to nearly $100 per barrel in 2008. There is no legacy to show for that, and no sovereign wealth fund created. Times have moved on, and the Scottish Government have created a just transition fund for north-east Scotland, but Westminster is not providing any match funding for that.

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18:00 Mick Whitley (Birkenhead) (Lab)

I applaud my right hon. Friend the Member for Doncaster North (Edward Miliband), the shadow Secretary of State for climate change and net zero, for demonstrating the strong leadership and breadth of vision that is so sorely lacking on the Government Benches. While Ministers issue desperate excuses from the Dispatch Box for their lack of action, the Labour party has today put forward a fully costed package of proposals that would provide millions of UK households with much needed support. By axing VAT on domestic energy bills, ensuring that no domestic consumer is forced to cover the cost of supplier failure and providing support for those most in need, we can slash energy bills by at least £200. In the midst of this Tory cost of living crisis, that is the difference between just about getting by and deepest destitution.

With the greatest respect to my good and honourable Friends on the Front Bench, I am convinced that we must be even more muscular in our response to the crisis. At the moment, the energy sector is simply not fit for purpose. Costs for consumers are far too high, investment in green energy is wholly inadequate and we remain dangerously dependent on volatile foreign energy supplies. We learnt last week that extraordinary amounts of UK gas were exported in autumn and winter, even as rising costs decimated hard-working families’ standard of living and hit small businesses’ bottom lines. Our energy system must always put ordinary people’s interests before those of private profits. Confronted with this historic crisis, we must surely accept that public ownership is the only way forward.

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18:04 Ian Byrne (Labour)

The system is broken. To transform this shocking situation, we need action from the Government on public ownership, decarbonisation in the energy sector, and the urgent retrofitting and insulating of houses to bring down energy costs. The practice of bailing out and subsidising private energy suppliers without the benefits of public ownership and control is wasteful and unjust. Research by Greenwich University’s public services international research unit showed that public ownership of water, energy grids and the Royal Mail would save UK households £7.8 billion a year and pay for itself within seven years.

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18:09 Richard Thomson (Gordon) (SNP)

The UK Government have had a windfall of their own from these higher energy prices. They could use that to reduce consumer bills, cut VAT and restore the universal credit uplift that was so cruelly snatched away, and they could copy the Scottish Government’s £20 child payment. In the long term, they could use that windfall to decarbonise heating and industry, to improve the quality of housing and energy efficiency to reduce bills and, above all, to introduce a progressive tax and benefits system to embed social justice. That will not happen with a Conservative Government who are failing to move far enough and fast enough on energy transition and security. I am sorry to say that it certainly will not happen with a main Opposition who seem to prize headlines from short-term gimmicks over embracing the long-term principles that might actually address the problems of people’s household bills.

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18:26 Bell Ribeiro-Addy (Labour)

Therefore, in the motion before the House the Opposition have offered a way forward: a windfall tax to help fund a package of support for families and businesses who are facing this crisis. I hope that such a package would include a programme of home insulation to increase energy efficiency. Our poorly insulated homes are giving rise to higher fuel costs and increasing our carbon emissions. But the ultimate solution would be one that helps fund the green industrial revolution, as the Labour party outlined at the last general election. We committed to a just transition fund, which was predicted to generate an £11 billion support package.

The objection that my proposal is hugely costly does not carry much weight because the Treasury, through the Debt Management Office, can borrow for 10 years at interest rates below 1.4% per annum. The energy companies’ dividend yield is currently 4% or 5% per annum, so purchasing them would generate cash for the public finances, and the excess could be used for public good. The priorities for public good are to cut bills and invest in capacity. Overall, this capacity should overwhelmingly be from renewable energy.

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18:30 Wera Hobhouse (Liberal Democrat)

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.

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.

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18:43 The Minister for Energy, Clean Growth and Climate Change (Greg Hands)

For the longer term, the Government are looking at how policy costs, which help to fund low-carbon energy infrastructure, support vulnerable consumers and ensure security of supply, are distributed between gas and electricity. Investment in renewable and nuclear energy will be key to achieving that, and we have made and are continuing to make massive progress in both those areas since 2010. As of 2020, renewables contributed 43% of our electricity mix, more than six times the percentage in 2010, when the right hon. Member for Doncaster North (Edward Miliband) was Secretary of State. On 13 December, we launched the latest round of our flagship renewable energy deployment scheme, contracts for difference.

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.

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.

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.

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