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Budget Resolutions and Economic Situation

The gist of my speech is the measures needed to tackle climate change. At least the Chancellor has moved in the right direction, given the measures that I have already mentioned. It would certainly be a retrograde step if the Conservatives had their way with a so-called voluntary agreement instead of the climate change levy. Aviation tax could be even more important than the levy. Figures from 2003 on carbon dioxide emissions from fuel combustion show that international aviation and marine bunkers were responsible for 3 per cent. of the world’s total carbon emissions, or 223 million tonnes. That figure has since increased substantially. I shall return to aviation tax later, but I wish to deal with the taxation of oil companies, which is a complex issue and is not often raised unless the Chancellor refers to it or it is mentioned in the Treasury Committee. My perspective, however, is different. One of the Chancellor’s greatest achievements was the introduction in 1997 of a windfall tax on oil companies that raised £5.2 billion, which was invested in the new deal—an employment strategy that put many young people into work. The new deal adopted four different approaches including, crucially, skills training. It transformed employment in this country and it was a great success. Oil prices have gone through the roof, as have oil company profits. I tabled a question to the Treasury asking the Chancellor to"““assess the merits of introducing a windfall tax on oil company profits””." A ministerial reply on 28 February said that in last year’s pre-Budget report there was a package of changes to North sea oil taxation, but that"““the Chancellor committed to no further increases in North sea oil taxation for the lifetime of this Parliament””.—[Official Report, 28 February 2006; Vol. 443, c. 680W.]" I thought that that was strange, given that there have been record increases in oil company profits. Indeed, although the new deal is still in place it has diminished, and we need to make a new effort on skills training, which is the biggest priority in the field of employment. The Government have delayed the introduction of a new approach called BoND—building on new deal, but another windfall tax could be utilised for that purpose. I undertook some research in the Library. As I said, the windfall tax produced £5.2 billion in 1997. The pre-Budget report shows that the Chancellor will receive £6.5 billion from the continental shelf oil companies in the North sea over the next three years. However, in the pre-Budget statement the Chancellor pointed out:"““Our economy has had to withstand an oil price rise from around $25 to a current price of around $55, which is also close to the level of almost all future projections. Returns in the North sea””—" this is a key point—"““are now nearly 40 per cent. on capital, compared with ordinary returns of 13 per cent.””" There is therefore scope for more taxation on oil companies. Indeed, the Chancellor told the Treasury Committee:"““The oil taxation change is on the basis that we expect oil prices to remain higher than what has been the previous range. The previous range was $22 to $28 and, even if the oil price was higher, OPEC expected oil to go back to between $22 and $28. We are now in a situation where at the beginning of the year it was $40, at one point it went to $70; it is now back to about $55. Our assumption is about $55 over the course of the next year.””" There is therefore scope to increase oil company taxation by about another £1.5 billion quite comfortably over the lifetime of this Parliament. The windfall tax represented 10 per cent. of the taxes of those continental shelf companies. With the changes, we will get 8 per cent., but we could have got extra money from them. Their profits went up from £14 billion in 1997, which was a good year, to £21 billion per annum. We could have used the extra tax on their profits to improve skills training. Aviation kerosene is duty-exempt. The Prime Minister has said that it might be included in a new emissions trading scheme as a first step. That is welcome, but the Chicago convention makes it illegal to tax fuel for international flights. The crisis is great. On 2 March The Independent reported:"““The boom in European air travel generated by cheap carriers is already threatening to wreck our attempts to bring climate change under control. Britons are forecast to take 101 million foreign trips by 2020””," with"““a corresponding increase in carbon emissions.””" The article continued:"““A tax on airline fuel is the obvious solution. That fact that the airline industry has been allowed to operate for so long paying no tax on their fuel is a scandal.””" Oxfam has stated:"““Although aviation currently accounts for only 3.5 per cent. of total greenhouse gas emissions, it is one of the fastest growing sources of greenhouse gas emissions; because aviation also has the highest growth rate as a mode of transport, emissions from air travel are projected to increase five-fold by 2050.””"