Oil and Gas Producers: Windfall Tax

I inform the House that Mr Speaker has not selected amendment (a) in the name of the hon. Member for Aberdeen South (Stephen Flynn).

I beg to move,

That this House notes the cost-of-living crisis hitting families across the country and that the energy price cap is predicted to rise by 50 per cent from April; recognises that rocketing energy prices are hitting businesses as well as household budgets; calls on the Government to introduce a windfall tax on the profits of North Sea oil and gas producers; and further calls on the Government to use that windfall tax to help fund a package of support for families and businesses facing the energy price crisis.

In the last few days, we have often heard the Government say that they are desperate to talk about the biggest issues facing the country. Conservative Member after Conservative Member has lined up to say that there is nothing they would rather do than end the distractions and talk about the burning issues facing people. I have to say, Madam Deputy Speaker, where are they all? Where are they? Today, we are giving them—[Interruption.] There are a few of them, but not very many. Today, we are giving them and the House the chance to talk about those issues, and there is no bigger issue facing families than the energy price crisis. For months, we have waited for the Government to tell us what it is that they are going to do and there has been silence. Today, we are making a generous offer to focus on what really matters and to give them the chance to support the principle of a windfall tax on the oil and gas companies to help to address the energy crisis.

Let me set out the case. In just six days’ time, we will know the scale of the price cap increase to be announced by Ofgem. It is expected, on the latest gas prices, that there will be a £600 increase in the cap, on top of the £120 increase we have already seen. April’s increase alone is expected to drag 1.5 million more families into fuel poverty. Let us be absolutely clear what that means. Consider a recent Citizens Advice case of a man in his 60s from Devon who had given up his job as an engineer when he was diagnosed with spinal cancer. He had been claiming universal credit but cannot work and recently saw that drop by £20 a week. He told Citizens Advice:

Does not my right hon. Friend agree that the Government’s version of the energy price cap, along with “use it or lose it” penalties on developers, banning letting fees for tenants and gender pay gap reporting, have his fingerprints all over them from our 2015 Labour manifesto, but that, unfortunately, they have made the schoolboy error of copying homework incorrectly? That is why we now need a windfall tax to rectify those errors. In a parallel universe—the Miliverse—this was done right, but sadly it has been done all wrong by them!

I thank my hon. Friend for that intervention. I am old enough to remember when an energy price cap was living in a “Marxist universe” and now it is Government policy.

The Federation for Small Businesses reports that 45% of members are seeing soaring costs from higher energy bills. Meanwhile, the Energy Intensive Users Group, representing vital industries such as steel and pharmaceuticals, has called repeatedly for “immediate action”.

This is an economic crisis plain and simple. What is extraordinary is that the Government, months into the crisis, have not produced a single solution. Where is the solution? There can be no greater evidence of a Government paralysed by inaction. Millions of families who want reassurance are instead subject to the spectacle of a rule-breaking Prime Minister still too distracted by trying to save his own skin.

Our case today is that millions of struggling families should not be left to face this situation alone and that we should do all we can to act. It is right to look to those benefiting from this crisis to make a contribution.

I am glad the right hon. Gentleman is highlighting this issue. Does he agree that gas prices are a lot dearer in Europe and the UK than they are in America because we are short of gas here? Would it not therefore be a good idea for us to get more gas out of our North sea to ease the squeeze?

The right hon. Gentleman and I differ somewhat on this. The real problem is that we have not gone far enough or fast enough on the green transition. The more we are subject to the volatility of fossil fuels—the prices are set internationally—the more we are at risk of the kind of crisis we are seeing at the moment.

If there is one principle that should get us through these tough times, it is that those with the broadest shoulders should bear the greatest burden. Britain’s families and businesses are facing the toughest times, but that is not true of everyone. For the oil and gas sector, the price spike has been a bonanza—a trebling of prices today compared with a year ago. Let us be clear about the effect that is having on oil and gas company profits.

Listen to Bernard Looney, the chief executive of BP. He says this: the rise in prices is a “cash machine” for his company. Those were his words—a “cash machine”. Let those words ring in the ears of right hon. and hon. Members in this House. Let us be clear about who is on the other side of the cash machine: the British people. In other words, it is an ATM from which the oil and gas companies collect billions and into which the British people pay—people like the man in Devon who could only afford to heat one room. He is one of the millions paying into the cash machine for BP.

Once the companies are withdrawing the cash from the cash machine, where is the unexpected windfall going? Let us not fall for the argument that may be made in this debate—that it is somehow going into investment or workers in the oil and gas sector. [Interruption.] The hon. Member for West Aberdeenshire and Kincardine (Andrew Bowie) says from a sedentary position that it is. Let me tell him that he is wrong. All the evidence is that the companies are so flush with cash that billions are being used to inflate the share price in buybacks from shareholders. BP did a share buyback of over £1 billion in August, but it was so overwhelmed with cash that it did another worth nearly £1 billion in November. Shell has done the same, with a £1.1 billion share buyback in December. But that is not enough: it says it will do another one, worth £4 billion, at pace, in 2022.

The right hon. Gentleman is setting out the problem, but the trouble is that his solutions do not add up. Does he acknowledge that last year Shell and BP, the two largest oil and gas producers, posted a £26.9 billion and £22.5 billion loss respectively? How much would his windfall tax get from those situations? Does he also acknowledge that the biggest investments in renewable energy—not least hydrogen, into which hundreds of billions are being invested—come from companies such as BP and Shell, which we need to continue investing in alternative non-fossil fuels?

I will answer all the hon. Gentleman’s points. We would raise £1.2 billion from the windfall tax. I will come to this later in my speech, but the tax position is incredibly generous for companies, including Shell and BP. He says that their money is going into renewables, but I am afraid that he is not correct. Shell’s near-term plans involve investment of just £2 billion to £3 billion in low carbon activities and £8 billion on upstream fossil fuel production. It is just greenwash to say that these companies have somehow moved out of fossil fuels and into renewables. The truth is that when profits have risen by billions and billions and when billions are being paid out in share buybacks, it is not credible that somehow a one-off tax rise, taking just a small proportion of the windfall profits that these companies did not expect, will somehow lead to a collapse in investment.

There is a clear consensus that a windfall tax is the right thing to do. An overwhelming majority of people support it—including, I might point out to Government Members, three quarters of Conservative voters. I do not know what Conservative Members are waiting for: they should support a windfall tax because some of the people who vote for them—or used to vote for them, anyway—also support it. Leading charities have endorsed it and some Conservative Members, including the right hon. Member for Harlow (Robert Halfon) and the former business Minister the right hon. Member for Kingswood (Chris Skidmore), have supported it too.

Of course the oil and gas companies do not want the windfall tax to happen. Let us take their arguments head on. As I have said, the argument that the tax will lead to a collapse in investment is not credible given what the companies are doing with this windfall, and it also misunderstands the long-term basis of these companies’ investment plans. I should also point out that the companies would keep a significant proportion of the windfall, even under our proposals. It is an unexpected, unearned windfall, half of which they would keep.

My right hon. Friend is making a powerful speech. He has identified the immediate issue of energy poverty and crisis that we have in this country. Those of us who are old enough to have lived through the 1970s and 1980s recall how the Norwegians used the wealth generated from the North sea to create sovereign wealth funds. Should we not be thinking about that? Could we perhaps not just use the windfall tax, but deploy such funds in the way that my hon. Friend is describing, to invest in renewables and invest in our country?

My hon. Friend has made a powerful point.

Labour has come up with a clear and costed plan. We plan, by levying the windfall tax, to reduce VAT to zero, to increase the warm home discount from £150 to £400, and to extend it from the 2.2 million families who currently receive it to 9 million. On top of that, we have set aside £600 million to help our businesses out. This is in stark contrast with what is being proposed by the Conservatives—the Government of the day, who, six days before the announcement of the rise in the price cap, seem to have nothing to say. What is their explanation for why they are not acting? It is very hard to find the explanation, although perhaps we will hear one today. The one person who has ventured to provide one is the Education Secretary, who has said:

“A windfall tax on oil and gas companies that are already struggling in the North Sea is never going to cut it.”

Even the oil and gas companies do not describe themselves as struggling. They say that this is a cash machine. I have to ask what planet the Government are living on. Does it not say everything about them that it is the struggles of companies making billions from an expected windfall that stir them, not the struggles of the British people? How dare they leave families in the lurch because of their refusal to stand up to vested interests in the oil and gas sector?

In 1998, when Labour was in power, oil prices bottomed out at $12 a barrel. By 2008, the price had risen to nearly $100 a barrel. What did Labour do with that money? It is regrettable that it did not create an oil sovereign fund, as Norway did.

I am very proud of the investments that the last Labour Government made in our public services.

Will the right hon. Gentleman give way?

No, I am going to make progress.

The truth is—we cannot get away from it—that the Conservatives are a party bankrolled to the tune of nearly £5 million by oil and gas interests since 2016. Bankrolled by oil and gas executives, they cannot act on behalf of the British people.

Let me end by saying this. The British people are fed up with what they have seen from the Government in recent months. They want a Government who are on their side. They want a Government who will act for them. That is why we need a windfall tax. It is a test of whose side they are on, and whose side we are all on in this House—on the side of gas and oil companies making billions of profits, or on the side of millions of struggling families. We know whose side we are on. If this Government were truly on the side of the British people, they would act, and that is why I urge Members on both sides of the House to vote for our motion tonight.

Thank you, Madam Deputy Speaker, for giving me the opportunity to open yet another Opposition day debate on behalf of the Government.

Another chunk of time has rightly been set aside for Her Majesty’s Opposition to explain their mature approach to politics—their open and transparent methods for taking difficult decisions or balancing nuanced trade-offs—and to articulate their thought-through programme for government if, heaven forbid, they ever win an election. At least, that is what I assumed these Opposition day debates would be like, as a new Minister. Now, on my fourth in relatively quick succession, I realise that that is not the purpose of such debates at all. How foolish of me to assume such laudable ideas when, instead, we are presented with further half-baked, sensationalist ideas solely for the headlines. We can do better than this.

None the less, let me try again to make sense—[Interruption.] If Opposition Members would give me a moment, I will try to make sense of the motion for which they are about to argue. The motion splices together two very important matters, the cost of living and business taxation, in a proposition whose coherence is inversely proportional to its attempt to grab the headlines. As this is a motion of two halves awkwardly coupled together for effect by the Opposition Front Bench, I will take each half in turn.

First, on the cost of living and in the spirit of being constructive, I will try to find areas where we can agree. There is no doubt that this is a difficult time, with rising energy prices, growing demand, stretched supply chains and the most unique set of economic and political circumstances in a century. Latent demand has been held back across the world by health factors, with countries competing among themselves to serve people, businesses and society.

The right hon. Member for Doncaster North (Edward Miliband) pointed out that Ofgem will be setting the cap in just a few days’ time, so there is no point in this endless consultation looking ahead. What will the Treasury do in the here and now to mitigate the energy cap rise?

I will come to that in a moment, just as I will come to the sedentary exhortations from the right hon. Member for Islington South and Finsbury (Emily Thornberry).