Oil activities: transferable tax history

Finance (No. 3) Bill – in a Public Bill Committee at 2:00 pm on 4th December 2018.

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Question (this day) again proposed, That the clause stand part of the Bill.

Photo of Nadine Dorries Nadine Dorries Conservative, Mid Bedfordshire

I remind the Committee that with this we are discussing the following:

Amendment 84, in schedule 14, page 260, line 15, leave out sub-paragraph (d).

The provision as drafted allows companies to transfer TTH worth double the value of anticipated decommissioning costs. This reduces the incentive for companies towards efficiencies in decommissioning costs and paves the way for decommissioning-related tax repayments far bigger than the companies are currently acknowledging. This amendment removes that provision.

Amendment 81, in schedule 14, page 261, line 29, at end insert—

“(aa) assessing the impact on employment, skills and the Exchequer from the asset’s production life and planned decommissioning phase, and”

Amendment 89, in schedule 14, page 261, line 42, at end insert—

“(d) includes an assessment of the impact on the Exchequer from the amount spent on directly employed and contracted staff by the seller over the production life of the asset to date; and the impact on the Exchequer from the buyer’s plans for employed and contracted staff up to and including the decommissioning stage.”

This amendment requires a decommissioning security agreement to include an assessment of the impact on the Exchequer from the amount spent on staff, in order for that agreement to be qualifying for the purposes of this Schedule.

Amendment 85, in schedule 14, page 268, line 40, at end insert—

“(aa) the amount spent by the purchaser in post-acquisition periods on new capital investment, major maintenance work, retraining of redundant staff, initiatives to reduce methane emissions or initiatives to introduce carbon-capture techniques into the operations in relation to the relevant TTH assets (‘post-acquisition qualifying investment’)”.

This amendment, and amendments 86 and 87 incentivize capital investment by new purchasers in job creation and emissions reductions. Combined, the amendments limit the TTH which may be claimed to an amount equal to such investment.

Amendment 86, in schedule 14, page 269, line 3 at end insert—

“(c) the amount by which total post-acquisition qualifying investment exceeded the higher of excess decommissioning expenditure and the total TTH amount as calculated for the first activation period under paragraph 35.”

See explanatory statement for Amendment 85.

Amendment 87, in schedule 14, page 269, line 40, at end insert—

“(c) provided that the total activated TTH amount may never exceed the purchaser’s post-acquisition qualifying investment for the relevant TTH assets or TTH oil fields.”

See explanatory statement for Amendment 85.

That schedule 14 be the Fourteenth schedule to the Bill.

Clause 37 stand part.

Photo of Robert Jenrick Robert Jenrick The Exchequer Secretary

If I may, I will conclude the remarks I was making earlier—[Hon. Members: “Hear, hear!”]—to widespread acclamation. Clause 36 will establish transferable tax history, which is widely supported across the industry and will help to protect and increase the number of jobs in the oil and gas sector in the whole of the United Kingdom and, in particular, in north-east Scotland. We see this as a great step forward for this important national asset. We believe that it is fiscally responsible, as was certified by the Office for Budget Responsibility. It will bring in revenues to the Exchequer of £65 million, and reports to the contrary are misguided.

Photo of Clive Lewis Clive Lewis Shadow Minister (Treasury)

Given that we know that the decommissioning costs could come to around £24 billion and that there is provision in the Bill to double that to £48 billion—I asked this question in my opening remarks, but I will ask it again—what money has the Treasury put aside specifically to cover these costs for future Governments, a little bit further into the future?

Photo of Robert Jenrick Robert Jenrick The Exchequer Secretary

Decommissioning costs will be covered by future Governments over the course of decades to come. We estimate that the costs will run into something in the region of £24 billion, as the hon. Gentleman says, although, as I said in my remarks earlier, we are working closely with the industry to bring down those costs. We hope the UK will become a world-leading market for decommissioning and that we will see at least a 35% reduction in those costs over time. The measure before us will help the situation by increasing revenues to the Exchequer, which could be set against future decommissioning costs if required.

Photo of Clive Lewis Clive Lewis Shadow Minister (Treasury)

We have said that the costs could be up to £48 billion—no insignificant sum of money. If we do not ring-fence some of the petroleum revenues to pay for this, it will fall entirely on future Governments further down the line, and nothing is being done now to prepare for that. That is a lot of money that could hit a future Government and a future Exchequer in goodness knows what economic conditions.

Photo of Robert Jenrick Robert Jenrick The Exchequer Secretary

The hon. Gentleman is arguing that we should ring-fence revenues from the oil and gas sector, whether through petroleum revenue taxation, the supplementary charge or whatever it might be in the future. That is not what we have done in the past. It is a peculiar argument to make when opposing the transferable tax history measure, which will increase revenue to the Exchequer, extend the life of a number of fields and make decommissioning easier and more affordable in the future. With that, I commend clause 36 to the Committee and ask hon. Members to reject the amendments.

Question put and agreed to.

Clause 36 accordingly ordered to stand part of the Bill.

Schedule 14