I rise to speak to new clause 5, which is in my name and the names of my hon. Friends, but I wish briefly to mention amendment 162, which has been proposed by the Labour party. I look forward to hearing from its Front-Bench Members. If they intend to push the amendment to a vote, we will join them in the Lobby.
New clause 5 is about the corporation tax treatment of the oil and gas industry. You will not be surprised, Madam Deputy Speaker, to hear me speaking on this subject as I have done so a number of times. What we want is a comprehensive review of the corporation tax rates and investment tax allowances applicable to companies producing oil and gas in the UK, or on the UK continental shelf. This is a timeous ask from us for a number of reasons. For a start, this Bill implements measures that were put in place and discussed first in February and March, before the EU vote, and there have not been any substantive changes by the Government to the Bill as a result of the Brexit vote.
Substantive changes to the Bill are needed because we find ourselves in a completely different situation as a result of the fall-out from Brexit. It is unfortunate that changes have not been made and that there have not been more announcements from the Government about how they intend to manage the financial situation going forward. We want to know about the impact on Aberdeen, which I represent, and on the UK’s tax take and the Treasury. It is important that we seriously consider making changes to the Bill.
We have repeatedly asked for changes to the tax rates and for a comprehensive strategic review. We appreciate that the Government made changes earlier this year, but we do not think they go far enough. Alex Kemp, a renowned petroleum economist, and his long-term research partner, Linda Stephen, are both at Aberdeen University, where they have been working on sophisticated modelling tools. If the Minister has not read the article that appears in Energy Voice today, it is worth reading, together with the report that accompanies it. The work that they have done suggests that corporation tax of 30% is too high, and it is far above the non-North sea rate. They said:
“From the analysis of the economics of new field investments and exploration in current circumstances in the UKCS it is clear that, at $50 and $60 prices, there are many ‘marginal project investment situations’.”
That is key. It is what we have been arguing, and now it is backed up by renowned experts.
The position in which the industry finds itself bears repeating. Estimates vary, but we have lost around 125,000 jobs—from 425,000 we are down to about 300,000. That implies a huge reduction in the tax take for the Treasury and it is a massive hit for the local area, particularly Aberdeen and across Scotland and other oil and gas-producing areas. Because of the reduction in the oil price, we have seen changes in the behaviour of companies. As well as making people redundant, they have changed shift patterns and terms and conditions. They have also managed to reduce production costs, which is a good thing.