Extract from Lords
debate on Revised Energy National Policy Statements
(GP):...Renewable energy was cheaper to produce than gas even
before the big explosion of oil and gas prices in recent months.
There is now a huge gap between what it costs to produce
renewable energy and what it is sold for as part of the national
grid. If renewables now dominated the energy sector in the UK,
everyone would be buying electric hobs and ovens as gas prices
soared and electricity prices continued to go down. Rich and poor
would all be better off, and the planet would be better off; the
only people not better off would be the fossil fuel companies
such as Shell—but I think we can manage without
their doing particularly well, personally...
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Oral answer (Lords) on
Windfall Tax: Oil, Gas and Energy Companies
Asked by
To ask Her Majesty’s Government what consideration they have
given to levying a windfall tax on the profits of oil, gas and
energy companies.
(Con)
The Government place additional taxes on the extraction of oil
and gas, with companies engaged in the production of oil and gas
on the UK continental shelf subject to headline tax rates on
their profits that are currently more than double those paid by
other businesses. To date, the sector has paid more than £375
billion in production taxes. All taxes are kept under review and
any changes are considered and announced by the Chancellor.
(Lab)
My Lords, the primary cost of producing oil, gas and green energy
has hardly changed. Only the selling price has, resulting in
excessive profits without any additional effort for the
companies. A windfall tax is needed to help hard-pressed
households. Why are the Government so wedded to their ideology
rather than helping the people?
(Con)
My Lords, the noble Lord is correct to talk about price
fluctuations in the sector, of course. In spring 2020, the price
of oil crashed to below $20 a barrel. That year saw investment in
the sector at an all-time low, so an abrupt tax change would
create further uncertainty and potentially undermine significant
investment in that sector. However, the Government remain
committed to supporting households with the cost of energy and
have set out plans to do so.
(Con)
My Lords, instead of threatening major companies such
as Shell and BP, would it
not be more sensible and in the interests of UK Ltd to recognise
that we need those companies to pioneer work in new areas of
supply for fuel and power, particularly hydrogen and areas like
it?
(Con)
My noble friend is right. The North Sea transition deal is a
global exemplar of how the Government can work in partnership
with the offshore oil and gas industry to achieve a managed
energy transition.
(CB)
My Lords, like the noble Lord, , and as president of the CBI,
we feel that a windfall tax is not efficient, as it puts
investments at risk for companies that are key to our transition
to net zero. Does the Government agree? Secondly, do they agree
that this is absolutely the wrong time for our tax burden to be
at its highest level for 70 years? Businesses have suffered so
much through the pandemic; will this not stifle what is already a
fragile recovery?
(Con)
My Lords, the Government agree that an abrupt tax change could
put investment in this sector at risk. While the overall tax
burden is high, we have had to take certain decisions to aid our
recovery from the pandemic. We saw the Government put in place so
much support during the pandemic, but we need to recover, for
example by getting on top of NHS waiting lists.
(Lab)
My Lords, the Minister tells us that the Government are concerned
that a windfall tax would deter companies from investment, so let
us look at that. The Norwegian Government tax companies at 22%
and add 53% for those that operate in the North Sea. We apply 40%
tax to profits, but we have massive rebates for investment and
for decommissioning, with the result that, over five years, 19
companies that operate in the North Sea have paid no tax at all.
The Norwegians have no problem getting corporate investment in
the North Sea; why would we have any problem getting corporate
investment in the North Sea, if we took some of these unearned
profits this year to help poor people with difficulties paying
their own energy bills?
(Con)
My Lords, I want to be absolutely clear that the Government have
put in support to help people pay their energy bills—we are
spending around £9 billion on that. The noble Lord is right that
the UK provides tax relief for decommissioning costs, which is
something that we have in common with Norway. Of course,
different oil and gas fields are at different levels of maturity
and have different costs relating to further extraction, and that
is reflected in our approach to the North Sea oil and gas fields
that we have in the UK.
(LD)
My Lords, despite fine words on net zero, it is nigh on
impossible to get an accurate picture of the amount of money that
oil majors spent on renewables. The little we do know shows that
their words pay lip service only. Eni spent less than 2% on
investment in renewables, and Shell and BP
spent similarly derisory amounts. It really is time to stand up
to them: tax their extreme profits and use the money to help
people who are having to make desperate choices between heating
and eating.
(Con)
My Lords, I am afraid that the Government do not agree with the
approach of the noble Baroness. However, where we do agree is on
the essential nature of providing further support to households
that are struggling with their fuel bills. That is why we are
providing a £150 cash rebate for homes in council tax bands A to
D, which is about 80% of all households, and a further £144
million of discretionary funding to councils for those households
that would not otherwise qualify for that rebate.
(Con)
My Lords, if we were really concerned about the cost of energy to
poor people in our country, would it not be a good idea to remove
the green levies that are adding to their bills? Surely it is
naive beyond belief to imagine that we can do without gas and oil
in the immediate future. The reason that prices are so high is
that we are not able to produce enough of our own gas supplies.
That requires investment and surely means not taxing the people
who are capable of providing it.
(Con)
My Lords, my noble friend is right that in the short to medium
term we will continue to need oil and gas supplies, and that is
why the Government think that it is important that investment
continues to be made in our oil fields. But we also need to fund
the transition to a net-zero economy, where we move more towards
clean and renewable energy in the longer term. That is why we
have programmes such as the North Sea transition deal, to do that
in a managed and orderly way.
(Lab)
My Lords, let me be absolutely clear: the Labour Party would
immediately implement a windfall tax on oil and gas profits.
Unlike the Government’s buy now, pay later scheme, our plan would
provide a genuine £200 off most household bills, with targeted
support of £600 for those who need it. The Chancellor will make
his Spring Statement a month from tomorrow, just weeks before the
energy price cap is hiked. Will the Government use that occasion
to do the right thing and adopt Labour’s proposals?
(Con)
My Lords, Labour may say that it would impose a windfall tax
immediately but under its proposals the support would not then be
passed on to consumers immediately; it would take far longer
under its plans to get money into people’s pockets. Furthermore,
Labour’s plans for a VAT cut would not target support at those
who most need it, with some of the wealthiest households saving
the most money under the proposals.
(CB)
My Lords, surely the Government agree that the long-term future
has to be renewable energy, yet at the moment the oil companies
are putting out that 20% to 25% of our energy bills is coming
from green levies, when in fact the figure is 8%. This cannot be
the moment that we take our foot off the gas, so to speak. Will
the Government give the House a guarantee that they will not
reduce the green levy but look to increase it, so that we do not
end up with these problems again and again?
(Con)
My Lords, I would not speculate on the green levy or any other
tax or levies outside of the Budget process. What I would say to
the noble Baroness is that we remain committed to our transition
to net zero. While we recognise that in the short term we need to
continue our oil and gas supplies, in the longer term we need to
move to greener forms of energy.
(LD)
My Lords, does the Minister recognise that between 2010 and 2020
real energy bills for consumers fell? That was in significant
part because of the green levies which helped to reduce energy
consumption, quite contrary to what the noble Lord on the
Government Privy Bench has just said. Will she ensure that we do
not cut these energy-saving levies, and will she make absolutely
clear that what is driving up prices is the cost of fossil fuels,
not of renewables and green levies?
(Con)
My Lords, I believe I have already answered a question about the
level of the green levy on bills. However, I have also given the
reassurance that the Government are committed to their net-zero
targets. That involves a transition from fossil fuels to greener
forms of energy, which is why we have a plan in place to do
so.
(Con)
My Lords, does my noble friend agree that it is only in this
sector that the industry is not paying for future infrastructure?
Will she ensure that, rather than funding renewable energy
through green levies, companies will be able to go to the market
and fund them in the usual way?
(Con)
My Lords, the green levy on bills is in place to help move the
transition towards more renewable energy sources. It has been
successful in doing that so far. The Government remain committed
to that transition.
