Mr. Dave Anderson (Blaydon): Is it not amazing that we are talking about a minute bank levy when hundreds of thousands of public sector workers will lose their jobs, and when those who stay in their jobs will see their pay frozen for two years and their pension contributions go up by 50%, all as a result of the failure of the banks? The Government parties think that that is okay.
Chris Leslie: It is a crying shame that there will not be more publicity for this debate; perhaps the complexity of bank taxation is difficult to report, for whatever reason. If people knew about the Government's weakness in trying to claw back the money that is owed to the taxpayer and their enthusiasm for cutting public services and raising taxes on ordinary people, they would see that it is a scandal.
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Mr. Dave Anderson (Blaydon): I thank my hon. Friend for giving way. He is being very generous.
UK Financial Investments, the Treasury body that manages the state's role in the Royal Bank of Scotland, gave its approval for Stephen Hester's package, which included £1.2 million in basic pay, a £2 million bonus, and share options that could amount to £4.5 million. It has already given in.
Chris Leslie: Again, I think that we need to engage in a proper debate about corporate governance of the state-owned banks. It is important for us to understand the potential powers that Ministers have, and the consequences of their choosing not to exercise those powers. If they choose to approve a certain level of remuneration, that constitutes intervention just as much as disapproval does.
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Mr. Dave Anderson (Blaydon): It is not only my hon. Friend who disagrees with the right hon. Member for Wokingham (Mr Redwood); the OECD disagreed with him as well, saying that the actions of the previous Government prevented the recession from turning into a depression.
Mr Jones: I agree with my hon. Friend. The Tory spin doctors forget that if we had followed the first reaction to the Northern Rock crisis from the then shadow Chancellor, the right hon. Member for Tatton (Mr Osborne), we would have let Northern Rock go, which would have had a knock-on effect on other banking systems and the recession would have turned into a depression. It is perhaps not fashionable to say it, but we should thank the Chancellor and the Prime Minister of the time for the decisions they took to ensure that that depression did not materialise.
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Mr. Dave Anderson (Blaydon): Does my hon. Friend agree that one of the differences between what is happening now and what happened in 1997 is that, in 1997, the Labour party went to the country to ask for a mandate to put in place a windfall tax on the energy companies, and that the people of this country voted for that?
Helen Goodman: That is a powerful point. What happened then contrasts with the total lack of consultation by this Government.
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Mr. Dave Anderson (Blaydon): I want to speak in support of amendment 10, but first I want to say something about the speech of the right hon. Member for Gordon (Malcolm Bruce). I am pleased that he has returned to the Chamber, because I was very interested in what he had to say. Most of those who have spoken in the debate on these amendments have done so on the basis of a degree of experience, which was not the case in earlier debates.
I wonder whether the case made by the right hon. Gentleman was made to the Government before the Budget. It appears from what was said by him and by the hon. Member for Dundee East (Stewart Hosie) that the industry has been saying to the Government for some time, "If you are going to do this, please talk to us and please make sure that we get it right." The industry does not want to end up with the circumstances described by my hon. Friend the Member for Bishop Auckland (Helen Goodman), in which anyone could do whatever they wanted whenever they wanted.
If that information was shared with the Chancellor before he made his statement on 23 March, it would seem from what was said by the hon. Member for Dundee East (Stewart Hosie) about why he had ignored the voices of experienced people such as the right hon. Member for Gordon and those in the industry that the only thing that matches the Chancellor's arrogance is his ignorance. Clearly he has decided to say, "I know better. I will impose this on the industry and on this country."
This is not just about places such as Aberdeen and the North-West, because a huge amount of work is going on across the whole of Tyneside and the North-East of England. Some of the most advanced technical work anywhere in this country is being done there in very small factory units by very skilled men and women who are doing a great job. Shipyards have reinvented themselves after the closure programme of the 1980s and are building exploratory rigs and doing work that is vital to maintaining the skills base and developing the new work that we want to do. That will be development for not only the oil industry, but the offshore wind industry.
Mr Kevan Jones: A large number of individuals, many of whom live in my constituency and that of my hon. Friend, worked in former shipyards and heavy engineering firms in the North-East and now travel to Scotland and other areas where the UK oil and gas industry is based. They have very good jobs and choose still to live in the North-East. Does he agree that they are an important part of the wages that go into the North-East economy?
Mr. Dave Anderson (Blaydon): My hon. Friend is absolutely right. These people are rightly still among the most well-paid people in this country - why on earth should they not be, given the work they are involved in and the risks they take in their daily lives?
I worked underneath the North sea bed as a coal miner, so I have some experience of working in the energy industry. I am not the person to feel sorry for multinational oil companies, but if the Government take crass decisions that will have a massive impact on not only the industry, but the people who are dependent on it right across the board, we should surely question that. I have no problem with saying to the oil companies that we want them to play their part in trying to help us to get this country back on an even keel. Clearly, when companies such as Shell and BP are making huge profits, that discussion should take place, but it should happen before decisions as serious as this are imposed on people.
Some 450,000 people work in the industry. Our subsea industry is at the cutting edge and leading the world. People talk about what happened in the gulf of Mexico only a year ago, but the probability is that that will never happen in the North sea because of the experience we have gained over many decades of working up there. We lead the world and we should be proud of that, but this taxation surprise has made the industry question whether it should carry on being there, and clearly the oil industry can go to lots of other places in the world.
Helen Goodman: Does my hon. Friend agree that the expertise, research undertaken and skills gained on the UK continental shelf in the North sea enable British-based companies to explore successfully in the gulf of Mexico and the south China sea, and that from that exploration we also gain in income and investment from dividends overseas?
Mr. Dave Anderson (Blaydon): My hon. Friend is absolutely right about that. There is no doubt that as we move further forward and the exploration starts to take place west of the Shetland Islands, presenting new challenges, our people working in these industries will again lead the way. But that may not happen if companies are frightened away by a tax regime that is going to punish them. It will particularly punish them when it is a rabbit pulled out of a hat at the end of a Chancellor's Budget, when it has not been discussed with the industry and when the industry has not been able to prepare, consider what it is doing and talk things through in a sensible and adult way in a genuine partnership to make these things work. As has been pointed out a number of times, Centrica has said this week that it is considering not reopening its gas fields off our north-west coast. That is a hugely important area of development and if Centrica decides not to reopen the fields they will just become sterile, like so many other of our energy reserves in this country over the past 30 years as a direct result of Government failures and inaction. It is clear that the Government have not thought this measure through, and the plea by the right hon. Member for Gordon is absolutely the right one, because they should think it through.
What will happen to the tax revenue in the meantime? That point was raised by my hon. Friend the Member for North Durham (Mr Jones). Clearly, the decision made on 23 March was that a certain amount of money would be raised by this attack on the North sea. If that money is not raised, either because of the discussions that go on or because the decision has changed, what will the Chancellor come back with? How will he fill the hole that will be left, at least temporarily, if we do not go ahead with the measure?
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This decision has clearly been made for political gain. The Chancellor was on the back foot - he was on the run - because he had been knocked all over the place by the shadow Chancellor's attacks about the impact that oil prices, petrol prices and, in particular, VAT on fuel were having on ordinary people and businesses in this country. As the Chancellor would not reverse the VAT on the petrol price at the pump, it was clear that he would have to find another way to fill that hole, and he did it through the rise in the North sea oil tax. It was clearly a huge mistake, made to cover up another political mistake. The mistake was not just the act of putting up VAT, but that of introducing a measure that was not supported and was in neither Government party manifestos nor the coalition agreement. Again, the proposal was sprung on the British people as well as the industry. There was no consultation with the industry, and when one says to a body such as Oil & Gas UK which represents a group of companies that the effective tax rate on their profits will be 81%, it is clear that they will go and look elsewhere in the world. If they can get a better return, that is where they will go. We should have been discussing that with the companies before they went.
It is plain to see that this measure has been a huge mistake - but I would say that. The criticism does not just come from me, however. I understand that the Treasury Committee is going to hear from a group that has been asked to report to it on the impact of the change in tax on offshore drilling to 32% from 20% - I was going to say that it would do that tomorrow, but it is probably today by now. One body, the Institute of Chartered Accountants in England and Wales, was critical of the North sea policy because it could deter investment in the area. It said:
"We understand the policy rationale for this decision but imposing unexpected tax charges with immediate effect is likely to cause damage to the UK's competitiveness."
The Association of Chartered Certified Accountants adds its disproval, saying:
"The increase in the rate of tax on ring fenced profits...was unexpected, and is understood not to have been subject to any consultation".
It goes on to say:
"While the measure is clear, simple and targeted" -
clearly it is, as the Government just need to say to somebody that they will pay 20% today and 32% tomorrow -
"it fails on the principles of stability and supporting growth".
The Conservatives lecture us constantly in the House on the idea that they are all about developing growth, but ACCA clearly does not think so.
Andrew Gwynne: Is that not exactly the difference between this measure and the example raised in an earlier intervention about the effect of the windfall tax on the privatised utilities? When Labour was in opposition before 1997, the party was in full discussions with the privatised utilities, which might not have been 100% happy with the proposal but were altogether certain that if the Labour party came to office, it would invest in our young people and get them back to work.
Mr. Dave Anderson (Blaydon): My hon. Friend is correct. That debate went on in the Labour party for a long time long before that election. It was quite clear to the industry and to the people of this country that if they voted Labour on 1 May 1997, we would impose a windfall tax. Discussions had been going on and the companies were able to absorb the idea and plan for that.
As ACCA says further:
"The sudden change in rate came as a shock to those involved in the North Sea oil industry" - the change was not a shock in 1997, because companies had been able to prepare for it -
"and has been widely condemned as reducing the competitiveness of the UK as a target for investment".
Mr Kevan Jones: Does my hon. Friend agree that the windfall tax, which was a one-off tax and quite clearly understood, was different from what we are facing today with this tax increase, which is a potentially fluctuating tax that gives uncertainty to oil and gas producers about the level of profit they will make long term on their investment in the North sea or anywhere else?
Mr. Dave Anderson (Blaydon): In the learned advice that she gave, my hon. Friend the Member for Bishop Auckland spelt out more clearly than anyone else in this debate that nobody seems to know what people will be paying in tax. Nobody knows whether they will be paying anything or whether they will be able to say, "I want to get away with this while you get away with that." That is absolutely ludicrous; even if we accept that the tax should be imposed, people at least need to know what the Government are going for.
Hugh Bayley: I wonder whether my hon. Friend has read the article in today's edition of The Guardian entitled "Accountants attack Osborne's North Sea oil levy", which reports on the ACCA report that my hon. Friend has just mentioned. It also reports the Chairman of the Treasury Committee as saying:
"Every time we do the unexpected, future business is deterred. It's crucial we construct a tax system around the principles of certainty, simplicity, stability as well as fairness. The only beneficiaries of complex changes are tax accountants and tax lawyers - the very people who are complaining."
Mr. Dave Anderson (Blaydon): I have read that report. Whatever hon. Members' views, we respect the Chair of the Treasury Committee as someone who has done a good job for the people of this country and for the House, and when he says such things, hon. Members should listen. He is not someone who should be ignored: he speaks not from arrogance or ignorance but from a lot of knowledge. His Committee has undertaken a rapid investigation of an issue that is of massive importance to the country.
We have been here before with Tory Governments, who have a long history of making crass policy decisions on energy. In the 1930s, the Tories presided over a coal industry that was in internal decline and had massive problems, with more than 1,000 men a year being killed in the industry and with no investment whatever. Those men were using 19th-century technology - life was cheap and people were not allowed to live decent lives. The situation was pushed back after the war when the Labour Government came in and nationalised the coal industry.
Then there was another repeat in the 1980s. My hon. Friend the Member for Bishop Auckland has mentioned the POP forecast and the pricing of oil according to how much it costs to get oil from coal. In the 1980s, we led the world in getting oil from coal, but that industry was destroyed at the whim of the then Government, who did that for political reasons. I can see that you are getting annoyed, Mr Hoyle, which is not like you, so I shall move on rapidly.
The truth is that Tory Governments, and not just in the past, have taken policy decisions that were to the detriment of the energy system in this country. That is being confirmed today, because this is not just about the oil industry. As has been discussed in debates on the solar power industry, Ministers have changed the rules halfway through a process. I have received a letter from a company in my constituency saying that it is involved in a number of projects in which clients want to build solar arrays that do not fulfil energy requirements. Funders and clients are now cautious because of the uncertainty caused by the policy change halfway through discussions. The industry had been told that it would be able to set targets at a certain level, but that level was later changed and the same thing is happening now. If the Government spring surprises on companies that are investing in energy policy, those companies will not know where they are and will look at other markets. As I have said before, I am not one to stick up for the oil companies, but I am one to stick up for this country and the workers of this country, and this part of the Bill, along with many others, is detrimental to the workers and the people of the country.
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Mr. Dave Anderson (Blaydon): Is not the point that this debate should have happened before the Chancellor made the decision, not afterwards?
Justine Greening: Realistically, it is not always possible to discuss rate changes with the industries concerned. It is not done as a matter of course, but the point about working with the industry to ensure that we understand the impact on more marginal investments is valid, and that is precisely what we are doing.
The clause increases the rate of the supplementary charge, which is a tax on the profits of oil and gas production, from 20% to 32% from 24 March this year. It is fair to point out that oil prices have increased from $77 a barrel at the time of the June 2010 Budget to about $125 a barrel today.
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