Gareth Davies

I rise to speak on behalf of the official Opposition on new clause 3, which stands in the name of the shadow Chancellor, my right hon. Friend the Member for Central Devon (Mel Stride). Clauses 15 to 18 concern the taxation of the oil and gas industry, which meets 75% of the UK’s household and industrial energy needs, with 50% of that need being met by the North sea. The sector supports more than 200,000 high-skilled jobs in this country, and that talent, along with the rest of the supply chain, will be crucial to our domestic energy transition. These realities underscore the imperative of a smooth and efficient transition and a fiscal regime that facilitates that, not least because the timeline for investment in the oil and gas industry is so long. If the fiscal regime is not calibrated correctly, the damage may be irreversible and the costs will be significant. To recap the measures in the Bill, clause 15 increases the rate of the energy profits levy from 35% to 38%, bringing the headline tax rate on the sector up to 78%. Clause 16 removes the 29% investment allowance and reduces the rate of the decarbonisation investment allowance to 66%, so that the cash value of that allowance remains the same. Clause 17 extends the energy profits levy to 2030, at which point the Government are committing to implementing a successor regime to respond to price shocks once the levy expires. Clause 18 and schedule 3 legislate for certain payments into decommissioning funds to be treated as decommissioning expenditure so that they can attract tax relief. The question that many are asking is this: do these measures add up to a fiscal regime that facilitates a smooth and efficient energy transition? Not according to the Office for Budget Responsibility, which concludes that on average over the forecast period, capital expenditure will be 26% lower, oil production 6.3% lower and gas production 9.2% lower compared with our March forecasts. Those are dramatic movements. The University of Aberdeen has warned: “A rise in the EPL and loss of investment and capital allowances may have the unintended effect of accelerating decommissioning and decelerating the energy transition as companies face an additional cost burden.” The Government have thankfully carried out a partial U-turn, retaining the decarbonisation allowance and the 100% first-year allowance introduced by the Conservative party, but if they were persuaded of the importance of those investment allowances and that removing them would do more harm than good, why persist with removing the main 29% investment allowance? What was it about that relief compared with the others that made them want to scrap it? The Government talk about closing loopholes—we saw how well that went with carried interest—but these measures will contribute just 1% of the new revenue raised by the Budget across this Parliament. Does the Minister really think it is worth jeopardising some 50% of our domestic gas supply for that? The measures in the Budget essentially throw a massive spanner in the works for oil and gas, and it is unclear exactly what the Government’s rationale is for doing that. When we brought in the levy, it was to tax extraordinary profits in extraordinary times. The revenue that we raised contributed to our efforts through policies such as the energy price guarantee and the energy bills support scheme to reduce energy bills for the British people. Today, as those extraordinary circumstances subside, Labour is ratcheting up the levy. That sends a mixed message to the industry ahead of the consultation on a successor regime. The terms of that regime will supposedly be set by the need to respond to price shocks, yet the Government’s justification for these measures has nothing to do with price shocks. Instead, they are all dressed up in language about the sector making a “fair contribution”, as the Minister said, to the Energy Secretary’s environmental ideological ambitions. What is the Government’s vision for the taxation of oil and gas in this United Kingdom—temporary windfall taxes or permanent climate levies? The Bill suggests the latter. I would be grateful for the Minister specifically commenting on that when he responds. One way in which the Minister could give an indication and provide some long-term certainty would be to confirm further the future of the energy security investment mechanism, which he mentioned. As he kindly said, we introduced the ESIM so that when prices returned to normal levels, the energy profits levy would end; no more windfall profits would mean no more windfall tax. Will he confirm that the ESIM will remain in place up to 2030? I think he said so at the Dispatch Box, but I would be grateful for his reconfirming its end date. Will he go further and confirm that it will remain in the same condition as today? Will the price floor continue to be consumer prices index-adjusted? The Treasury and the Minister have said that the ESIM will be retained, but the industry would like further confirmation, as I have set out. Will he also write to me with the Treasury’s latest modelling of future oil and gas prices to prove that the expected revenues are not at the expense of the ESIM? That modelling will be important for us to understand and get that reassurance and certainty on the ESIM. Having been in the Treasury, I know that that modelling is continually reviewed and produced; I would be grateful if he would write to me with that. These are not purely academic questions. Our concern is for the hundreds of thousands of people employed by the UK oil and gas industry, for the UK’s energy security and for the efficient and smooth energy transition that we all care about. The Government should be not ideological but empirical in their approach, which is why we have tabled new clause 3, which would require a review of the impact of these measures on employment, investment, production, demand and the whole Scottish economy. If the Government have already made detailed assessments on those specific areas, we would be grateful for the Minister publishing them. On every measure, the Budget has not survived contact with reality. Growth has been downgraded, real incomes depressed and business investment reduced, with broken promises and credibility completely shattered. It is not so much that the Labour Government take a different view on economic matters; it is that they take the wrong view. Labour is the party of the tax rise that loses money. We are the party of the tax cut that raises revenue. That is why Labour Governments always leave office with more unemployment, larger debt and higher taxes. They always run out of other people’s money, and this Government are set to do so in record time.