I beg to move,
That this House notes the cost-of-living crisis hitting families across the country and that the energy price cap is predicted to rise by 50 per cent from April; recognises that rocketing energy prices are hitting businesses as well as household budgets; calls on the Government to introduce a windfall tax on the profits of North Sea oil and gas producers; and further calls on the Government to use that windfall tax to help fund a package of support for families and businesses facing the energy price crisis.
In the last few days, we have often heard the Government say that they are desperate to talk about the biggest issues facing the country. Conservative Member after Conservative Member has lined up to say that there is nothing they would rather do than end the distractions and talk about the burning issues facing people. I have to say, Madam Deputy Speaker, where are they all? Where are they? Today, we are giving them—[Interruption.] There are a few of them, but not very many. Today, we are giving them and the House the chance to talk about those issues, and there is no bigger issue facing families than the energy price crisis. For months, we have waited for the Government to tell us what it is that they are going to do and there has been silence. Today, we are making a generous offer to focus on what really matters and to give them the chance to support the principle of a windfall tax on the oil and gas companies to help to address the energy crisis.
Let me set out the case. In just six days’ time, we will know the scale of the price cap increase to be announced by Ofgem. It is expected, on the latest gas prices, that there will be a £600 increase in the cap, on top of the £120 increase we have already seen. April’s increase alone is expected to drag 1.5 million more families into fuel poverty. Let us be absolutely clear what that means. Consider a recent Citizens Advice case of a man in his 60s from Devon who had given up his job as an engineer when he was diagnosed with spinal cancer. He had been claiming universal credit but cannot work and recently saw that drop by £20 a week. He told Citizens Advice:
“I don’t buy the things I need to buy. I’m constantly looking at the bank account. I put things off as I can’t afford the petrol to drive. I feel isolated and stressed, but what can I do? I’m living in one room to keep the heat down as low as I possibly can, but everything is just mounting up. It’s direct debit after direct debit.”
I have had similar cases in Doncaster. This is the reality facing millions in our country, and that is before the price cap has actually gone up. It is against the backdrop of inflation running at nearly 6% and the national insurance rise on top. So people are facing very difficult times. Businesses, too, are facing great difficulty as a result of what is happening.
Does not my right hon. Friend agree that the Government’s version of the energy price cap, along with “use it or lose it” penalties on developers, banning letting fees for tenants and gender pay gap reporting, have his fingerprints all over them from our 2015 Labour manifesto, but that, unfortunately, they have made the schoolboy error of copying homework incorrectly? That is why we now need a windfall tax to rectify those errors. In a parallel universe—the Miliverse—this was done right, but sadly it has been done all wrong by them!
I thank my hon. Friend for that intervention. I am old enough to remember when an energy price cap was living in a “Marxist universe” and now it is Government policy.
The Federation for Small Businesses reports that 45% of members are seeing soaring costs from higher energy bills. Meanwhile, the Energy Intensive Users Group, representing vital industries such as steel and pharmaceuticals, has called repeatedly for “immediate action”.
This is an economic crisis plain and simple. What is extraordinary is that the Government, months into the crisis, have not produced a single solution. Where is the solution? There can be no greater evidence of a Government paralysed by inaction. Millions of families who want reassurance are instead subject to the spectacle of a rule-breaking Prime Minister still too distracted by trying to save his own skin.
Our case today is that millions of struggling families should not be left to face this situation alone and that we should do all we can to act. It is right to look to those benefiting from this crisis to make a contribution.
I am glad the right hon. Gentleman is highlighting this issue. Does he agree that gas prices are a lot dearer in Europe and the UK than they are in America because we are short of gas here? Would it not therefore be a good idea for us to get more gas out of our North sea to ease the squeeze?
The right hon. Gentleman and I differ somewhat on this. The real problem is that we have not gone far enough or fast enough on the green transition. The more we are subject to the volatility of fossil fuels—the prices are set internationally—the more we are at risk of the kind of crisis we are seeing at the moment.
If there is one principle that should get us through these tough times, it is that those with the broadest shoulders should bear the greatest burden. Britain’s families and businesses are facing the toughest times, but that is not true of everyone. For the oil and gas sector, the price spike has been a bonanza—a trebling of prices today compared with a year ago. Let us be clear about the effect that is having on oil and gas company profits.
Listen to Bernard Looney, the chief executive of BP. He says this: the rise in prices is a “cash machine” for his company. Those were his words—a “cash machine”. Let those words ring in the ears of right hon. and hon. Members in this House. Let us be clear about who is on the other side of the cash machine: the British people. In other words, it is an ATM from which the oil and gas companies collect billions and into which the British people pay—people like the man in Devon who could only afford to heat one room. He is one of the millions paying into the cash machine for BP.
Once the companies are withdrawing the cash from the cash machine, where is the unexpected windfall going? Let us not fall for the argument that may be made in this debate—that it is somehow going into investment or workers in the oil and gas sector. [Interruption.] The hon. Member for West Aberdeenshire and Kincardine (Andrew Bowie) says from a sedentary position that it is. Let me tell him that he is wrong. All the evidence is that the companies are so flush with cash that billions are being used to inflate the share price in buybacks from shareholders. BP did a share buyback of over £1 billion in August, but it was so overwhelmed with cash that it did another worth nearly £1 billion in November. Shell has done the same, with a £1.1 billion share buyback in December. But that is not enough: it says it will do another one, worth £4 billion, at pace, in 2022.
This is simply a redistribution of wealth from the energy bills of the British people—those who can least afford it—to the shareholders of those companies. The question before us, then, is one that has confronted previous Governments: should we do something about the situation or say that it is wrong to take account of the windfall in the tax decisions that we make? I say that it is not wrong to take account of it—it is fair and it is right and it is principled.
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?
I will answer all the hon. Gentleman’s points. We would raise £1.2 billion from the windfall tax. I will come to this later in my speech, but the tax position is incredibly generous for companies, including Shell and BP. He says that their money is going into renewables, but I am afraid that he is not correct. Shell’s near-term plans involve investment of just £2 billion to £3 billion in low carbon activities and £8 billion on upstream fossil fuel production. It is just greenwash to say that these companies have somehow moved out of fossil fuels and into renewables. The truth is that when profits have risen by billions and billions and when billions are being paid out in share buybacks, it is not credible that somehow a one-off tax rise, taking just a small proportion of the windfall profits that these companies did not expect, will somehow lead to a collapse in investment.
There is a clear consensus that a windfall tax is the right thing to do. An overwhelming majority of people support it—including, I might point out to Government Members, three quarters of Conservative voters. I do not know what Conservative Members are waiting for: they should support a windfall tax because some of the people who vote for them—or used to vote for them, anyway—also support it. Leading charities have endorsed it and some Conservative Members, including the right hon. Member for Harlow (Robert Halfon) and the former business Minister the right hon. Member for Kingswood (Chris Skidmore), have supported it too.
Of course the oil and gas companies do not want the windfall tax to happen. Let us take their arguments head on. As I have said, the argument that the tax will lead to a collapse in investment is not credible given what the companies are doing with this windfall, and it also misunderstands the long-term basis of these companies’ investment plans. I should also point out that the companies would keep a significant proportion of the windfall, even under our proposals. It is an unexpected, unearned windfall, half of which they would keep.
Secondly, as I said to the hon. Member for East Worthing and Shoreham (Tim Loughton), the proposal comes against a backdrop of the incredibly generous tax position in the UK, which meant that BP and Shell actually paid no net tax at all between 2018 and 2020.
Thirdly, there is a wider context. [Interruption.] The hon. Member for East Worthing and Shoreham is muttering, from a sedentary position, that those companies are not making profits. Actually, they are forecast to make near-record profits this year, as the hon. Gentleman will see if he looks at what outside analysts are saying.
As I was saying, there is a wider context. The oil and gas sector provides important employment for our country and communities. We need a phased transition, but, as I said to the hon. Gentleman, the long-term answer to this crisis is not more reliance on fossil fuels. Indeed, the Business Secretary himself has said:
“the UK is still too reliant on fossil fuels.”—[Official Report, 20 September 2021; Vol. 701, c. 95.]
The answer must be instead to go further and faster on renewables, nuclear and other zero-carbon alternatives, but that is not what the fossil fuel companies are doing with their profits.
My right hon. Friend is making a powerful speech. He has identified the immediate issue of energy poverty and crisis that we have in this country. Those of us who are old enough to have lived through the 1970s and 1980s recall how the Norwegians used the wealth generated from the North sea to create sovereign wealth funds. Should we not be thinking about that? Could we perhaps not just use the windfall tax, but deploy such funds in the way that my hon. Friend is describing, to invest in renewables and invest in our country?
My hon. Friend has made a powerful point.
Labour has come up with a clear and costed plan. We plan, by levying the windfall tax, to reduce VAT to zero, to increase the warm homes discount from £150 to £400, and to extend it from the 2.2 million families who currently receive it to 9 million. On top of that, we have set aside £600 million to help our businesses out. This is in stark contrast with what is being proposed by the Conservatives—the Government of the day, who, six days before the announcement of the rise in the price cap, seem to have nothing to say. What is their explanation for why they are not acting? It is very hard to find the explanation, although perhaps we will hear one today. The one person who has ventured to provide one is the Education Secretary, who has said:
“A windfall tax on oil and gas companies that are already struggling in the North Sea is never going to cut it.”
Even the oil and gas companies do not describe themselves as struggling. They say that this is a cash machine. I have to ask what planet the Government are living on. Does it not say everything about them that it is the struggles of companies making billions from an expected windfall that stir them, not the struggles of the British people? How dare they leave families in the lurch because of their refusal to stand up to vested interests in the oil and gas sector?
In 1998, when Labour was in power, oil prices bottomed out at $12 a barrel. By 2008, the price had risen to nearly $100 a barrel. What did Labour do with that money? It is regrettable that it did not create an oil sovereign fund, as Norway did.
No, I am going to make progress.
The truth is—we cannot get away from it—that the Conservatives are a party bankrolled to the tune of nearly £5 million by oil and gas interests since 2016. Bankrolled by oil and gas executives, they cannot act on behalf of the British people.
Let me end by saying this. The British people are fed up with what they have seen from the Government in recent months. They want a Government who are on their side. They want a Government who will act for them. That is why we need a windfall tax. It is a test of whose side they are on, and whose side we are all on in this House—on the side of gas and oil companies making billions of profits, or on the side of millions of struggling families. We know whose side we are on. If this Government were truly on the side of the British people, they would act, and that is why I urge Members on both sides of the House to vote for our motion tonight.
Thank you, Madam Deputy Speaker, for giving me the opportunity to open yet another Opposition day debate on behalf of the Government.
Another chunk of time has rightly been set aside for Her Majesty’s Opposition to explain their mature approach to politics—their open and transparent methods for taking difficult decisions or balancing nuanced trade-offs—and to articulate their thought-through programme for government if, heaven forbid, they ever win an election. At least, that is what I assumed these Opposition day debates would be like, as a new Minister. Now, on my fourth in relatively quick succession, I realise that that is not the purpose of such debates at all. How foolish of me to assume such laudable ideas when, instead, we are presented with further half-baked, sensationalist ideas solely for the headlines. We can do better than this.
None the less, let me try again to make sense—[Interruption.] If Opposition Members would give me a moment, I will try to make sense of the motion for which they are about to argue. The motion splices together two very important matters, the cost of living and business taxation, in a proposition whose coherence is inversely proportional to its attempt to grab the headlines. As this is a motion of two halves awkwardly coupled together for effect by the Opposition Front Bench, I will take each half in turn.
First, on the cost of living and in the spirit of being constructive, I will try to find areas where we can agree. There is no doubt that this is a difficult time, with rising energy prices, growing demand, stretched supply chains and the most unique set of economic and political circumstances in a century. Latent demand has been held back across the world by health factors, with countries competing among themselves to serve people, businesses and society.
I acknowledge the concern of industry, businesses and consumers. The right hon. Member for Doncaster North (Edward Miliband) may be wrong on many things, but he is right that this is a challenging time. I make it clear that the Government are committed to working with industry, businesses and consumers, both now and over the long term. We know some things are challenging at the moment, and we will continue our extensive engagement with them, not least the large energy users, businesses, consumer groups and energy retailers, to consider what action may be necessary.
The right hon. Member for Doncaster North (Edward Miliband) pointed out that Ofgem will be setting the cap in just a few days’ time, so there is no point in this endless consultation looking ahead. What will the Treasury do in the here and now to mitigate the energy cap rise?
If I were not being heckled, I might get on with it.
As most of the House knows, and as most reasonable people will accept, the recent rise in energy prices in the United Kingdom has largely been driven by the increase in the wholesale price of gas caused by growing demand and broader geopolitical issues as we emerge from the pandemic. Those price rises are visible across many parts of Europe and beyond, and they demonstrate the importance of long-term security of supply and energy resilience, to which I will return in a moment.
With that in mind, it is important to answer the questions that have been asked, although it was wholly absent from the speech of the right hon. Member for Doncaster North that the Government are already doing much to support those in the greatest need.
If the hon. Gentleman will give me a moment, I will try to answer these questions. The first solution is the warm home discount scheme, which provides support for household energy bills through rebates, helping households stay warm and healthy in winter. The scheme currently provides more than 2 million low-income and vulnerable households with more than a £100 rebate on their winter energy bill, and a further consultation is under way on whether that is to be expanded.
Secondly, the winter fuel payment from the Department for Work and Pensions is worth between £100 and £300 and is paid automatically to those in receipt of the state pension and other social security benefits. Thirdly, the cold weather payment is a £25 payment to vulnerable households on qualifying benefits when the weather is, or is expected to be, unusually cold.
Fourthly, last autumn the DWP announced a £500 million household support fund to help those most in need during the winter, which includes provision for utility costs, including energy. Longer-term energy schemes are also assisting, and every year more and more people are having their home insulated or upgraded to reduce their energy bills for the long term.
The Minister is right to say that we are in a unique position, but that requires a unique policy response. He will know that the most vulnerable are at risk from inflationary pressures, especially in energy prices. We are looking at inflation of 6%. When the rates for social protection were set in September, inflation was 3%. Do we not need a unique response just for this situation and this year, to reset those levels to reflect the true cost of living in April?
I am grateful to the hon. Gentleman for his intervention. The reason I articulate and go through existing programmes and policies that have already been done is because hon. Members, such as the right hon. Member for Islington South and Finsbury (Emily Thornberry)—[Interruption.] She continues to heckle from a sedentary position. She absolutely refuses to acknowledge that the Government are doing a substantial amount and, as has been indicated, we will continue to look at what else we can do in the coming days, weeks and months ahead. We of course recognise that the immediate situation is challenging, but it would be remiss of the Opposition to refuse to acknowledge the significant immediate help and the long-term subsidy going in to support those who need assistance with energy costs. As I have said, the Government remain committed to working with all to see what more can be done.
Let us turn to the second part of the motion. As the House knows, taxation matters are dealt with by the Treasury. As hon. Members are aware, and as Governments of all colours have regularly reminded them from this Dispatch Box over many decades, all taxes are kept under review. Yet given that the Opposition want to couple the cost of living with fiscal matters such as this, let me say a few words about this particular rabbit out of the hat from the Labour party—its big idea; its solution to the problem. This money will no doubt be spent multiple times, as it always is, and on multiple causes in the multiple Opposition day debates ahead. This is the Labour party’s generous offer, to take the words of the right hon. Member for Doncaster North a moment ago, and its reason to be cheerful. I confess, following the right hon. Gentleman’s speech, that if this Miliverse is the reason to be cheerful, we should all be very gloomy. I am none the wiser about the ultimate purpose of what the Labour party proposes. Its objective is mystifying. Its aim is confused.
So what is the purpose? Is it simply a money source? Or are we instead talking about the use of the tax system for something more fundamental? The right hon. Gentleman talks about the long term, but he should also recognise that short-term decisions are required. Either way, he should be clear about the position he argues for and its implications. If this is to be a money source, the best way to maximise that money—both at the time the Opposition presumably want to implement this, and then in the future when they inevitably come back for more money—is to maximise the amount of oil and gas coming out of the ground.
The Conservative party has received more than £1.5 million in donations from companies and individuals linked to the oil and gas sector. Is it not the case that although some Conservative Members want a windfall tax to help their constituents, they and their Government are not prepared to stand up to vested interests?
What is the case with this Government is that we will take decisions in a proportionate and reasonable manner, rather than using Opposition day debates and the half-baked motions underneath them to make decisions as a result.
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 now appears in favour of encouraging as much activity on the UK continental shelf as possible so it can tax it. The Labour party needs to accept that oil and gas will be a significant part of the future of the UK’s energy supply for the coming decades during the transition, if only because it wants the money that comes with that. I presume that the Labour party will therefore immediately go out and proclaim to its friends and fellow travellers who shout about keeping it in the ground that that is not possible, advisable or practical, and that it has made a political choice to keep the oil and gas flowing because it wants the money that comes with it.
The Labour party will presumably be withdrawing its opposition to further exploration as a result, because if it is all about the money, the taxes and the spending, by default it also has to be about the exploration, the extraction and the production. That is the choice that the right hon. Member for Doncaster North has made in coupling the two propositions together as he has done in his own motion.
My hon. Friend is being far too gentle on the Labour party. Is what we have heard from it not completely disingenuous? It has suggested a cut in VAT, which of course we can only do because we are out of the EU, which it voted against leaving. That cut would bring in a 5% reduction against what will possibly be a 50% rise in energy prices, so it would be a drop in the ocean. In addition, we have just heard that the windfall tax on profits—profits that do not exist at the moment—would bring in £1.2 billion, another drop in the ocean of the problem that we need to address. The Labour party is trying to con us into thinking that that is the answer to the problem that we will have. It is not.
The Minister is being generous with his time. We need to put his point about the drop in the ocean and the value of £1.5 billion in the context of the £4.3 billion that the Treasury has just written off. We are talking about not dissimilar sums of money, are we not?
I am very glad that the hon. Gentleman raises that point. I am not sure whether he was present at the end of the last debate, but it was made clear from this Dispatch Box that that is not the case in the slightest. This Government will continue to pursue the recovery of as much of that money as possible. The Labour party can keep repeating the point if it wants, but it would not be fair, accurate or real to do so.
To come back to the Opposition motion, if it is not all about the money, the motivation has to be different. If that is the case, the Labour party should just be clear. The right hon. Member for Doncaster North knows that policy actions have consequences and decisions have reactions. He has put forward a specific proposal for a windfall tax, so he should be held to account for it.
The implications of a windfall tax structured in such a way would have to fall somewhere: on consumers, on investors or on the activity itself. I assume that the Labour party does not propose to go after consumers or to reject the idea of oil and gas as a commodity, so ultimately it will have to be the investors who shoulder the burden. If so, the right hon. Gentleman should be clear that he is expecting less of a return for pension funds and therefore for pensioners and the many hundreds of thousands of people out there who are reliant on the performance of the stock market to ensure that they can be supported in old age.
Perhaps the proposal is just a blunt tool to reduce production in general. If so, the right hon. Gentleman should just say so. That certainly seems to be the inference to draw from his statements today, and from his questions over recent weeks to other Government Front Benchers. It does not sound as if he is simply looking for a source of money to fund others; it does not sound as if he is seeking to maximise economic return; it sounds as if he is deliberately trying to penalise activity on the UK continental shelf and, if possible, to reduce it. If that is the case, he should say so out loud, because then will we know.
I will make progress.
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.
Moreover, the Labour party should be clear that its objective over the long term—no doubt as it comes back for more and more money—is to reduce our energy security. Taxing out of existence the oil and gas industry, which we need to conclude the transition, will make us more dependent on other countries whose actions may have caused some of the things that the Labour motion seeks to deal with—greater foreign imports and fewer jobs in north-east Scotland and in supply chains all the way through constituencies such as mine, North East Derbyshire, or the shadow Secretary of State’s constituency of Doncaster North. The Labour party has no clear plan for energy to ensure in a measured and balanced way that we move from hydrocarbons to renewables and tread more lightly on the earth. That is what the Labour party is about these days: extinction, not transition.
We are used on Opposition day debates like this, on motions that do not add up, and this one has it in spades—incoherent, confused and unclear. Perhaps some of the hon. Members who are about to speak might be able to clear up the ultimate objective in the way that the right hon. Member for Doncaster North failed to do. For a party that talks so much about good government, Labour has demonstrated this afternoon that it is only interested in good headlines.
First, reflecting on the Minister’s response to the shadow Secretary of State’s contribution, I am a little perplexed, because we continually find ourselves in this situation, where the Tories portray themselves as the defenders of the North sea oil and gas sector, and that is the best that they can provide to do that. It is simply not good enough and it will not wash with people in the north-east of Scotland whatsoever.
The situation facing families in my constituency, up and down Scotland and indeed across the entire United Kingdom is devastating. I, like every other person in the Chamber, will be receiving emails from constituents who are having to choose between heating their homes or feeding their families. It is intolerable. It is simply not justifiable. It is simply not acceptable. What I really struggle with the Government about on this is that, irrespective of the fact that food prices are rising, clothing prices are rising, fuel prices are rising—
Yes, absolutely I agree. Over a number of months, irrespective of the challenges that families are facing, this Conservative Government have consistently not come forward with any new support. The price cap increase is imminent, yet there is still nothing on the table for families up and down the country. That needs to end.
SNP Members do not have a monopoly of knowledge of how to solve those problems, but we have consistently put forward suggestions to the Government, some of which, I think, would gain the support of many of their own Back Benchers. The situation in relation to VAT has been talked about at great length. I see Conservative Members nodding. The deplorable decision to take £20 away from those on universal credit could be reversed—I think we would probably get significant agreement on that as well. The UK Government could match the Scottish Government by introducing a £20 child payment to assist those in the most difficult situations. We are putting forward these proposals to try to be constructive, but unfortunately the Government are not responding in any way, shape or form.
The Government will say, “How do we pay for new measures to support people?” The Labour party has come forward with its proposal, which I will come to in due course. I sometimes struggle in this place with this argument about where the money is going to come from. We have just had a debate about £4 billion that has been squaffed away to fraudsters. This afternoon we have seen a release from the Department of Health saying that there has been a loss of £8.3 billion in the value of PPE that has been purchased. There is going to be £3 billion of additional income to the Treasury, notwithstanding the windfall tax, from the North sea oil and gas sector. They can find half a million pounds to fly the Foreign Secretary to Australia. Of course—this is also true of the Labour party—they can always find tens if not hundreds of millions of pounds for nuclear weapons on the Clyde. So I will not take any lessons from them about where the money is going to come from. In relation to the specific proposal for a windfall tax put forward by the Labour party, what was missing from the contribution of the shadow Secretary of State and the Minister himself was the workers. What impact would it have on the workers?
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.
If that happens again, what does it mean? It means that my constituents will lose their jobs. Some 35,000 jobs have gone in the past couple of years alone. The price of oil was barely scraping zero last year, yet the Opposition come forward to tell us that this tax is the right thing to do, notwithstanding any concerns about the impact it might have on investment in the North sea.
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.
Why did Norway do that and this place not do that? Why did this place choose to squander Scotland’s wealth? It is simply unforgivable. When I have discussions with my constituents about the challenges they face, I simply hope the Government will not repeat the mistakes of the past.
I welcome this opportunity for us to discuss one of the biggest issues facing the country. April could indeed be the cruellest month this year if more action is not taken to tackle the forthcoming problem, because we are likely to see an unfortunate coincidence of a big surge in electricity and gas bills as the cap is relaxed, an increase in council bills, general inflation that is a bit too high, and a national insurance increase hitting people’s work incomes. I urge the Government to think again about the possible severity of that squeeze on real incomes, as it would have a knock-on effect, reducing people’s ability to spend on other discretionary items as they struggle to pay energy bills. It would therefore slow the economy quite considerably, at the same time as creating this shock to living standards.
The Ministers sitting on the Front Bench are, I am sure, engaged in conversations more widely in Government, including with senior members of the Government who will make the ultimate decisions. Today is not really the day to debate more general taxation issues, although even at this late stage I would like the Government to cancel the national insurance increase, on the grounds that public finances generated a big surge in revenue compared with the Budget forecast last March, and our deficit is around £60 billion lower than they thought it was going to be. I say to the Government that they can accommodate the £12 billion they need to spend—rightly—on health improvements, without that money.
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.
I urge my colleagues on the Front Bench to be sympathetic, as I think they are, to the case that while we still need to burn quite a lot of gas, and while we are awaiting plentiful supplies of renewable or nuclear power that will be affordable and reliable, we must accept that we will be burning somebody’s gas, and it must make more sense to burn our own, rather than imports. Indeed, I would start that case from the green point of view. A while ago I had a useful answer to a parliamentary question, pointing out that the CO2 generated by importing liquefied natural gas and burning it in whatever we wish to burn it in is more than double the amount of CO2 generated from burning a comparable thermal equivalent of gas taken from the North sea. There is a very good green case for substituting domestic gas for imported LNG.
Over the past two years, the North sea oil and gas that was exported doubled. It is not our oil and gas. It belongs to the corporations that bring it out of the ground, and they sell it to the highest bidder. It does not increase our energy security. The right hon. Gentleman made a point about Biden inheriting fracked shale oil and gas in the US, but he failed to mention the ecological costs, which every year run into hundreds of millions of pounds of damage to the natural world. That is the price the United States is paying for its fracking, which I imagine the right hon. Gentleman would expect us to take up here as well.
I was not talking about onshore gas at all; I was talking about North sea gas, which comes from under the sea. A variety of reservoir easing techniques have been used for many years and never caused political controversy. I was recommending that we review again the opportunity to explore for more, to develop more and to bring into production the fields that we know are out there. That would also help the SNP spokesman, the hon. Member for Aberdeen South (Stephen Flynn), who would rightly like more jobs or to sustain jobs in his successful oil and gas city, which faces the problems that he described. I was interested in his warning about how a windfall tax could, like last time, collapse investment and reduce the amount of extraction and future investment that we get.
The hon. Member for Norwich South (Clive Lewis) said that not all the gas produced in the North sea would be sold to us. That may be right, but the European market in general is chronically short of gas and the continental market is cruelly dependent on Russian gas, which today we can see is not a good idea. A North sea supply would therefore help when we are trying to ease supply pressures and bring prices down.
The second reason why it makes much more sense to use our own gas—or to extract more of it—rather than rely on imports is that we collect much more tax on it, and we are losing all that tax revenue on imports. The hon. Gentleman should remember that we now import 53% of the gas that we need, and we do not get anything like the revenue that we could if we extracted more of our own. Preferably, we would sell it to ourselves, but even if we exported it—we may well do that—we would still collect the extra revenue. There would also be a benefit in jobs and prosperity, because the industry tends to create quite a lot of well-paid jobs, which is good for the communities that sponsor those activities.
I hope that Ministers will look favourably on the idea that, during this transition, we will burn a lot of gas—as will everyone else—so it makes a lot of sense for the UK to produce gas and offer it on long-term contracts, trying to smooth some of erratic prices that we see because of what is happening on the continent, and make our contribution to greater security of supply for ourselves and—indirectly—for Europe.
Finally—I know that time is limited—electricity is much in demand, and it will be much more in demand if the electrical revolution that the Government wish to unleash comes true. One reason why we had a big spike in gas prices was that the wind did not blow, which added to the need to burn a lot more gas in power stations. That can happen again, because the wind clearly is an unreliable friend, and it is particularly difficult if it goes down at times of peak demand or when it is very cold. We therefore need to ensure that we are putting in enough reliable electricity capacity, because that has a direct relationship with the gas supply and demand issue as well as with gas prices, and I do not think that the current plans have nearly enough new capacity in them.
While the Prime Minister, the Government and Tory MPs have spent the past several months arguing among themselves about the untenable future of the right hon. Member for Uxbridge and South Ruislip (Boris Johnson), my constituents have been on the blunt end of rising fuel prices, mounting food costs and soaring energy bills, which have pushed already struggling household finances to the brink and created a grave cost of living crisis for many families across the Bradford district. I remind the Minister that that is the central part of the debate. Let me be clear, however, that the cost of living crisis, which means that many families in Bradford need to choose between heating and eating, is no accident. It is the direct result of a decade of this Conservative Government’s incompetence and complete indifference to the lives of ordinary people in places such as Bradford, and it is the direct result of their ideologically driven austerity cuts targeted at some of society’s most vulnerable. It means that in places such as Bradford, nearly half of all children continue to live in poverty, working families continue to be forced to use food banks and destitution continues to spread like a cancer.
The cost of living crisis is not of the making of my constituents in Bradford or, indeed, of the constituents of any Member in this House, but they are the ones literally having to pay the price. Now this Government’s failures to get a grip on soaring energy bills mean a further attack on the most vulnerable, as the needs of greedy energy companies and their profits are put before the needs of our constituents. That is frankly scandalous, and people struggling to make ends meet in Bradford and across the country deserve much better. They deserve better than a Conservative Government who delay taking action on this cost of living crisis to spend time trying to save their doomed Prime Minister. We have to be clear: when people are struggling to put food on the table, to heat their homes and to keep a roof over their head, it is not the time for dithering or for political games; it is the time for leadership and immediate action—something that is lacking from those on the Government Benches.
Does the hon. Member agree that there is an incentive for the Government to act, because people living in cold homes are far more likely to get ill with respiratory diseases? That then leads to a huge hit on health budgets and social care budgets. It is a false prophecy to let market forces rip. We have to act quickly and we have to act now.
I absolutely agree with the hon. Gentleman, but the reality remains, as I stated earlier, that this tragedy has not just started now. The last decade under this Government has seen some of the biggest ideological austerity cuts in places such as my constituency in Bradford and in many other places across the country. The reality remains that it is ideological, and the Government know the impact. That is the worst thing: they know the impact of what they do.
Not once in the Minister’s speech did he talk about the impact on ordinary people up and down the country. He could not bring himself to talk about the fact that today, children in our constituencies will go hungry. He could not bring himself to discuss the fact that many people go days on end without a hot meal. He could not bring the words to his mouth to say that destitution is now rife in our country, or that we now have international reports that say that we—the fifth largest economy in the world—are not providing for the public. He does not mention any of that. I am not sure he was in the right debate. He is a new Minister, so perhaps he was in the wrong debate, and I forgive him if so.
Those things are why, as the shadow Secretary of State, my right hon. Friend the Member for Doncaster North (Edward Miliband) stated clearly, a Labour Government would scrap VAT on domestic energy bills, expand and increase the warm home discount, and impose a windfall tax on greedy energy companies that are taking people for a ride.
The reality is that, even as people in Bradford continue to suffer and even as the plan set out by the Opposition stares them in the face, the Government have no answers, no solution and no offer for my constituents. Frankly, it seems that they could not care less if the most vulnerable places in the country, such as Bradford, are plunged into further poverty and deprivation. I assure them that the longer they take people in Bradford and across the country for fools and the longer they delay in taking the action that ordinary people need to save them from the cost of living crisis, the more that those people will repay them with interest in the ballot box at the next election.
Perhaps unsurprisingly, I rise to speak against the motion. I declare an interest, although it is not necessarily required, as having been employed in the oil and gas sector for 25 years prior to being elected to this place. [Interruption.] Despite the groans from my hon. Friends, I think that provides me with some context and experience, rather than anything sinister.
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 am aware, as are Ministers, of the anxiety of people across the country, including in my constituency, about the increased cost of living. I welcome the measures that the Government have already taken to support those on low incomes with their energy and heating bills. One of those, the energy price cap, has already saved customers about £1 billion a year, which is equivalent to about £77 to £100 a year for typical households on default energy tariffs. Some 2.2 million pensioners and low-income families are protected with a £140 discount on their electricity bills, which has been extended to 2026 and will rise to a £150 discount from October.
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.
Labour’s plans would bring genuine help to millions of households across the country who are facing an unprecedented increase in their energy costs. They are fully funded plans that would give some support to all households and a more substantial package of support to the 9 million households who need it most.
The plans would not increase taxation on working people; they would raise the money by a windfall tax on the North sea oil and gas companies, which are raking in huge profits from the price increases. The plans anticipate the increases that people will see in their bills. Perhaps unusually, we have a clear view of those increases coming down the track, so there is time for the Government to act, and I beg Conservative Members to vote for our motion today in order to tackle the misery that people find themselves in.
This fuel bill crisis comes at a time when people are already being hit by other problems. There has been coverage in the press over the last 10 days of how the rising cost of food is hitting the least well-off the hardest, not just for the obvious reason that they spend a greater proportion of their income on food, but because the rate of inflation is much higher on basic items, with many basic lines having been withdrawn altogether by the supermarkets.
Of course, the least well-off often have the least control over their energy costs. Someone who is renting their home does not have any choice over the type of heating they have, and they will not necessarily have the most efficient cooker or boiler, or the best insulation. There are some shocking examples where lean-to parts of houses—former breakfast rooms or kitchens—become a flat on their own and the thin-skin roof provides no insulation whatever. The lack of sunshine between high blocks of terraced housing makes it almost impossible to heat those homes. There is evidence that housing associations are having to cut back on maintenance projects. Food banks are even reporting that people are saying that they do not want pasta because they cannot afford to cook it, and admitting that they only eat cold food out of tins.
High energy costs mean families cutting right back, living in cold, damp rooms with particular risks to the very old, those with disabilities or chronic illnesses and the very young, such as increased risk of respiratory disease. It is not just heating and cooking. How can people get their washing dry in a cold, damp flat? How can they afford to iron school uniforms for their children? If they get cut off, more complications will follow.
The warm homes discount is totally inadequately funded. The total amount allocated to the fund is barely enough to help half of the households eligible. Then there is the difficulty of applying. Claimants have to know about the scheme and know how to ask their energy provider, which is made all the more difficult for those who cannot go online, for economic reasons or lack of skills. Even if they get through, the main energy supplier in my area, for example, has no warm homes discount money left. It depends on whether people get in early, the demand on their particular energy company or where they live. The likelihood is, of course, that the most needy will miss out. Even if people do get it, £140 does not go anywhere near far enough, given the huge hike in energy prices.
The Welsh Government are trying to do their best with the winter fuel support scheme. It has given £100 to households on universal credit, income-based JSA, income-related ESA, income support or working tax credits and, in view of the frightening increases, today, the Minister for Social Justice has doubled that to £200. That is a Government with far fewer options in their economic decisions, and far fewer economic levers at their disposal, recognising the desperate need to help the least well-off to heat their homes. The cut in VAT would help everyone. Labour’s proposal today would offer additional help to 9 million households in the most precarious financial situations, with up to a further £400 of help for each household. Together with the VAT cut, that would leave households with bills that are marginally higher than last year’s.
Why are we facing such energy price rises, worse than in other countries? It is not just because world prices are rising or because the Conservative Government are taking no action whatever, either because they simply do not care that people are cold and miserable, or because they cannot get their act together to do anything—either they do not care or they cannot do. It is also because the Government dismantled gas storage facilities and, crucially, have been sending very mixed messages about investing in renewables.
The Government wasted precious time in the development of renewables with the nonsense of the moratorium they imposed on constructing onshore wind farms in England. That not only thwarted opportunities to increase the generation of renewable electricity, but sent a very negative message about the future commitment of the Government to renewables. We should be far further ahead now in our production of electricity through renewable means. The fact that we are not is an abject failure by the Government to stimulate the production of renewables. Luckily, we have devolved powers in Wales and we are able to continue the development of wind power.
We also had the reluctance of the Conservative Government to consider the Swansea tidal lagoon. Thanks to the initiative, imagination and hard work of the Labour-controlled city and county of Swansea, the project will go forward, providing power for thousands of local homes.
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.
Labour would also implement an up-to-date energy and industrial strategy, drawn up with businesses, and invest—as my hon. Friend the shadow Chancellor announced at conference in the autumn—the sort of sums of money needed to make a green transformation: some £28 billion a year to ensure that we have industries fit for the future that provide good jobs. But of course an immediate crisis faces energy-intensive industries such as the steel industry. If that is not resolved as a matter of urgency, we could see steel production go elsewhere. Labour would also use money from the windfall tax on North sea oil and gas production to help our struggling energy-intensive steel-producing firms and protect our world-class industries for the future.
I recognise the enormous challenges that many households are facing in struggling to pay their energy bills currently, but unintended negative consequences would arise from such a tax rise, and I shall briefly outline what they are. I make these observations as an MP representing a constituency where many people work in the oil and gas sector, as chair of the British offshore oil and gas industry all-party parliamentary group, and as a supporter of offshore wind—a technology with which the oil and gas sector is increasingly collaborating.
First, it is necessary to set the context. Extraction of oil and gas on the UK continental shelf over the past 55 years has brought an enormous dividend for the UK. It has provided heat for our homes and businesses. It has created hundreds of thousands of well-paid and highly skilled jobs—expertise that we have exported around the world—and, importantly for successive Chancellors, much-needed revenue.
Extracting oil and gas in the North sea is not straightforward. It is a difficult basin in which to work. It needs a stable fiscal regime to attract investment, which is globally footloose. Some might say that, as we move towards a zero-carbon economy, that matters less, and that we should not be promoting further investment in the North sea. The response is that we need that investment as we will continue to use oil and gas, albeit in lesser amounts, for some time, and that funding is required to secure a just and optimum transition to a zero-carbon economy, where we can add to and enhance the skills and expertise built up over the last half-century.
It is necessary to highlight that the existing tax system is working well without the need for a windfall tax. The UK oil and gas industry will pay about £3 billion in extra corporation tax as a result of the global rise in gas prices.
It is appropriate to look at the consequences of previous windfall taxes—most recently, that of the coalition Government in 2011. After all such previous increases, the Treasury has had to offer incentives to claw back investment into the UKCS. That additional fiscal risk puts a cost premium on investments compared with the cost in most other nations, in particular Norway, which is experiencing an economic surge and is well ahead of the field in the race to zero carbon.
The North sea oil and gas industry has a key role to play in the drive towards a zero-carbon economy. That is evidenced in the North Sea transition deal from last March.
I thank the hon. Gentleman for that intervention. He may well be right, but that decision was made 55 years ago. Norway has, I think, far bigger resources than we do, and of course it is a much, much smaller population and country. So that is a debate for another time. I understand where he is coming from, but there is another side to that argument.
I think we are actually on the same side of the argument here. Norway has done remarkably well and there are lessons to be learned. I was actually pointing to the fact that they have had that stable fiscal taxation regime, which has enabled them to be at the forefront of the drive towards a low-carbon economy.
The North Sea transition deal from last March has enabled the industry to deliver investment of £14 billion to £16 billion by 2030 in new technologies such as carbon capture and storage and hydrogen. While the supply chain of the oil and gas industry extends across the UK, activity tends to be concentrated on the North sea coast in north-east Scotland around Aberdeen, on Tyneside and Teesside and in East Anglia around Great Yarmouth and Lowestoft. These are coastal communities that have their own particular challenges and it would be very wrong to add to them at this particular time.
Off the East Anglian coast, there are exciting opportunities to promote a prosperous transition in the southern North sea by redeploying infrastructure and expertise from the oil and gas industry to create a leading hydrogen production and carbon capture, usage and storage hub around the Bacton gas terminal in the constituency of my hon. Friend the Member for North Norfolk (Duncan Baker). The energy price crisis presents many people with enormous challenges, and I look forward to scrutinising the Government’s proposals to address it, which will probably come forward next week. A windfall tax might, at first glance, be a compelling way of meeting that challenge, but it would have untold negative consequences.
Over the past few months, I have been approached by numerous constituents in Birmingham, Hall Green who have expressed serious concern over the affordability of their fuel bills. Many people are now facing a significant cost of living crisis that has been driven, in my view, by two main factors. First, over the last 20 years in the UK, gas prices have nearly tripled; the increase is staggering: 221%. Given the reliance on gas in many households across the country, this significant increase, which is set to further accelerate this year, has driven the cost of living up for millions of families and businesses and forced families to choose between heating and eating.
The second factor is the anaemic growth in wages over the same period. Wage growth has been slow and has struggled to recover to pre-2008 levels. Taken together, what does this mean? It means a significant squeeze in the standard of living for millions of families, who are seeing more and more of their hard-earned wages being absorbed by the gas and oil companies, which have registered record profits over the course of the pandemic. If that is not bad enough, some of the largest North sea oil and gas companies, such as Shell and BP, have paid zero corporation tax in recent years. Not only is that deeply unfair for hard-working families; it also means growing inequalities in the distribution of our national resources.
That situation is unsustainable. Without massive investment in alternative sources of energy, the spiralling cost of gas and oil will only continue to worsen in future years, yet this Government seem to have no plan to address the issue. They are content to see a low-wage, high-cost economy where the wealthy continue to profit while hard-working families struggle to make ends meet. That is why we on this side of the House are proposing a windfall tax on gas and oil companies. It is high time that we began to redistribute the massive wealth built on the back of consumers who have no choice but to pay the ever higher prices for energy bills.
The revenue generated by such a tax would help to relieve the burden of higher energy bills for millions of families and businesses throughout the country and for my constituents in Birmingham, Hall Green. That would further help to sustain our economy. Money saved on energy bills can be spent on our high streets and in our small and medium-sized enterprises. Most importantly, this can help the families whose children get their only meal of the day at school. We can make school meals free for everyone. We can make sure that no child goes hungry. We can make sure that food banks, a landmark legacy of this Conservative Government, are eradicated and do not exist.
This is why I know the people of Birmingham, Hall Green are fully behind the proposal for a windfall tax. Unlike this Government, we will not simply sit back and watch as families are made poorer while energy companies continue to post profits and avoid paying their fair share in tax. The right hon. Member for Wokingham (John Redwood) said that energy companies had made a loss. No, they have not. No energy company has made a loss. What he means is that they did not make as much profit as they did in previous years. If they had made a loss, they would be among the energy companies that have folded and do not exist.
I would like to congratulate the Minister on his contribution, matching what we have seen in recent days in terms of the verbal diarrhoea from the Prime Minister. He is on a par with that.
It is a pleasure to rise to speak in this debate and to follow the remarks of the hon. Member for Birmingham, Hall Green (Tahir Ali). It has been quite a remarkable afternoon, not least because I found myself in agreement with much of what was said by the hon. Member for Aberdeen South (Stephen Flynn), which is an uncomfortable and unusual position for me to be in—it is a shame that he has left the Chamber just now—because we keep being told by the Labour party that the grown-ups are back in the room and the Labour party is back to where it was and all the rest of it. We are hearing Member after Member on the Labour Benches get up and castigate successful British businesses for having the audacity to make a profit, and castigate successful British people who have chosen to invest in British success stories as somehow evil or the devil incarnate, because they have chosen to invest in oil and gas companies, which employ hundreds of thousands of people across this country and, indeed, many thousands in my constituency.
For most of my life, the Labour party dominated Aberdeen city politics. Until 2015, it held both Aberdeen North and Aberdeen South, ran the city council and elected numerous MSPs to the Scottish Parliament, not that we would know it listening to Labour Members today. The party of Frank Doran and Dame Anne Begg —or Donald Dewar when it comes to it, who represented Aberdeen South—seems completely disconnected from the oil and gas industry. It seems ignorant of how the industry operates and the workers who are employed by it. It is on those workers that the impact of the windfall tax would be most harshly felt were we to introduce the Labour party’s policy, as put forward today. I see some on the Labour Benches shaking their heads, but it is absolutely true.
The very reason that the UK’s oil and gas industry recovered to the extent that it has following the crash in 2014, is in very large part due to the fiscal stability offered to it by this Government. That led to the North sea becoming the most attractive basin in the world in which to invest, which was an incredible reversal of fortunes considering where the industry was in 2014. I just wonder how many international companies would look at a situation that the Opposition would have us in, where the tax regime could be changed at the stroke of a pen or the drop of a hat, and think, “That is the sort of stable fiscal regime I want to invest in,” and not take their business and create jobs elsewhere around the world—the middle east, Russia or the gulf of Mexico—anywhere there is another successful oil and gas sector.
When those companies fail to create new jobs or invest in platforms in the North sea, it will be my constituents, and the constituents of many Members in this House today, who will suffer. It will be the over 100,000 Scots who are directly employed by the oil and gas industry who will suffer. It will be the economy, particularly in the north-east of Scotland, that will suffer. And how exactly do Labour Members think the cost of living of the people I am elected to represent will be impacted if they have uncertainty about their future employment and how they are going to put food on the table for their families?
It is not a surprise that Labour is still so far behind in Scotland that it cannot elect a Member north of the Forth if this is how it understands, or misunderstands, one of Britain’s most successful industries. It is an industry, by the way, that has contributed—I heard the right hon. Member for Doncaster North (Edward Miliband) say its profits were unearned—£330 billion to the UK Treasury. It has a supply chain worth £30 billion. We heard that exports were somehow a bad thing. It exports almost £12 billion of goods and services around the world. The north-east as a region was only just recovering from the oil price crash of 2014 when covid struck. As the hon. Member for Aberdeen South said earlier, this time two years ago the oil price was barely scraping zero.
That is a key point: oil and gas prices fluctuate wildly. Gas may be sitting at near record prices today and oil may be sitting at $88 a barrel right now—that is, of course, impacting on energy bills—but tomorrow that might all change. It is grossly incompetent, naive, inept—this is the Labour party, of course—and totally ignorant to base a policy around the price of oil and gas. Imagine anybody being so stupid, short-sighted or ignorant as to do that. The SNP would never base a significant policy proposal on the price of oil or gas, I am sure.
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.
In starting my contribution in support of Labour’s proposal, I would like to consider what it is actually about. We have heard a mass of iteration in support of the oil and gas industry, but this debate is about the cost of living crisis hitting families in all our constituencies across the country, and I am afraid I heard no mention of that during the last contribution.
I support the proposal for a one-off windfall tax on the profits of North sea oil and gas producers—a one-off tax that will help families and businesses across this country as they face enormous rises in their energy bills. Windfall taxes have been used before and could be used again. This is a one-off measure to try to help the immediate situation facing every one of our constituents in this country.
There is no doubting that the energy market is in chaos; it has been for a decade or more. For many years, I was the shadow energy Minister, and seven years ago we were here talking about the very same thing. This measure will not solve the crisis, but it will help alleviate the massive impact that the cost of living, including energy prices, is having at the minute. Twenty-seven companies have gone bust in the sector since September. Customers are being transferred to new suppliers. That is also a crisis: although Ofgem says that money built up through direct debits will be transferred to the new suppliers within 70 days, that is not happening. Some of my constituents are having to pay bills now when they have hundreds and hundreds of pounds in the bank with the previous suppliers, without that money being used to offset. They have the threat of debt collectors coming to their homes if they do not pay the bills. That needs addressing by the Government as well.
The energy price cap is supposed to protect customers, but last October bills went up by 12%. We are expecting them to go up by 50% or more next time in April, and my constituents cannot afford that. The cost of living is going up all the time, but wages are not going up at the same rate. As of November, inflation was at 5.1% and wages were rising by 3.5%—a real-terms cut of more than 1.5% on average prices. And then we are going to be hit with the rise in energy prices.
I represent Sunderland in the north-east of England—an area where many people work in the oil and gas industry, which I know very well. Rounded up average earnings in the north-east are £28,000 a year, while in London they are £38,000 a year, yet energy prices are the same. How are my constituents going to pay for that enormous rise in energy prices? No one can afford it, and Sunderland and the north-east can afford it least.
The energy market is broken; as I have said, we have known that for years. People need help now while other things go on to try to fix the disaster in the energy market. I heard nothing from the Minister to suggest how the Government will address this real crisis hitting every one of our constituents. It has nothing to do with politics. The energy bills of every person in this country are going up enormously in a couple of months’ time. If the Government do not accept our motion for a one-off windfall tax, or our call for a cut in VAT, what are they going to do?
We are now at a point where warm words simply are not enough. We need action from the Government to help every one of our constituents in this crisis that means people will not be able to pay for their energy supply. This utility is essential to every person in the country, so I look forward to hearing what the Minister has to say in summing up. Something simply has to be done.
We have had a pandemic, and the Prime Minister and the Chancellor put £400 billion into the economy to support businesses, people and employment. At one point, 11 million people—a third of the workforce—were being paid by the Treasury. If at that point one had said, “We will emerge with a growing economy, falling unemployment and 1.5 million vacancies,” it might have been thought to be a very optimistic scenario.
Yet the British economy is growing, and Europe, America and Canada are growing. The reason for the inflation spike and rising oil prices—they were zero during lockdown—is that the world economy is recovering. I make the gratuitous point that that is rather good news. It causes a problem for the Government in how to deal with some of the shortages and some of the price increases, but it is all good news. There are jobs out there, and people have a great opportunity to get into employment. The key point is that the Government’s policy of saving jobs has been a tremendous success.
The North sea has been a tremendous British success story, as my Scottish colleagues have said, but it is now in a mature phase. It needs stable, calm husbanding and tax rates so that less viable fields are eked out to their maximum life and so that newer fields in deeper waters are able to be developed. That is why we need a stable tax regime.
The arguments that have been made are perfectly sensible. Companies were losing money only a year or two ago, and now they are making money. The corporation tax regime and the petroleum revenue tax generate money when they make profits, which is the fair solution. The oil companies are owned by pension funds, and most of the people in those pension funds are ordinary people up and down the land. We have already heard about the 100,000 jobs that rely on the North sea. Why kick a successful industry when it can generate a lot more wealth, a lot more jobs and a lot more gas and fuel for the benefit of our nation, just to make a quick political point and make a few runs?
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.
We need more nuclear power, so we need to give it a big push. We need to value and to continue supporting the North sea. We should leave alternative measures, on top of all the measures the Minister set out at the beginning of the debate, for a statement from the Treasury. I think the Government’s policy is perfectly sensible and will get more supply of energy and a stable tax regime.
Yes, it is very good value for money, because that is a lot cheaper than Hinkley Point C. The reality is that the Government are underwriting the industry, and if the industry overspends when it is producing a nuclear power station, it either gets equity or gets paid in cash. That is a very sensible way of doing it.
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.
Yesterday, many Conservative Members, not many of whom are here today, said that they wanted to talk about the real things that affect their constituencies. I am as happy as they are to talk about the things that affect our constituencies.
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.
Financial challenges loom for our constituents because the Government did not get the job done in that policy area. The Joseph Rowntree Foundation has found that single adult households on low incomes could soon be spending 54% of their income on energy bills—a shocking statistic. The energy crisis is compounded by inflation at 5%, the highest level since 30 years ago when the Tories were last in government. There is a slash-and-burn approach to the country’s energy supply. Households across our nation have had their resilience tested time and again by this Government. Millions more are struggling with the cost of living, and it is becoming impossible to heat houses. Energy bills are shooting up and there is no action of any substance from the Government.
What is the Government’s response? Let us say that there are two options: a windfall tax on the oil and gas companies that have profited from the Government’s mess, or an increase in taxes on struggling low-income families and workers. Of course, we all know what the Government will go for and have gone for: taxing £12 billion out of people’s pockets. It is worth remembering that a 1.25 percentage point increase on national insurance contributions is in effect an 8% increase, given a national median wage of about £29,900. On that income, in 2021-22, a person will have paid £2,439, but in 2022-23 they will pay £2,652, which represents an increase of 8%.
The gas companies have made mega-profits over the years. The largest made a combined profit of $174 billion in the first nine months of 2021. Huge profits are being made, but despite the ambitious plans from BP, for example, to reduce its carbon footprint and move towards renewables, they are not being reinvested at the level that they should be—not at all.
Data published by the UK Government-backed extractive industries transparency initiative shows that in 2019-20, ExxonMobil received £117 million in total from HMRC, while Shell got £110 million and BP received £39 million. What are the Government going to do about those tax reliefs? Can we have an answer to that? What was the total expenditure forgone in tax reliefs in 2020-21?
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.
Finally, we have heard the outrageous suggestion that no one supports a windfall tax. May I remind—or bring it to the attention of—Conservative Members that 75% of Tory voters support a windfall tax?
It is clear to anyone living in this country that we are experiencing a cost of living crisis. As food and energy prices are spiking, my constituents tell me that they are anxious and outraged at ever larger bills. The Resolution Foundation estimates that in April, when changes to the energy price cap are introduced, those bills will soar by 50%. That will lead to more than one in four households spending at least 10% of their income on energy. With housing costs already taking up a significant proportion of household spending and food bills increasing, more and more people will be forced to choose between heating and eating while this Government dawdle.
I strongly support Labour’s proposal to introduce a windfall tax on oil and gas. While my constituents worry about their bills, North sea oil companies have been reaping criminal profits. The think-tank Common Wealth reports that Shell and BP alone have paid £147 billion to their shareholders since 2010, which is more than seven times the £20 billion that it would take to keep household energy bills at their current level. Those profits have only become more obscene as the current energy crisis has worsened. At the end of last year Bernard Looney, the chief executive of BP, described the crisis as a “cash machine” for his company. That cash is coming from my constituents’ pockets, and those of people who are struggling to pay their bills. There is simply no argument when it comes to whether these companies can afford a windfall tax. It is my constituents who cannot afford the Government’s inaction. This refusal to act, however, comes as no surprise when the Conservative party has taken almost £1.5 million from the energy industry under this Prime Minister.
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.
I therefore urge the Government to implement a windfall tax now, to bring energy into public ownership, and to invest in the transformative changes that will protect struggling families and our planet now and for years to come.
We are facing two energy crises. The first is the one that is right in front of us. In opening the debate, my right hon. Friend the Member for Doncaster North (Edward Miliband) made a powerful case for action to help people. I would say to the Minister, were he still in his place, that he may have felt that his speech got him through this afternoon, but it is not going to get the Government through to the end of April, because I think we all know that the Government are going to have to do something. They are going to have to raise funds. We have a plan; we have debated it today. The Government do not have a plan, but they will have to come up with one.
In Leeds, fuel poverty is rising, and is now up to 57,000 households. We can trade statistics, but in each of those households, a debate takes place. Parents have to make decisions that they do not want to have to face. We heard about the choice between heating and eating, or between buying clothes for their children and heating or eating, and about people going up to a complete stranger and saying, “I know we have never met, but can you help to feed my family this weekend, because I cannot”, which takes a lot of courage. This is happening in the sixth richest country in the world.
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.
However, to go back to the start of the debate, we are already concerned about the ability of our constituents to pay the bill today, never mind the bill in April. How on earth will so many of our constituents be able to afford to make that change? A heat pump can cost between £5,000 and £15,000. We think hydrogen boilers will be cheaper, but we do not yet know whether that technology will work; I hope it does. At the moment, there is no way in which many of our constituents will be able to afford that transition. The Government, as well as needing a plan for April, will have to come forward with a plan for the next 10, 15 and 20 years to make that happen. It has to be a plan that can be afforded by the nation and by our constituents. We do not have a lot of time for it to appear.
We associate energy poverty with the poorest people and the most deprived communities. Liverpool, Walton is home to many people struggling to afford everyday essentials and wishing their streets and neighbourhoods might see some of the prosperity this Government promise in their empty words.
For the young mum struggling with the top-up payment card in the local shop, trying to keep the lights on and the heating running in her home, that poverty is humiliating, yet the experience of living hand to mouth for energy, and that humiliation, is now spreading across the UK, because the energy market is broken. It is not even really a market but a racket of monopoly suppliers, capped prices and enormous excess profits. Rising energy bills are not an act of God. They are the result of the anarchy of global energy supply and the total mismanagement of Britain’s energy industry by a Tory party that seems to put any interest above the interests of the British people. I support a windfall tax on oil and gas producers to lower bills this year. I listen to my hon. Friends asking Government for an extra £1 billion here or an extra £1 billion there. Now more than ever, the evidence before us—an industry pleading with Government to lift its cap, families pleading with Government to make the cap tighter, and oil and gas producers boasting that their companies are like cash machines—demands a new settlement.
I stood for election pledging to take the whole energy supply industry into public ownership, to set up a national energy agency to own and manage the grid and to put the big six energy suppliers, the only ones likely to survive this crisis, under public control. I believe it is the job of Government to fix the energy crisis, not to prop up the failing energy market.
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.
I do not know whether any of my colleagues present listen to the “Political Thinking with Nick Robinson” podcast, but the Leader of the House was the guest on Saturday, and it was interesting to note that he referred to the cost of living crisis. He was using it as an excuse to avoid talking about Downing Street parties, but the fact that he acknowledged that we have a cost of living crisis is something he may need to go and discuss with the Under-Secretary of State for Business, Energy and Industrial Strategy, the hon. Member for North East Derbyshire (Lee Rowley), who opened this debate.
People will know that the Leader of the House is my constituency neighbour, and he may have popped across the border to buy some fish and chips, although I think that is unlikely. If he did, he might have spoken to a fish and chip shop owner who got in touch with me recently to say that his gas and electric bill has increased fourfold in the past three months. That is simply unsustainable and he cannot pay it, so a valued business that has served the community for more than 30 years now faces closure. The same scenario is playing out across the country in people’s homes and businesses, with April’s price cap rise looming large.
Surging gas prices are a global issue, but the extent to which the consequences are allowed to crush consumer and businesses finances is a Conservative issue. While bill payers grow increasingly anxious about how they will make ends meet, UK oil and gas producers are making near-record profits, on a scale not seen since before the 2008 crash. The industry has suggested that to tax it more would deter investment in renewables, and we have heard some comments of that nature from the Government Benches today, but the fact is that the UK is one of the most profitable countries in which it operates, because of the favourable tax environment.
Despite David Cameron’s pledge to lead “the greenest Government ever”, measures introduced by his Chancellor have meant that many oil and gas companies have paid negative tax in recent years. Despite our commitments at COP, oil and gas producers are rushing to taking advantage, determined to exploit to the max what is left of our fossil fuel reserves, instead of doing as we should and keeping it in the ground. It is not just environmentalists who say this: there is a very sound business case, if we listen to people such as Lord Adair Turner.
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.
The Chancellor needs to act on this issue, but until he does, oil and gas producers need to pay their fair share of tax rather than expecting energy bill payers to pick up the tab for them. If Tory MPs—I see there are only one or two left in the Chamber—care about their constituents and the cost of living crisis, they should join Labour in the Division Lobby tonight. Rather than adopting Labour’s plans to prevent millions from falling into fuel poverty, the Government, in presiding over wage stagnation, universal credit cuts and a national insurance hike, have accelerated that process.
The owners of local cafés, barbers and bakeries did not have the luxury of jetting off to California like the Chancellor did when the going got tough over the Christmas period; they were struggling to keep going despite the supply chain issues, depleted workforce and rise in inflation. Was expecting the Chancellor to be doing his job too much to ask? At least Labour is here today doing the Chancellor’s job for him. The £600 million contingency fund proposed by Labour offers tangible and immediate support to businesses and families crippled by inflation. Our plan to cut VAT on energy bills—which, incidentally, the Government used in the referendum campaign as a reason to support Brexit—and to roll out targeted support would take hundreds of pounds off most households’ monthly costs. In rejecting the windfall tax on oil and gas companies, the Government send a clear message to millions of families and business owners across the UK that when it comes to choosing which side they are on, they care more about the oil and gas producers profiting and polluting than they do about keeping pensioners warm this winter.
It is a real pleasure to participate in this debate, particularly because we have heard so much from the Tories about this being the issue that their constituents would like us to talk about instead of cakes and parties. It is great to see so many of them here to discuss it! [Laughter.]
The Liberal Democrats support Labour in its call for a one-off windfall tax. I regret that the Minister would not allow me to intervene earlier, because I wanted to ask him what exactly is his understanding of a windfall tax, as he did not seem to be very clear on that point. We are clear that the profits being made by the oil and gas sector over the past few months are related to the market price of gas going up way beyond typical levels, and that that is very much as a result of increased demand. We expect it to be very much a medium-term rise that will not last very long. That is why we support the calls for this one-off, targeted tax in order to lessen the burden on those who will feel the impact. We have heard many great contributions, particularly from the Labour Benches, about the impact on ordinary people who will have to pay. It is quite right that we try to equalise that impact. We are proposing not only to double the warm home discount payments from £150 to £300 but to extend it to all those on universal credit and pension credit, and to double the winter fuel allowance to give up to £600 a year to 11.3 million elderly pensioners to help them with their heating bills.
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.
The hon. Member for West Aberdeenshire and Kincardine (Andrew Bowie) talked about business and the importance of the oil and gas industry, but he needs to remember—I am addressing an empty seat, since he is no longer in his place—that there are many other energy-intensive businesses across the UK that are facing a double whammy this April. They face not only increased energy costs—and they already find themselves uncompetitive compared with EU businesses on energy costs, which tend to be higher in this country than they are abroad—but the planned increase in national insurance, which will hit employers as much as it will hit employees. We have been calling for the Government to scrap that planned tax rise. It is the wrong tax rise at the wrong time.
The Government need to look at the cost of living crisis in the round. They need to look at energy costs, tax rises, and at all the other costs being imposed on British consumers. One Member—I am afraid I forget which—made the point that the more people have to pay for basics, the less they have in their pockets for discretionary spending on our local high streets, and to help our economy grow. The Government need a much better plan for the cost of living crisis, and we are seeing woefully little of that.
One thing we all seem to agree on is that there is a cost of living crisis, although the Tories seem to agree on that only now, and they are using it as an excuse, having done nothing about it, for the Prime Minister needing to stay in his place. That makes no sense. Given that we agree there is a cost of living crisis, I understand why many people would sympathise with the proposal that Labour has brought forward. In reality, however, it may be an easy political soundbite, but it does not seem well thought out, and it does not address the immediate practicalities of this cost of living crisis. Nobody has yet explained how the proposed windfall tax will work. Either it will be a retrospective tax to try to claw money back once profits are announced at the end of the financial year, or it will not kick in for a year’s time. We need to bring in money here and now, so that it can be used to help households that are struggling with eating, or heating their houses.
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.
As I have said many times, at the moment during this crisis the Treasury is raking it in, compared with what it predicted would happen in the March 2021 Budget. The November Budget already estimated that this financial year will see an increase of £1.1 billion in oil and gas revenues, an extra £2 billion next year, and £6 billion in total over the Parliament. That is money that the Treasury has got here and now, which should be used to help households—and we should also consider what the additional VAT from our energy bills and extra fuel duties are bringing in.
The Treasury allocated £1.7 billion in the November Budget for the development of Sizewell C. If that money was reallocated, that would mitigate the cap for those households who qualify for the warm homes discount. Once more, I say to Labour: rethink this madness on nuclear, spending up to £60 billion, adding that to our energy bills, for a new nuclear station. The phrase “Let’s speed up investment in nuclear” is an oxymoron because nuclear projects take that long to come to fruition.
Households do need help and the Treasury has got money that it should be using to help people. We have not heard one new Treasury-funded policy from the Government—hopefully the Minister will be able to provide one in summing up. In the meantime, that is why I make the case for Scotland to go its own way.
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.
As people in my constituency bear the brunt of this unprecedented crisis, oil and gas companies are set to report near record profits, with private shareholders cashing in on soaring wholesale energy prices.
No—[Interruption.] I am sorry.
Even so, that is not enough for this Cabinet of millionaires. In fact, last month, the Education Secretary had the temerity to take to the airwaves and plead poverty on behalf of the fossil fuel giants, saying that they were struggling enough already. This morning, when my hon. Friend the Member for Brighton, Kemptown (Lloyd Russell-Moyle) challenged the Chancellor to put the interests of ordinary people before those of the oil and gas companies, the Chancellor made it clear exactly whose side he was on. Today, Conservative Members have a simple choice: they can either insist that the fossil fuel giants step up and accept responsibility for a crisis from which they have profited so handsomely, or they can continue to turn a blind eye to the immense human suffering unfolding not just in my constituency but in theirs, as they have throughout this long and bitter winter.
Labour is offering the Government the chance to right their failure to prevent the crisis. We know from the Prime Minister’s grotesque performance in the House yesterday that the word “responsibility” is entirely missing from the Conservative party’s vocabulary, but, as recent research by Carbon Brief demonstrates, had successive Conservative Governments not taken a wrecking ball to the zero-carbon homes standard subsidies for onshore wind and spending on essential energy-efficient measures, household bills would be £2.5 billion cheaper than they are today.
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.
We must not forget that the public are watching. They will remember who stood up for them at this terrible time and they will never forget those who looked away. I hope that Conservative Members will reflect on that before walking through the voting Lobby today.
The impact of the cost of living crisis on my constituents and people across the country is truly harrowing and a shameful injustice inflicted by the Government. An article in the Liverpool Echo this week talked about the “perfect storm” that people in our city are facing of soaring energy costs and record inflation—all against a backdrop of a decade of Conservative austerity that has cut our support services to the bone.
According to research from Feeding Liverpool, about 14% of households in Liverpool experience fuel poverty, which is significantly higher than the England average. Some 32% of adults in Liverpool are food insecure, where food is a source of worry, frustration and stress—that is more than 150,000 people in Liverpool alone. That was all before inflation started to spiral. A humanitarian crisis demands permanent solutions, not tinkering with a broken system.
An example of that broken system was highlighted by my good friend Tony Caveney, a cabbie from Liverpool, who said in a message last week:
“An old woman in the taxi this morning said she had to get out the house to get warm.”
I did not know whether to laugh or cry, but we should all be raging with anger, because it is the political choices of the Government that have enabled the scandalous situation that many people in our communities find themselves in.
This crisis will affect generations to come. Before Christmas, I spoke in the House about what Professor Ian Sinha, a paediatrician at the fantastic Alder Hey Children’s Hospital in my constituency, said to me:
“A big issue at the moment is the interplay between food and fuel poverty—eat or heat—in essence babies and infants in the coldest houses will spend their calories trying not to get hypothermia rather than utilising the energy to grow their body systems and lay the foundations for a healthy life course”.
That is shameful. Fuel poverty is a political choice and hunger is a political choice. They are all choices made by the Government and inflicted by the Chancellor in particular. The £20-a-week cut to universal credit and his current failure to intervene in the spiralling costs of fuel bills are political choices.
Many households have already seen a significant energy price rise and the household energy price cap is expected to rise by up to 50% in April. Fuel poverty campaigners estimate that that increase will drive 2 million people into fuel poverty and impact older households already seeing the suspension of the triple lock on pensions. By voting for the motion today, the Government could introduce a windfall tax on the profits of North sea oil and gas producers, which is a much-needed first step towards funding a national package of support for households.
The crisis has been long in the making and we need the Government to bring about systemic change. Trade unions and campaigners have long argued that the privatisation of the energy sector has resulted in high profits while the public foot the bill and costs rise. People who cannot afford the extortionate bills pay with damage to their health, livelihood and wellbeing.
Workers in the industry are being made to pay through attacks on their terms and conditions by industry bosses, which have pushed many workers into fuel and food poverty. We saw that when British Gas used fire and rehire tactics against its workers at the height of lockdown, and we see it today with OVO, which is threatening to make between 1,700 and 2,000 staff redundant despite, according to Unite the Union’s estimate, its top directors taking £4.6 million out of the company in salaries and benefits in the last five years.
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.
The technology and solutions exist. What is lacking is the political will from a Government whose mission is always to prioritise private profits over the wellbeing of the people who they are supposed to represent. We do not have to look far. Across the border in Wales, the Welsh Government are going to set up a publicly owned energy provider in the near future, so another way is possible.
I urge the Government to back the motion, bring some much-needed relief quickly to worried communities across the country and have the bravery to tackle the systemic failings that are driving this humanitarian crisis to alleviate the suffering of millions. We cannot let this plight continue when it can be eradicated by the correct political choices.
That we are living presently with a cost of living crisis is surely undeniable. Inflation is at 5.5%, and that is reflected in our food prices and our energy prices. It is exacerbated by a supply chain crisis due to coronavirus and from the twin shotgun holes that the UK Government have blasted in each of their feet through the Brexit that they have stumbled towards.
This motion, I am sorry to say, probably looked great on the desk of a researcher somewhere in this building, or that of a press officer, but it collapses the instant it comes into any kind of contact with reality. The problem we are facing with the cost of living crisis is undeniable. While we have heard many stories about the pressures facing our constituents—we have similar stories we can tell—I am sorry to say that I have not heard anything to persuade me why a one-off smash and grab on the North sea industry is the best way to deal with this crisis.
In Scotland, we are used to dealing with fuel poverty amidst energy plenty, but the real problem—I am sorry to say it is encapsulated by the motion from the Labour party today—is exacerbated by the short-termism that we have seen in UK energy policy. Some £375 billion has been taken out of the North sea since oil started coming ashore along with gas, but in the years of those peak revenues, the revenues were pumped out by a Conservative Government as quickly as possible to try to close a catastrophic balance of payments gap. That drove sterling up to unsustainable levels, drove out manufacturing jobs and drove 3 million on to the unemployment queues. Unlike Norway, we have been left with nothing tangible to show for it, whether a long-term oil fund for future generations, or an energy company such as Statoil, given that the UK equivalent, Britoil, was privatised early in the 1980s.
Successive UK Governments have lied about the extent of that resource, almost as assiduously as they have mismanaged the public policy that should have been going on around it. We are seeing that repeated in many respects with the failure of the UK Government to press on with the carbon capture project at Peterhead and with the intransigence that we see over electricity grid charges, and once again Scotland and Scottish jobs risk being the casualty of that.
It is perhaps hardly a surprise that trust among SNP Members in the UK Government to do the right thing by the North sea and its massive resources is low. Given our previous experience of windfall taxes and the impact they have had, we certainly have no confidence that a UK Government of any stripe can be trusted to use that windfall wisely. This measure is simply a short-termist one-off that will not tackle the fundamental problems.
Despite what some Members might believe, the finances and economics of the North sea have been precarious over the past few years. We will need oil and gas for years to come as fuel and feedstock as part of a transition. It may not fit the preferred narrative, but it is many of the energy companies operating in the North sea that are investing most heavily in the renewables revolution. To give an example, a couple of weeks ago, there was the announcement of the ScotWind round of investment. That is 25 GW of electrical power from the seabed around Scotland, which has brought £700 million up front for the Scottish Government. It will bring supply chain benefits, and once the projects are under way, there will be an ongoing revenue stream per megawatt-hour of energy generated. That is what can be done with the limited powers that the Scottish Government currently have. Would that we had had similar powers over oil and gas in the ’70s, ’80s and ’90s, we might have something to show for it.
If we are to reduce energy bills, we need to drive energy efficiency and reduce our CO2 emissions, and we need to recognise that the windfall tax will do nothing useful in that regard and will likely do great harm. It will sap confidence. It will destroy jobs in the North sea, and with that it will harm investment and damage the skills base and human capital we will be relying on for the renewables sector.
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.
It is a real honour to speak in the debate. The hon. Member for West Aberdeenshire and Kincardine (Andrew Bowie) said that the Labour party is not the party of business, and I refute that and disagree with him, considering that many businesses up and down the country are very worried about the increase in energy prices and how that will continue to affect them. In my constituency and across the borough of Lewisham, we have among the highest numbers of self-employed people in London, and they are well supported by the local council.
I support the motion, which is all about the cost of living and how it will affect families. We have a seen a global rise in wholesale energy prices that has already led to 27 energy suppliers going bust last year. Energy prices are at their highest levels for the last three decades. Customers have seen increases in their bills that have largely been protected by the energy price cap. The chair of the Lewisham Pensioners’ Forum, Bridgit Sam-Bailey, recently spoke on BBC News about her personal experience of rising fuel prices. She explained the misery of suffering in her home due to increases in fuel prices that she can no longer afford from her pension. She said that she often stays in bed to keep warm and only heats one room. She no longer has the financial freedom that she used to have. We have heard other such stories today, and they are indeed heartbreaking. Her situation is not unusual. So many other people are experiencing a diminished quality of life. Surely the Government do not wish that for our older generation. Older people should be treated with respect and dignity. Do the Government really view such experiences as acceptable?
Energy bills are due to rise again, and that will affect mainly older people, vulnerable people and low wage earners. Recently, I met a lady in her home who was wearing a winter coat and a blanket to keep warm. From the outside of her semi-detached house, nobody could identify the misery and deprivation that she was experiencing from poverty and lack of heat.
As for children and young people, the Government need to consider how being cold can affect children’s development and their ability to learn, play and grow. It does affect them. It is harmful to them to be cold and it is a sign of poverty. The rise in fuel prices is driving people and families deeper into poverty. When a child is in poverty, they experience deprivation. If that continues, their family becomes a family in need and they will go on to need support from social services and other public services, perhaps leading to a cascade of situations in which they will need support.
According to Maslow’s hierarchy of needs, the most basic needs are food, water, warmth and rest. People’s most basic need for warmth is not currently being met. For some people suffering illnesses such as sickle cell disease, lack of sufficient warmth can bring on a sickle cell crisis and lead to hospitalisation, organ damage and, at worst, death. Other problems arise from damp and rot after prolonged loss of heat in the home, and those can also affect children. The Government must not bury their head in the sand. Deprivation of warmth is a serious issue.
Our country faces a cost of living crisis and a growing strain on businesses, with petrol, food and energy bills sky-rocketing. What will the Government do about that? What will they do to prevent further hikes in gas prices, as those can be prevented by the Government? According to the energy sector specialist Cornwall Insight, bills could rise by 46%, from £1,277 a year under the current price cap to £1,865 a year. When faced with a crisis, this Government shift the brunt of the burden on to the most vulnerable. To fix the social care crisis, they decided to increase national insurance contributions, which will disproportionately hit working families, young people and businesses trying to create more jobs. Despite pressure from those on his own Benches, the Prime Minister will not halt those plans.
Faced with an energy crisis, the Government now have an opportunity to break that trend and find sensible solutions rather than dipping into the pockets of those only trying to get by. As energy bills soar for consumers, natural gas operators in the North sea will rake in their biggest profits in over a decade. UK-based natural gas companies such as BP and Shell are expected to record profits of $20 billion. A one-off tax on those companies makes sense.
This is not unheard of; Thatcher introduced a windfall tax on North sea operators, as did Blair. Will the Secretary of State for BEIS do the same? Wales has stepped up to help those who are struggling, and France and Denmark are likely to follow suit, but we have seen dither and delay from this Government. I remind the Secretary of State that this all reveals how deeply unreliable fossil fuels such as natural gas are. Even natural gas in our backyard is tied to global prices. We need a safer long-term plan.
A green industrial revolution guarantees greater home-grown energy, decreasing our dependence on unreliable fossil fuels and better protecting us from external price shocks. Will the Secretary of State therefore also promise to increase capital investment in renewable technology in order to keep my constituents’ energy costs down, now and in the future?
Before I start, may I say gōng xı̌ fā cái—happy lunar new year—to everybody celebrating today? When we were kids, we used to cheekily add the phrase “âng-pao gia lái”, which means, “Where’s my packet of red money?”—and boy couldn’t ordinary people do with some pounds in their pocket after more than a decade of Conservative government.
That is why I am pleased to speak in this incredibly important debate about a windfall tax to help consumers with energy costs. We are here in the mother of all Parliaments discussing the issues that matter and, importantly, the solutions—solutions that Labour has put forward, which would save people money and help them with the problem of skyrocketing energy costs. This debate is so very important because it is the same discussion that people are having up and down the country—“Why are our energy bills going up so much, how are we going to afford them, and why aren’t this Government doing anything to help?”
A family in Luton North came to see me last week, absolutely terrified about the real impact of the cost of living crisis—and it is a real crisis. The cost of their rent, their energy bills and their food costs, all things that they were able to cope with not so long ago, are now becoming a struggle, to the extent that this wonderful family—who are working, before anyone wants to come at them on that point—are struggling so much that they came to their MP for help.
Throughout this entire energy crisis and the debates we have had about Labour’s plan to cut the cost of people’s energy bills, we have heard a lot of tone-deaf attacks from those on the Government Benches—particularly from the Under-Secretary of State for Business, Energy and Industrial Strategy, the hon. Member for North East Derbyshire (Lee Rowley), who sadly is not in his place. Shamefully, they even voted against out plans to cut VAT on energy bills to help people get through these difficult times. It is as if they do not know the value—the breathing space—that an extra two hundred quid would give a household who were struggling. They just do not get it at all.
During the pandemic, children told the charity the Food Foundation that their parents skipped a meal so that their child could eat. One child said:
“Mum is receiving those school meal vouchers because she tends not to eat so she has enough for me.”
Another kid confided that they were worried about their mum’s job, saying that
“she only eats a little.”
Last week, when I raised the issue that women were 36% more likely to struggle with housing costs or be in arrears, it was met with utter disdain. But this is the very real and very horrible reality that thousands of people are living day in, day out under this Government: having to choose between eating, heating and keeping a roof over their heads.
There is another way. Labour’s fully costed package to help keep energy bills low would scrap VAT on home energy bills for a whole year, alongside focused and targeted support through increasing and expanding the warm home discount to 9.3 million people. That would not only help the average household with around £200 off bills; it would also deliver targeted and focused support to those who need it most, including low earners and pensioners.
That targeted help for pensioners cannot come soon enough. Rising inflation is already hitting pensioners hard. That, combined with increased food costs and this Government’s retrograde decision to scrap free TV licences for all over-75s, means that the unprecedented hike in wholesale energy prices will be totally unmanageable for those living on low fixed incomes. Age UK has reported that the latest Government figures show that around 1 million pensioners—8%—said they could not afford an unexpected bill of £200. The charity also warns that if nothing is done to tackle rocketing energy costs, that 1 million older households that will be struggling with their costs will be added to the 150,000 households who already fell into fuel poverty this winter, yet the Government are still taking a hands-off approach, saying that they cannot do anything to help. That is simply not good enough. There is plenty that can be done to help; they just need the political will to do it.
So why are the Government still on the side of big businesses instead of consumers, despite clear evidence that oil and gas producers are reported to have near-record incomes for this past year? The Government have still so far ruled out that windfall tax—why? Because they lack the political will and backbone to do it, and the understanding of why it is so necessary. A simple, straightforward solution is staring the Government in the face today; one that is carefully costed and clearly laid out. But they will reject it again, and the British public, and the ordinary people who play by the rules, will be all the worse off for it.
The planned rise in energy bills will be devastating for tens of millions of households, and it is clear from the contributions of right hon. and hon. colleagues that there is widespread understanding of just how devastating those price increases will be. Unfortunately, that understanding does not seem to extend to the Government Benches. Not only is that complacency very misplaced, but it is a political error. I know that I am relatively new to the House, but I would like to offer those on the Government Benches some advice: “When you are in a hole, stop digging.” The fortunes of the Government are not going to recover if they stand by and allow energy prices to skyrocket. As my hon. Friend the Member for Bradford East (Imran Hussain) pointed out, if they make the public pay, they will in turn pay. Because obscene profits are being made by the energy wholesalers and the energy retail companies while our constituents are suffering, and it has nothing to do with their own efforts.
My hon. Friend the Member for Salford and Eccles (Rebecca Long Bailey) recently reminded us that the disastrous rise in prices should not be a surprise; we were all warned that closing Britain’s largest gas storage plant in 2017 was illogical, when we already faced volatile winter gas prices and were becoming too dependent on energy imports. Scrapping our own energy storage capacity also obliged the energy companies to make short-term purchases in the wholesale markets—quite possibly the most short-sighted and idiotic way to run a utility business.
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.
Utility businesses provide public goods, but there is nothing good about the current conduct, or how the market is chaotically structured under this Government and their predecessors. The main objection to windfall taxes is that they are very destructive to business planning, but that is not really a fair description of a one-off price rise if it is met by a one-off tax increase. Businesses continue as before, but the windfall is redistributed to consumers rather than shareholders.
The further objection is: what if it is not a one-off energy price rise and is instead a permanent—or at least a long-lasting—increase in energy costs: what is the response then? Windfall taxes year after year. Although that objection has some merit, the appropriate response is not to let these poorly run energy companies make excess profits in perpetuity. If it is found that they are making huge profits year after year, and households continue to struggle year after year, that would undoubtedly be a failure of Government policy, in which case the logical response would be to take them into public ownership. After all, who better to provide a public good than the public sector? That is something that trade unions such as Unison and campaigns such as We Own It have been arguing repeatedly. The model of diversified owners, new entrants and challenger companies has completely failed. Many of those companies failed so much that they have gone bust. It is a fake competition model, because they all buy energy from exactly the same source.
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.
I support the motion for a windfall tax on the profits of oil and gas companies. Household utility bills will rise by an estimated £50 a month in April, and we have heard many moving stories today about how struggling households will have to make very difficult and awful choices. Millions of people will be turning down their heating, or turning it off altogether, so that they can keep eating, and millions more will feel the pinch, including many of my families in Bath.
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.
Ideally, all power should come from renewables: onshore and offshore wind, solar and marine. There are few countries as well situated as the UK for wind and marine. Not only should we be generating all our power renewably but we should be exporting it across Europe. This is a perfect opportunity to be a global leader.
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.
A lot more should have been done over the last seven years, when the Tories have been in government on their own. The Government quadrupled the number of contracts for difference offered in the last auction round, but that is not enough. Why limit the number at all, as it slows the roll-out of renewables?
So far, the Tory Government have allowed renewables to grow, but only slowly to maintain the fossil fuel and renewable industries alongside each other. As businesses and residential customers shift from gas to electricity, limiting the growth of renewables by restricting the number of contracts for difference keeps the fossil fuel industry in the game.
That brings me back to the millions of consumers who are committed to climate action and have switched to a renewable electricity supplier. In April they will find they are paying more for their electricity, even though they are not buying any electricity generated from gas. This is a clear example of the market being regulated for the benefit of the gas companies. Renewable electricity prices are approximately the same now as they will be in six months’ time, so why should such customers have to pay higher bills?
The Government need to fix this unfairness as a matter of urgency. Although it would not fix the energy crisis for everybody, it would at least reward customers who are doing the right thing on climate action. It would incentivise more people to switch and, in turn, drive climate action, but a windfall tax on the profits of the oil and gas companies is needed immediately.
Thank you for calling me to close today’s debate, Mr Deputy Speaker. Throughout the debate, there has been at least one area where we have had clear agreement: no one has disputed the fact that we are living through a cost of living crisis. Prices are up, real wages are down, taxes are being hiked and growth is stalling. No one has denied that the looming spectre of eye-watering energy bills is now hanging over households and businesses. That is precisely what the motion today seeks to address, with real solutions to the problems people are facing. Many Members across the House have shared examples of the hard choices their constituents are already making, and I am extremely grateful to them for that.
In responding to the debate, I have to begin with the scale of the problem. My hon. Friends are right to say that people are struggling now. I am sure we have all spoken to constituents who are genuinely scared about the impact of sky-high bills. Those people are feeling the pinch now when they go to the shops or fill up their car, but that is mild compared with the storm that is about to hit households this April. If the average energy bill hits close to £2,000, most people I know will feel it very much, and some will not be able to pay.
In closing this debate, I want to respond to the points that have been raised and to say why I believe the interventions that we have put forward and the windfall tax we would use to pay for them are fair, proportionate and necessary. Many Members have lamented the fact that we were in this position to begin with, and I acknowledge that. A decade of poor Government decisions has left us particularly exposed to global gas prices. This Conservative Government were wrong to reduce our gas storage capacity, they were wrong not to proceed with their original plans for better home energy insulation and they were wrong to prevent the further development of some of the most cost-effective renewables, such as onshore wind.
It is also down to this Government that families are having to consider the prospect of rising energy bills alongside other things that will hit their household budgets hard, particularly the very large rise in national insurance scheduled for April this year. Let us not forget that this tax rise will see the poorest subsidising the wealthiest, the north subsidising the south and the young subsidising the old. So with inflation soaring and energy inflation of particular concern, I put it simply to Conservative and SNP colleagues that action is essential. Despite the unholy alliance of Conservative and SNP Members ranged against the motion today, I put it to them that it is a question of how, not if, the Government should intervene.
The Labour plan would save everybody at least £200 off their energy bills. Those who are most vulnerable would receive £600. That most vulnerable group would include all working families with children claiming universal credit and all pensioners in the savings credit group of pension credit. We would pay for that by levying a windfall tax for 12 months on profits from North sea oil and gas companies. We can do this, and we need to do this because, as my right hon. Friend the Member for Doncaster North (Edward Miliband) said in opening the debate, given the scale of the challenge, we need to maximise the resources available to alleviate it. In today’s debate we have heard an overwhelming case for that, including in the speeches from my hon. Friends behind me.
We are advocating a one-off, proportionate tax on firms that are experiencing record profits directly as a result of this crisis, to help customers and other businesses secure our economy for the long term. The North sea will continue to be one of the most profitable and attractive places to extract oil and gas from. It will also continue to provide a substantial amount of our domestic supply. No evidence has been put forward today that a windfall tax on those profits, which were never expected or anticipated, would reduce investment or have a negative impact on jobs. It has been done before, by Labour and Conservative Governments, and we can do it again.
I want to give three explicit reasons why such a tax would be in the interests of businesses and the economy as a whole. First, despite the unprecedented squeeze on household budgets, consumer spending is still forecast to grow this year. That is because some households saw a considerable increase in their savings during the pandemic, but if concerns about energy bills and other pressures were to result in consumer spending not growing as expected, we would be in a very difficult position indeed. I think the right hon. Member for Wokingham (John Redwood) made a similar point in his speech.
Secondly, inflation is high. It is currently being written into contracts as businesses try to protect themselves against future price rises, which means that even if global inflationary pressures diminish, inflation will be baked into our economy for some time. A rise in energy bills of the kind that the Government contemplate would add as much as two additional percentage points to inflation and would have a significant spending cost for the Government.
Thirdly, under our plans, the windfall tax would give us a contingency fund of £600 million to help energy-intensive businesses through the energy crisis. I recently visited Pilkington Glass in St Helens, where the rise in energy prices means millions of pounds in additional costs. If Conservative Members are worried about the impact of a windfall tax on investment, will they think about the cost of not acting for investment in jobs, growth and the future of energy-intensive industries?
I was surprised to hear Conservative Members arguing against the case for cutting VAT on energy bills, given that in many cases they themselves advocated the same policy. The argument that cutting VAT does not help those most in need simply does not hold water. Crucially, cutting VAT is a step that we could take now. Labour’s policy, which would give every household some relief from sky-high bills, would also mean extending the warm home discount, saving those most affected, such as pensioners and low earners, nearly £600. Many Conservative Members are on the record as supporting the measure precisely because of the arguments made in this debate. Claims that cutting VAT is unprogressive and would benefit only the wealthiest simply do not take Labour’s motion and our policy in the round; they are as disingenuous as they are insulting to constituents who are crying out for some help.
The reality is that the Conservatives cannot fix the cost of living crisis, because they are the crisis. They have become the high tax party because they are a low-growth Government. Some of the defences that I have heard today of voting against the motion are as thin as the Prime Minister’s excuses for flouting his own lockdown rules. Labour has shown the leadership that our country needs and delivered a plan to tackle the energy crisis that would take £200 off the average household bill, offer up to £600 for the most vulnerable in the current crisis, including low earners and pensioners, and provide funding to help the energy-intensive businesses worst hit by energy spikes—all fully costed, with a windfall tax on the North sea oil and gas producers that have profited from the price rises.
It is so telling that at no point today have I heard any Government representative outline an alternative or offer a coherent explanation of how the Government will help families. Labour laid out our plan to address the cost of living crisis two months ago, and still the Government have failed to rise to the challenge. We know why: they are too mired in their own scandal to take the action required. They are more focused on saving the Prime Minister than on serving the public.
The performance of this country’s Prime Minister at the Dispatch Box yesterday was quite frankly shameful. The continued dereliction of duty in not facing up to the big challenges of the day, such as the cost of living crisis, compounds that shame. The Government are out of ideas, out of energy and out of time. The sooner they all go, the better.
This has been a useful debate. May I start by paying tribute to those workers who are working hard out there, helping the recovery from Storms Malik and Corrie? As we know, the storms hit Scotland and north-east England very hard. Some 214,000 customers have had power restored, but approximately 10,900, particularly in the north-east of Scotland, were still without power as of 10 o’clock this morning. I spoke to Scottish and Southern Electricity Networks last night and have updated MPs.
As we have heard today, the Government have a wide range of support measures in place to help the most vulnerable households. We have both rebates and energy efficiency measures to help households reduce their energy consumption. To recap, the warm home discount scheme provides support with energy bills through rebates, helping households to stay warm and healthy in winter. The scheme currently provides more than 2 million low-income and vulnerable households with a £140 rebate off their winter energy bills. The Government have already consulted on proposals that would expand the scheme from approximately £350 million in value to £475 million per annum in 2020 prices, which will help it reach 3 million households from winter 2022-23 onwards.
We are of course considering a range of options to address the current challenges further, but we must also be mindful of the wider consequences of any actions that we take. The Government already place additional taxes on the extraction of oil and gas, with companies producing oil and gas from the UK continental shelf subject to headline tax rates on their profits that are currently more that double those paid by other businesses.
We have ourselves raised more than £375 billion-worth of production taxes. North sea oil and gas have been a big success story for this country, and also for our Exchequer. As a former Treasury Minister, I can repeat that of course all taxes are kept under review by the Treasury, and any changes are considered and announced by the Chancellor.
No, I am going to make a bit more progress.
The oil and gas industry and its supply chain are supporting more than 195,000 jobs, but investment in 2020-21 was at an all-time low of £3.5 billion. Meanwhile, there are £11 billion-worth of opportunities awaiting investment. We would be cautious about the potential implications that any change in the tax regime could have on investment, not just in oil and gas developments but in the development of cleaner-energy technologies. Moreover, continuing investment in the UK continental shelf is needed to support production and our security of supply. That is particularly important this winter, but it is also important in the longer term, because UKCS production can help to mitigate potential supply issues.
When it comes to the sector itself, I heard nothing from any of the Opposition Front Benchers about whether they supported our world-leading North sea transition deal. However, we want to support up to 40,000 high-quality direct and indirect supply chain jobs, including jobs in Scotland and our industrial heartlands in the north-east and east of England, generating up to £14 billion to 16 billion of investment to 2030 and delivering new business and trade opportunities to assist our transition to a low-carbon future.
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.
I hope the Minister will forgive me if I point out that an increase in the energy price cap is likely to be announced on 7 February, and ask what he will say to my constituents who will be pushed into fuel poverty as a consequence of that.
I would say this: we are providing support. We have the warm homes discount, we have winter fuel payments, we have cold weather payments, we have the household support fund, and, of course, we have the energy price cap itself to protect customers.
The latest CfD round is the largest yet, with a goal of about 12 GW, more capacity than the last three rounds combined. The offshore wind that this round will deliver could be enough to power up to 8 million homes.
I have been clear that matters of taxation are for the Chancellor, but of course the Government continue to monitor the situation very closely. I was answering a specific point about what support is already available for consumers.
I did not hear a word from any of the Opposition parties in support of our incredible North sea transition deal, concluded just last March, between the UK Government and the oil and gas sector. It will support workers, businesses and the supply chain through this transition by harnessing the industry’s existing capabilities, infrastructure and private investment potential to exploit new and emerging technologies such as hydrogen production, carbon capture, usage and storage, offshore wind, and decommissioning.
I will make a bit more progress.
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.
I turn to the contributions in the debate itself. My right hon. Friend the Member for Wokingham (John Redwood) made an excellent speech. He said: please can we burn our own gas, rather than importing it? That is a really strong point, not just in terms of jobs in this country but for our energy security as well. It makes no sense for us to be importing, beyond what we have to, expensive volatilely priced foreign hydrocarbons—hydrocarbons that come with a significantly increased emissions content. LNG has up to two and half times the emissions content compared with natural gas produced in the UK. He also made strong points about tax revenues.
My hon. Friend the Member for Banff and Buchan (David Duguid) knows oil and gas better than anybody in the House. The sector is hugely important for his constituency, as I saw when I visited in December. He talked about the punitive intervention that Labour is proposing. He also rightly pointed out that renewables have increased by four times under Conservative Governments since the right hon. Member for Doncaster North was Secretary of State.
My hon. Friend the Member for Waveney (Peter Aldous) talked about the unintended consequences. He is right that in the transition we need the oil and gas sector to co-operate with the offshore wind and hydrogen sectors. He is the living embodiment of transition, representing both the older and newer energy industries.
My hon. Friend the Member for West Aberdeenshire and Kincardine (Andrew Bowie) made an excellent speech. He praised British business and discussed how Labour is giving up on Aberdeen. Mr Deputy Speaker, you, the right hon. Member for Doncaster North, the Labour Chief Whip, the right hon. Member for Tynemouth (Sir Alan Campbell), and I were here in the days when Labour had two Members of Parliament for Aberdeen. It has now totally given up on the North sea and the North sea transition deal, and the jobs that it represents. My hon. Friend’s excellent speech was about how Labour is giving up on Scotland. We have seen the right hon. and learned Member for Holborn and St Pancras (Keir Starmer) implicitly doing a deal with the SNP—it was implicit in one of his rare visits to Scotland just this last week.
My hon. Friend the Member for Poole (Sir Robert Syms) made another excellent speech, rightly pointing out that energy prices are rising due to world economic recovery and praising the work of this Government on job numbers and economic recovery. I agree with him. The North sea is a great British success story. He also made a really strong point about nuclear energy.
I want to correct a few points made by Labour Back Benchers. The hon. Member for Birmingham, Hall Green (Tahir Ali) made an extraordinary speech. He seemed to be saying that companies cannot make a loss without going bust. That is extraordinary: of course companies can make a loss without going bust. The hon. Member for Sunderland Central (Julie Elliott) made some important points about the supplier of last resort processes. If she has constituents whose credit balances are not being transferred from their previous suppliers to their new suppliers, could she write to me—or even better, to Ofgem—with details? I am sure we could look at that.
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.
We then heard from the SNP spokesman, the hon. Member for Aberdeen South (Stephen Flynn). I am afraid his nice words about oil and gas are at odds with his party overall, which has a nonsensical energy policy. The people of Scotland will be relieved that energy policy is reserved.
Not only is the SNP anti-nuclear, cheering the closure of plants such as Hunterston and Chapelcross and reportedly telling Rolls-Royce that its small modular reactors are not welcome in Scotland, but the hon. Gentleman’s colleagues and the Scottish First Minister seem to be opposed to new gas licences off the Scottish coast. They want to close oil and gas down. They say they want a windfall tax—just not the same windfall tax that Labour wants. They are still on a mission of trying to close down the industry. The SNP is against Scottish energy consumers, it is against Scottish energy jobs and it is against Scotland’s energy transition.
To finish off, Labour is still in a state of confusion. This time, the motion is not four pages. It has been shortened to around 100 words—or perhaps 280 characters; I am not quite sure. Where Labour has cut the words, however, it has not made up for them with any numbers. The motion includes no costings. There are no numbers in it at all. We have no information about this windfall tax and no information on the package of support for families and businesses. There is no detail there, but still a lot of confusion. There are no impact assessments on the taxes raised, on jobs—there are 40,000 jobs in north-east Scotland and 195,000 jobs in all—on fuel bills or on gas production.
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.
Does Labour agree with our ground-breaking North sea transition deal? No answer. Its solution is, again, to hammer domestic UK continental shelf production and increase imports, reducing our energy security and increasing our emissions at the same time. Labour’s approach is confused and misguided. It is not a plan, it is a motion for less energy security, higher emissions and higher fuel bills. I urge the House to stick with our approach: North sea transition, support for households and the UK’s remaining open for business.
The Question is as on the Order Paper. As many are of that opinion say “Aye”—[Hon. Members: “Aye!”] Of the contrary no—I think the Ayes have it, the Ayes have it. [Interruption.] I am sorry, you had the opportunity to do it then, and nobody shouted “No” when I put the Question. Do you want me to put the Question again? [Hon. Members: “Yes.”] Can you be a little more prompt this time, please? Do not forget that your votes should follow your voices.
That this House notes the cost-of-living crisis hitting families across the country and that the energy price cap is predicted to rise by 50 per cent from April; recognises that rocketing energy prices are hitting businesses as well as household budgets; calls on the Government to introduce a windfall tax on the profits of North Sea oil and gas producers; and further calls on the Government to use that windfall tax to help fund a package of support for families and businesses facing the energy price crisis.