HC Deb 24 June 1999 vol 333 cc1280-2
8. Mr. Peter L. Pike (Burnley)

What progress has been made in deciding the details of the proposed climate change levy. [87064]

The Economic Secretary to the Treasury (Ms Patricia Hewitt)

We are working closely with business on the detailed design and implementation of the climate change levy, which will make a significant contribution towards reducing greenhouse gas emissions. The levy will entail no increase in the overall burden of tax on business, as the revenues will be fully recycled; and, following the recommendations of Lord Marshall, we recognise the special position of the energy-intensive industries, given their high energy usage and their exposure to international competition. We intend to set significantly lower rates of the levy for energy intensive sectors that agree targets for improving their energy efficiency. Detailed negotiations are now under way with the sectors concerned.

Mr. Pike

I thank my hon. Friend for that helpful answer. While everyone accepts the main objective of environmental improvement, does she recognise that the manufacturing industries that are high-energy users have genuine fears that we may drive them and their investment out of the country, resulting in a loss of jobs and an adverse effect on our balance of payments? That will not have a beneficial effect on the world environment. Does my hon. Friend acknowledge that there should be a special case for combined heat and power schemes, which could perhaps be exempt from the levy?

Ms Hewitt

I thank my hon. Friend for that question. Of course we understand the concerns of manufacturing industry. That is why we have said that we will not take an across-the-board approach to the levy but will set significantly reduced levy rates for energy-intensive sectors that agree our targets for improving energy efficiency.

On the issue of renewables, we have not ruled out the possibility of an exemption. We are consulting on how to treat combined heat and power schemes within the climate change levy, as they can make a substantial contribution to improving energy efficiency, thereby cutting greenhouse gas emissions.

Mr. David Heathcoat-Amory (Wells)

After the fiasco of road fuel duties—which have effectively made the British haulage industry uncompetitive in European terms—why are the Government planning to do the same on a wider basis next year by imposing a general energy tax on the rest of industry? How will the Minister answer the many international firms that have explained to her that, even at a lower or rebated level, they will have to respond to the additional business tax by switching their operations and their investment away from the United Kingdom?

How can the Government expect to be taken seriously on this issue when, at the same time, they are forbidding many of the same firms to invest in gas-fired electricity generating plants, which would cut carbon dioxide emissions? When will the Government sort themselves out on this issue and remove this threat to competitiveness, jobs and industry, which will do nothing for the environment in the longer term?

Ms Hewitt

The right hon. Gentleman is wrong about the transport industry and wrong about the impact of the climate change levy. As Lord Marshall proposed, there must be recognition of the special position of the energy-intensive sectors. That is why, following his recommendations, we said that there will not be an across-the-board approach to the levy. There will be significantly reduced rates for those industries, providing that they agree the targets for energy efficiency improvements.

We are in detailed negotiation with industry about this issue, in line with our statement of principles on environmental taxation. Meanwhile, the right hon. Gentleman has been reduced to making offensive remarks in the Finance Bill Standing Committee about Lord Marshall, who has done so much to move this debate forward, particularly in the business community. It shows once again how completely out of touch this extremist Conservative party is with the business community.

Mr. Ian Pearson (Dudley, South)

Is my hon. Friend aware that the proposed climate change levy would be a nightmare for many small and medium-sized manufacturing businesses in my constituency; and that cutting a deal with major energy users will be of little or no help to them? Does she agree that measures that lead to booming supermarket profits but busts in large swathes of the manufacturing sector are absolutely no good for the British economy? Will my hon. Friend look to reducing the proportion of national insurance rebates, increasing the amount of money allocated to energy efficiency schemes, and ring-fencing some of them for small and medium-sized businesses?

Ms Hewitt

Perhaps I should remind my hon. Friend that, as my right hon. Friend the Chancellor said in the Budget statement, the new climate change levy will entail no increase in business taxation because the revenues will be recycled both through a reduction in employers' national insurance contributions, thus helping to promote employment, and through specific support—as my hon. Friend suggests—to small and medium-sized enterprises to help them achieve greater energy efficiency.

We made it very clear in our statement of intent on environmental taxation that we would always design environmental taxation in order to protect and, where possible, enhance the international competitiveness of British industry. That is what we are doing in our negotiations with industry, and I trust that my hon. Friend will support us in seeking not only to protect competitiveness but to reduce environmental damage.