Energy Industry (Hansard, 17 March 2004)

§ Mr. Timms

[holding answer 3 March 2004]: The information is as follows:

Tax relief

In arriving at the tax which companies pay on their profits, a range of reliefs apply, some of which are specific to particular taxes while others only apply under certain circumstances. The range of tax reliefs that can apply to oil, gas and generation of electricity (including through renewables) includes capital allowances; exemptions from the climate change levy; the R&D tax credit; and specific treatment for British Energy, and the North Sea oil and gas industry.

The main tax reliefs and their costs are listed in the December 2003 Tax Ready Reckoner and Tax Reliefs, which is available in the Library of the House and is published by HM Treasury at http://www.hm-treasury.gov.uk/media//AAB24/ pbr03_trr.pdf. Aggregate figures for the economy-wide costs of the minor direct tax reliefs can be found on the Inland Revenue's website at http://www.inlandrevenue gov.uk/stats/tax_expenditures/menu.htm.

Given the range of activities undertaken by companies, to collect figures for the costs of tax reliefs given to specific industries would be too burdensome on business. It is only possible to provide such figures where tax reliefs apply solely to a specific sector (such as reliefs against petroleum revenue tax which is granted only to the North Sea oil and gas companies).

The Government have made the following specific provisions for the nuclear, oil, gas, electricity and renewables industries:

(a) Nuclear

The Government made provision in section 4 of the Electricity (Miscellaneous Provisions) Act for a tax disregard in respect of its proposed restructuring aid to British Energy. As the Secretary of State for Trade and Industry said in her statement to the House on 3 June 2003, the tax disregard, estimated at £0.9 billion, will not result in any extra cost to the Government. It has been provided to avoid a large tax charge hitting British Energy as a result of the proposed aid and thus the need for the aid to be correspondingly higher to achieve the same effect.

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(b) and (c) Oil and Gas

Information on reliefs against petroleum revenue tax granted to North Sea oil and gas companies for 2002–03 and 2003–04 can be obtained from table 7 of the December 2003 Tax Ready Reckoner. Figures are published twice a year and figures for earlier years can be obtained from the Library of the House. These reliefs are given against PRT only. Information on the PRT payments made by oil and gas companies is contained in Table 11.12 of the Inland Revenue's corporate tax statistics, at http://www.inlandrevenue.gov.uk/stats/corporate_tax/menu.htm.

(d) Electricity

The climate change levy was introduced in April 2001. In view of their environmental benefits, the Government announced that electricity from good quality combined heat and power plants (CHP) sold via licensed electricity suppliers would be exempt from the climate change levy. This exemption took effect from 1 April 2003. Electricity generated from coal mine methane (CMM)

£ million
	Nuclear	Oil	Gas	Electricity	Renewables
	(a)	(b)	(c)	(d)	(e)	(f)	(g)
1990–91	1,265	0	0	0	21.3	6.1	0
1991–92	798	0	0	0	24.8	11.7	0
1992–93	864	0	0	0	26.6	28.9	0
1993–94	895	0	0	0	26.8	68.1	0
1994–95	892	0	0	0	20.5	96.4	0
1995–96	699	0	0	0	21.6	94.5	0
1996–97	0	0	0	0	18.5	109	0
1997–98	0	0	0	0	15.9	115.9	0
1998–99	0	0	0	0	14.4	113.7	0
1999–2000	0	0	0	0	14.9	41.9	0
2000–01	0	0	0	0	15.9	52.1	0
2001–02	0	0	0	0	24.1	70.2	0
2002–03	0	0	0	0	48.1	—	¹277.9
¹ Gross est.

Notes:

Column (a):

Figures are based on the premium received by Nuclear Electric plc over and above the market price for electricity in the period 1990–96. Grant in aid payments to UKAEA have not been included. These payments were to fund research and development in nuclear fusion which is likely to be many years from commercial exploitation, and to discharge UKAEA's own nuclear liabilities which arose from proving their technology rather than for commercial objectives. All UKAEA's reactors were experimental, and all are now closed.

The Government are supporting the restructuring of British Energy on the terms set out in the Secretary of State's announcement of 28 November 2002, including making available to the company a credit facility, up to a maximum of £200 million. There are currently no outstanding drawings on the facility.

Column (e):

These figures show direct Government funding for capital grants, research and development on renewable energy through the DTIs Sustainable Energy programme and through Research Councils.

Column (f):

This column shows expenditure through the Non Fossil Fuel Obligation (NFFO) for England and Wales.

Column (g):

The figure of £277.9 million for 2002–03 represents the value of the equivalent of the total Obligation on suppliers of 3 per cent. Of electricity supplied. This equals 9,261,563 Renewables Obligation Certificates (ROCs) at the buy-out value of £30 per MWh. This figure includes the value of NFFO ROCs for which there was a surplus of £57.6 million in 2002–03.