Finance (No. 2) Bill

Part of the debate – in the House of Commons at 10:03 pm on 11th April 2016.

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Photo of Kirsty Blackman Kirsty Blackman Shadow SNP Spokesperson (House of Lords) 10:03 pm, 11th April 2016

I am sure that they are many and varied, Mr Speaker.

As a relative newbie to Parliament, I am fascinated by the fact that this House manages to have incredibly complicated and incredibly cumbersome processes and hoops to jump through in order to get legislation through, while at the same time managing to ensure that those processes are entirely opaque and provide the general public with the smallest possible amount of useful information.

I want to speak about a number of things: oil and gas—you will not be in any way surprised by that, Mr Speaker; the travel and subsistence changes, for those in rural areas in particular; and the savings changes, which Rachel Reeves mentioned. The UK Government are attempting to undertake a savings swizz. This is not a Budget for hard-working people and young people at all. Increasing the level of tax-free savings will help only those who can afford to save thousands of pounds every year. Most hard-working people will not be helped by this. Just because somebody earns a high income, it does not necessarily mean that they are hard-working. A lot of hard-working people earn pretty low incomes.

Folk who are earning the Chancellor’s pretendy living wage, which is not recognised as being enough to live on, struggle to make it to the end of the month, let alone to have spare money to save for the future. The help to save scheme included in the Budget is welcome, but folk working the minimum 16 hours a week on the pretendy living wage will be earning only £500 a month, and they are hardly likely to be able to spend 10% of that income on savings rather than on immediate concerns.

The tax measures in this Finance Bill disproportionately reward unearned income, and they continue to ensure that tax avoidance is not illegal—only immoral. Many of my constituents find themselves living from pay cheque to pay cheque, and they cannot imagine having the comfort enjoyed by those with six-figure salaries, large savings and stocks and shares—in much the same way, I presume, as those in charge of the Finance Bill have no idea what is like to exist on a low income with a lack of long-term financial security and the absolute necessity of reliance on the state. Some people have no ability to put cash in the bank to fall back on. Rather than all being in this together, too many Members of this House cannot comprehend the real world that most of my constituents live in, and they could do with being given a reality check before they are allowed to make tax policy. The changes to ISAs and the uplift are hardly useful to anyone. As Opposition Members have said, ISAs disproportionately benefit those earning above £150,000 a year. That is not helpful for hard-working, low-income families or for young people.

I am delighted that repetition is encouraged in this place, because I am going to talk once again about oil and gas. That is quite useful, because I can recycle this speech fairly regularly—[Interruption.] Yes, I am also recycling the speech made by my hon. Friend Callum McCaig. Oil and gas are vital for Aberdeen and for Scotland as a whole. Some of the measures in the Finance Bill go a little way towards easing the situation for oil and gas companies in the current economic climate. Nobody quite knows when the oil price is going to go back up, or what level it will reach when it finally does so. Oil prices are completely unpredictable. The UK Government need to show that they are committed to the future of the industry in the North sea in order to ensure investor confidence.

There is positive movement in the reduction of the supplementary charge from 20% to 10%, but oil and gas companies will still pay significantly more than most companies. The oil and gas industry is vital to Scotland, particularly to the north-east of Scotland and my city of Aberdeen. Back in 2014, Sir Ian Wood published the Wood report. The Energy Bill, which is currently in ping-pong and will be discussed again down the Hoose corridor in the other place tomorrow, cements the position of the Oil and Gas Authority in legislation. The principal objective of the OGA, which arose from the Wood report, is to maximise the economic recovery of UK offshore oil and gas resources. That can only happen if the UK Government seriously consider the tax regime for companies extracting oil and gas in the UK continental shelf.

The tax regime has been built up over the last half century, with measures being added and taken away as the Government of the day make changes to the decisions of Governments past—or, in some cases, to their own decisions. Now that the UKCS can be considered a mature basin—in fact, some are calling it super-mature—I suggest that now is the time to look afresh at the fiscal measures in relation to the taxation of the oil and gas industry. Until the UK Government can commit to doing so, some issues need to be looked at as a matter of urgency. If we are doing only minor overhauls, rather than a major overhaul, these are the key issues for us.

Enhanced oil recovery is mentioned in the OGA corporate plan for 2016 to 2021. The OGA intends to issue an enhanced oil recovery strategy to the industry in the first half of this year. If the UK Government took action so that the activity of enhanced oil recovery could count towards a tax allowance to offset against income, rather than count as operational expenditure, I suggest that the OGA’s strategy could easily be more ambitious, but still achievable. Enhanced oil recovery is very important for the UKCS given its super-mature situation. We really need to work in different and new ways to get out the oil, which is much more difficult and costly, so we would benefit from a fresh look at the tax regime in relation to how that spend is considered.

Finally on specific issues relating to the offshore oil and gas industry, I welcome the fact that HMRC will produce updated guidance notes on the decommissioning allowance. It is very important, particularly for new entrants to the industry, to have the ability to take on such assets in the North sea and exploit them for a longer period than a big player perhaps would, so I am really pleased that that is coming in. On decommissioning terms, we suggested during the passage of the Energy Bill that tax incentives and allowances should be put in place in relation to decommissioning in the UK, so that as much as possible takes place in the UK and benefits UK companies. It is really important that the UK becomes very good at decommissioning, because we can then export that expertise. I would very much appreciate it if the Government considered incentivising UK spend in whatever ways are possible. We will talk about that during the next stage of the Finance Bill.

To move on from oil and gas to a more general point, I want to flag up issues about the Government’s proposal on the taxation of travel provided for those paid through intermediaries. There is no question but that this change will hit rural communities disproportionately. It is perfectly legitimate and sometimes incredibly sensible to pay individuals as contractors or through intermediaries, but I suggest that the Government have not really thought this one through or have not grasped quite how rural some of these communities are. It can absolutely be necessary for people doing work in rural areas to stay overnight to fulfil a task that can in no way be done as part of a daily commute. I understand what the Government are trying to do on daily commutes, but that does not apply in such situations. For example, on some islands off the coast of Scotland, a locum doctor or relief teacher has to stay because there is no regular transport. Surely they should receive tax relief on their hotel stays: it is not a daily commute, but a necessary part of the job, particularly if they cannot possibly get home because there is no boat.

For communities such as Shetland in particular, where there is heavy reliance on oil and gas companies, that may have a significant negative impact. Due to the level of expertise and specialisation in oil and gas, many people in the industry are employed as contractors—disproportionately so—and removing the tax allowance that workers can claim when they stay overnight in Shetland on the way to a rig would be a bizarre way to support either the oil and gas industry or small rural communities. A specific case could be argued for our rural communities, many of which are not diverse in their employment, and such a change may have a significant and disproportionate negative impact on them.

The SNP is concerned both about the future of the oil and gas industry and about the fate of contractors in rural communities. When we go into Committee, we will table new clauses and amendments. The Chancellor has claimed that he is going to listen and learn. We will test him on that claim.