Asked by Baroness Jones of Moulsecoomb To ask Her Majesty’s
Government what steps they have taken to ensure that (1) subsidies,
and (2) licensing decisions, related to the oil and gas industry
are not subject to undue influence from outside interests. Baroness
Jones of Moulsecoomb (GP) First, I apologise for speaking seated;
it is because I sprained my knee. Secondly, I welcome the noble
Lord, Lord Offord, to his first outing as a Minister, and I look
forward...Request free trial
Asked by
To ask Her Majesty’s Government what steps they have taken to
ensure that (1) subsidies, and (2) licensing decisions, related
to the oil and gas industry are not subject to undue influence
from outside interests.
(GP)
First, I apologise for speaking seated; it is because I sprained
my knee. Secondly, I welcome the noble Lord, Lord Offord, to his
first outing as a Minister, and I look forward very much to his
maiden speech later.
Between July 2019 and March last year, government Ministers had
63 meetings with fossil fuel and biomass producers. That is nine
times the number of meetings they had with renewable energy
companies. That strikes me as slightly odd: a Government who
chaired COP 26 and are meant to be switching to renewables very
fast are meeting fossil fuel and biomass companies nine times
more than the companies they are meant to be relying on to
deliver the sustainable future they promise.
As well as the small private meetings, Ministers also attended
hundreds of other larger group meetings with fossil fuel
companies and their representatives. Fossil fuel producers were
present at 309 of these, compared with 60 for renewable energy
generators. Again, I do not understand why Ministers are focusing
on a polluting industry that we need to shut down rather than
renewables—with all the new job opportunities —which we need to
grow very rapidly. But there is a clue, because the Conservative
Party under has taken almost £1.5 million
in donations from the energy industry since 2019.
I mention this slightly disturbing fact because my intention in
this debate is to draw attention to the fact that we live in a
corrupt country run by autocratic Ministers who facilitate their
friends pocketing large amounts of public money either directly,
via government contracts, or indirectly, through putting holes in
the regulatory system. We have seen this recently with the
fast-track scheme for PPE contracts, the second-jobs scandal
involving MPs, and all sorts of lobbying, such as on behalf of Greensill. Money
buys access, and access gives you everything from subsidies to
licences.
The point I am making is that corruption has real-world impacts
on government policy and the lives of ordinary people. If you are
in the development industry, it might give you changes to
planning red tape. If you are in the energy business, it might
buy you another decade of profitable polluting while the planet
burns.
We have a Government who are keen to support a polluting industry
that is equally keen to support the Government. That might be
excused if the oil and gas industry was filling the coffers of
the Treasury as well as the Conservative Party, but surprisingly
that is not always the case. In a recent court case brought by
some climate campaigners, the judge acknowledged that in some
years oil and gas companies had paid less in taxes than they
received in tax breaks. The judge wrote:
“The claimants point to clear evidence of negative taxation flows
in particular years; specifically negative tax flows overall in
2015-16 and 2016-17 of £2 million and £359 million
respectively.”
The judge quite rightly said that focusing on single years
ignored the fact that
“the tax position over the life of the concession is at worst
neutral”.
We know that the UK is one of the most profitable countries for
the oil and gas industry in the world, but we cannot even be sure
that it pays its own way in tax.
The Government will claim that there is no subsidy for oil and
gas, as they define fossil fuel subsidies as
“measures that reduce the effective price of fossil fuels below
world market prices.”
In other words, the Government are giving the industry millions
of pounds in tax breaks, but this is not a subsidy because it
does not result in lower prices for consumers—well, that is
obviously absolutely brilliant. But if the Government do not like
“subsidy”, we could just call it “fossil fuel support”. Our
Government do not deny the tax breaks; they just make it clear
that this does not lower prices—it just enables the companies to
make more profit. In fact, it is so profitable that those making
money out of this polluting industry have enough spare cash to
give it to the Conservative Party. That is obviously something we
need to be concerned about.
Of course, if a previous Prime Minister, Cameron, had not cut
what he called the “green crap”, our energy bills would be £40
lower each. Imagine how much lower they would be if he had been
serious about insulating homes and expanding cheap renewable
electricity, reducing our current reliance on foreign gas.
I will not go into all the details of the donations made by the
industry, directly and indirectly, as we would need far longer
than the hour that we have just to list them. Our self-regulatory
system of government does not stop people buying influence. Civil
servants are not around to take notes when a Minister attends a
party fundraiser where oil executives have paid £12,000 for a
seat at the table. Civil servants cannot know what conversations
go on when an MP gets a huge donation to the private office a few
months before they are appointed as a Minister in charge of
projects that the donor wants to push through. It has happened in
the past few years and, to be fair, the Minister I am thinking
about stepped aside from a major decision—but only after the
media contacted them.
The National Audit Office cannot even get access to Ministers’
WhatsApp conversations with party donors about favoured projects,
unless the Minister self-declares that they regard the messages
as relevant. Even when Ministers have been taken to court to get
those messages, suddenly the phone is broken or lost—or they do a
Boris, who claimed that messages were lost when he changed his
phone number. It is not very nice, is it, quite honestly? It is
shameful.
Last year, we chaired COP 26, but the Government are now dishing
out a large number of licences for North Sea exploration. I
really do not see how that can be compatible with reducing our
greenhouse gas emissions. Generic conditions have to be met, but
only on new submissions; as I understand it, projects already in
the pipeline get a licence without reference to climate change.
How is that possible?
Individuals and companies linked to the oil and gas industries
have donated more than £400,000 to the Conservative Party in the
past year, while the Government mulled over these new licences.
There might be parliamentary rules that stop Peers like me from
asking Written Questions about the influence that such donations
have on the Ministers making the decisions—which I have tried to
do, but was stopped—but it is clear and obvious that the
influences is there.
We have an acknowledgement that corruption is rife, the negative
impacts on our environment are clear, and I really want to hear
from the Minister today how we are going to junk the broken
system of self-regulation in favour of a more robust legal system
that involves either the police or an end to large-scale
donations. The days of having a Ministerial Code enforced by
someone appointed by the Prime Minister really should be gone. It
does not work when Ministers do not play by the rules.
3.07pm
(LD)
My Lords, I start by welcoming the Minister to his post—it may be
a baptism by fire—and thanking the noble Baroness, Lady Jones,
for introducing this debate. My views will be pretty similar to
hers on this topic.
The compelling scientific evidence tells us that we must act now
to curb greenhouse gas emissions from fossil fuels, but we seem
to have an oil and gas industry which is resisting the
science—not in words, because it is too clever for that, but in
deeds. It is an industry that seems to have the various arms of
government firmly tucked into its elbow and is leading them
astray.
The OGA regulates and licenses petroleum exploration and
production in the UK. Three of its 13 board members are
shareholders in oil companies, and eight members of the board
previously worked in the industry. There are no voices on the OGA
board to put the view of climate scientists, workers or NGOs; it
is not a balanced board. The Government seem to be similarly
tainted. According to the Library briefing, £812,000 was donated
to the Conservative Party between 2019 and 2020 by climate
sceptics and fossil fuel interests.
Against this background, we must look at subsidies enjoyed by the
sector. Of course, the Government insist that they do not give
subsidies to fossil fuels, yet the UK’s tax regime makes it the
most profitable country in the world for oil and gas companies,
according to a report by Rystad Energy in January 2021. Since
signing the Paris agreement, the UK has given £4 billion to oil
and gas companies—and I thank the NGOs UPLIFT and Paid to Pollute
for the figures. In the tax years 2015-16 and 2016-17, the
Treasury gave more money to oil companies than it took from them
in taxes. Here is a mind-boggling figure: in 2019, the UK
received $1.72 in taxes for each barrel of oil, while at the same
time and under the same conditions, Norway received $21.35 per
barrel of oil. Here is another mind-boggling fact: Shell paid
$1.8 billion in tax to Norway in 2020 but received from the UK
Government £99.1 million, according to the company’s own annual
report on payments to Governments. There are other examples, but
time is short and the list is long, so I will move on.
I will quickly mention decommissioning. The UK taxpayer, not the
polluters, pays the decommissioning costs of abandoned oil
structures. The UK Government call this a tax rebate, but this
process meets the WTO, International Energy Agency and IMF
definitions of a subsidy. HMRC estimates that the cost to the UK
taxpayer will be £18.3 billion—I think that is a gross
underestimate. No wonder the risks of stranded assets are not a
deterrent to the shameless companies pushing for new licences,
because they are a licence to print money. The Government
subsidise exploration, shareholders pocket dividends, and when
the game is up, the company ups sticks and leaves it to the good
old British taxpayer to pick up the tab. Shame on the Government
for letting this continue. With vested interests whispering in
their ear, it stinks of corruption. None of that tax relief is
benefiting workers in the industry or you and me. We do not see
the impact on our living costs, our energy bills or at the pump.
The RMT union estimates that 12,000 jobs were lost in the
industry in 2020. Compare that to Shell receiving £99.1 million
in tax from the UK in 2020. The company went on to increase its
dividend in 2021, just weeks after announcing plans to cut 330
North Sea jobs, and CEO Ben van Beurden took home $7 million in
2020. The system is rotten to the core.
The Minister will say that we have to protect the sector or we
will be dependent on imports of Saudi or Russian oil and gas, but
that is just not so. Most of our oil and gas imports come from
Norway, and even if more was pumped from the ground, it would
have to be placed on global markets and would not benefit UK
citizens with lower prices. To reduce volatility and energy
costs, the only solution is to produce more home-grown
renewables. Put a halt to this madness and help our citizens
lower their energy bills and reduce greenhouse gas emissions.
Invest in the green transition, get job security for oil and gas
workers, and get energy security for the country by moving away
from dependency on geopolitically unstable areas.
In ending, I want to go back to the science. The Mauna Loa
observatory in Hawaii recorded the highest-ever concentration of
carbon dioxide in May 2021. At 419 parts per million, this is the
highest since records began. We are in uncharted territory, and
the rate of increase of carbon dioxide in the atmosphere is
accelerating. The time for arguing and prevaricating is over—we
have to stop burning fossil fuels.
3.14pm
(CB)
My Lords, I congratulate the noble Baroness, Lady Jones, on
securing this debate and look forward to the Minister’s maiden
speech later.
We can point to donations or meetings, but I would like to spend
a couple of minutes focusing on whether the structures of
government are perhaps out of kilter with our modern goals for
energy. It appears that there are legacy structures and
conflicting goals within government that at times are not joined
up.
In 2014, the Wood review was published and made a number of
recommendations focused squarely on increasing the efficiency of
the UK continental shelf in the extraction of hydrocarbons. The
review then informed the Energy Act 2016 and ushered in the Oil
and Gas Authority, a government-owned company that has taken over
a range of responsibilities from government in relation to
overseeing developments in the UK continental shelf. This body’s
primary objective is maximising the economic recovery of
hydrocarbons. It is therefore not necessarily a question of
external influence. Rather, we have created a statutory
obligation and a body single-mindedly pursuing a very narrow set
of goals within our energy policy. It may be occluding the real
energy agenda that we should be pursuing.
At the time of the Energy Bill in 2016, we argued that to create
a new body with such a narrow remit represented a missed
opportunity. It was clear even then that UK plc’s pursuit of
barrels of oil and, to a lesser degree, therms of gas from the
North Sea was unlikely to be the biggest priority. It is an old,
mature field, and the biggest discoveries were all found decades
ago. What remain are very risky and expensive fields, which the
bigger operators are now finding it is not in their interests to
exploit. When we think about energy security and climate
considerations in the round, is it correct and right that we
should have this body and this statutory obligation that skew our
focus, and potentially the focus of Ministers?
The UK is rightly considered a leader on climate change, thanks
to both its domestic actions and its role in international
negotiations. It does not sit well for a country such as the UK,
a very mature economy that has arguably benefited from the
exploration of oil and gas over decades, to be seen to be trying
to extract the very last drop of oil and gas out of the North Sea
without a real economic case for doing so. We have had decades of
relatively stable and secure energy provision. We have managed to
provide a secure and affordable lowering of our carbon footprint
at the same time, which has benefited businesses and consumers.
Our oil and gas efforts in the North Sea and the UK continental
shelf have not contributed to those goals; other sources in our
energy policy do that job far more effectively. We need only look
at the sudden spike in gas prices now to see how a policy based
on fossil fuels can undermine our ability to deliver affordable
energy.
I turn to the international case. The case will always be stated
that we need to extract our oil and gas, otherwise we will be
importing from other places. But in reality we do not use the
majority of the oil production from the North Sea domestically,
because our refineries are not fit for the refining of those
oils; most of it is traded. On an economic basis, it does not
matter where it is extracted—we will all face the global price
set in the traded market—so that argument does not really hold
water.
Another often-cited advantage to the UK is the jobs. The jobs in
the North Sea oil and gas sector are very limited—around 30,000
direct jobs. Just the low-carbon economy today employs 200,000
employees, so clearly there should be a much greater focus on the
low-carbon future sources of energy, rather than pursuing this
very narrow goal.
We have not really addressed the problem of how a Government can
develop a balanced policy fit for UK plc in terms of a large,
rather than a narrow, set of interests. The risk is that, given
these high prices, there will yet again be a temptation to invite
in the fossil fuel experts. We will probably hear, even today, a
call for a return to “drill, drill, drill”, and the idea that
finding more resources will be the way out.
I argue that that would distort the reality, which is that we
have a vast array of opportunities to exploit energy, which go
beyond fossil fuels. We have a huge offshore wind industry and,
as we have recently seen, we are granting very large licences to
that sector. That is where our future lies, and it would be a
mistake to invite in a narrow band of experts, yet again, to
dictate to us what our energy policy should be in response to the
current energy crisis.
I believe that there needs to be another Wood review—an updated
opportunity to look again at what our focus should be for our own
indigenous energy sources. It is clear that there are huge
challenges ahead of us. From my perspective, climate is the
largest of them, but equally there is energy security, and there
are economic concerns that we have to address. We have huge
potential to secure investment in a range of zero-emissions
technologies, but we need to focus on that and make it our
priority.
We should see the hydrocarbons in the North Sea in that context.
They are no longer our greatest asset; if anything, they will be
a net drain on the public purse in coming years. We receive very
little in taxation. Let us start a review to assess whether the
Government have the right bodies and the right powers in
place—and if we are to have an energy Bill, let us look again at
the OGA and whether the obligation it was given is correct for
2022.
3.21pm
(Con)
My Lords, I apologise for missing the first few seconds of the
debate; foolishly, I was sitting in the Chamber instead of here.
I congratulate the noble Baroness, Lady Jones, on securing the
debate. I have always longed to agree with her, since I like her
so much, and I do agree with her on the two objectives of the
debate. I am against subsidies for the oil and gas industry, as I
am against subsidies for renewables. I am also against undue
influence being brought to bear on government.
The oil and gas resources with which this nation has been endowed
by a beneficent providence are, essentially, the property of the
people. It is right that the economic rent and value of those
resources should be extracted for the benefit of the people and
not given away. I first made myself an enemy of the oil industry
when I published a document called North Sea Giveaway, advocating
that licences should be not allocated but sold to the highest
bidder, so as to extract the economic rent. For a while, it
actually changed the Government’s policy. That was before I was
ever a Member of Parliament; I had more influence then than I do
now. Sadly, it did not continue for ever, and eventually
Governments and officials went back to allocating, rather than
selling, auction blocks.
Instead of extracting the money that way, they tried to do so by
imposing a whole range of taxes—the royalty, the petroleum
revenue tax and the supplementary corporation tax, all on top of
the basic corporation tax that other industries pay. Since 1975,
when oil first began to be extracted from the North Sea—I was
then an energy analyst in the City—the oil industry has paid over
£186 billion in those taxes to the Government.
Beyond the folly of giving away the licences rather than selling
them, the idea that the UK subsidises the oil and gas industry is
a nonsensical myth. The £4 billion that the noble Baroness
mentioned is not a subsidy. Every industry is allowed to offset
the costs it incurs to produce revenues against the revenues that
those costs generate. The oil industry is no exception, but in
that industry some of the costs are incurred after the revenues
have been generated—in particular, the decommissioning costs. It
is absolutely normal and acceptable for companies to be able to
offset those costs against revenues in previous years. They get
back tax that they paid on those revenues that were in excess of
their costs. That is normal, and to describe it as a subsidy is,
frankly, an abuse of language.
(CB)
I am enjoying this very much, but can the noble Lord comment on
the rules that now underwrite those decommissioning costs with
taxpayers’ money? As I understand it, that will cost us in the
region of £20 billion over the coming years, because we are now
underwriting some of those decommissioning costs. Is that not a
subsidy?
(Con)
It could well be but, as I understand it, that is not the £4
billion to which the noble Baroness referred.
(CB)
I am saying the wrong thing?
(Con)
Maybe. It seems unwise to have got into a position in which the
oil companies are required to do something that they cannot and
have not been financing, and to take it to the taxpayer. I think
that the noble Baroness will agree with me that up to now there
has not been a subsidy. If we did not allow the costs of
decommissioning to be offset against the revenues that the
oilfields generate, we would effectively be taxing rather than
supporting the most ecological activity that we require of oil
companies; namely, the removal of what they have constructed in
the North Sea.
The second thing that the noble Baroness is against is undue
influence on licensing. One of the arguments in my pamphlet about
the North Sea giveaway was that giving away those huge resources
means that the civil servants who decide on it will be open to
corruption. Amazingly, in the ensuing years, I found no evidence
of that micro-corruption; nor is there any evidence of
macro-corruption, in the sense of the oil and gas industries
exercising undue influence. On the contrary, the offshore fields
are not being developed—Cambo and the other one whose name I
forget—and, onshore, hugely valuable shale resources are not
being exploited. It is clearly not the oil industry that is
exercising undue influence; somebody else must be. It is not
those who want to reduce carbon emissions who are exercising
undue influence because, by and large, particularly in the case
of shale, if we import gas instead of producing our own—that is
the consequence of not allowing shale exploration—we incur
greater emissions, not just in transport but in liquefying and
then deliquefying gas, which is an energy-intensive process.
There are two ways in which we can meet the net-zero target. One
is to reduce demand, and the other is to reduce supply. The
sensible way is to reduce demand. If you reduce supply ahead of
reducing demand, the price goes up, as we are seeing now; the oil
and gas companies make undue profits, which will upset you all
greatly, and I do not particularly want to see them make undue
profits either; and it will cause difficulties to households in
the short term, which is what we are experiencing. I hope that we
will see more realistic analysis than we have heard so far.
(LD)
I want to ask the noble Lord something before he sits down. I bow
to his greater understanding of the finances behind pricing of
oil. Maybe he can explain why, in 2019, for each barrel of oil
the UK received so much less—$1.72 in tax—than Norway’s more than
$21 per barrel of oil. On the supply and demand side, would he
not say that it is not one or the other? We need to do both if we
are to get to net zero in the timeframes that we have set
ourselves.
(Con)
I have not looked at the profitability per barrel and the tax
paid per barrel, but I used to do that every day 40 years ago. I
assume that it is because our fields are now running down,
whereas the Norwegian fields are still far from fully mature. As
far as I know, Norway’s tax regime is not hugely different from
our own; it was not then. On the question of whether we have to
restrict supply as well as restricting demand, no, we do not. If
you reduce demand and anyone has supply available and no market
for it, they lose money—that is their problem—but if you reduce
supply without reducing demand, you raise prices, increase
profits to the industry and increase costs to ordinary
households.
(GP)
Before the noble Lord sits down, can I ask him how he thinks
demand could be reduced?
(Con)
You could do all sorts of things to reduce demand for oil and
gas—requiring people to spend thousands of pounds on shifting
from gas to electric heat pumps, that sort of thing. The noble
Baroness knows the answer to her own question.
(GP)
Except—
(CB)
My Lords—
(LD)
My Lords—
(Con)
My Lords, can we have a little order? Also, I need to remind
future speakers that the Minister needs to be speaking by 3.47
pm.
(LD)
My Lords, I welcome the noble Lord, Lord Offord, to his place and
look forward to hearing his—
3.29pm
(CB)
Sorry, I thought you were just interrupting the noble Lord,
, to make a point. I, also,
welcome the new Minister and look forward to his maiden speech. I
much enjoyed the exchange just now. It is worth pointing out that
the largest single group at the climate talks was the 503 oil
executives, spending the most amount of money to show off their
wares.
I shall lay out a few facts. We are, undoubtedly, one of the most
profitable countries in the world for oil and gas companies, as
the noble Baroness, Lady Sheehan, pointed out. Since the Paris
agreement, the UK has granted tax relief of £10 billion. I know
that the noble Lord, , would say that that is just
par for the course, but we are trying to aim for a zero-carbon
world.
During an exchange last week, the noble Lord, , posed the question about
where we get our oil and gas from, and he asked
“do we use oil and gas products we generate … or do we get them
from Russia or Saudi Arabia?”.—[Official Report, 11/1/2022; col.
964.]
The facts are that, in 2020, 54% of the demand for natural gas
was met by domestic production, 32% from pipeline flows from
Norway and the remainder met mainly by LNG cargoes from Qatar at
12%, the US at 7% and Russia only 3%.
On the climate compatibility checkpoint, according to E3G, the UK
continental shelf is a mature, high-cost basin with declining
reserves. The basin is oil weighted, with gas making up only 30%
of remaining reserves. Even if those reserves could be brought
online at speed, the UK would still be exposed to international
gas markets and their inherent price volatility. To be clear, we
do not need to drill anymore for our domestic consumption. The
reason why the gas price is currently so high is because of how
the global markets work. Companies that extract it just sell it
to the highest bidder, and a lot of the gas extracted from our
sites is sold to Europe, rather than being used domestically,
even if we have a need for it. The argument that, if we drill
more, we will have more, is an oversimplification of the issue.
It will mean only that producers sell more and, due to the low
domestic tax rates, there will be negligible difference to the
Treasury. Our Government would have to directly intervene to
ensure that domestically produced gas is used in the UK, and to
date we have made no signals that that is something we are
willing to do.
On the other part of this question, lobbying and licensing, the
Times reported that met industry officials in
the days after COP to urge them to keep drilling in the North
Sea, despite what was actually said in Glasgow. How is that
compatible with our goal? Afterwards, on 20 December, the
Government published a consultation on a new climate
compatibility checkpoint, which will govern our new licensing
rounds. Did the Government meet oil and gas executives to discuss
this consultation before it went public? Surely, they should see
that at the same time, everyone should be allowed to feed into
the general discussion. For example, the document states that,
for the purpose of licensing, it is not practical to separate oil
from gas and that
“we understand that, for many fields, a mix of hydrocarbons (both
gas and oil) is usually found, and it can be difficult to predict
which reservoir fluids will be encountered at licensing stage.
For that reason, we have rejected the idea that oil and gas could
be licensed separately”.
However, it is not clear how or why the Government have reached
that decision. We know that Cambo, for example, is—or, one hopes,
was, in the past tense—going to be drilled for oil. So how have
the Government got there?
This is an important point because, although we can expect
continued domestic demand for gas during any transition, we
already export 80% of our oil, so further extraction is just
adding to global supply rather than quenching domestic needs. If
that was discussed before the checkpoint was published, there is
a clear conflict of interest. Oil and gas companies would
obviously be in favour of tying them together, as to separate
them would affect their profits. So while it is welcome that we
have a consultation proposing consideration of production gaps,
other parts of it raise suspicion that this is a tick-box in
green-washing. “Consideration” is a really weak word.
Finally, on the current energy costs and the cost-of-living
crisis, it is likely to become dire without government
intervention, but I challenge the argument that this is because
we do not have enough fossil fuels to burn. It is because we do
not have enough renewable energy. If there had not been an
effective moratorium on onshore wind since 2015, for example, our
bills would now be lower. Bills are not high because of the green
levies; they have been decreasing, and account for about 3% of
gas bills. They are high because, as other noble Lords have
mentioned, we have uninsulated homes. If the green homes grant
had been better implemented, people would have lower bills. It is
easy to see high bills and think that we need more of the product
that is causing it but, actually, we need to quicken our
transition away from it. Fossil fuels have always been volatile,
whereas renewables have consistently become cheaper as well as
better.
3.35pm
(LD)
My Lords, I apologise to the noble Baroness, Lady Boycott, for
stepping in. I welcome the noble Lord, Lord Offord, to his place
and look forward to his maiden speech. I cannot help noting,
although I am very pleased we heard his point of view, that the
noble Lord, , was allowed to speak having
arrived about three minutes late, when only recently in a debate
on the nuclear industry, the noble Baroness, Lady Bennett of
Manor Castle, was refused the opportunity to speak despite
arriving at almost exactly the same time. There cannot be one
rule for members of the governing party and another for members
of the Opposition. I hope the Government Whips will take note of
that. However, I am glad we heard from the noble Lord.
The urgent need for the North Sea industry is not further
subsidies or contradictory policy-making by a Government who on
the one hand say that they are in favour of net zero and on the
other continue to endorse the maximum economic recovery policy.
The urgent need for the North Sea industry is transition. If
there are tax breaks and subsidies, they must be directed at
transitioning that skilled workforce out of the oil and gas
industry, because that fossil fuel industry is coming to an end.
That is what will happen. It is the reality, and those who think
they are standing up for workers in the industry by backing
further drilling are simply sending people down a blind
alley.
As I mentioned during debate on the Financial Services Bill, the
last part of my title—Lord Oates of Denby Grange—is taken from a
colliery in Yorkshire where my grandfather and uncles all worked
as coal miners. I have great respect for the people who work in
the fossil fuel industry; they powered our industry and heated
our homes, often working in very dangerous circumstances.
However, we know what happened to the coal industry: it came to a
dead stop. There was no proper transition and, as a result,
communities were stranded and suffered massive social and
economic deprivation that remains to this day.
Let us not pretend we are doing any favours if we go down this
maximum economic recovery route and keep going until the dead
stop happens. It will happen; as the International Energy Agency
has stated, we cannot burn all the reserves we have already
identified if we are to have any hope of keeping to 1.5 degrees.
We cannot do it. The argument of the noble Lord, , is that we have this stuff so
let us burn it. If everybody else takes the same view, we will
get nowhere near even 2 degrees but go far beyond it. That is not
a problem for the noble Lord, because these things do not matter
to him. He thinks the whole net-zero thing is ridiculous and
absurd, and he calls anyone who stands against that an
eco-fanatic. But, for those of us who care about it, there must
be a logical policy.
The Government have set ambitious targets for net zero which the
Liberal Democrats welcome. However, it is no good having those
targets if your policy tools contradict them. Maximum economic
recovery in the North Sea, and the tax subsidies, absolutely do
that. The noble Lord, , said that the reserves in the
North Sea should be used for the benefit of the people. The
benefit of the people would be to keep those reserves where they
are, not to burn them. It would certainly be to the benefit of
future generations.
(Con)
How long—or how shortly—does the noble Lord think it will be
before we cease to use gas, both to heat homes and as the natural
source of power to deal with the intermittency from renewables?
Most people think we will still be using it in 30 years’
time.
(LD)
We have to transition away from using it by 2050, or at least
without abatement of it. Exploiting the North Sea resources when
we are trying to lead the world is not going to work. It is rank
hypocrisy, and it is deeply damaging.
Let me just pick up on the point that the noble Baroness, Lady
Boycott, made about energy costs. It is a complete fallacy that
the way to reduce energy costs is by scrapping all the green
levies, as the GWPF and other people want to do. If you look at
what happened to energy costs between 2010 and 2020, in terms of
the bills that people paid, you see that total household
expenditure on energy fell. It did not rise. One of the reasons
it fell was because the levies funded insulation of properties
and measures to reduce consumption. Consumption of gas and
electricity fell significantly during that time. In fact, the eco
levies save people money.
I understand the position of the noble Lord, , of not worrying about net
zero. I do not understand the Government’s position, because they
claim to worry about net zero but take actions that show the
exact opposite.
3.41pm
(Lab)
I take this opportunity to welcome the noble Lord, Lord Offord,
and to wish him all the best with his maiden speech. As a fairly
new Member, a maiden speech being made in these circumstances is
a first for me. It feels as though he is jumping in at the deep
end here, but I look forward to hearing his contribution. I thank
the noble Baroness, Lady Jones, for securing the debate.
Time is extraordinarily limited. We have so much to discuss in
this hour and we are not going to do it, so I do not want to
cover too many of the points that have already been made, other
than to recognise the seriousness of the examples that the noble
Baroness, Lady Jones, and others gave of where things are going
seriously wrong in the whole debate about what a subsidy is. The
Government might have a technical definition of a subsidy, but
there are certainly other means of getting money where it needs
to be which distort the market, lower the price and make fossil
fuels a much more positive option than they need to be.
In the limited time I have, I want to turn first to the very
nature of the debate. Running through all this is transparency.
We have so many examples of where undue influence is being
brought to bear, and that lack of transparency in so many areas
of public life now is becoming a real scandal. This debate fits
very well into that area.
The other important area I want to dwell on is the whole issue of
the plan that we need to get to net zero. It is all very well
talking about where we will be in 2050 and what it will look
like, but we need to know what it will look like in 2022 or 2025.
The year 2030 is obviously recognised as a critical date, but the
plan really is missing. For example, I took part in the debate on
the Subsidy Control Bill last night. Where is the plan which says
that if we are investing and giving subsidies to any range of
interests, the recipients have to demonstrate that they are
joining the collective effort towards net zero? I am afraid that
the absence of this in government policy and the lack of costing
of what it is actually going to take gives me deep cause for
concern.
This is against the backdrop of the impact not only on the planet
but on individual households and families, the cost of living
crisis, the choices that people are making on whether they heat
their homes or feed their kids, and the crisis we saw with the
break in deliveries from the shortage of drivers. It is that lack
of resilience and forward planning, and the whole issue of
security that is wrapped around it, that I do not believe the
Government are really taking seriously enough.
The other issue is the obligations that we came to from COP 26,
and there is another dimension to this. Although the outcomes
were lauded as some degree of success, there was watering down
from other countries across the world. While we must look at
local imperatives, we need also to look at the global
imperatives. We have some really important discussions about
trade deals coming up. Are we making sure that those countries
that failed to sign up fully to COP 26 will receive our full
influence?
We can talk about government action, but the Government need to
empower those out there who can actually make the difference. I
draw your Lordships’ attention, if they have not already seen it,
to the letter from the CBI, the TUC and different green groups to
the Government suggesting a really practical way forward. Until
almost a year ago, I was the leader of the second largest local
authority in the country, and there is a lack of powers going
down to local level, where the differences can be made by
reducing energy consumption and through planning and transport
powers—all the things that can really make the difference and
reduce our dependency on fossil fuels.
I highlight one of the asks from the letter, which is that the
Government establish a cross-government initiative to review all
those policy areas. Is the Minister aware that such a
cross-government initiative has been set up? Do different
departments of government talk to each other and say, “If this
department does that, the knock-on impact will be something
else”? Those are the collective actions that everyone at local
level has been charged with taking for many years, but the
Government are falling down.
I urge real focus to go to those areas that can assist this
agenda. The clock is well and truly ticking. As the noble
Baroness said, the debate about corruption is absolutely at the
top of the agenda. What is being done to address what we
collectively are doing to enable our dependency on fossil fuels,
and all the corruption to which it leads? When will we see a real
road map to achieving net zero by, at the very latest, 2050?
3.48pm
The Parliamentary Under-Secretary of State, Scotland Office
() (Con) (Maiden
Speech)
My Lords, it is a great honour to be here to make the final
contribution to this short debate today. As a newly appointed
Parliamentary Under-Secretary of State for Scotland, here I am
making my maiden speech in this House.
Allow me to start by thanking noble Lords for the great welcome
you have given me in this place, my supporters—my noble friends
and of Drumlean—Black Rod, the
Clerk and, especially, the doorkeepers, who look with great
amusement at me as I wander around the place in circles. I should
also give special thanks to my mentor and noble friend , and to my Whip and
noble friend , for sharing their
invaluable knowledge of the workings of your Lordships’ House. We
have an important debate to discuss this afternoon, but just
before I do, I think it is customary on these occasions to spend
a little moment on some personal matters, so let me get those out
of the way now.
I was born in a modest but homely tenement at 33 Bank Street in
Greenock, an industrial town west of Glasgow on the Firth of
Clyde. I was educated at my local schools, Ardgowan Primary and
Greenock Academy, and I got a first-class education for free. I
am not the first alumnus of that school to be associated with
this House; my noble friend Lady Goldie of Bishopton was a
distinguished head girl of Greenock Academy, as indeed was the
wife of my noble friend . I was dismayed when
my old school was closed in 2011, having been founded in 1855. It
was determined by the local council that, with Inverclyde
depopulating post industrialisation, the schools needed to go
down from eight to six, and it was decided that it conferred too
great an advantage on the students who went to that school to
study there, so it was closed. Surely that is an egregious
example of levelling down in Scotland, and it was a personal
motivator for me in joining this Government to support the
levelling-up agenda.
So, why ? If you walk down
Bank Street, where I was born, past the Wellpark to my local
parish church, the mighty Mid Kirk, and cross the road past the
magnificent Georgian Custom House on the Clyde, and then turn
right along the river, you will come to Garvel Point. Garvel has
long been a landmark in Greenock because it is where the deep
water is located, and it was originally a safe harbour for the
fishing fleets before the first industrial revolution transformed
the town into a thriving trading port and shipbuilding hub.
Greenock’s most famous son is the inventor and engineer James
Watt, and the dock which bears his name today remains in use at
Garvel Point. In fact, two of the three dry docks on the Clyde
were located at Garvel, and a recent renovation project has
repurposed one into the award-winning Beacon theatre.
That brings me neatly to the Question before the Committee today.
One of my first ministerial duties was to participate in COP 26
in Glasgow—how fitting that the world came back to the Clyde to
seek new solutions to this climate emergency. What a tremendous
achievement of the UK’s two-year presidency it was to increase
the global commitment to net zero from 30% to 90% of world
emissions. Some say that the UK has a limited role to play in
climate change as we account for only 1% of world emissions. Yet
COP 26 proves that our leadership still counts, because we can
demonstrate that it is possible simultaneously to grow our
economy while cutting our emissions.
This is what I learned at COP 26: we have the capital, the brains
and the political will to meet the climate challenge.
Participating in the Net Zero Technology Centre forum—funded by
the Aberdeen City Region Deal—I was so encouraged to hear
technologists from the oil and gas sector in Aberdeen
collaborating with Houston, Calgary, Perth and Canberra as they
repurposed their assets and people into low-carbon energy
sources.
How gratifying it is that Scotland has such a prominent and
world-leading role to play in rebalancing the UK’s energy
programme to net zero by 2050. We have all the natural resources
and the existing infrastructure, plus the scientists, engineers
and skilled workforce required to build a balanced scorecard in
energy. Scotland contributes 60% of UK wind and 40% of the
160,000 highly skilled jobs already working in energy across the
UK. This is called punching above our weight in a UK where we
contribute just 8% of the population but 33% of the
geography.
However, we must remember that a key word in this climate debate,
already mentioned by the noble Lord, , is “transition”, and that it is
to net zero, not to zero carbon. Some 35% of our energy needs in
2050 will still come from carbon; today it is 75%, so that will
be a massive reduction—more than halved. It would be foolhardy
and irresponsible to ditch our world-class oil and gas sector in
the North Sea to increase our carbon footprint by importing,
whether from Russia—bad—or Qatar: good.
The North Sea Transition Deal is an exemplar in the G7 of a
domestic oil and gas industry working in partnership with
government to ensure that net zero is met by 2050. The noble
Baroness asked what milestones we have along the way. By 2030,
the cash flow generated in oil and gas will contribute £15
billion of long-term investment into new energy technologies. On
the transition of jobs, by 2030 the UK offshore energy sector in
total will increase from 160,000 to 200,000 jobs, of which
two-thirds will be in low-carbon energy sources.
One of my new responsibilities is the North Sea Transition Deal,
and in the last forum we had there were presentations from oil
and gas companies, talking about how their target for 2025 is
50:50 investment of capex and renewables to get a return on
capital in the region of 12%. Speaking as a businessman, I asked
what percentage return on capital you get on each side of the
scorecard. There was a certain amount of silence, because it
emerged that renewables on their own do not return on capital at
this point. Therefore, it is essential for the cash flow made in
oil and gas to be reinvested to produce renewables. We will get
transition to renewables only if it is a managed transition,
using cash flow from carbon as it reduces to invest in
renewables. That is absolutely essential. The two go hand in
hand; you cannot have one without the other.
I will directly answer some of the questions posed in this
debate, turning first to the noble Baroness, Lady Jones. I must
say, this is a baptism of fire. I do not recognise the country
she mentioned as corrupt. Maybe if I am here long enough that
will emerge for me, but I do not recognise that to be the case
where we are today. The financing of parties seems to be a whole
new debate and perhaps can be done another time. I am on the
record as saying that parties should not be financed by
taxpayers. However they are financed, as long as it is
transparent and legal I suggest that it is fine, but perhaps we
should park that for another debate at another time.
The key thing that has come through here is the use of language
and the fact that the word “subsidy” is so misused. My noble
friend made it very clear that as a
matter of business practice, whichever industry you are in, it is
entirely legitimate to off-set costs against revenues. In this
sector, because the lead times are so long there is quite often a
mismatch, and therefore money flows back and forwards. Since the
oil and gas industry began in this country, total tax revenues of
£360 billion have been received, and £33 billion in the last 10
years alone, but along the way you will see ebb and flow: money
in, money back.
Tax relief is a normal part of the corporate tax system. Genuine
costs and injuries such as the safe removal of infrastructure at
the end of a field’s life are not a subsidy but a tax deduction
and quite often, in certain cases, money flows back to the
Treasury. Therefore, it is just inaccurate—perhaps
self-serving—to use an emotive word such as “subsidy” when
something is regulated by our own accountancy businesses, as is
the case for all sectors. I push back firmly on the idea that we
subsidise. We are against subsidies in this country and generally
want to have free trade.
As I said before, on the point raised by the noble Baroness, Lady
Worthington, it is essential that we transition jobs to
renewables if we are to have two-thirds of jobs in low-carbon
renewables. We have discovered from a study at Robert Gordon
University that the onshore and offshore skills we currently have
in carbon are absolutely essential to the new world. For example,
when it comes to carbon storage, floating oil fields, et cetera,
we currently have very transferable skills in the oil and gas
industry and will transition them into renewables.
The noble Lord, , talked about his heritage in
coal mining. We know exactly how that feels in Scotland; 40 years
ago we closed the mines and started importing coal. What on earth
is the point of that? Are we really going to make the same
mistake again 40 years later, when we have a vibrant industry
with 160,000 workers?
We are talking about a new Britain here, are we not? This is a
new global Britain—a high-production, high-wage economy, with
highly skilled jobs. This is an exemplar of highly skilled jobs
in this country that we should be very proud of. Certainly, from
a Scottish perspective, this is our second biggest industry,
after fisheries, food and drink. It is one of our five exemplars
in the UK, and we need to protect it.
Before I come to the end of my piece, the answer to the
Question—for Hansard—is that the Government do not give subsidies
to fossil fuel companies. The licences are awarded by an
independent regulator, the Oil and Gas Authority, within the
framework of achieving net zero. In fact, on Tuesday the High
Court dismissed a case brought by climate activists that the
regulator was giving unlawful subsidies.
The OGA is an independent regulator. Its staff are classified as
public servants and are subject to rigorous standards and codes.
Therefore I would say that the oil and gas industry is subject to
a robust, multilayered regulatory system, which is independent
and transparent, and there is no
“undue influence from outside interests”.
In closing this debate, let me be quite clear that the Government
do not believe that decarbonising our economy means shutting the
oil and gas industry, as has been said in this Room. We certainly
do not believe in demonising a world-leading industry with the
sort of intemperate language used by , Green Minister in the
Scottish Government, who recently said that only those on the
“hard right” would support oil and gas extraction. What an insult
to the 160,000 workers in this vital sector. A broad range of
stakeholders, from entrepreneur Sir Ian Wood to the GMB trade
union, have warned politicians against creating an adverse
investment environment for this vital sector. There is nothing
just or fair about that, and it would set us back on the road to
net zero.
(Con)
May I intervene, on behalf of the Committee, to congratulate the
Minister on his maiden speech? It was an eloquent, fascinating
account of his background. His is a welcome Scottish voice in
this House, and he will bring his experience of developing
industries and business to our debates. We look forward eagerly
to hearing his future contributions to our debates.
(Con)
I thank the noble Lord for those kind words.
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