Finance (No. 3) Bill

It is a great pleasure to take part in this debate and to follow the hon. Member for West Aberdeenshire and Kincardine (Sir Robert Smith), who made such a reasonable, well informed speech. One question that has remained unanswered tonight is why the Government chose such a complex route rather than a much simpler windfall tax. Everyone understands that when the Government are looking for sources of funds, they will look at particularly profitable industries. However, the structure they have chosen means that investment in and the future of the industry have been brought into question. A far simpler structure would have raised the money without risking future work in the North sea oil and gas sector. The Red Book is peculiarly unclear. The supplementary charge was raised from 20% to 32%, but the Red Book states:"““As part of the fair fuel stabiliser, if in future years the oil price falls below a set trigger price on a sustained basis, the Government commits to reduce the Supplementary Charge back towards 20 per cent on a staged and affordable basis while prices remain low.””" However, the meaning of a ““sustained basis”” for a fall in prices and of a ““staged and affordable basis”” is not set out in the Bill. It is particularly important that Ministers explain why they chose an oil price of $75 per barrel. It would really help the Committee to know what the Government's forecast is for oil prices. They say in the Red Book that oil prices are extremely volatile, which of course is true, but what model are they using for forecasting? Twenty eight years ago, I was a junior official in Her Majesty's Treasury, and I worked on something called the POP forecast. The POP forecast was not about lemonade, but the prospects for oil prices in the long term. This model looked at the back-stop price for oil—in other words, the cost of making oil from coal—and at the time we estimated it would be $60 per barrel. What underlying model do the Government use for forecasting oil prices now? Are they looking at the cost of getting oil from shale? Are they looking at the cost of getting good-quality oil from, for example, Orimulsion? What is their model for forecasting oil prices? As is evident to everybody who has been in the Chamber for the past six months, the situation in the middle east and north Africa is particularly unstable, yet despite the current instability in the oil price the forecasts for revenue in the Red Book show a pretty constant level of revenue over the five-year period. Are the Government assuming that the level of oil prices will be constant over this five-year period? That seems to be an incredible assumption.