Energy (Oil and Gas) Profits Levy Bill

House of Commons, 11 July 2022.

Simon Clarke (Conservative, Middlesbrough South and East Cleveland)

I beg to move, That the Bill be now read a Second time.

People across the country are facing rising energy costs and an increase in the overall cost of living. Of the basket of goods and services that we use to measure inflation, a record proportion are seeing above average price increases. Indeed, the country is now experiencing the highest rate of inflation for 40 years, which is causing acute distress to the people of this country. In May the Government announced a series of measures to help the British people during this difficult time, in which we have seen oil and gas prices reach new highs; oil prices have nearly doubled since early last year and gas prices have more than doubled. This is a global phenomenon that is driven by factors out of any single Government’s control, in large part resulting from Russia’s illegal war.

With increased prices at the global level, profits from oil and gas extraction in the United Kingdom have also shot up. These are unexpected, extraordinary profits—above and beyond what forecasters could have expected the sector to earn. Because of these extraordinary profits, and to help fund more cost of living support for UK families, the Government are introducing an energy profits levy. The temporary levy is a new 25% surcharge on the extraordinary profits. When oil and gas prices return to historically more normal levels, it will be phased out.

Stephen Flynn (Scottish National Party, Aberdeen South)

I would welcome some clarity from the Minister as to what his Government regard normal prices to be, because those involved in the industry will be watching on at this moment.

Simon Clarke (Conservative, Middlesbrough South and East Cleveland)

The answer is: prices of an order that we saw prior to Russia’s invasion of Ukraine and prior to some of the inflationary pressures resulting from the covid disruption—prices more akin to those seen in 2021. Indeed, we could also refer to factors that predate that, back to 2019. The system has clearly been in flux, but I would certainly not want to encourage the artificially low prices of 2020 to be seen as a baseline for these purposes.

Stephen Flynn (Scottish National Party, Aberdeen South)

I thank the Minister for giving way again. Getting investment into the industry is one of the Government’s big arguments for the tax break incentives they are providing to the industry. How can that possibly happen when they do not even say what a normal price is?

Simon Clarke (Conservative, Middlesbrough South and East Cleveland)

I will set out more about our investment incentives in a moment. We are not going to tie ourselves to a specific price level, but will obviously look towards a return to more normative market conditions—not, as I said, the artificial lows of 2020—such as the pre-crisis situation in 2019 and some of the much healthier pattern of last year, prior to what Russia has done in Ukraine, which has obviously driven prices to new highs. That gives the House a sense, but we will obviously set out our thinking well in advance of repealing the levy.

I am firmly committed to our net zero strategy.

Alan Brown (Scottish National Party, Kilmarnock and Loudoun)

Will the Minister give way once more?

Simon Clarke (Conservative, Middlesbrough South and East Cleveland)

No, I will not; I am going to make some progress.

As set out in the energy security strategy, the North sea will still be a foundation of our energy security for years to come. Currently, about half our demand for gas is met through domestic supplies. In meeting net zero by 2050, we have to be realistic; we will still be using about a quarter of the gas that we use now. It is therefore necessary to incentivise investment in oil and gas, and to encourage companies to reinvest their profits to support the economy, jobs, and our energy and security, but it is possible to tax extraordinary profits fairly and to incentivise investment. That is why, within the energy profits levy, a new “super-deduction” style relief has been introduced to encourage firms to invest in oil and gas extraction in the UK. We expect that the energy profits levy, with its investment allowance, will lead to an overall increase in investment. Indeed, one oil and gas company has already said that the immediate investment allowance should spark further investment in the North sea. The new 80% investment allowance will mean that, overall, businesses will get a 91p tax saving for every £1 they invest, providing them with a clear incentive to do so. This nearly doubles the tax relief available and means that the more investment a firm makes, the less tax it will pay. Unlike Labour’s windfall tax in 1997, this levy both incentivises investment and raises more revenue.

The energy profits levy contains an investment allowance that doubles the overall investment relief for oil and gas companies, unlike Labour’s proposal of a few weeks ago. Our levy raises around £5 billion over the next 12 months against Labour’s estimate of around £2 billion for its proposals. Its windfall tax would raise less than £70 per household, not £600 as it claimed. In fact, the Opposition’s regressive VAT plans would give millionaires in mansions more off their bills than those in need. They are now caveating their windfall tax costings by stating that their £600 per household support will be supported by “other measures”. By that I presume they mean more public spending and a higher rate of taxation for hard-working people across this country. As usual with Labour, the sums sadly do not add up.

The new tax we are introducing today ensures that the extraordinary and unexpected profits from which oil and gas companies have benefited are taxed fairly and provide a significant investment incentive. This is a sensible considered move and one that will be warmly welcomed across the House.

Our plans mean that the oil and gas producers can claim the allowance when their spending on investment is actually incurred. This is unlike the allowance under the existing permanent tax regime for oil and gas companies, which can be claimed only once income is received from the field, subject to the investment, and, as some Members of the House will know, that can take several years.

I want to make it clear what the investment allowance will apply to. First, if capital or operating expenditure qualifies for supplementary charge allowance, it will qualify for the energy profits levy allowance. As the levy is targeted at the extraordinary profits from oil and gas upstream activities—that is the profits that came about owing to global price increases—it makes sense that any relief for investment must also be related to oil and gas upstream activities.

Secondly, such spending can be used to decarbonise the oil and gas production, for example through electrification. Therefore, any capital expenditure on electrification, as long as it relates to specific oil-related activities within the ringfence, will qualify for the allowance.

Stephen Flynn (Scottish National Party, Aberdeen South)

I thank the Minister for giving way once again; he is being very generous. On that specific point, the Financial Secretary to the Treasury stated the same last week. It is good to have that clarification, but why is it not written into the text of the Bill?

Simon Clarke (Conservative, Middlesbrough South and East Cleveland)

I can provide that assurance from the Dispatch Box. Examples of electrical expenditure on plant and machinery will be things such as generators, which include wind turbines, transformers and wiring. I also remind the House that there are other tax and non-tax levers to support non-oil and gas investments, such as in renewables. Those levers include the super-deduction and our competitive research and development tax credit regime. Importantly, the returns on these investments are taxed at 19% rather than at 65% as for UK oil and gas profits.

We have been listening closely to feedback from industry. Late last month, my right hon. Friend the former Chancellor met industry stakeholders in Aberdeen to discuss the levy and to make sure that it works as the Government intend it to. As my right hon. Friend the Financial Secretary to the Treasury confirmed in a debate last week, the Government have changed the legislation, which is reflected in the Bill before us today.

Tax repayments that oil and gas companies receive for petroleum revenue tax related to losses generated by decommissioning expenditure will not be taxed under the levy. These are repayments that are typically taxed under the permanent tax regime. However, as wider decommissioning expenditure is also left out of the account for the levy, this change is both consistent and fair. I wish to reiterate my thanks to those in the industry with whom we have engaged on this matter, and to again reassure the House that, with this change, the Government still expect the levy to raise around £5 billion over the next year.

On how long the levy will be in place, it will take effect from 26 May this year and, when oil and gas prices return to historically more normal levels, it will be phased out. The sunset clause in the Bill ensures that the levy is not here to stay. There are very few taxes that have their expiry date set in law, so this provision demonstrates the Government’s commitment to keeping the levy temporary and gives oil and gas companies further reassurance as they seek to plan their investments.

Our permanent oil and gas tax regime is competitive globally against similar operating environments and is lower than that of Norway, the Netherlands or Denmark. However, it is both fiscally prudent and morally right that we have a temporary and targeted levy that applies to extraordinary profits in our oil and gas sector and reflects an extraordinary global context.

Through the Bill, the levy will raise some £5 billion of revenue over the next year so that we can help families with the cost of living through significant and targeted support to millions of the most vulnerable. These are extraordinary times and we are seeing extraordinary prices, and that requires extraordinary Government action.

I did not come in to politics to raise taxes, nor did this Government, but we are about delivering the action required to support families in their time of need. At the same time, the Government are clear that we want to see the oil and gas sector reinvest its profits to support our economy, jobs and energy security. For those reasons, I commend the Bill to the House.

James Murray (Labour/Co-operative, Ealing North)

I thank the Minister for setting out how North sea oil and gas producers will be affected by the measures the Bill seeks to introduce—even though he seemed unable to say the words “windfall tax” when referring to it at any point during his speech.

This Bill is long overdue. We are finally debating this legislation in Parliament, more than seven months after the shadow Chancellor first set out Labour’s plans for a windfall tax on oil and gas producers’ profits. In the seven months since Labour first called for a windfall tax, cost of living pressures for people have grown relentlessly, and in those seven months, oil producers’ profits have soared.

Since the start of this year, energy bills have spiralled by £700 for a typical household, inflation across the board has hit 9.1%, the highest in 40 years and, despite Tory smoke and mirrors with thresholds, average earners will still be paying £300 more in national insurance contributions by 2027.

Alan Brown (Scottish National Party, Kilmarnock and Loudoun)

The hon. Gentleman is making the point that Labour has campaigned on this for seven months. At the same time, the SNP has been calling for a much wider profits levy to address excess profits of other companies. Why is Labour not looking at that? I will give an example: Tesco chair John Allan, as we know, called for the windfall tax on oil and gas, but Tesco trebled its profits from £636 million to more than £2 billion. Why not an excess profit levy on Tesco and others that have profited through the pandemic?

James Murray (Labour/Co-operative, Ealing North)

I look forward to the hon. Gentleman supporting Labour’s amendments and new clauses to the Bill as we seek to cut some of the loopholes the Government have introduced, which I will turn to in a moment.

Let us not forget that, while cost of living pressures on people across the country have soared relentlessly, oil and gas producers’ profits have climbed too, with some tripling this year. A fair solution has been staring the Government in the face: levy a one-off windfall tax on North sea oil and gas producers’ profits and use that money to help to cut people’s energy bills at home.

Yet when, on 9 January this year, the shadow Chancellor first called on the Government to levy just such a tax, Conservative MPs opposed it outright. Leading that opposition the very next day was the then Education Secretary, the right hon. Member for Stratford-on-Avon (Nadhim Zahawi). He is now of course the Chancellor, so this is his Bill. At the time of our announcement, the now Chancellor, who was an oil industry executive before becoming an MP, came out firmly against the tax on the grounds that oil producers were “already struggling”. When she responds, I would be grateful if the Financial Secretary to the Treasury confirmed whether the Chancellor supports his own legislation today.

Back in January, of course, it was not only the now Chancellor who opposed the tax. The Business Secretary opposed it too, saying:

“I have never been a supporter of windfall taxes.”

The then Northern Ireland Secretary, the right hon. Member for Great Yarmouth (Brandon Lewis), said that he thought a windfall tax sounded attractive, but did not work. The Deputy Prime Minister claimed it would be disastrous. Ministers and their Back-Bench Conservative colleagues then went on to vote against our plan for a windfall tax on three separate occasions.

Andrew Bowie (Conservative, West Aberdeenshire and Kincardine)

This demonstrates the difference between Opposition Members and Conservative Members, in that we do not come lightly to the decision to increase taxes on successful British industries. Labour and the SNP would tax anything that moved; we take a long time to think through our plans carefully. That is why we are presenting this plan today, which is far removed from Labour’s plan. That would decapitate the oil and gas industry—which, by the way, Labour does not support—and we would have the taps turned off tomorrow.

James Murray (Labour/Co-operative, Ealing North)

The hon. Member is right that Conservative Members have taken a long time to come round to this. They have taken seven months to come round to it—seven months in which the cost of living pressure on people across the country has risen relentlessly and in which oil producers have seen extraordinary profits. That delay has not been without cost.

Despite our common-sense plan for a windfall tax having wide support across the country for many months, with even oil bosses backing its logic, Conservative Ministers and their colleagues on the Back Benches simply refused to get on board—until 26 May, the day after the Sue Gray report was published. That was the day the Prime Minister and the former Chancellor suddenly changed their minds. It seemed clear that what had finally caused the Conservative leadership to change course and back a windfall tax was not the deafening calls from people across the country for help with their energy bills, nor the blatant unfairness of oil and gas producers’ profits soaring in the middle of a cost of living crisis; rather, it was the need for a different set of headlines in that week’s news. That is a grubby way to govern, and it is proof, if further proof were needed, that the Conservatives are not fit to lead our country.

Now, after months of refusing to act, Ministers are rushing this Bill through Parliament with just one day of debate and with a consultation period on the draft legislation of just seven days. As Tax Justice UK, working with the campaign group Uplift, has said, such a short period of just one week for consultation on the draft Bill is

“a breach of well-established legal principles of procedural fairness.”

As it points out, having a longer consultation period would not delay the levy taking effect, as the Bill names its start date as 26 May. It fears that the shorter consultation period the Government have chosen offers

“those with most resources—such as oil and gas producers—more opportunity to influence the shape of the legislation.”

Alan Brown (Scottish National Party, Kilmarnock and Loudoun)

It is good that the hon. Gentleman mentioned Tax Justice UK. It is probably worth speaking to it about pandemic profits and a wider profits levy, because that it is what it advocated. Hopefully when he is discussing the oil and gas stuff with it, he will discuss a wider profit levy as well.

James Murray (Labour/Co-operative, Ealing North)

I thank the hon. Gentleman for his intervention. We discuss many matters with Tax Justice UK, not least its response to the ridiculously short consultation period on the draft of the Bill that the Government are now seeking to rush through Parliament in a day.

Despite the fact that Ministers may be in a rush today, we know that their story until recently has been one of delay. Those months of delay in backing a windfall tax mean that the public finances have missed out on billions of pounds of tax revenue that could have gone towards further help for people struggling with the cost of living. But whatever it took to get the Prime Minister and the former Chancellor over the line, we were relieved that they finally agreed to back a windfall tax. On behalf of the people we represent across the country, we were relieved that some help with soaring energy bills was finally on its way. That help is set to include a payment of £400 to all domestic energy bill payers. We welcomed that promise of support announced alongside the windfall tax, and we were relieved that the Government had finally listened to what we and so many others had been saying as they agreed to drop the “buy now, pay later” compulsory loan scheme that had been promised before. But we were dismayed to learn that some of the people who need the help least will be getting that £400 payment several times over. Because this package has been cobbled together at the last minute, people who live in more than one home will get £400 for each of them, so a total of £200 million of public money will go towards people with multiple properties. That is not fair, it is not a good use of public money, and, as we see far too often, it is public money being casually wasted by this Government.

While that particular loophole may have been the result of carelessness or haste, the Bill contains another loophole that has been created by design—a brand-new tax break for oil and gas producers that will give money back to the same firms that were supposed to be paying their fair share through the windfall tax. This tax break means that oil and gas producers will receive an unprecedented level of subsidy for their spending on oil and gas-related activities. For every £100 an oil and gas producer invests in the North sea, they will receive £91.25 from the taxpayer. That compares with £25 that companies receive for investing in renewable energy—a figure that will fall to just £4.50 from April 2023.

Andrew Bowie (Conservative, West Aberdeenshire and Kincardine)

Although the hon. Gentleman is talking about how the Labour party likes to support working people, he is quite obviously abandoning all those working people who rely on the oil and gas industry for their employment, including the many thousands who live in my constituency. Given that he has had so many months to think about this, how many times have he and his shadow Cabinet colleagues actually met those in the oil industry to discuss this and see how it impacts on them?

James Murray (Labour/Co-operative, Ealing North)

I and my hon. Friends have had discussions with them many times, and it is absolutely clear that even oil company bosses agree with the logic of a windfall tax, saying that it would not affect their investment plans.

Andrew Bowie (Conservative, West Aberdeenshire and Kincardine)

rose—

James Murray (Labour/Co-operative, Ealing North)

No, I am not going to give way. I have been generous in giving way, and I am going to make some progress now.

This is a subsidy that not even oil executives think is necessary. BP’s chief executive, who in November last year said that soaring global commodity prices had made his company a “cash machine”, told shareholders in May that the company’s £18 billion of investment plans were

“not somehow contingent on whether or not there is a windfall tax.”

Yet despite even oil executives questioning its worth, the Government are pushing ahead with this tax break. Our analysis has shown that this means a third or more of any revenue from the new levy could be handed straight back to oil and gas producers.

The truth is that this tax break means that money that is supposed to be helping people struggling with their home energy costs will instead go back to the very oil and gas producers that have been making record profits during the energy crisis. Furthermore, that money will subsidise projects that almost certainly would have happened anyway. There is no requirement in the Bill for investments claiming this tax relief to be additional to what was already planned.

I wonder whether the Financial Secretary to the Treasury wants to correct what she said in this Chamber on 6 June. That day, she said:

“The investment relief should not be available for investments that are deadweight. It should be for new investments.”—[Official Report, 6 June 2022; Vol. 715, c. 546.]

Yet there is nothing in the Bill to make sure the tax relief it introduces goes towards investments that are new. Above all, let us remember that we are currently holding the COP26 presidency and being trusted with a position of leadership in the world’s efforts to tackle the climate crisis. It is astonishing and appalling that, at this of all times, we are giving 20 times more in taxpayer incentives to oil and gas producers than will be offered to firms investing in renewable energy.

While this Bill has plenty to say about tax breaks for oil and gas producers making extraordinary profits, it is silent on the idea of a windfall tax on the electricity generation sector. We know the Government were planning to tax the sector’s profits, as it was widely briefed in late May that the former Chancellor had ordered Treasury officials to draw up plans for a windfall tax on electricity generators. The uncertainty created by this will-they-won’t-they hokey-cokey on taxing profits from electricity generation risks discouraging vital investment in our future energy security.

As the Government are well aware, the price of electricity generated from renewable sources is currently linked to the price of gas. The spike in gas prices we are facing has therefore pushed up electricity prices, despite the costs of generating electricity from renewable sources not having changed, yet there is nothing about the electricity generation sector in today’s Bill and no detail on any wider plans from the Government to delink electricity prices from the price of gas. All we were promised in the explanatory notes published with the draft Bill was a vague intention that

“the government will urgently evaluate the scale of these extraordinary profits and the appropriate steps to take.”

I therefore urge the Financial Secretary in her response to take this opportunity to say, once and for all, whether the Government will or will not be introducing additional taxes on this sector, and when the Government will bring forward urgent legislation to delink the price of electricity from the price of gas. We are not claiming that a solution to this is simple, but it is the job of Ministers, and a sign of leadership in government, to plan ahead and solve the challenging issues our country is facing.

The windfall tax is a way to offer immediate help to people now, but we need to be investing in the long term to keep energy bills down and make our economy more secure and more sustainable. That is why the Government should be adopting not just our plan for a windfall tax, but also our wider plan to improve energy security and keep energy bills lower in the future. Labour’s plan would see us accelerate home-grown renewables and new nuclear, double onshore wind capacity, reform our broken energy system and retrofit 19 million homes to save households an average of £400 a year on their bills. From the Government, however, all we have in front of us today is a Bill that gives a tax break for oil producers’ continued spending in the North sea. Once again, this Government lurch from crisis to crisis with no plan to fix our broken system and provide the security we need.

We are relieved that the Government are finally proceeding with the windfall tax, and we will be supporting this Bill today, but we will come back to the detail of it in Committee of the whole House. At that stage, we will urge Ministers to make right their delay in introducing the windfall tax and to drop the unnecessary tax break for oil producers that undermines the impact of this windfall tax and our country’s wider efforts to tackle the climate crisis.

The Conservatives’ approach to the windfall tax shows that they are not fit to govern. When we called for a windfall tax, they wasted months opposing it before finally changing course. Now they are undermining their own windfall tax with a new tax break for oil companies. When it comes to the long-term challenges we face, they simply do not have the plans we need for the future. That goes for the former Chancellor, the current Chancellor and all the Conservative leadership candidates as much as it does for the outgoing Prime Minister. Changing the person at the top of the Conservative party will not change anything. We need a change of Government, and that means we need a Labour Government.

Peter Aldous (Conservative, Waveney)

This Bill is of particular interest to me, as not only is the cost of living crisis hitting hard in the Waveney constituency, but we need jobs based on the North sea to revitalise the local economy. I should also point out that I chair the British offshore oil and gas industry all-party parliamentary group, as the industry is a significant employer in the Lowestoft and Great Yarmouth area.

It is necessary to balance the need for short-term measures to support people through an unprecedented challenge, caused by covid and exacerbated by Russia’s brutal invasion of Ukraine, against our long-term priority of promoting investment in the UK continental shelf, which will not only revitalise coastal communities but help us achieve our net zero obligations. It is important to point out that the activities taking place on the UK continental shelf are not just the extraction of oil and gas, but those in emerging new lower carbon industries such as offshore wind, hydrogen production and carbon capture, utilisation and storage, all of which are inextricably linked. Any levy on the oil and gas sector, if poorly thought through and poorly drafted, could have a negative impact on investment in those emerging industries, which are so vital to our future.

There is concern that there is a lack of a coherent long-term energy strategy. This Bill, printed on 5 July, in many respects conflicts with the Energy Bill published the very next day. The latter Bill aims to boost the UK’s energy independence and security, attract private investment, reindustrialise the economy and create jobs through clean technologies. What is required is a seamless thread that runs through all aspects of energy policy, from our long-term strategy for producing energy to the need for a major step change in how we insulate our homes and our businesses, right through to the support for those who need it most at the current time. Those latter initiatives should build on policies already in place, such as the energy price cap, the warm home discount and the energy company obligation. We should also look to add to them with support such as the social tariff.

Underpinning this integrated approach should be how we ensure that we fully realise the great opportunity to create exciting, new jobs and how we can best provide people with the necessary skills. In mapping out the strategy with particular regard to this levy, the Government should have in mind the following considerations. The first is the vital importance of not inhibiting investment in decarbonised projects that will create jobs and help us meet our net zero obligations.

Secondly, the Government must have it in mind that investment in energy projects is global and footloose and, if we have an unstable fiscal regime, business will go elsewhere. Thirdly, they must ensure, and not undermine, the security of our energy supply. Fourthly, they should have regard to the negative impact on not just those high-profile oil and gas majors, but the supply chain companies located in many constituencies that are invariably highly innovative small and medium-sized enterprises and are the lifeblood of our local economies. Fifthly, notwithstanding that the Bill contains a sunset clause, there remains some uncertainty on the levy’s timeframe, which I hope the Minister will clarify.

Taking those considerations into account, the amendments and clarification that the Government have made are welcome. They include the exclusion of petroleum revenue tax rebates from the levy, reassurance that capital expenditure on electrification linked to oil and gas is included in the investment allowance, and the inclusion of the aforementioned sunset clause.

That said, more changes would be welcome to reduce the fiscal uncertainty, so I would be grateful if the Government considered the following suggestions. To support SMEs, they should introduce a small profit allowance to allow companies with small profits to be exempt from the levy. That would assist small companies that have been investing for many years. They accumulated significant losses when oil and gas prices were low and are now making only marginal profits.

There should also be support for decarbonisation schemes to ensure that projects such as the electrification of oil and gas production facilities benefit from the capital allowance. A regular review mechanism should be included to ensure that the levy is delivering on its aims and is not having any unintended consequences. There is also a need for regular ongoing dialogue with the industry and the sector’s investors.

I understand why the Bill is being introduced—we are in unprecedented and deeply troubling times—but I am mindful that unintended consequences could undermine much-needed inward investment into the UK, particularly along the North sea coast, which is vital to the regeneration of towns such as Lowestoft. I therefore urge the Government to do all they can to address those concerns, and I hope that the Minister will do that in her summing up.

Stephen Flynn (Scottish National Party, Aberdeen South)

It would be remiss of me as MP for Aberdeen South not to reflect on the fact that last week marked 34 years since the Piper Alpha disaster. It is all well and good for Members to talk about the Bill, but it is important to reflect on the sacrifices that many people have made in the North sea, particularly my constituents and those of the hon. Members for Banff and Buchan (David Duguid) and for West Aberdeenshire and Kincardine (Andrew Bowie), who continue to work in inhospitable terrain daily. I also reflect on the ultimate sacrifice that was paid by so many people long ago; I am sure the Minister will join me in that in her summing up.

On a less serious note, it is funny that we are in the midst of a leadership contest where all we hear about is tax cuts—some have promised £200 billion of tax cuts—yet the Chief Secretary to the Treasury is in the unenviable position of coming to the Chamber to tell us that he will hike taxes to 65% on the oil and gas sector. The irony of that will not be lost on anyone present. Importantly, that tax hike is four times greater than the £1.2 billion that the Opposition pushed for in January, so I congratulate him on being the only Conservative at this moment who appears to want to hike taxes.

Seriousness is important in this debate, however, because we are talking about why the legislation is needed. All hon. Members present are aware of the severe challenges that people up and down the country are facing. Energy prices are absolutely skyrocketing and we have all seen the troubling news in the last couple of days that they are expected to go higher than even Ofgem anticipated. There is also the knock-on impact of inflation, which is away to hit double figures. Fuel costs are skyrocketing. Clothing costs are skyrocketing. Food costs are skyrocketing. Interest rates are going up. Whichever way people turn, irrespective of where they live on these isles, they are getting squeezed and hammered. And the situation is not going to get better: we know the UK under the leadership of the current United Kingdom Government has the slowest growth in the entire G20 outside of Russia and the true effects of Brexit continue to be felt.

So implementing a policy that puts money into people’s pockets is necessary and we of course support the principles of what the Government are seeking to do in that regard. It is worth reflecting on the fact that we are now at a point where the UK Treasury has coined some £400 billion from Scotland’s North sea oil and gas sector. Is it not a pity that we are returning to the well once again? We look enviously across the North sea at Norway, which has a sovereign wealth fund from its own oil and gas sector. It is a bigger basin there, but that fund sits at around $1 trillion. What a comparison to this Government. Not only are they going back to the Scottish well to try to put in place financial support for people, but they are at this crux, where they do not necessarily know what it is and where they are seeking to go, because the Bill was undoubtedly hastily written on the back of Sue Gray’s report, as the Minister acknowledged earlier, when he could not even tell us at what price the levy would be removed. He talks about a normal price for oil and gas. I do not know what a normal price is for oil and gas; I am the MP for Aberdeen South and I have no idea what a normal price for an oil and gas barrel should be, and I do not think any Members on the Government Benches do. That offers absolutely no certainty to industry, irrespective of what the Government seek to suggest.

Perhaps the most glaring omission from the Bill is the fact that the Government are going to offer tax incentives in relation to further exploration, but we will not have anything in the Bill on renewable technologies directly linked to the offshore industry. Those tax incentives are not going to be applied to the renewables industry itself. We were told that is outwith the scope of the Bill, but it is a great disappointment that the Government had an opportunity to seriously incentivise investment in renewables and chose not to do so.

We are of course talking about the wider picture at the present time and I reflected earlier on the UK Government’s desire to cut taxes, but we have not heard about climate change from any single Tory leadership candidate; what are their views on climate change? It is disappointing that there is no talk in relation to this Bill about the journey to net zero or the climate compatibility checks that I think we all across this Chamber, and indeed in industry, agree with.

It is clear, from looking at the situation at the moment, why the Bill is needed. The Government chose to introduce it when they did for reasons of political expediency, but we cannot allow the Bill to simply go through without attempting to improve it and I look forward to doing that at Committee stage.

Nigel Evans (Conservative, Ribble Valley)

Order. I ask Members to respect the maiden speech conventions as I call and welcome Simon Lightwood.

Simon Lightwood (Labour, Wakefield)

Thank you, Mr Deputy Speaker. It is with great pleasure that I rise to make my maiden speech today. The people of Wakefield have placed their trust in me to restore their rightful voice in this place, and I hope I will reflect their affinity for no-nonsense straight talking in my contributions in this House. I will speak briefly on the Energy (Oil and Gas) Profits Levy Bill before begging Mr Deputy Speaker’s indulgence to speak about the wonderful constituency that I now proudly represent.

What took you so long? It has been seven months since the shadow Chancellor, my hon. Friend the Member for Leeds West (Rachel Reeves), first set out Labour’s plans for a windfall tax on oil and gas giants—seven long months of dither and delay as Government Members attacked the common-sense, compassionate plan to help millions of people facing soaring energy bills and the choice between heating and eating. Why? Pride. The Government could not possibly embrace an idea proposed by the Labour party, so instead of focusing on the people crying out for help, they attacked and ridiculed the idea, while millions worried about how to make ends meet.

I have spent the past few months telling people that this was their chance to tell the Prime Minister he should go. I am delighted that the voters of Wakefield took my advice, but am slightly surprised that 53 Conservative Ministers did, too. We need a change in Government and a fresh start for Britain. Everywhere we look, we see things that are broken, but under this Government, nothing gets fixed. They are incapable of governing in the national interest, and should move aside and call a general election. Those, perhaps, are not the words expected of a Member still exhausted by the rigours of a by-election, but it is an important message to deliver when the Government show such a clear detachment from reality.

I was not born in Wakefield, but I was made in Wakefield. It opened my eyes to a world of opportunity, and I fell in love with the people and the place when I moved to West Bretton to study for my theatre acting degree at Bretton Hall College, which is nestled in the glorious grounds of the world-renowned Yorkshire Sculpture Park. The city also boasts the Hepworth gallery, which was designed by the British architect David Chipperfield and takes its name from the artist and sculptor Barbara Hepworth, who was born and educated in the city. Wakefield constituency includes Wakefield—the merrie city, as it is known—and a large rural area to the south-west. It also includes the towns of Horbury and Ossett, each with their proud history and unique identities.

Wakefield has a proud mining heritage, and I pay tribute to those who powered our nation and kept our lights on. At the National Coal Mining Museum, situated in Wakefield, people come from all over the country to learn about that important industry and its important place in our history. While we cherish our proud heritage, we also have our eyes set towards the future, as shown by the recent opening of CAPA College, which is inspiring, training and educating the next generation of performers, creatives, designers and technicians. I was also pleased to visit the construction site of Tileyard North a couple of weeks ago. That exciting 135,000 square feet creative industries hub, based at Rutland Mills, is transforming the site into the UK’s largest creative community outside London.

As is tradition, I would like to pay tribute to some of my predecessors, including Mary Creagh, who I watched from the Gallery delivering her maiden speech some 17 years ago. A tenacious campaigner and advocate for the people of Wakefield, she successfully introduced the Children’s Food Bill in 2005, which sought to introduce minimum nutritional standards for all school meals. She went on to hold various positions, including shadow Secretary of State for Environment, Food and Rural Affairs, and was pivotal in delivering the new Pinderfields Hospital.

I also pay tribute to David Hinchliffe, who represented Wakefield from 1987 to 2005. He was Chair of the Health Select Committee and, in 1988, became the founder and first secretary of the all-party parliamentary rugby league group—coincidentally, the first all-party parliamentary group I joined upon my election. Finally, I pay tribute to the right hon. Walter Harrison MP, who represented Wakefield from 1964 to 1983. He proudly served as a Government Whip from 1966 to 1970, and as Deputy Chief Whip from 1974 to 1979. I believe Walter remains the only half vote recorded in Hansard, having jammed his foot in the Lobby door just as it was about to close, after being delayed in a lift.

It will not have escaped the notice of Members that I have omitted my most recent predecessor, who left the people of Wakefield without a voice in Parliament, but what I would like to do is pay heartfelt tribute to all victims of sexual abuse for their bravery in pursuing justice. Their actions leave the world a safer place and send a message to those who perpetrate such heinous crimes that we, as a society, will not tolerate sexual violence and abuse. No matter what your status, you are not above the law.

The reality of sexual violence and abuse in England is truly shocking: one in four women have been raped or sexually assaulted as an adult; one in 20 men have been raped or sexually assaulted as an adult; and one in six children have been sexually abused. Those are staggering statistics and represent an uncomfortable truth that must be heard—and, more importantly, urgent action must be taken. Our justice system is failing when only one in 100 rapes are reported to police and charged that same year. Sadly, most victims and survivors of rape do not report it to the police: five in six women and four in five men do not report it.

The biggest tribute we can pay to victims is our action, our perseverance and our commitment to demanding better, to doing more and to being honest with ourselves and admitting that when victims and survivors are forced to wait three years for their case to get to court something is badly wrong. We can and must do better. So, I pay tribute to all victims and survivors of sexual violence and abuse, and promise to always be straight-talking on this issue, and to ensure that the voices of victims and survivors are always heard.

Before taking my seat, I proudly worked for the national health service and witnessed the sheer exhaustion and the struggle that those on the frontline continue to face, and the frustration of those seeking to access NHS services stretched far beyond their limits. I worked with some real-life superheroes. As we move into a world where we live side by side with covid, I urge all colleagues to remember that for the NHS, the impact will be with us for many years to come. They deserve our respect, our patience and our gratitude for all they continue to do.

The people of Wakefield are weary of our politics and their trust has been eroded, but I promise to rebuild that trust every day and be their strong voice in Parliament, fighting every day for the betterment of my constituency.

Nigel Evans (Conservative, Ribble Valley)

Congratulations on your maiden speech. You will remember this day forever.

Wera Hobhouse (Liberal Democrat, Bath)

I congratulate the hon. Member for Wakefield (Simon Lightwood) on an excellent speech. He told us about the wonderful heritage, arts and culture in his constituency. I went to Yorkshire Sculpture Park, a long time ago now, and it was absolutely beautiful. I encourage everybody to go. I hope he will not suffer the fate of one his predecessors and get his foot jammed in one of the Lobby doors. Maybe if he comes early for voting, he can avoid that fate.

We Liberal Democrats have been calling for a windfall tax since last year. It was my right hon. Friend the Member for Kingston and Surbiton (Ed Davey) who first suggested, last October, a windfall tax on the super profits of the oil and gas giants that were taking millions of pounds in profit while households were starting to struggle badly. For months the Government tried to resist a windfall tax, defending the indefensible. The Government have finally caved in, but too late for many. For example, my constituent wrote to me in January saying that he had to stay in bed because he could not heat his home. Our Liberal Democrat analysis shows that more than double the amount could have been raised if the Government’s levy was tougher now and had been implemented earlier. The equivalent of £200 is lost to each household because the Government are doing too little too late.

Imran Hussain (Labour, Bradford East)

The hon. Lady is making an absolutely excellent and pertinent point. Does she agree that the Government have had ample opportunities, but voted no fewer than three times in this House against bringing a levy in earlier?

Wera Hobhouse (Liberal Democrat, Bath)

I could not agree more. The Government have dithered and delayed. They could do something about it and back our amendment, which would ensure that the new levy on oil and gas companies is backdated to last October. That would at least reflect the dither and delay and do something about it.

What should we make of the proposals to exempt those companies investing in new oil and gas exploration? There is nothing in the Bill to incentivise investment in renewables. That flies in the face of the Government’s commitment to get to net zero. In fact, it demonstrates once more how quickly they are prepared to U-turn on their promises, making it harder for struggling households to get on top of soaring energy bills now and in future and failing to take serious action on climate change. What is more, where is the programme to transform the pace of home insulation, which is lagging shockingly behind? Where are the planning laws to ensure that we build zero-carbon homes now rather than allowing developers to build homes that will require very costly retrofitting in a few years’ time?

We need bold and swift action to help families with the soaring cost of living and energy prices. The cheapest form of energy is onshore wind. When will the Government drop their effective ban on onshore wind and turbo-charge its revival? That would be the surest way to help struggling households to bring their energy bills down in the near future. The Government, however, can only fire-fight, and they have no vision and no real ambition.

Under Liberal Democrat plans, we would cut most emissions by 2030. That would be good not only for the climate, but for people’s pockets as we wean ourselves off global oil and gas markets as soon as possible. The Government have to come clean on the fact that even if gas and oil are produced in the UK, that will do nothing for household energy costs, because the price of oil and gas is fixed globally, not nationally.

On new green jobs, cleaner air, warmer homes and lowering living costs, the levy could have done so much more. We Liberal Democrats support the Bill but deplore the lack of a much greater ambition from the Government to rein in soaring energy costs and tackle the climate emergency.

Nigel Evans (Conservative, Ribble Valley)

I call the shadow Minister, Abena Oppong-Asare.

Abena Oppong-Asare (Labour, Erith and Thamesmead)

It is a pleasure to respond on Second Reading on behalf of the official Opposition. I thank all hon. Members; this has been a good debate with many interesting contributions from across the Chamber. I particularly congratulate my hon. Friend the Member for Wakefield (Simon Lightwood) on his excellent maiden speech—isn’t it great to see Wakefield turn red again? I know that he will be a great champion for Wakefield and his constituents, and I look forward to hearing many more of his speeches. I also thank the hon. Members for Waveney (Peter Aldous), for Bath (Wera Hobhouse) and for Aberdeen South (Stephen Flynn), who made interesting speeches; it is good to hear them supporting Labour’s policy.

The message that we have heard loud and clear from hon. Members today is that the Tory cost of living crisis is far from over. In fact, the financial pressures that many people are facing grow larger and larger. Food, fuel and energy bills continue to rise and families across the country are already worrying about the winter that lies ahead, as we all see reflected in the emails that we get from our constituents across the country. As my hon. Friend the Member for Wakefield mentioned, in that context, we are finally considering this long-overdue Bill, seven months after my hon. Friend the Member for Leeds West (Rachel Reeves), the shadow Chancellor, set out Labour’s plan for a windfall tax on oil and gas producers—I repeat: seven months.

As my hon. Friend the Member for Ealing North (James Murray) said, since Labour first called for the windfall tax on oil and gas producers, energy bills for typical households have risen by a shocking £700, inflation has rocketed to its highest level in 40 years, and, of course, people’s taxes have gone up as the Government have pressed ahead with the national insurance increase. In that period, oil and gas producers’ profits have soared. Indeed, we estimate that between Labour first calling for the windfall tax in January and the former Chancellor and soon-to-be former Prime Minister finally accepting our arguments at the end of May, nearly £2 billion of tax revenue could have been raised to help people with the cost of living crisis. In that time, Conservative MPs voted against our plans for a windfall tax not once, not twice, but three times. Ministers repeatedly claimed that such a plan would not work. Famously, the current Chancellor said that oil and gas producers were “already struggling”; I would be very interested to hear from the Chancellor whether he has changed his mind about that.

It is shameful that it took the Government so long to come to their senses and finally do the right thing. That is yet more evidence, if we needed it after last week, that this Government are on their last legs, out of touch, out of ideas and now truly out of time. With the windfall tax and with so many other issues, it is Labour that leads and the Conservative party that follows. We are relieved that the Government are finally legislating for a windfall tax, and we will not oppose the Bill today, but there are several areas of concern for us.

Several hon. Members have mentioned the Bill’s tax break for oil and gas producers. We simply do not think it right that the Bill will hand back money to the same companies that are supposed to be contributing their fair share to tackling the cost of living crisis. As my hon. Friend the Member for Ealing North said, for every £100 that an oil and gas company invests in the North sea, it will receive £91.25 from the taxpayer. How is that right? I compare that with the £25 that companies receive for investing for renewable energy, which is set to fall even further. A third or more of the revenue from the windfall tax will be handed straight back to oil and gas producers. How can it be right that we are subsidising oil and gas projects, which companies have said would happen anyway, to this level? It is an insult to families who are struggling and it makes a mockery of our climate commitments.

I turn to electricity generation and the excess profits in the electricity sector.

Stephen Flynn (Scottish National Party, Aberdeen South)

The hon. Member is making a very passionate case. A similar question was asked earlier of her Front-Bench colleague, the hon. Member for Ealing North (James Murray), but I would be keen to know when shadow Ministers last met industry representatives in Aberdeen to discuss their views on the matter. I ask out of interest.

Abena Oppong-Asare (Labour, Erith and Thamesmead)

As the hon. Member knows, Labour has been consulting regularly with organisations and stakeholders about the matter. We are willing to meet anybody who would like to meet us. Our door is open.

We called for the windfall tax months ago and are glad to see that the Government are taking it forward, but I have to say that they have been all over the place on the issue. In May, it was suggested that the Chancellor had asked the Treasury to draw up plans for a windfall tax on excess profits by electricity generators. I really wish that the Government had been vocal on the issue when Labour raised it months ago. As hon. Members will know, the price of electricity is closely linked to the price of gas; electricity prices have therefore been pushed up, although the costs of generating electricity from renewable sources have not changed. That is leading to significant profits for the sector. It was reported that such a windfall tax could raise up to £10 billion, but the Bill says nothing about the electricity generation sector.

As the Government have gone quiet on wider plans to decouple electricity prices from the price of gas, I would be grateful if the Financial Secretary would shed some light today on the Government’s plans for the electricity generation sector. It is clear that the market needs urgent reform so that it delivers for consumers and businesses. I hope that she can tell us why the Government are delaying bringing forward an energy market reform Bill that will finally break the link between gas and electricity prices.

Hon. Members have mentioned the support announced alongside the windfall tax. Of course it is a relief to our constituents that the Government have finally brought forward payments to help with energy bills and have scrapped their proposed “buy now, pay later” scheme, but we think it simply wrong that owners of multiple properties will receive the £400 payment for each and every property that they own and live in. There are surely far better uses for the money than that, so I urge the Government to think again.

Although we will support it today because we have long argued for a windfall tax on oil and gas producers to help people with soaring energy bills, we know that the Bill will not be enough. It is simply not ambitious enough. We need a long-term plan to guarantee the UK’s energy security and bring down bills for families. We have called for an acceleration of home-grown renewables and new nuclear, a plan to double onshore wind capacity and reform our broken energy system, and a national mission to retrofit 19 million homes to save households an average of £400 a year on their bills.

Alan Brown (Scottish National Party, Kilmarnock and Loudoun)

Will the hon. Lady give way?

Abena Oppong-Asare (Labour, Erith and Thamesmead)

I think that I have already been very generous.

Given the crisis facing the Conservative party, I do not have much confidence in them to deliver these essential priorities for Britain. While they spend the summer arguing among themselves, we on this side of the House will continue to provide the leadership that our country needs, just as we have with the windfall tax. We will stand up for families through the cost of living crisis, we will back British businesses and we will provide economic security for our country.

Lucy Frazer (Conservative, South East Cambridgeshire)

It is a pleasure to close this important debate on behalf of the Government. We have talked today about the context of the Bill: the high oil and gas prices, and the extraordinary profits that are being received by the industry while working people struggle with the cost of living. We are introducing a temporary, targeted levy to fund cost of living support, at the same time as encouraging companies to invest.

Let me start by responding to some of the points made by the hon. Member for Ealing North (James Murray). He criticised our levy for not raising enough, but, as was pointed out by the hon. Member for Aberdeen South (Stephen Flynn), Labour’s proposal would have raised only £1.2 billion at the time when it was made, whereas our levy will raise £5 billion—more than the £4 billion called for by Greenpeace, more than the £3.7 billion called for by the Green party, and, as I have said, significantly more than the amount proposed by the Labour party.

The hon. Member for Ealing North criticised our scheme because it will encourage investment, while the hon. Member for Erith and Thamesmead (Abena Oppong-Asare) said that we needed domestic energy security. We are ensuring that the important oil and gas sector will continue to invest so that we have that domestic energy security. The hon. Gentleman criticised us for not listening to industry, but I noted that neither of the Labour Front Benchers was able to say how or when they had engaged with industry. As Conservative Members know, last month the Chancellor held an industry roundtable which was attended by me and by the former Exchequer Secretary, my hon. Friend the Member for Faversham and Mid Kent (Helen Whately).

Let me quote some of what has been said by representatives of the industry about our investment proposal. Orcadian Energy has said:

“We believe the immediate investment allowance, included in the Energy Profits Levy, has transformed the attractiveness of domestic oil and gas projects for companies extracting oil and gas in the UK and it should spark further investment in the North Sea.”

Cornerstone Resources has said that there has been

“more interest in partnering with us”

in the last few weeks. I could go on, but what we are trying to do is raise money to help with the cost of living, at the same time as encouraging industry to invest in a vital sector.

Let me now answer some of the questions put to us by the hon. Member for Ealing North. First, I can confirm that the Chancellor supports the Bill. I also want to respond to the point about consultation. The hon. Gentleman was, of course, encouraging us to do this a long time ago, but now he says that we should have consulted for longer and, therefore, introduced the measure later. We have sought to engage, and put the industry on notice, as much as possible regarding the announcement of the levy. Ministers in my Department have been in regular contact with the industry and we also undertook a short period of technical consultation on the legislation for the levy. Hon. Members will know that draft legislation was published on 21 June, with stakeholders able to provide technical feedback on it until 28 June.

The hon. Member for Ealing North asked what we were doing about the electricity generation sector. As the former Chancellor said at the time, that is something we are urgently looking at. The hon. Gentleman said that we should follow Labour’s plan. Well, let us remember what Labour’s plan is. Labour has put forward £100 billion-worth of spending proposals, of which only £10 billion-worth are fully funded.

I would like to mention the passionate and important speech from my hon. Friend the Member for Waveney (Peter Aldous). He rightly identified the need to balance short-term measures with long-term investment, and I hope that that is what we are doing. He raised the importance of renewables. As I have had the opportunity to discuss with him before, there are other tax levers and non-tax levers to support non-oil and gas investment, including the super deduction and the UK’s research and development tax credit scheme. There is also the contracts for difference scheme, which provides developers of low carbon electricity generation with direct protection from volatile wholesale prices, and the £1 billion carbon capture infrastructure fund.

My hon. Friend also asked about the timeframe. That is an important point, because this is a temporary measure. There is a sunset clause in the legislation. It is rare to include a sunset clause, but we have done so to underline that this is a temporary measure with a timeframe of 2025. He raised the importance of dialogue with the industry, and I reassure him that we have engaged fully with the industry and will continue to do so.

Alan Brown (Scottish National Party, Kilmarnock and Loudoun)

On carbon capture infrastructure, the Minister is well aware that the Scottish cluster has been made a reserve and been let down yet again. Can she define what “reserve” means, because nobody seems to know? Does she expect one of the two selected projects to fail, at which point the reserve would step up, or is it a question of dangling a carrot in front of it? What does “reserve” really mean, and why do the Government not just make the Scottish cluster a track 1 cluster?

Lucy Frazer (Conservative, South East Cambridgeshire)

The hon. Member makes an important point, because we value the investment and work that is going on in Scotland in the oil and gas sector and in renewables. He knows that, because I and Ministers from the Department for Business, Energy and Industrial Strategy have stood at this Dispatch Box and engaged with him regularly on this. He is right to identify that that cluster is in reserve, and I am sure these matters are being discussed with the relevant Ministers in BEIS.

I recognise the points that the hon. Member for Aberdeen South made about the sacrifices made by those who work in this sector. I am grateful to him for making those points, which I am happy to associate myself with. He asked what the normal price was, and I would like to refer him to the comments that the former Chancellor made when he was questioned on this by the Treasury Committee. He said:

“The last time this was done, a price target was published, which was $74 or $75 for Brent…If you look at average Brent price over the last five or 10 years, that will give you something like $60 or $70 for oil…so that gives you a sense.”

This is something we will be considering in due course.

Stephen Flynn (Scottish National Party, Aberdeen South)

I was of course aware of the former Chancellor’s fluff in relation to this topic. Is the Minister confirming to the House and to the industry, which will be watching, that if the price of oil falls to around $60 or $70 a barrel, the levy will be no more?

Lucy Frazer (Conservative, South East Cambridgeshire)

As I have just said in responding to the hon. Gentleman’s earlier point, the former Chancellor said that that “gives you a sense”, and I too am happy to relay that sense of where the prices would be, but we also have the long-stop date, which should give the industry some certainty as to when this will finally come to an end.

I welcome the hon. Member for Wakefield (Simon Lightwood) to this place. I was born and made in Leeds so I am very pleased to welcome a neighbour, in one sense of the word, and to hear him extol the virtues of Wakefield. He made a passionate speech about standing up for victims of sexual abuse and I welcome him to his place in the House of Commons.

The hon. Member for Bath (Wera Hobhouse) asked for bold and swift action, and that is what this Bill is about. Tonight this House has the opportunity to support the introduction of an energy profits levy on the extraordinary profits of UK oil and gas producers. It has the opportunity to support investment in the North sea through the levy’s investment allowance, and to support the automatic expiry of the levy in law, giving companies additional reassurance that the levy is temporary. This is a balanced approach that allows the Government to deliver support to families while encouraging investment and growth. For those reasons, I urge Members of this House to support the Bill.

Question put and agreed to.

Bill accordingly read a Second time.

Clause 1 - Charge to tax

Nigel Evans (Conservative, Ribble Valley)

With this it will be convenient to consider the following:

Amendment 9, in clause 2, page 2, line 42, at end insert

“, which may include electrification investment that decarbonises upstream oil and gas activities”.

This amendment would put on the face of the bill that electrification investment which decarbonises upstream oil and gas activities is eligible for relief.

Clause 2 stand part.

Clauses 3 to 11 stand part.

Amendment 1, in clause 12, page 9, line 32, after “levy” insert

“and the amount of tax relief on additional expenditure treated as incurred that the responsible company is claiming under section 2 of this Bill.

(2A) The data submitted by responsible companies under subsection (2) of this section must be published in aggregate on a quarterly basis.”

This amendment requires companies making a payment of the levy to also provide information to HMRC about the amount of extra tax relief they are claiming under section 2 of the Bill, and requires the total amounts of levy received and tax reliefs claimed every quarter to be published.

Clause 12 stand part.

Clauses 13 to 19 stand part.

That schedule 1 be the First schedule to the Bill.

That schedule 2 be the Second schedule to the Bill.

New clause 1—Assessment of revenue effects of a higher Energy Profits Levy—

‘The Chancellor of the Exchequer must, no later than 30 September 2022, lay before the House of Commons an assessment of the effects on—

(a) tax revenues, and

(b) oil and gas company profits

of the Energy Profits Levy being charged at 45%.’

This new clause would require the Government to publish an assessment of the effect on tax revenues and on oil and gas company profits of charging the Energy Profits Levy at 45% rather than 25%.

New clause 2—Review of the impact of tax relief on additional expenditure treated as incurred—

‘The Chancellor of the Exchequer must, by 26 August 2023, publish an assessment of the impact of the tax relief provided by this Act on the UK’s energy market, including the impact on—

(a) net zero obligations;

(b) energy security;

(c) renewable energy supplies; and

(d) fracking.’

This new clause requires an assessment, within three months of the end of the first year of the levy being in place, of what impact the Bill’s extra tax relief for investment expenditure by oil and gas companies would have on the UK’s net zero obligations and other aspects of the energy market.

New clause 3—Review of impact of earlier start date of the levy—

‘The Chancellor of the Exchequer must, within three months of this Act receiving Royal Assent, publish an assessment of how much the levy would have raised between 9 January 2022 and 25 May 2022 if it had been in place from 9 January 2022.’

This new clause requires an assessment, within three months of the Bill becoming law, of how much extra revenue would have been raised if the levy had been introduced on 9 January 2022 rather than 26 May 2022.

New clause 4—Review of the amount of tax relief on additional expenditure treated as incurred—

‘The Chancellor of the Exchequer must, within three months of this Act receiving Royal Assent, publish an assessment of—

(a) how much tax relief on additional expenditure treated as incurred under sections 2 to 7 of this Act will be claimed; and

(b) how much of the tax relief expected to be claimed is estimated to be in respect of investment that would have taken place if the tax relief had not been in place.’

This new clause would require the Government to assess the amount of tax relief for investment expenditure introduced by this Bill expected to be claimed by oil and gas companies, and to estimate how much of this is a deadweight cost.

New clause 5—Review of the impact of limiting the scope of the tax relief on additional expenditure treated as incurred—

‘The Chancellor of the Exchequer must, within three months of this Act receiving Royal Assent, publish an assessment of the impact of making ineligible for the tax relief on additional expenditure treated as incurred any investments that—

(a) do not align with the IEA’s net zero emission scenario for a 1.5 degree temperature increase;

(b) have been announced before 26 May 2022; or

(c) are incurred by companies that have engaged in share buy-backs in the three previous financial years.’

This new clause would assess the impact of limiting the scope of the tax relief introduced by this Bill to exclude investments on the basis of their impact on climate change, whether they had already been announced, and whether the company making the investment had engaged in share buy-backs in the last three years.

New clause 6—Environmental impact of exploration activity on which levy relief is claimed—

‘The Government must undertake an environmental impact assessment in relation to any claim for relief in respect of exploration activity, which must include an assessment of whether the exploration activity is consistent with the Government’s net zero commitments.’

This new clause would require the Government to assess against its net zero commitments any investment in oil and gas exploration activity against which levy relief is claimed.

New clause 7—Regular reviews in relation to oil and gas market—

‘The Government must publish a review of the oil and gas market by 26 November 2022 and every six months thereafter during the period of the levy, which must include an assessment of—

(a) whether there is a continued need for the levy, and

(b) whether the levy should be continued in order to promote further decarbonisation of upstream oil and gas activities.’

This new clause would require a six-monthly review by the Government of the oil and gas market to assess whether the levy is still needed and whether it should continue in order to promote decarbonisation of upstream oil and gas activities.

New clause 8—Assessment of revenue from a permanent levy rate of 30%—

‘The Government must within six months of Royal Assent lay before the House of Commons an assessment of the expected change in levy revenue if the levy is set at a permanent rate of 30% so that taxation on oil and gas company profits was permanently set at 70%.’

This new clause would require the Government to produce an assessment of the amount of revenue which would be generated if the level of taxation on oil and gas company profits was permanently raised to the global average of 70%.

New clause 9—Assessment of levy revenue if investment relief not permitted—

‘The Government must within six months of Royal Assent lay before the House of Commons an assessment of the revenue that the levy would yield if no relief was permitted in respect of investment expenditure.’

This new clause would require the Government to produce an assessment of how much revenue would be generated by the Energy Profits Levy if the investment allowance were removed.

New clause 10—Assessment of investment allowance on compliance with climate change targets—

‘The Government must within six months of Royal Assent lay before the House of Commons an assessment of the impact of the levy investment allowance on compliance with the requirements of the Climate Change Act and the global agreement to limit global heating to 1.5 degrees.’

This new clause would require the Government to produce an assessment of the impact of the investment allowance on achieving Net Zero by 2050 and limiting global temperature increase to 1.5 degrees.

Just to remind everyone: as I am sitting down here, I am the Chair of the Committee and not Mr Deputy Speaker, so it is “Mr Evans”, “Chair” or “Chairman”. Anything like that will do.

Lucy Frazer (Conservative, South East Cambridgeshire)

Thank you very much, Mr Chair. I open this debate by reminding the Committee of the purpose of the energy profits levy. The levy is a temporary 25% surcharge on extraordinary profits being made by the oil and gas sector as a result of the substantial rise in energy prices precipitated by the Russian invasion of Ukraine. It will help to fund the cost of living package for UK families that we announced in May. It will raise around £5 billion over the next year and will apply to companies within the ringfenced corporation tax regime. Specifically, these are companies involved in the exploration for and extraction of oil and gas in the UK and on the UK continental shelf.

The Government have been clear that they want the oil and gas sector to reinvest its profits to support the economy, jobs and UK energy security. That is why the Bill includes the 80% investment allowance. This new super deduction-style relief is being introduced to encourage firms to invest in oil and gas extraction in the UK. In future years, if oil and gas prices return to historically more normal levels, the Government will phase out the levy. However, the first clause in the Bill specifies that the levy will automatically cease to apply after 31 December 2025. I want to highlight this to the House, as it demonstrates the Government’s commitment to keep the levy temporary. Very few taxes have their expiry date set in law. Before I address the clauses and schedules in the Bill in turn, I would like to say that I have noted the amendments and new clauses tabled by Opposition Members and I will respond to them later in the debate.

Clause 1 gives the Government the ability to collect the energy profits levy. It sets the 25% rate and the levy’s main scope. The clause sets out that the levy applies to accounting periods for when the measure is in effect. It also sets the adjustments to ringfence profits for the purposes of calculating taxable profits for the levy. The levy is a tax on profits that companies are realising from oil and gas activities during what is an exceptional period. It is only fair that the measure of profit on which the EPL is charged should not be reduced by the amount of decommissioning expenditure or losses incurred from previous years. Therefore, those adjustments, which include finance costs, decommissioning costs and historic losses, are left out of account. However, the repayment of petroleum levy revenue tax arising from decommissioning is also left out of accounts. As I mentioned on Second Reading, the Government have responded to feedback from the industry in making this change. Although such repayments remain taxed under the ringfenced corporation tax and supplementary charge, they are not taxed under the levy. Another adjustment to profits is the new 80% investment allowance, which is deductible against profits.

Clause 2 defines the investment allowance, which applies to capital expenditure incurred on oil-related activities. It also includes certain operating and leasing expenditure. The allowance will be calculated in the same way as the investment allowance for the existing supplementary charge. However, it is both more immediate and more generous, as it will be available to companies at the point of investment. It is also worth emphasising that qualifying expenditure can be used on the decarbonisation of upstream activities, including electrification.

This is important to the industry, and members of the industry—and, indeed, Members of this House, including my hon. Friend the Member for Banff and Buchan (David Duguid)—have raised it with us. Any capital expenditure on electrification, as long as it relates to specific oil-related activities within the ringfence, will therefore qualify for the allowance. This will include, for example, expenditure on plant and machinery such as generators—including wind turbines—transformers and wiring.

Clauses 3 and 4 set out the types of operating and leasing expenditure that are eligible for the investment allowance, and they are modelled on the provisions for the supplementary charge investment allowance. For operating expenditure, the expenditure must have been incurred for one of the listed purposes, such as increasing oil extraction rates or oil reserves, and must be incurred in relation to a qualifying facility or oil well. However, the allowance is not available for routine repair and maintenance. Leasing expenditure must be for leases of at least five years, and must be for mobile production or storage assets such as floating production storage and offloading ships.

Alan Brown (Scottish National Party, Kilmarnock and Loudoun)

The right hon. and learned Lady sent a letter to MPs saying that electrification will be covered in the offsetting, but does she agree that it should really be in the Bill? Ministers and Prime Ministers come and go, as we have seen, so the only way the industry can have full certainty and clarity is to have something in the Bill about electrification, which is the purpose of SNP amendment 9.

Lucy Frazer (Conservative, South East Cambridgeshire)

I have read amendment 9 and will address it in due course. In response to the hon. Gentleman’s point, that will be included in guidance. I said it at the Dispatch Box last week, and my right hon. Friend the Chief Secretary to the Treasury has also said it at the Dispatch Box, so I think that point is quite clear.

Clause 5, on the meaning of “disqualifying purposes,” is an anti-avoidance provision to ensure that expenditure is not eligible for the investment allowance if it arises because of any tax avoidance arrangements. Clause 6 ensures that additional expenditure for the investment allowance is available only for new assets, including the acquisition of an interest in an oilfield. It prevents the allowance from being generated on assets that have already been taken into account for the purposes of the levy or that would have been had the levy been in force.

Clause 7 determines when investment expenditure is incurred. For capital expenditure, it is as per the rules set out in the existing capital allowances legislation; for operating and leasing expenditure, it is the date on which it is paid. The clause also makes it clear that expenditure incurred before 26 May 2022 or after 31 December 2025 is not to be treated as expenditure incurred in an accounting period to which the levy applies.

Clauses 8 and 9 define financing and decommissioning costs and are modelled on existing legislation. Clause 10 and schedule 1 set out the loss regime within the levy. This includes group relief and the losses that companies carry back or forward under the levy, such as carrying forward losses to a future qualifying period. Clause 11 applies general corporation tax principles to the levy, which is treated for administrative purposes as an amount of corporation tax. It also prescribes the framework within which the levy will operate.

Clause 12 introduces a requirement for companies making a levy repayment to provide information about that payment to HMRC, so that receipts from the levy can be monitored. Clause 13 provides for necessary adjustments to be made if alterations are made to a company’s ringfenced profits or losses. Clause 14 introduces schedule 2, which makes consequential amendments to enactments in the light of this Bill.

Clauses 15 to 17 set out the rules for apportioning profits for accounting periods that straddle the levy’s start or sunset dates. These rules identify which profits are chargeable to the levy by treating the periods before and after the start or end date as separate accounting periods. In particular, this requires companies to apportion their receipts, expenses, assets and liabilities on a just and reasonable basis. Clauses 18 and 19 simply set out the Bill’s legal interpretation and short title in the usual manner.

This Bill delivers the energy profits levy, a 25% surcharge on the oil and gas sector’s extraordinary profits. The levy will raise around £5 billion over the next year, and it will go towards supporting people via the cost of living measures we announced in May. The Bill also provides for the new 80% investment allowance, which means that businesses will overall get a 91p tax saving for every £1 they invest. Finally, the Bill provides certainty through a sunset provision. It will therefore give businesses further reassurance that the levy is indeed temporary.

James Murray (Labour/Co-operative, Ealing North)

I will now address the detail of the Bill’s key clauses, as well as the amendments and new clauses tabled in my name and those of my hon. and right hon. Friends.

As I set out on Second Reading, this Bill is long overdue. The Government have finally agreed to introduce a windfall tax many months after they should have done. As I noted earlier, Ministers still cannot bring themselves to say “windfall tax” in relation to these measures, so we offer them amendment 8, which would rename the Bill, as one last chance to call this new tax what it is.

It has been six months since, on 9 January, the shadow Chancellor first set out Labour’s plans for a windfall tax on oil and gas producers’ profits to help to fund a cut to people’s home energy bills. Until their U-turn in late May, Ministers were falling over each other to attack our plans. In all the time they opposed our plans, people’s energy bills and oil producers’ profits both soared. Those months of opposing our plans left the public finances missing out on billions of pounds of tax revenue. Those extra funds could have given people further help with their energy bills. Today we are giving the Government the chance to right that wrong.

Clause 1 makes it clear that the windfall tax will apply from 26 May 2022. Our new clause 3 would require the Government to recognise how much extra tax revenue would be raised if the levy instead applied from 9 January. We urge all Conservative MPs to support our amendment and apply the windfall tax from 9 January, the day the shadow Chancellor first laid out Labour’s plans for a windfall tax, rather than leaving it to start only from 26 May, the day the former Chancellor finally changed his mind.

Those extra months would raise an extra £1.9 billion for the public finances, which we would then urge the Government to put toward removing VAT on domestic energy bills for the rest of this year. We have been urging the Government to scrap VAT on this year’s domestic energy bills since last autumn. We know that a VAT cut would provide immediate help to families now. Furthermore, taking VAT off energy bills would help to push inflation downwards from its current 40-year high. Funding for this should come from applying the windfall tax from January this year, when Labour first called for it, rather than only from May, when the Government finally came round.

Conservative leadership hopefuls have been talking a lot over the weekend about how keen they are on tax cuts, although they and their supporters have all failed to explain how any of those would be paid for. Today, we offer them a fully funded tax cut that will help people immediately with the cost of living. Today, we are asking them to follow our plan to cut VAT on home energy bills by applying the windfall tax on oil producers from the start of the year, as should always have been the case. The principle of backdating a windfall tax is not only well established—given that the very principle of windfall taxes is to tax unexpected profits that have occurred—but is included in this Bill, which backdates the levy in its first clause.

We know that oil producers such as BP and Shell reported bumper profits in the first quarter of 2022. As drafted, however, the Government’s Bill ignores those profits entirely, as their levy will not apply until well into the second quarter of this calendar year. I realise that the Financial Secretary has said that she will not support our new clause and that the current Chancellor, a former oil industry executive, is unlikely to change his mind after coming out so firmly against a windfall tax on oil and gas producers back in January, on the grounds that those producers were “already struggling.” But given the situation in the Conservative party, I wonder whether colleagues of the Minister may feel able to think more openly about how to vote. I wonder whether any of the other Conservative leadership candidates may like to support our plan for an immediate, fully funded tax cut to help people with the cost of living and tackle inflation. Later this evening, when we vote on new clause 3, we will find out what judgment they have made.

We would also like to know what judgment those people have made about the Government’s decision to undermine the levy by shamefully giving a third or more of any money raised straight back to the oil producers through the new tax break introduced by clauses 2 to 7. This new tax break offers oil and gas producers an unprecedented subsidy for their spending on oil-related activities. As we made clear on Second Reading, for every £100 an oil and gas producer invests in the North sea, they will receive £91.25 from the taxpayer. That is an astonishing 20 times the £4.50 that companies investing in renewable energy will receive from April next year.

Any argument by Ministers that this tax break is necessary to support investment in oil-related activities has been challenged by the bosses of the oil producers themselves. BP’s chief executive told shareholders just two months ago that the company’s £18 billion investment plans were

“not somehow contingent on whether or not there is a windfall tax”.

Yet despite even oil executives questioning its worth, the Government are pushing ahead with this tax break. Our analysis has shown that that means a third or more of any revenue from the new levy could be handed straight back to oil and gas producers. That money will subsidise projects that almost certainly would have happened anyway, as there is no requirement in the Bill for investment to be additional to what was already planned, and this move stands totally at odds with the paramount need to invest in renewable energy sources.

It is critically important and urgent for us to invest in renewable energy to strengthen our energy security while bringing down people’s bills and tackling the climate crisis. We have set out Labour’s plan to do just that. Alongside insulating 19 million homes over 10 years to cut people’s bills, we would strengthen our energy security and reduce our carbon emissions by doubling our onshore wind capacity, tripling solar power, backing tidal power and nuclear power, and further investing in hydrogen. Yet the Government are today introducing a tax break that seems to fly in the face of tackling the climate crisis.

That is why we have tabled new clause 2, which would force the Government to come clean about the impact of their unnecessary tax giveaway to oil producers on our country’s net zero obligations, energy security and renewable energy supplies. This new clause also asks the Government to spell out what impact their tax break will have on fracking, given the deeply concerning reports in the media that legal advice provided to the campaigning group Uplift suggests that fracking companies would also be eligible for this tax break, based on the way the Bill has been written. I urge the Government to accept new clause 2, to make it clear what impact the tax break in the Bill will have on fracking. If the Minister refuses to do that, will she at least come clean today and confirm or deny whether this tax break could lead to public money being channelled toward dangerous, unpopular and expensive fracking projects?

Astonishingly, despite offering such a generous, unnecessary, and counterproductive tax break in this Bill, the Government still do not seem able to say how much it will cost. I note that the tax information and impact note, published just a few hours ago, gave no figures on that at all. To make sure the Government are open about the impact of this tax break, we have tabled amendment 1, which requires them to be transparent on the details of this tax relief once the levy is in place, by collecting and publishing the figures on how much it will cost. We have also tabled new clause 4, which forces the Government to do what they really should do without our needing to ask, which is coming clean now on how much they estimate this Bill’s new tax relief will cost. New clause 4 also forces them to come clean on the simple question of how much of the tax relief is estimated to be claimed in respect of investment that would have taken place anyway. As I highlighted on Second Reading, the Financial Secretary seemed clear in this Chamber on 6 June that:

“The investment relief should not be available for investments that are deadweight. It should be for new investments.”—[Official Report, 6 June 2022; Vol. 715, c. 546.]

Yet there is nothing in the Bill to make sure the tax relief it introduces goes toward investments that are new. We are therefore left unclear how she could have been so confident that the relief will not be available for investments that are deadweight, and our new clause seeks clarity on that point. If she will not accept our amendment, perhaps she can at least confirm whether she may have unintentionally misled the House on 6 June by suggesting the tax relief will not be available for investments that are deadweight, and that it will all go toward new investments.

Let us take a step back from the details. We simply do not believe this tax break is right; it undermines the windfall tax, it does not even work on its own terms and it flies in the face of the urgent need to respond to the climate crisis. That is why we have tabled amendments 2 to 7. When we conclude this debate, we intend to vote against clause 2 to remove this tax relief in its entirety. For months, we have opposed the Government’s tax rises on working people. In the past few days, we have heard Conservative leadership candidates talking a lot about tax cuts. If potential Tory leaders refuse to back us tonight, one of the very first votes they cast since launching their campaigns will be to cut taxes for oil producers. If they keep refusing to back us tonight, they will be opposing our fully funded plan to cut VAT on home energy bills. That will simply confirm what we all already know to be true: that changing the person at the top of the Conservative party is not going to change anything at all. We need a change of Government, and that means we need a Labour Government.

Craig Mackinlay (Conservative, South Thanet)

I was asked on 26 May by one of the main newspapers what I thought about this proposal of a windfall tax, on the back of what Labour had proposed some time before. I gave this fairly high-octane statement:

“Whichever way you look at it, a 65% tax rate applied to an industry that we need to encourage to help us through our energy policy mess seems topsy-turvy.

Higher taxes can never mean lower prices.”

And this was the statement that caused some alarm and was widely reported:

“All in all, I’m disappointed, embarrassed and appalled that a Conservative Chancellor could come up with this tripe.”

With the change of Chancellor, I had hoped that we would have quietly disposed of the Bill and not progressed to Second Reading. It should sensibly have been scrapped, but although the former Chancellor has gone, the Chief Secretary to the Treasury, my right hon. Friend the Member for Middlesbrough South and East Cleveland (Mr Clarke), is still here and presented the Bill this afternoon. I fully understand public disquiet about the supranormal profits that have been earned by the oil and gas industry over the period. The hon. Member for Ealing North (James Murray), who speaks from the Labour Front Bench, has made those points, which form the backbone of some of Labour’s new clauses.

The comments of various chief executives of the oil and gas industry—calling their profits “cash machines” and all that—were particularly unhelpful; they did not do themselves too many favours. Such companies lost similar amounts of money during covid, when, as we all recall, the gas and oil price completely collapsed. Owing to storage issues, there were a few days when oil was trading at a negative rate, which was rather bizarre; I wish I had had a few barrels to fill at the time.

We already did some rather strange things in years past. Under the Finance (No. 2) Act 2017, we restricted the carry-forward of losses. There is an allowance of £5 million, but the amount of profit that can be relieved with carried-forward losses is restricted to 50% on the rest. We have created a tax regime whereby we are happy to take the profits and tax them, but we are not willing appropriately to relieve the losses, and I am not sure that any of Labour’s new clauses would address that.

I have had discussions with various Front Benchers prior to today. Labour has objected to many parts of the Bill, because in its analysis of life—shadow Ministers have given quite a lot away— anything less than taking 100% of everything is a loss of tax. I am not sure that it was quite what the hon. Member for Ealing North intended to say, but he clearly suggested that that is Labour’s view of tax: it is necessary to take the lot, as anything less is a sort of tax give-back.

Geraint Davies (Labour, Swansea West)

The hon. Member may know that over the last few decades, the five biggest oil companies have made $2 trillion of profit, and the profit that they have been making is over the normal operational costs. What we have now, thanks to Putin’s war, is a massive price hike. That windfall profit is literally that—the companies have done nothing to earn it; they have simply stolen money from the pockets of people using transport and filling their cars. Is the hon. Member saying that that theft should simply be kept by the oil companies, which have done nothing other than exploit an illegal war? What sort of statement is that?

Craig Mackinlay (Conservative, South Thanet)

The hon. Gentleman has merely clarified what I have been trying to say; yes, of course there were supranormal profits on the back of Ukraine war and coming out of covid, when the entire planet was getting its factories back up and running and life was returning to normal. I had hoped I was making the clear point that there were substantial losses by similar companies in years past. Given the hon. Gentleman’s analysis, I assume that grain wholesalers would face a similar tax from Labour. Semiconductor manufacturers supplying their goods from South Korea would similarly, through artificial means, have earnt good profits at this time. It seems that the Labour party would definitely want to tax everybody on anything that it considered to be an inappropriate amount of profit, whatever that might be.

I have a number of objections to the levy. Labour’s new clauses 7 and 8 go some way to clarifying a little of what I am saying, although I will not support them tonight. Let me turn to the relevant North sea businesses that will be caught by the levy. Since 1 January 2002, we have had the ringfenced corporation tax at 30%—more than our current headline rate of corporation tax. The supplementary charge, which goes on top of that, has been up and down over the years. It commenced on 17 April 2002 and peaked during the coalition period—very relevantly, between 24 March 2011 and 31 December 2014 —at 32%. Of course, the then Department for Business, Innovation and Skills was held by the Liberal Democrats in the coalition, so that gives us a little insight as to what they think of tax: it is generally a high one.

We had a 62% tax during that period, but immediately prior to this legislation the supplementary charge had been down to 10%. We were bobbling along with massive profits and were taking 40% of the total to the Treasury. Whichever way I look at it, I see that as a goodly rate of tax. However, under clause 1, which has just been outlined by the Financial Secretary to the Treasury, my right hon. and learned Friend the Member for South East Cambridgeshire (Lucy Frazer), this new energy profits levy is 25%.

Let me be very clear about my objections: a 65% tax rate is excessive in any tax regime. We are asking the self-same companies to go all out—“Please go all out!”—for more oil and gas in the North sea at this time of energy crisis, energy insecurity and very high prices. Why have they not, thus far, explored those parts of the North sea that we are now asking them to explore? It is because they are more complicated, deeper and more hostile environments. The profits derived from those tougher locations—the higher hanging fruit, rather than the lower hanging fruits—will be less, as the costs are higher.

I am aware of what I perceive as the tax nudge, but I am afraid that it is a little bit like Baldrick’s cunning plan. We are trying to nudge companies—this is about the only good thing about the Bill—by saying, “You make the right investments to get more oil and gas out of the North sea that we desperately need, and we will give you a very substantial tax relief.” And that tax relief is substantial, at 91.25%. I am afraid that the Chief Secretary to the Treasury has let the cat out of the bag; if that is the Baldrick cunning plan, which I can see the benefit of, how can we have estimated £5 billion as the amount of tax to be raised? That cunning plan is not going to work fully; many companies will not take the option of relieving the variety of taxes that are now before them, they will not invest, and we will be taking £5 billion out of the industry.

We are not only asking the companies to undertake new investment in the North sea. We are asking them to undertake some rather fresh thinking and research, with unknown outcomes, on the net zero pathway. I know for a fact that BP is doing a lot of work in this field—its people have been in one of the dining rooms of this House—and good luck to it, but as has been highlighted by the Labour Front Benchers, there is nothing in the Bill that nudges such investment in the net zero field.

“Profit” is not a dirty word. Profits pay our salaries, every salary of every civil servant, and every single pension in this country; they are all on the back of profits. “Profit” is a good word—a word that makes the world turn. Another objection I have to the levy is that the self-same companies, which are earning good profits, are the backbone of many blue chip investments that can be found in practically every pension fund in the land, because they are good dividend payers. Millions of pensioners rely on those dividends—a long and usual flow that can be relied on year in, year out. By the Government taking the extra 25%, those dividend flows will have to be lessened. We cannot take another 25% out of a profit and expect the dividends to flow at the same rate.

Most importantly—and I really do wish that this Bill had been smothered—what does a tax rate of 65% say about doing business in the UK? Does it say, “Do well, and we may change the tax rate rather quickly on future profits, because you are doing rather too nicely”? My hon. Friend the Member for Waveney (Peter Aldous) made the point on Second Reading that these companies are fleet of foot. They can invest wherever they like. There is plenty of oil and gas around this world that they can go to, but where their investments may not be carried out and administered in such an environmentally positive way as in the UK. There might be very little monitoring of how much methane is being vented off and of the actual working conditions of people working off the coast of Brazil or the coast of Africa. I would rather that that was done in the UK, but that is a wider argument about energy security and why we should be doing things for ourselves.

Alan Brown (Scottish National Party, Kilmarnock and Loudoun)

Is the hon. Member seriously saying that the companies that currently work in the North sea—companies that are environmentally responsible, take workers’ rights very seriously and look after their workers—might just move somewhere else in the world and give up on workers’ rights and the environment? That does not sound like responsible companies, yet that is what he seems to be saying they would do.

Craig Mackinlay (Conservative, South Thanet)

I am saying very clearly that big companies can make investments anywhere they please in the world, perhaps with tax regimes that are more suitable to them and where they are not being taxed at 65%. I would rather that they were investing here and staying here than going abroad to invest, with all the potential consequential impacts on the environment and employment. It seems that the hon. Gentleman agrees with me.

David Duguid (Conservative, Banff and Buchan)

I rise in response to the hon. Member for Kilmarnock and Loudoun (Alan Brown). I declare an interest: I used to work for BP. I worked in the oil and gas industry for 25 years. I worked for BP in the North sea in this country, and in Angola, Venezuela and a range of different places. I worked for other companies in other countries as well. It is true that these companies have made their bread and butter in this country, and cut their teeth in the North sea, particularly from a safety point of view. The hon. Member for Aberdeen South (Stephen Flynn) mentioned Piper Alpha, which led to our having one of the highest regulatory regimes on the planet. It is not true to say that companies abandon that when they work elsewhere; it does make it a lot more difficult for them to work in those environments, but it does not stop them.

May I take the opportunity to totally agree with what my hon. Friend was saying before? This legislation, for all its flaws, compared with what Labour is proposing—

Stephen Flynn (Scottish National Party, Aberdeen South)

Will the hon. Member give way?

Rosie Winterton (Labour, Doncaster Central)

Order. The hon. Member for Banff and Buchan (David Duguid) will resume his seat. We are getting interventions on interventions, because the interventions are perhaps a little long, and people are mistaking them for speeches. Please remember that interventions are supposed to be quite short.

Craig Mackinlay (Conservative, South Thanet)

Thank you, Dame Rosie, for clarifying that. I think that we will find that the hon. Member for Aberdeen South (Stephen Flynn) was being a touch facetious.

Caroline Lucas (Green, Brighton, Pavilion)

Will the hon. Member give way?

Craig Mackinlay (Conservative, South Thanet)

I had not developed a point, but, please, make an intervention.

Caroline Lucas (Green, Brighton, Pavilion)

I am grateful to the hon. Member for giving way—I am intervening on a previous point on which he was intervened on. Is he aware that the 65% tax that the Government are proposing is still below the global average? The figure in Angola is actually higher at 70%, so there is not any real logic to what he is saying. These oil companies are already operating in places where the tax is higher.

Craig Mackinlay (Conservative, South Thanet)

Let me take a couple of those points. The hon. Lady makes the point that tax rates on the oil and gas industry are higher elsewhere in the world. Well, that may be the case. I know that some will be fundamentally opposed to the whole concept of being energy secure in the UK. Gas, in my view, is part of an interim solution as we get on the path to net zero, but it is a fact of life. I do not have an awful lot of time for the output of the Climate Change Committee, but even it is saying very clearly that we will be using gas and oil up to 2050 and probably beyond. My view is that that gas and oil should be sourced in the UK. Hence my support for the nudge part of this legislation, which may encourage businesses to stay here and invest here.

I did not address properly the point from my hon. Friend the Member for Banff and Buchan (David Duguid). He makes the point that we have the most fantastic environmental standards not just in oil and gas technology, but in practically everything that we do in the manufacturing space in the UK. There will be very few regimes around this world that have such high standards. On the issue of methane venting, which we have not really addressed, I can be absolutely sure that, with a very robust and advanced regulatory regime, the advanced oil and gas companies of this country will be telling the truth and doing the right thing rather more than may be the case elsewhere, and I think we have to accept that as a fact of life.

Caroline Lucas (Green, Brighton, Pavilion)

First, the hon. Member seems to think that just because gas is exploited in the UK, it will get used in the UK, yet he must know that it gets sold on global markets and therefore might get used anywhere. Secondly, he talks about our environmental standards being higher than others. He will know that we get most of our gas from Norway, where, actually, its carbon footprint is significantly less than it is here in the UK. His argument just does not stand up.

Craig Mackinlay (Conservative, South Thanet)

I am so delighted that the hon. Lady has expanded this debate. This is not somewhere that I wanted to go, Dame Rosie, but I think it is my duty to respond to the intervention. Surely it is obvious, no matter where on the spectrum on net zero we are—I am obviously on the rather more critical part of that spectrum—that we will be having gas in this country. We have a choice: do we import it halfway across the world on a liquefied natural gas ship, with the CO2 cost of chilling it, transporting it and regasifying it, or do we try to do that domestically?

Caroline Lucas (Green, Brighton, Pavilion)

We sell it on international markets.

Craig Mackinlay (Conservative, South Thanet)

If I may, Dame Rosie, I will address the hon. Lady’s questions. On international markets, I do not know any more about economics than this: if we add more capacity to any system, the price should drop. Even if her view of economics holds water and the price does not drop, which I think is the basis of what she is saying, would I prefer the pounds of gas revenue to be at least retained and spent in the UK, or do I want to export those pounds to Qatar? I do not think there is much choice, and the answer is obvious.

I will finish now, Dame Rosie—I am sorry for the time I have taken, but I am grateful for your indulgence. If we take up this type of proposal of penal taxes that can be changed within a month, we will lose in future deferred taxes the opportunity cost of investment. Big companies will say, “Do you know what? The UK is not a place for good investment. I think I will take my money elsewhere.” We may get £5 billion out of this tax as a windfall, but over time, in my view, we will lose more than £5 billion in the lost opportunity of businesses being attracted to the UK.

I have never believed, as has said in the House this afternoon, that the investment plans of the big oil and gas companies will be unaffected by this. I have been having discussions with them. There are already signs that they are scaling back their investment activities to the detriment of UK energy security, and I am afraid this Bill does not help with that all. If there is a Division on Third Reading, I will be voting against the Bill this evening.

Stephen Flynn (Scottish National Party, Aberdeen South)

Repetition is of course a convention of this House, but I am not much for many of the conventions of this House, so I do not intend to say much more than I did earlier about the Bill in general. I will just reflect very briefly on the amendments in my name and the names of my hon. Friends.

Amendment 9 relates directly to the electrification of North sea assets. We have heard comforting words about that from two Ministers now. I am sure the Minister for Energy, Clean Growth and Climate Change, now sitting beside the Financial Secretary to the Treasury, would agree that it will be in guidance that the electrification of assets will be able to get the taxation incentives. We cannot escape the fact that Ministers come and go, as we have seen so clearly in this place over the course of recent times, but what industry needs in relation to this issue is certainty. The best way—the only way—to provide certainty on the electrification of grids is to put that on the face of the Bill.

I agree with the hon. Member for South Thanet (Craig Mackinlay) on one point he made: it is deeply disappointing that there is not additional scope for the wider renewable sector to get these incentives. If the Government were serious about combating climate change and reaching their net zero ambitions, they would have extended those incentives to that industry.

That takes me on to new clause 6, again in my name and those of my hon. Friends, which aptly relates to net zero. The Government have rightly promoted, and will continue to promote, climate compatibility checks. I think we all in this place agree about those. What we need to be clear about, however, is the implications of this Bill for reaching net zero. The easiest, indeed the obvious, way to do that is to ensure that those climate compatibility environmental checks take place in relation to any investments. I thought that would be a very straightforward thing for the Government to agree with, and I hope they will do so.

Finally, in relation to new clause 7, I have teased this argument out on a couple of occasions in exchanges with Ministers: we know there is going to be a sunset clause on this levy, to end it in a couple of years’ time. However, the phrase “normal oil and gas prices” keeps being used again and again. We heard inferences from the former Chancellor that somewhere around $60 to $70 a barrel was normal. I just did a very quick calculation of prices. Between 2015 and 2021 the price was $56 a barrel, but between 2010 and 2015 it was double that, at $101.4 a barrel. I again ask the Minister—[Interruption.] Indeed, oil and gas is a good argument for independence.

David Duguid (Conservative, Banff and Buchan)

Will the hon. Gentleman give way?

Stephen Flynn (Scottish National Party, Aberdeen South)

I will not give way to the hon. Gentleman. That has nothing to do with this Committee stage, and I would hate to get diverted, as some others did earlier.

What we and the industry need to be clear about is what price the Government regard as normal. If we are to have serious legislation, we need serious answers to the most basic of questions.

Richard Burgon (Labour, Leeds East)

I wish to speak in favour of my new clause 1, new clauses 8 to 10, which I have signed, and of course the amendments from the Labour Front Benchers.

Away from the drama among Government Members over who will be their next leader, the cost of living emergency out there is biting ever harder. Experts now warn that the energy price cap will surge by another 64% in October to more than £3,200 a year—up £2,000 in just a few months. Millions of people will be thrown even further into crisis. We urgently need further Government interventions to help them, and my new clause offers a way to do that.

In May, after political pressure from the Labour Benches, the Government were forced into imposing a windfall tax on the North sea oil and gas producers’ excess profits. Such a tax is certainly needed. The Government’s own figures suggest that North sea oil and gas companies will make pre-tax profits of £21.4 billion this year—a staggering increase from the £2.5 billion average over the past five years. We have gone from a £2.5 billion average to £21.4 billion this year.

Let us be clear: these excess profits are not the result of extra investment. They are not the result of innovation. They are an undeserved and unexpected windfall, mainly resulting from Russia’s horrific war on Ukraine. They are vast super-profits made on the backs of higher bills for ordinary people. We have a clear choice. Either we allow the oil and gas giants to hoard those excess profits, or we use the funds to help to bail out the vast majority of people hit hard by soaring energy bills.

My new clause 1 calls on the Government to look at setting the windfall tax at 45% on top of normal tax rates, not the current proposed 25%. The aim is to ensure that nearly all of the windfall—the undeserved, unmerited excess profit—goes to supporting families instead of boosting the profits of oil and gas giants.

The windfall tax as it stands will raise £5 billion. The higher windfall tax that my new clause addresses would raise another £4 billion in tax revenues this year alone, which could provide an extra £1,000 payment to the most vulnerable 4 million households. Surely that is more important than boosting oil and gas company profits. North sea oil and gas companies’ revenues have risen so much that even with this higher tax they would still make £3 billion in profits this year, which is above their recent average.

I am also supporting calls for the current windfall tax to be made permanent and brought in line with international averages tax rates of 70%. Norway, another North sea oil and gas-producing nation, has a regular tax rate of 78% on its production, almost double our levels. That could raise billions annually to provide immediate help and to fund a huge home energy efficiency programme to cut energy use, permanently lower bills and tackle one of the biggest sources of carbon emissions.

We also need action against a major loophole in the Government proposal, which allows oil and gas companies to avoid much of the windfall tax through a major tax relief scheme on new investments that gives a 91p tax saving for every £1 they invest. That is a subsidy to oil and gas giants—[Interruption.] Conservative MPs laugh in defence of the oil and gas giants. They are in no position to laugh at all. They are an utter disgrace to their party, to the Government and to the country, so I suggest they pipe down. If they are going to speak up, let them start speaking up for the ordinary people hit hard by this cost of living crisis, not for oil and gas giants.

Chris Matheson (Labour, City of Chester)

My hon. Friend has obviously given real thought to his proposals. Does he agree that the vast profits that the oil and gas companies make do not stay with those companies but go to their ultimate owners, the big City institutions which, in my view, the Conservative party represents these days?

Richard Burgon (Labour, Leeds East)

That is an important point well made by my hon. Friend. That is what this is really about. It is a political choice that we are discussing.

On the Government’s major loophole that I referred to, which gives a 91p tax saving for every £1 invested by the oil and gas companies, we need to be clear that it is a subsidy to oil and gas giants. It takes money away from supporting families and encourages further fossil fuel production when we need to be ending all new oil and gas production to avoid climate catastrophe.

With another huge spike in energy prices now expected, much more needs to be done to help families. The Government should start by accepting my amendment and others that would see less going into profits for oil and gas firms, and more into bailing out people facing the biggest crisis in living memory.

Caroline Lucas (Green, Brighton, Pavilion)

It is a pleasure to follow the hon. Member for Leeds East (Richard Burgon), whose new clause 1 I am happy to support. I rise to speak in favour of new clauses 8 to 10 tabled in my name.

First, new clause 8 would require the Government to produce an assessment of the revenue that would be generated if the level of taxation on oil and gas companies were permanently raised to the global average of 70%. That is 5% higher than the total level of taxation with the addition of the Government’s levy, but it would be permanent.

I know the new Chancellor may be disinclined to increase taxation on the oil and gas industry, given that he has benefited so handsomely from it in the past, previously earning £1.3 million from his executive position at Gulf Keystone Petroleum, including a whopping £285,000 settlement payment when he stepped down from that role in 2018 after becoming a Minister. However, it is important to understand that the level of taxation that this new clause proposes on oil and gas would simply bring the UK into line with countries such as Angola and Trinidad and is backed by 63% of the public. By way of comparison, it may be interesting to note that the UK’s North sea neighbour, Norway, has a taxation rate of 78%, and that does not seem to have done it any harm. I therefore hope that the Government will recognise that this is a very reasonable amendment that it should be easy for them to support.

The reason I am proposing a permanent taxation level is that the UK currently has the lowest tax take in the world from an offshore oil and gas regime. That is not a badge of honour; it should be a badge of shame. Indeed, Norway’s tax take from a barrel of oil in 2019 was over 10 times the equivalent here in the UK. The amendment would simply require the Government to assess the impact of ending that shameful state of affairs. Greenpeace estimates that a tax at that level would generate an additional £13.4 billion for the Exchequer in comparison with the status quo—money that, in addition to providing immediate support to households to cope with the cost of living scandal, could be used to invest in much-needed energy efficiency, quite literally insulating households from escalating costs.

To date, the Government have spent £37 billion on short-term financial support. Although that support is of course very welcome, gas prices are likely to remain high for several years, and a more long-term approach is necessary, especially when the CEO of Ofgem is warning that the number of households in fuel poverty could reach 12 million in October when the energy price cap rises again. The think-tank E3G estimates that the average household with an energy performance certificate of D or lower will be paying what it calls an inefficiency penalty of £916 per year for adequate heating compared with households with an EPC of C or higher. Investment to kick-start a local-authority-led, street-by-street home insulation programme would save cash-strapped families money not just this year but every year. It would also rectify a glaring omission in the Government’s approach so far, with the Climate Change Committee saying clearly in its 2022 progress report to Parliament:

“Given soaring energy bills, there is a shocking gap in policy for better insulated homes.”

New clause 9 would require the Government to produce an assessment of how much revenue would be generated by the energy profits levy if the investment allowance were removed. I also support the Labour Front-Bench amendment that would simply delete the clause on the investment allowance, which is nothing less than a scandal. As the Chancellor and his team very well know, it will come at huge cost to the taxpayer. Analysis by the New Economics Foundation suggests that the investment allowance will cost £1.9 billion a year because any subsidised oil and gas projects will not start to return a profit until after 2025—the date of the sunset clause in the Bill.

Geraint Davies (Labour, Swansea West)

I very much support what the hon. Lady is saying. Is she aware that in Germany for three months in succession people are being offered a €9 a month pass that can be used on all public transport, thereby shifting people on to public transport, reducing energy costs, encouraging environmental green investment, and stopping our addiction to fossil fuels? Does she think that a higher tax could help us to do that and put us on a more sustainable route to a green future?

Caroline Lucas (Green, Brighton, Pavilion)

I am grateful to the hon. Gentleman for his intervention, particularly since it helpfully highlights a party policy of the Greens, who were, as he knows, in coalition Government in Germany. It has absolutely been their policy to introduce those kinds of incentives, and they are being massively taken up because they are incredibly popular.

I was talking about the investment allowance and just how egregious it is. The Institute for Fiscal Studies says that investing £100 in the North sea now will cost companies just £8.75, with the public picking up the remaining investment costs in the form of the forgone windfall tax. What is more, there is a chance that this new subsidy could lead to the development of otherwise economically unviable projects, becoming stranded assets of little or no economic value. Oil and gas companies are benefiting from that right now. For example, according to analysis by Rystad Energy, Shell, which recorded quarterly profits of over £7 billion earlier this year, will pay £210 million less in windfall tax for investment in the newly approved Jackdaw gas field.

The investment allowance also significantly reduces the amount of revenue generated, which is why I can only assume that the Treasury believes that its levy will raise only £5 billion in its first 12 months, especially since oil and gas company profits are expected to reach £11.6 billion this year, with BP’s chief executive describing the company as a “cash machine”. Let us remember that, as other hon. Members have outlined, these profits are not earned; they are a consequence of high global gas prices fuelled by Russia’s illegal invasion and war in Ukraine, and must be urgently redistributed to provide vital support to struggling families. Will the Government now publish their full impact assessment? Will they accept this crucial amendment so that we can have clarity over the cost of their perverse proposal?

The subsidy in the Bill is unfortunately entirely consistent with the Government’s approach to subsidising the fossil fuel sector overall. While they refuse to acknowledge that tax reliefs are indeed subsidies and prefer to use the very narrow International Energy Agency definition of a subsidy, Ministers and colleagues will know well that there are much wider definitions in use, including that developed by the World Trade Organisation, which would very definitely include the investment allowance. If the Government go ahead with this subsidy, it will come on top of countless other tax reliefs from which the sector benefits, including those for exploration for new fields, for R&D, and for decommissioning. The latter, for decommissioning, has an especially egregious element in the form of decommissioning relief deeds that guarantee future tax reliefs for oil and gas companies at a given rate. Imagine any other sector being guaranteed tax reliefs in perpetuity with future Governments unable to make changes to that! Companies should pay decommissioning costs, with decommissioning plans required to ensure a just transition for workers. That is the only fair approach. The measures in the Bill will add to the decommissioning tax relief burden faced by the public purse going forward, to say nothing of the impact on fossil fuel extraction.

Geraint Davies (Labour, Swansea West)

The hon. Lady will be interested to know that people in Swansea University are looking at using the energy from wind farms that is not used by the grid off-peak to create hydrogen that can be put in the gas pipes to dilute the gas to reduce the carbon footprint of everyday gas. Would it not be better to put the money into those sorts of green investments rather than digging more and more holes to destroy the planet?

Caroline Lucas (Green, Brighton, Pavilion)

Again, I am grateful to the hon. Gentleman. Those are precisely the kinds of forward-looking policies that we need rather than the backward-looking, dinosaur policies that seem to think that digging out more and more fossil fuels is the way forward.

Chris Matheson (Labour, City of Chester)

To make the same point that I made to my hon. Friend the Member for Leeds East (Richard Burgon), can I urge the hon. Lady to follow the money? For as long as these tax credits are given to the oil and gas companies, they are passed on to the people who control the Conservative party in the City—the big hedge fund investment billionaires who have massive incomes because of their ownership stakes in those companies.

Caroline Lucas (Green, Brighton, Pavilion)

The hon. Gentleman puts it perfectly succinctly and I very much agree.

It has been estimated that existing decommissioning relief deeds could enable the extraction of the equivalent of 1.7 billion barrels of oil that otherwise would have remained unextracted, and that will only increase if we continue with the vicious cycle of handsomely subsidising fossil fuel companies to exploit oil and gas reserves. In response to the Glasgow Climate Pact’s call for parties to

“phase out inefficient fossil fuel subsidies”,

the Climate Change Committee said that the Treasury should initiate a review of the role of tax policy in delivering net zero, and was very clear that no fossil fuel subsidy should be considered efficient in the UK. Will the new Chancellor now commit to that review, listen to his own Climate Change Committee, and take its advice?

New clause 10 would require the Government to produce an assessment of the impact of the investment allowance on achieving net zero and on limiting the global temperature increase to 1.5°. It is frankly astounding that the Government need to be reminded yet again that the IEA has been clear that limiting global temperatures to 1.5° necessitates

“no new oil and gas fields approved for development”

as from last year. Yet according to the United Nations Environment Programme, the level of fossil fuel production planned and projected worldwide by Governments in 2030 is more than twice the levels consistent with that goal. The UK has given North sea oil and gas companies almost £14 billion in subsidies since signing the Paris agreement in 2015 alone. This Bill was an opportunity for the Government to change course, but instead they have chosen to double down and to play with fire by bringing forward a Bill that is plainly incompatible with a safe future.

It is patently obvious that the Government should amend the Bill to ensure that oil and gas profits are taxed properly, but I believe fundamentally that that should pave the way for a much wider overhaul of our tax system. We need a carbon tax, which, if implemented properly with a dividend to shield low-income households, could be pivotal in driving the change we need in order to decarbonise our economy fairly. That tax—it has long been Green party policy—would target the big polluters such as oil and gas companies. It is estimated that, starting at a rate of about £100 per tonne of CO2, it could generate up to £80 billion to fund the transformation necessary to achieve our climate goals. That is the kind of innovative policy we need right now to save ourselves from the climate emergency that is only growing deeper.

Lucy Frazer (Conservative, South East Cambridgeshire)

Many of the points that have been raised in Committee were considered on Second Reading, but I would like to touch on a few of them and then deal with amendments.

The hon. Member for Ealing North (James Murray) asked how the new investment allowance works. On 6 June, I said I was very happy to look further at this point, and I can reassure him that the investment allowance within the levy will be generated on investment expenditure —that is, capital expenditure and some operating and leasing expenditure—incurred on or after 26 May. The legislation includes an anti-avoidance provision to prevent any recycling of existing assets from getting the allowance, and that is all very clearly set out in clause 6.

I want to deal with some of the points made by my hon. Friend the Member for South Thanet (Craig Mackinlay), because I understand his objections, and no Conservative wants to bring in a tax rise where it is not necessary. I have had the opportunity to talk to him on a number of occasions about these measures, and he will know that they are targeted and temporary. He says he fears for investment coming through, but of course that will be assessed by the OBR in due course. I am not sure whether he was in the Chamber earlier when I quoted some companies that have said that they will be investing and that this encourages investment, but I will mention a further one. Kistos has said that it is

“assessing opportunities in the UK that would enable us to take full advantage of the investment allowances implicit in the recently introduced UK Energy Profits Levy”.

I turn to the amendments. Amendment 1 would require companies to report on how much additional tax relief they are claiming as a result of the levy’s investment allowance, in addition to the existing requirement to report how much levy is payable. The amendment would also require that data to be published on a quarterly basis. Companies will already be reporting the information to HMRC that allows it to ensure appropriate compliance with the law, and figures on the amount of tax raised through the levy will also be published on a periodic basis in line with other taxes. As a result, this amendment should not be made to the Bill.

Amendment 9 would add clarification to the allowable purposes of expenditure under the levy’s investment allowance. I have already dealt with that point on Second Reading, and I confirm to the Committee that HMRC will clarify this in written guidance.

New clause 1 calls for an assessment of the impact on revenue and on oil and gas companies’ profits of a 45% levy rate. Similarly, new clause 8 calls for assessments of the revenue impact of a permanent 30% levy rate, which would bring the permanent headline rate of tax for oil and gas companies in ringfence corporation tax to 70%. However, it is not standard—I will be saying this in relation to a number of new clauses—for the Government to publish assessments of the fiscal and economic impacts of measures that they are not introducing, and it is not clear that doing so would be a beneficial use of public resources. Therefore, I recommend that the Committee rejects these new clauses.

Again, new clauses 3, 5 and 9 would require reviews or assessments of policies that the Government are not introducing. New clause 3 would require a review of the revenue that would have been raised had the levy taken place from early January. I set out on Second Reading why we did not bring forward this measure earlier, and I did so last week as well. We are not supporting these measures because, as I have said, it is not usual to bring forward public assessments of measures that we are not introducing.

New clauses 2, 6 and 10 would require reviews or assessments of the impact of the investment allowance on the energy market, climate change commitments and exploration activity. The Government oppose these amendments on the basis that the Treasury already carefully considers the impact of all measures on the energy market and our climate change commitments as a matter of course.

New clause 4 would require a review of the amount of investment allowance that will be claimed and how it relates to expenditure that would have happened were the investment allowance not in place. The first point to reiterate here is that the Government expect the combination of the 25% levy and the 80% investment allowance to lead to an overall increase in investment, and the OBR will take account of this policy in the next forecast. HMRC already publishes data on the costs of non-structural reliefs, which will include the investment allowance in due course, once data is available.

Finally, new clause 7 would require the Government to publish regular reviews of the oil and gas market, including assessments of the need for the levy and whether it should be continued to promote further decarbonisation of upstream oil and gas activities. That is also unnecessary, since the Government already monitor the UK oil and gas sector, and data is published on gov.uk on a monthly and quarterly basis.

For all the reasons I have set out, I urge Members to reject all the amendments and new clauses. I commend the clauses and schedules to the Committee.

Question put and agreed to.

Clause 1 accordingly ordered to stand part of the Bill.

Clause 2 - Additional expenditure treated as incurred for purposes of section 1

New Clause 3 - Review of impact of earlier start date of the levy