Utilising the UK’s oil and gas reserves is not inconsistent with net zero

Last week we heard the welcome news that all Covid restrictions are being lifted. Thanks to our world-leading vaccine rollout we are among the first countries in which Covid is moving from pandemic to endemic status. But just as the last of the restrictions ease in March, families are facing the biggest squeeze on living standards for a generation.

The public are already feeling the pinch from rising inflation. Currently at 5.4 per cent, it is the highest for nearly 30 years - acting as a stealth tax on earnings and hitting those with the least the hardest. And in a few months, the pockets of hard-working families will come under siege as the National Insurance (NI) rise kicks in, town halls threaten rises in council tax, and energy bills soar. For an average constituent of mine in Newark, the cumulative impact is akin to a 10 per cent cut in disposable income.

Westminster is turning its mind to this crisis lamentably slowly. The cost-of-living squeeze will not pass quickly. Having misread the inflationary pressures facing the economy and printing too much money for too long, the Bank of England cannot easily bring inflation back to its 2 per cent target. Unravelling the decade-long monetary policy of ultra-low interest rates and QE is fraught with danger.

The market price for energy has quadrupled since before the pandemic, mainly because of an insatiable desire for gas in China. This upward pressure is compounded by Russia restricting the flow of gas for geopolitical ends - the bleak picture in Ukraine points to this continuing. The world may be structurally short of gas through the 2020s as China gobbles it up and Europe turns its back on coal. We should expect high energy prices to be with us for the foreseeable future.

Alleviating the cost-of-living challenge requires us to confront hard realities. First, it means recognising the need for the Government to intervene to help those facing brutal decisions as to what they must do without. But these should be targeted measures that are focused on low-and middle-income families. The size of the state is already the largest in my lifetime, and growing.

In the medium term we need to address our exposure to volatile energy markets by increasing domestic output, and this involves utilising the oil and gas that our islands have been blessed with. It is absurd that we have foregone cheap, reliable energy in the name of saving the planet, only to import it at higher prices from abroad - in the process, ceding jobs and creating vulnerabilities to unsavoury actors.

It is not inconsistent with our net zero commitment to utilise the UK's oil and gas reserves. Natural gas accounts for 40 per cent of our electricity generation and we cannot put a significant dent in this figure any time soon. Although we have undergone a wind technology revolution, we will always have to contend with its intermittent nature - indeed, the still summer was a major contributing factor to the current energy price rise.

Similarly, this Government's record investment in nuclear plants will not pay dividends on the grid until the next decade. And, unfortunately, we cannot magically wish new green technology into existence. The discussion about net zero can no longer be detached from our current energy situation.

So we must go hell for leather at both the renewable technology that will allow us to reach net zero in the long term and maximising recovery of gas right now. It comes at no cost to the net zero project to seize opportunities like the Jackdaw development in the North Sea. And we should be encouraging investment to accelerate production, not scaring it off with talk of windfall taxes. The prospect of cheaper and more reliable sources of energy that can ease pressure on energy bills makes the case for it overwhelming.

While inflationary pressures and rising energy prices have their roots in structural economic shifts and are less easily mitigated, tax and spend decisions are within the control of the government of the day. At a time when the public are feeling the pinch, the tax burden is at its highest since the 1950s. The Treasury now faces an unenviable decision about whether to proceed with the NI hike planned for April. The quickest way to alleviate pressures on household budgets would be to postpone the hike. That seems sensible now. NI penalises work by disincentivising taking on more hours and getting promoted. It would also show the Government's Conservative instincts remain.

None of these solutions is without its drawbacks, but policymaking is often about taking the least bad option. To avoid the worst outcome for families this coming year, we need a new approach to monetary, energy and tax policy and hard realities must be confronted.