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North Sea Oil and Gas (Taxation)

I am pleased to have obtained the debate, especially having been granted it two weeks ago, but having had to withdraw, as I had committed myself to accompanying the Holocaust Educational Trust and some young constituents to the Auschwitz extermination camp. I am therefore grateful to have a second chance today. When I saw the new date for the debate, I thought that it presented a problem. Should I prepare a speech in advance or wait to see what the Budget turned up on Budget day? I wondered whether there would be anything in the Budget on North sea oil and gas taxation. I am glad that I prepared something, because as far as I can see, there have not been any changes to the North sea fiscal regime—not even the corporation tax and capital allowances changes that will apply to all other industries in the country. I shall return to the question whether that is good or bad for the oil and gas industry, but today, we have a rare opportunity to debate oil and gas taxation in detail on Budget day. Now that we have that opportunity, and the Treasury has not made its mind up, I hope that my hon. Friend the Financial Secretary will take on board what I have to say and return with some good proposals in the pre-Budget report later this year. To some people, the debate is simple: oil companies make a great deal of money, and the majors make enormous profits, so we should tax them as highly as we can, and if the oil price goes up, we should tax them more. I do not have any problem with taxing people who can afford to pay, because I want the public services that taxes provide, but we must remember that those companies’ profits are worldwide, based on each company’s global operation and their substantial investments throughout the world. The issue for the UK is the proportion of that worldwide investment which we attract, and the Treasury should monitor it carefully for several reasons. The investment that we receive is huge, and it has been for many years. Last year, the oil and gas industry spent £11.1 billion in the UK, which was an enormous injection in our economy. That investment boosts growth, and it dwarfs spending by most other sectors. It probably makes the industry the largest industry in the country, because it amounts to about 11 per cent. of all industrial investment in the UK. It finds its way down the supply chain, it sustains many other businesses and it leads to the employment of some 480,000 people, so it is hugely valuable to our economy and we cannot afford to lose any of it. What else do we get from the investment? We are self-sufficient in oil and still receive enough gas to meet 92 per cent. of our demand, and we obtain all that from an indigenous source which is surely our most secure energy supply. The investment also makes a substantial contribution to the balance of payments. Indigenous production of oil and gas last year saved £30 billion in oil and gas imports, and the industry supply chain exported goods and services worth £4 billion. Overall, therefore, the industry contributed £34 billion to the balance of payments, which is not to be sneezed at. The industry paid £10.3 billion in tax last year, and its corporation tax payment alone amounted to 20 per cent. of all corporation tax paid by UK companies.