Debate on Energy
8 September 2022, House of Commons
The Prime Minister Liz Truss started the Debate by laying out the measures taken to help households and businesses to bear the cost of risen electricity bills. She then said the aim was to make Britain more self sufficient in energy, in particular by building small nuclear power stations and by removing the ban on fracking. She further expressed the wish that electricity prices should be decoupled from the price of gas, without explaining how that could be done:
“Renewable and nuclear generators will move on to contracts for difference, to end the situation in which electricity prices are set by the marginal price of gas. This will mean that generators receive a fair price that reflects their cost of production, further bringing down the cost of this intervention.”
Starmer’s reply, notable for opposition to fracking and demand for a windfall tax:
I thank the Prime Minister for advance sight of her opening speech.
We are in the middle of a national emergency. People are really scared, families do not know if they can warm their homes this winter and businesses ask if they can keep the lights on. That is why the Labour party spent the summer fighting for a price freeze, so that no household would pay a penny more on their bills. When we called for it, many people said we were wrong. They pretended that this crisis was something that just affected the poorest, as if working families on average wages could easily shoulder astronomical bills. They dismissed our call for support as “handouts”. But those objections could never last; the Prime Minister had no choice. No Government can stand by while millions of families fall
into poverty, while businesses shut their doors and while the economy falls to ruin. So I am pleased that there is action today and that the principle of a price limit has been accepted, but under our plan there will be not a penny more on bills; under this plan, there will be a price rise.
This support does not come cheap. The real question before the House today—the real question the Government face; the political question—is who is going to pay. The Treasury estimates that energy producers could make £170 billion in unexpected windfall profits over the next two years. Let me repeat that: £170 billion in unexpected windfall profits over the next two years.
The head of BP has called this crisis “a cash machine” for his company. Households are on the other end of that cash machine—their bills are funding these eye-watering profits. That is why we have been calling for a windfall tax since January, and it is why we want to see the windfall tax expanded now, but the Prime Minister is opposed to windfall taxes. She wants to leave these vast profits on the table, with one clear and obvious consequence: the bill will be picked up by working people. She claims that a windfall tax will deter investment. That is ridiculous. These vast profits are not the reward for careful planning. They are the unexpected windfall from Putin’s barbarity in Ukraine. There is no reason why taxing them would affect investment in the future.
Do not just take my word for it. Asked which investment BP would cancel if there were a windfall tax, the chief executive said, “None”—his word, not mine. The Prime Minister’s only argument against the windfall tax falls apart at first inspection, laying bare the fact that she is simply driven by dogma, and it is working people who will pay for that dogma.
Does the right hon. and learned Gentleman accept that this Government have already introduced a windfall tax, and energy companies today are paying 65% on their profits? What would he rather see that tax set at?
We are talking about what happens this winter and next. If the hon. Gentleman does not understand—[Interruption.] I will tell him something. Every pound the Prime Minister’s Government refuse to raise in windfall taxes, which is leaving billions on the table, is an extra pound of borrowing. That is the simple, straightforward argument. Every pound that she leaves on the table is an extra pound of borrowing, loading the burden of the cost of living crisis onto working people who will have to pay back for years to come.
This is the basic political divide. The Government want to protect the excess profits of the oil and gas and energy groups; we want to protect working people.
I would be absolutely amazed if Government Members have not picked that up. Ask voters whether they think it is fair that they pick up the bill, rather than those companies that made profits they did not expect to make. There is only one answer to that question. It is a very simple question of whose side are you on.
I am afraid this is not a one-off. Not only is the Prime Minister refusing to extend the windfall tax; she is choosing to cut corporation tax—an extra £17 billion in tax cuts for companies that are already doing well. That means handing a tax cut to the water companies polluting our beaches, handing tax cuts to the banks and handing a tax cut to Amazon. She is making that choice, even though households and public services need every penny they can get. Working people are paying for the cost of living crisis, stroke victims are waiting an hour for an ambulance and criminals walk the streets with impunity. It is the wrong choice for working people; it is the wrong choice for Britain.
I am grateful for that intervention. It comes down to this basic point. All hon. Members recognise that profits are needed for investment in all businesses, but in this case these are profits that the companies did not expect to make. When the chief executive of BP says that the windfall tax would not deter any investment, it is a bit rich for Government Members to say that he is completely wrong. He is the chief executive of BP. He has made his case and it is the complete opposite of the case the Prime Minister is trying to make.
The immediate cause of this energy crisis is Putin’s grotesque invasion of Ukraine. We stand united in our support for Ukraine. If we are to defend democracy, defeat imperialism and preserve security on our continent, Putin’s aggression must fail. Whatever our political differences, the Prime Minister will always have my full support in that common endeavour. But we must ask ourselves why we are so exposed to changes in the international price of oil and gas. Why are we so at the mercy of dictators able to pull the plug on wells and shut down pipelines? Why is there such a fundamental flaw in our national security?
It is about a failure to prepare, a failure to increase our energy independence and a failure to rapidly decrease our reliance on fossil fuels. The Conservatives banned onshore wind in 2015, and that cost us clean energy capacity equivalent to all our Russian gas imports in recent years—a policy disaster. The Prime Minister has been consistently opposed to solar power, the cheapest form of energy we have, and she has been consistently wrong. It is not just what the Prime Minister said in the heat of her leadership campaign this summer. When she was Environment Secretary, the Government slashed solar subsidies and the market crashed.
I take it from that intervention that the hon. and learned Gentleman does not quarrel with me that the ban on onshore wind since 2015 has been a policy disaster, along with the opposition to solar power.
I am grateful for that intervention and I will deal with it in full, because it is a very important point. Nuclear is vital to our future, and a new generation of power plants should have been built by now. Yesterday, the Prime Minister desperately tried to blame Labour, and that intervention goes to that point. I remember the exchange across the Dispatch Box in 2006 when Prime Minister Blair said that he was pro-nuclear, and the Leader of the Opposition, David Cameron, did not know where to look. If Members have not seen the clip, they should have a look. The uncomfortable truth for Members opposite is that the last Labour Government gave the go-ahead for new nuclear sites in 2009. In the 13 long years since then, not one has been completed.
What was the Conservative party’s position on nuclear when David Cameron was asked the question in 2006? He did not have a position on it. I think the right hon. Gentleman is wrong about the £170 billion. If there is any doubt, I invite the Treasury to disclose the documents so that we can all evaluate them.
That is the fundamental choice and the fundamental divide in the House. Let the Conservatives defend their position of protecting those excess profits, and we will defend our position of standing up for working people.
Let me turn to home insulation, which reduces energy consumption like nothing else. We have the draughtiest homes in Europe. The last Labour Government set about fixing that. Then the Conservative party said, “cut the green crap”, and the whole project all but collapsed. Installation rates fell by 92%—utterly short-sighted, and costing millions of households £1,000 a year on their energy bills right now.
The Prime Minister is right to recognise that immediate support needs to be combined with longer term action. Fracking and a dash for gas in the North sea will not cut bills, nor strengthen our energy security, but they will drive a coach and horses through our efforts to fight the looming climate crisis. The Prime Minister should listen to her Chancellor, who is sitting next to her. What did he have to say on fracking just a few months ago? I see him leaning forward. This is a long quote, and I have tried to cut it down, but every sentence is worth repeating.
“Those calling for its return misunderstand the situation we find ourselves in…if we lifted the fracking moratorium, it would take up to a decade to extract sufficient volumes—and it would come at a high cost for communities and our precious countryside.”
Those are his words. I will go on, because this is so good. He said, just a few months ago:
“Second, no amount of shale gas from hundreds of wells dotted across rural England would be enough to lower the European price any time soon.”
He went on:
“And with the best will in the world, private companies are not going to sell the shale gas they produce to UK consumers below the market price. They are not charities”.
Spot on, Chancellor.
What did the Chancellor have to say about North sea gas at the same time? He said that,
“additional North Sea production won’t materially affect the wholesale price”.
Indeed, earlier this year his previous Department helpfully put out a series of Government myth-busting documents. Here is one of them—Chancellor, your document:
“MYTH: Extracting more North Sea gas lowers prices.”
“FACT: UK production isn’t large enough to materially impact the global price of gas”.
I have a copy for the Prime Minister.
We do need to carefully manage our existing resources in the North sea, and the industry has an important role to play in our future as we transition to a different form of energy, but doubling down on fossil fuels is a ludicrous answer to a fossil fuel crisis. If all countries took the approach advocated by the Prime Minister’s new Energy Secretary of squeezing “every last drop” out of their fossil fuel reserves, global temperatures would rise by a catastrophic 3°. That would be devastating for our planet and for future generations, and it is totally unnecessary.
New wind and solar power are now nine times cheaper—nine times cheaper! We need a clean energy sprint, urgently accelerating the rollout of offshore wind, onshore wind, solar, nuclear, hydrogen, and tidal. Last year, I set out a new national mission to insulate 19 million homes and cut bills for good. If the Government had taken me up on that challenge, 2 million homes would already be insulated by this winter.
Britain needs a fresh start. We need a Government who will never leave working people to pick up the tab for excess profits in the energy industry. We need a Government who plan for the long term rather than leaving us badly exposed to the whims of dictators, and we need a Government who will drive us forward to energy independence rather than doubling down on fossil fuels. The change we need is not the fourth Tory Prime Minister in six years; it is a Labour Government.