Speaking in response to an Opposition Day motion calling for a windfall tax on North Sea oil and gas producers, Peter Aldous recognises that the Government needs to help households facing very high energy bills, but says that such a tax would have untold negative consequences.
Peter Aldous (Waveney) (Con)
I recognise the enormous challenges that many households are facing in struggling to pay their energy bills currently, but unintended negative consequences would arise from such a tax rise, and I shall briefly outline what they are. I make these observations as an MP representing a constituency where many people work in the oil and gas sector, as chair of the British offshore oil and gas industry all-party parliamentary group, and as a supporter of offshore wind—a technology with which the oil and gas sector is increasingly collaborating.
First, it is necessary to set the context. Extraction of oil and gas on the UK continental shelf over the past 55 years has brought an enormous dividend for the UK. It has provided heat for our homes and businesses. It has created hundreds of thousands of well-paid and highly skilled jobs—expertise that we have exported around the world—and, importantly for successive Chancellors, much-needed revenue.
Extracting oil and gas in the North sea is not straightforward. It is a difficult basin in which to work. It needs a stable fiscal regime to attract investment, which is globally footloose. Some might say that, as we move towards a zero-carbon economy, that matters less, and that we should not be promoting further investment in the North sea. The response is that we need that investment as we will continue to use oil and gas, albeit in lesser amounts, for some time, and that funding is required to secure a just and optimum transition to a zero-carbon economy, where we can add to and enhance the skills and expertise built up over the last half-century.
It is necessary to highlight that the existing tax system is working well without the need for a windfall tax. The UK oil and gas industry will pay about £3 billion in extra corporation tax as a result of the global rise in gas prices.
It is appropriate to look at the consequences of previous windfall taxes—most recently, that of the coalition Government in 2011. After all such previous increases, the Treasury has had to offer incentives to claw back investment into the UKCS. That additional fiscal risk puts a cost premium on investments compared with the cost in most other nations, in particular Norway, which is experiencing an economic surge and is well ahead of the field in the race to zero carbon.
The North sea oil and gas industry has a key role to play in the drive towards a zero-carbon economy. That is evidenced in the North Sea transition deal from last March.
Jonathan Edwards
Will the hon. Gentleman reflect on the point raised by the hon. Member for Aberdeen South (Stephen Flynn)—that it was a huge mistake not to create a sovereign wealth fund in order to reinvest in the transition that we now face?
Peter Aldous
I thank the hon. Gentleman for that intervention. He may well be right, but that decision was made 55 years ago. Norway has, I think, far bigger resources than we do, and of course it is a much, much smaller population and country. So that is a debate for another time. I understand where he is coming from, but there is another side to that argument.
Alan Brown
The fact that Norway is a small independent country actually backs up Scotland’s argument for independence, does it not, considering Norway has a $1.3 trillion sovereign wealth fund?
Peter Aldous
I think we are actually on the same side of the argument here. Norway has done remarkably well and there are lessons to be learned. I was actually pointing to the fact that they have had that stable fiscal taxation regime, which has enabled them to be at the forefront of the drive towards a low-carbon economy.
The North Sea transition deal from last March has enabled the industry to deliver investment of £14 billion to £16 billion by 2030 in new technologies such as carbon capture and storage and hydrogen. While the supply chain of the oil and gas industry extends across the UK, activity tends to be concentrated on the North sea coast in north-east Scotland around Aberdeen, on Tyneside and Teesside and in East Anglia around Great Yarmouth and Lowestoft. These are coastal communities that have their own particular challenges and it would be very wrong to add to them at this particular time.
Off the East Anglian coast, there are exciting opportunities to promote a prosperous transition in the southern North sea by redeploying infrastructure and expertise from the oil and gas industry to create a leading hydrogen production and carbon capture, usage and storage hub around the Bacton gas terminal in the constituency of my hon. Friend the Member for North Norfolk (Duncan Baker). The energy price crisis presents many people with enormous challenges, and I look forward to scrutinising the Government’s proposals to address it, which will probably come forward next week. A windfall tax might, at first glance, be a compelling way of meeting that challenge, but it would have untold negative consequences.