Category: Energy

  • Lucy Frazer – 2022 Statement on Energy (Oil and Gas) Profits

    Lucy Frazer – 2022 Statement on Energy (Oil and Gas) Profits

    The statement made by Lucy Frazer, the Financial Secretary to the Treasury, in the House of Commons on 5 July 2022.

    I beg to move,

    That provision may be made for, and in connection with, imposing a charge on ring fence profits of companies (within the meaning of Part 8 of the Corporation Tax Act 2010).

    This Bill deals with the taxation of extraordinary profits in the oil and gas sector, but it is important to remember that its effect is to allow us to focus on supporting families up and down the country at this difficult economic time. The Bill will help us to raise revenues and support families while continuing to encourage investment in North sea oil and gas.

    Darren Jones (Bristol North West) (Lab)

    I wonder whether the Treasury has made any assessment yet of how much money will be raised by this windfall tax, given the debt that will need to be taken on as a result of the tax cut for those drilling for fossil fuels. Is there an estimate of how much the Minister intends to raise by these means?

    Lucy Frazer

    The estimate of the amount that the measure will raise is £5 billion over the course of the first year. I start by highlighting the context for our introducing the Bill. The oil and gas sector is making extraordinary profits. Those profits are not the result of recent changes to risk-taking, innovation or efficiencies; they are the result of surging global commodity prices, driven in part by Russia’s war. The profits are over and above what analysts and businesses in the sector could have expected to earn. Indeed, since early last year, oil prices have nearly doubled and gas prices have more than doubled. The Bill is being introduced at a time when many of our constituents are struggling with the cost of living, and at a time when we have said that the Government will support the most vulnerable and the least well off in getting the support that they need.

    I would like to touch on how the Bill ensures that we tax extraordinary profits fairly while incentivising investment. To do that, we are introducing the energy profits levy, a new 25% surcharge on the extraordinary profits that the oil and gas sector is making. At the same time, the new 80% investment allowance will mean that businesses will, overall, get a 91p tax saving for every £1 they invest. This provides them with an additional immediate incentive to invest. That nearly doubles the tax relief available and means that the more investment a firm makes, the less they will pay. As set out in the energy security strategy, the north will still be a foundation of our energy security, so it is right that we continue to encourage investment in oil and gas. The Government expect the energy profits levy, with the investment allowance, to lead to an overall increase in investment.

    I want to make clear what the investment allowance will apply to. First, the allowance will be calculated in the same way as the investment allowance for the existing supplementary charge. Therefore, if capital or operating expenditure qualifies for the supplementary charge allowance, it will qualify for the energy profits levy allowance, but unlike the supplementary charge, it will be available to companies at the point of investment. This makes it both more immediate and more generous. As the levy is targeted at the extraordinary profits from oil and gas upstream activities, it makes sense that any relief for investment must also be related to oil and gas upstream activities. Such spending can be used to decarbonise oil and gas production—for example, through electrification—so any capital expenditure on electrification, as long as it relates to specific oil activities within the ringfence, will qualify for the allowance. Examples of activity that may be carried out for specific oil activities include expenditure on plant and machinery such as generators, which includes wind turbines, transformers and wiring.

    We have also been listening closely to feedback from industry. We published draft legislation for the Bill on 21 June to seek technical feedback. Two weeks ago, the former Chancellor met industry stakeholders in Aberdeen to discuss the levy—not just to communicate the aims of the levy and how it will fund vital support for families, but to ensure that the levy works as the Government intended. That is why I can confirm that the Government are making a change to the legislation. I confirm that tax repayments that oil and gas companies received for petroleum revenue tax related to losses generated by decommissioning expenditure will not be taxed under the levy. Since wider decommissioning expenditure is also left out of account for the levy, that change is consistent and fair. We are very grateful for the engagement that we have had with industry on the matter. When the Bill is published, this will be made clear. To reassure the House, with this change, the Government still expect the levy to raise about £5 billion over the next year.

    Finally, let me turn to how long the levy will be in place. It will take effect from 26 May this year and it will be phased out when oil and gas prices return to historically more normal levels. A sunset clause will also be written into the legislation so that, by the end of 2025, the levy will automatically cease to be in place. The energy profits levy is temporary, with a set lifespan that raises about £5 billion revenue over the next year, so that we can help families with the cost of living in the shape of significant, targeted support to millions of the most vulnerable.

  • Greg Hands – 2022 Statement on Energy Efficiency

    Greg Hands – 2022 Statement on Energy Efficiency

    The statement made by Greg Hands, the Minister for Energy, Clean Growth and Climate Change, in the House of Commons on 22 June 2022.

    Upgrading our homes to be more energy efficient is the best long-term solution for reducing our energy costs, keeping ourselves warm and healthy in winter and tackling fuel poverty. It is also essential for our transition to net zero and in supporting local jobs and growth. This is why the Energy Company Obligation scheme remains a key policy in supporting low income and vulnerable households to upgrade their homes with energy efficiency and heating measures.

    Making homes more energy efficient reduces heating costs permanently, mitigating the impacts of current and future price rises. There are wider benefits; energy efficient homes are more comfortable to live in, with consequent improvements to householder’s health and wellbeing.

    The Energy Company Obligation has a good track record of delivering such upgrades to homes. Since 2013, it has installed around 3.5 million energy efficiency measures in 2.4 million homes across Great Britain.

    In April, we published the response to the consultation on the future of the Energy Company Obligation across Great Britain, committing to an expansion of the scheme from £640 million to £1 billion a year and extending it by four years to 2026. Today the Government have laid the regulations for the scheme.

    The last iteration of the Energy Company Obligation scheme, EC03, came to an end on 31 March 2022 and since 1 April 2022, EC03 measures could continue to be delivered to previous scheme rules—subject to some exceptions—until 30 June 2022. Similarly, suppliers have had the option to deliver to the new scheme, EC04, rules from 1 April 2022.

    EC04 will be focused on low-income and vulnerable households in Energy Performance Certificate (EPC) Band D-G homes. The scheme will bring positive value to society, with estimated installations of around 800,000 measures in around 450,000 homes. Households could save on average £290 annually off their energy bills over the lifetime, or up to £1,600 in the least energy efficient homes. However, those savings could average £600 next winter. 360,000 homes will be upgraded to EPC Band C, helping more households out of fuel poverty.

    Government will mandate minimum energy efficiency improvements requiring Energy Performance Certificate (EPC) Band F and G homes to be improved to a minimum Band D and Band D and E homes to be improved to a minimum Band C, contributing to our statutory fuel poverty target and interim milestone.

    To make greater progress on upgrading the least energy efficient homes, there is a minimum target of upgrading 150,000 Energy Performance Certificate (EPC) Band E, F and G private tenure homes. This will ensure the least energy efficient homes are not left behind. Furthermore, a minimum target of 90,000 solid wall insulation measures is introduced to maintain the focus on insulating harder to treat homes, while supporting the solid wall insulation industry.

    Under the scheme, support for repairs and replacements of broken gas and electric storage heating systems will be limited to 5,000 homes per year and the repair of inefficient oil and liquefied petroleum gas (LPG) systems will be permitted as a last resort where renewable heating cannot be installed. This will ensure measures installed under EC04 align with the Government’s Heat and Buildings Strategy and net zero targets.

    Homes in off-gas rural areas will be incentivised in Scotland and Wales, to ensure homes that may be harder to reach and more expensive to deliver are not left behind. EC04 has been designed to complement the Home Upgrade Grant in off-gas homes in England, social housing funding and the private rented sector regulations. It will continue to work alongside existing energy efficiency and fuel poverty policies in Scotland and Wales.

    Up to 50% of a supplier’s obligation may be delivered under the reformed Flexible Eligibility mechanism (EC04 Flex), an increase from 25% under the previous scheme. EC04 Flex enables local authorities, the Scottish and Welsh Governments and energy suppliers to target and refer other low-income households who may not be in receipt of means tested benefits.

    A new scoring methodology will be introduced, providing greater support to the worst performing homes. Support will continue for new and innovative installation methods and measures via a reformed innovation measure mechanism. Only fully tested measures with adequate consumer protection will be eligible.

    This expansion of the scheme forms part of the wider support package to help households with rising energy bills.

    In May, in recognition of increased cost of living and continued rising energy costs, a package of support worth £37 billion was announced, which includes the Energy Bills Support Scheme. Most vulnerable households will receive at least £1,200 of support this year and, all households will receive a £400 grant as a credit from energy suppliers from October 2022 onwards, which does not need to be repaid.

  • Greg Hands – 2022 Comments on the Boiler Upgrade Scheme

    Greg Hands – 2022 Comments on the Boiler Upgrade Scheme

    The comments made by Greg Hands, the Energy Minister, on 23 May 2022.

    The Energy Security Strategy showed our strong commitment to powering Britain with homegrown renewable and nuclear energy.

    Thanks to the government’s Boiler Upgrade Scheme, heat pumps using this clean, cheaper electricity will be the cheaper, obvious choice for households choosing to replace their fossil fuel boiler.

    It will also kick-start a British manufacturing industry that will help bring down prices even further whilst creating huge investment and job opportunities.

  • Zarah Sultana – 2022 Speech on the Cost of Living Crisis

    Zarah Sultana – 2022 Speech on the Cost of Living Crisis

    The speech made by Zarah Sultana, the Labour MP for Coventry South, in the House of Commons on 17 May 2022.

    Thank you, Madam Deputy Speaker.

    The annual profits of oil giant Shell were £12 billion. BP’s profits were £9.5 billion. The company’s boss said that his pay had more than doubled to just under £5 million, and then the company complained that it is

    “getting more cash than we know what to do with”.

    In the next year, the combined profits of those two companies are expected to double to £40 billion.

    It is not just oil giants; bankers’ bonuses are booming, too. They are higher than at any time since the 2008 financial crisis. Posh bars in the City say that they have had a run on their most expensive champagne. While the vast majority are struggling like never before, the wealthy few are raking it in. The Institute for Fiscal Studies says that the booming incomes of the top 1% are driving rising inequality. It is a crisis for the majority, but a bonanza for the few.

    This is not inevitable. This crisis was made in Downing Street. It is the result of political choices made by this Tory Government. Last year, they let Shell pay zero tax on North sea oil and gas production, with the Treasury actually paying Shell £92 million. Earlier this year, the Tories voted to give bankers a tax cut worth £1 billion a year, and just a week later they voted to slash social security payments in real terms and to cut pensions by about 4%, once inflation is factored in. A couple of months earlier, they implemented the biggest overnight cut in the history of the welfare state, scrapping the £20 a week universal credit uplift, and then they let energy bills soar by a whopping 54%. Their choices are why my constituents and millions of people across the country are struggling while the super-rich line their pockets.

    We could choose to do things differently, and that is what amendment (f), tabled in my name, would do. It would use a windfall tax on oil giants to slash energy bills and bring energy companies into public ownership. It would give millions of workers a real pay rise, making the minimum wage a genuine living wage, and implement a real-terms public sector pay rise. It would rebuild the social security safety net, with a real-terms increase in social security and pensions, including restoring the £20 a week universal credit uplift. It would pay for that by raising taxes on the richest, not on ordinary workers, including an end to the tax-dodging loopholes that Conservative Members are so fond of, including the non-dom status. Instead of the political choice to squeeze the livelihoods of working people, we could squeeze the profits of the rich. That is what my amendment would do, and I urge Members to back it.

  • Kwasi Kwarteng – 2022 Comments on New Nuclear Power Projects

    Kwasi Kwarteng – 2022 Comments on New Nuclear Power Projects

    The comments made by Kwasi Kwarteng, the Secretary of State for Business, Energy and Industrial Strategy, in the House of Commons on 13 May 2022.

    Our new £120 million fund will push forward our plan to deploy a new fleet of nuclear power stations as part of a British nuclear renaissance.

    By encouraging new companies to come forward and build in Britain, we can spur greater competition in the market to cut development costs so consumers benefit in the long-term.

    Nuclear is central to our long-term plan bolster the UK’s energy security with cheaper, cleaner, home-grown power, while creating thousands of high-skilled jobs across our country.

  • Greg Hands – 2022 Statement on the Warm Home Discount

    Greg Hands – 2022 Statement on the Warm Home Discount

    The statement made by Greg Hands, the Minister for Energy, Clean Growth and Climate Change, in the House of Commons on 12 May 2022.

    Upgrading our homes to be more energy efficient is the best long-term solution for reducing our energy costs and keeping ourselves warm in winter. However, this takes time, which is why the warm home discount remains a key policy for tackling fuel poverty now. For 11 years, the warm home discount has provided vital help with energy bills to households on the lowest incomes. Last summer, the Government consulted on the future of the warm home discount scheme in England and Wales, and today, the Government have laid the regulations for extending, expanding, and reforming the scheme to 2026.

    From this winter, the Government are expanding the warm home discount scheme. The annual spending envelopes will increase from around £350 million to £475 million (in 2020 prices), and the value of the household rebates will rise from £140 to £150. As a result, around 2.8 million households in England and Wales will receive a rebate every year, 750,000 more compared to the previous scheme. We are also lowering the energy supplier participation thresholds from 150,000 domestic customer accounts to 50,000 in 2022-23 and 1,000 in 2023-24, meaning that almost all customers will be with a participating supplier and thereby reducing the barriers for people switching energy suppliers.

    Under the scheme, around 1 million low-income pensioners will continue to receive their rebates automatically through the core group 1 element of the scheme. It is right that we protect this low-income vulnerable group susceptible to the effects of living in a cold home.

    From this winter, the Government are replacing the former application-based broader group element, under which low-income and vulnerable households had to apply to their energy supplier every year. Broader group rebates have often been awarded on a first-come, first-served basis or by lottery, as there have been more eligible households than there were rebates available.

    Instead, around 1.9 million households will receive rebates under a new core group 2. These households will be those on the lowest incomes and with high-energy costs, determined by using data on property characteristics. Through data-matching between Government Departments and energy suppliers, the vast majority of these households will be identified automatically and receive their rebate without having to take any action. These reforms will improve the fuel poverty targeting of the scheme, ensuring more of the rebates go to households in, or at risk of, fuel poverty.

    Lastly, the Government recognise the value of industry initiatives, taking the form of additional financial and energy-related support measures, that energy suppliers and industry partners provide to fuel poor households. It will therefore become mandatory for all energy suppliers participating in the scheme to provide or fund industry initiatives.

    The Government are consulting on a warm home discount scheme in Scotland for the period until 2026 and shall lay separate regulations, subject to the outcome of that consultation.

    This expansion of the warm home discount scheme forms part of the wider support to help households with rising energy bills. The Government have announced £9.1 billion of support through the energy bills rebate in 2022-23. This includes: a £200 discount on energy bills this autumn for domestic electricity customers in Great Britain; a £150 non-repayable council tax rebate for households in England in council tax bands A to D; and a £144 million discretionary fund to support households not eligible for the council tax rebate. Meanwhile, the devolved Administrations will receive around £565 million corresponding funding through the Barnett formula.

    More information on the warm home discount scheme will be made available over the summer on www.gov.uk/the-warm-home-discount-scheme.

  • Lee Rowley – 2022 Comments on Supporting High Energy Usage Businesses

    Lee Rowley – 2022 Comments on Supporting High Energy Usage Businesses

    The comments made by Lee Rowley, the Industry Minister, on 29 April 2022.

    We want to keep the UK at the forefront of manufacturing, helping our energy intensive industries remain competitive and sustainable for the long term, and continuing to power our economy with thousands of jobs across the country.

    We are not only extending our support through the compensation scheme, by offering a greater level of compensation to eligible firms, we are delivering more relief from electricity costs for these industries.

  • Greg Hands – 2022 Statement on UK Green Infrastructure Platform Ltd

    Greg Hands – 2022 Statement on UK Green Infrastructure Platform Ltd

    The statement made by Greg Hands, the Minister for Energy, Clean Growth and Climate Change, in the House of Commons on 19 April 2022.

    I can today inform the House that UK Green Infrastructure Platform Ltd (UKGIP) is being wound up, via a members’ voluntary liquidation, having fulfilled its objectives to own and manage the five assets retained following the sale of the UK Green Investment Bank and to enhance and realise value through their sale.

    UKGIP, a private limited company, was established in 2017 to manage the Government’s interests in the unsold assets from the Green Investment Bank. It was 90% owned by the Department for Business, Energy and Industrial Strategy. UK Green Investment Bank Ltd (UKGIB), which is wholly owned by Macquarie, held the remaining 10% shareholding in UKGIP.

  • Kwasi Kwarteng – 2022 Comments on Innovative Energy Technologies

    Kwasi Kwarteng – 2022 Comments on Innovative Energy Technologies

    The comments made by Kwasi Kwarteng, the Business and Energy Secretary, on 8 April 2022.

    This investment will unlock the enormous potential of hydrogen, advanced nuclear reactors and Carbon Capture to level up the UK energy landscape and deliver for businesses and households.

    High gas prices and Russia’s aggression in Ukraine have highlighted the urgent need to produce more of our energy here in the UK.

    That’s why we have set out bold plans to harness clean, cutting-edge, homegrown technologies and build the energy security we need for the future.

  • Greg Hands – 2022 Comments on the Future System Operator

    Greg Hands – 2022 Comments on the Future System Operator

    The comments made by Greg Hands, the Energy Minister, on 6 April 2022.

    Russia’s appalling aggression in Ukraine amid escalating global gas prices has shown the vital importance of strategic change to the UK energy system. We need to boost our energy resilience, reduce our dependence on expensive imports and slash emissions. The FSO will do just that.