HC Deb 13 May 1999 vol 331 cc410-2
10. Mr. Gordon Prentice (Pendle)

What assessment he has made of the impact of the proposed climate change levy on (a) the aluminium industry and (b) other high-energy using manufacturing industries. [83198]

The Economic Secretary to the Treasury (Ms Patricia Hewitt)

Following Lord Marshall's recommendation, the Government are not taking an across-the-board approach to the climate change levy. As my right hon. Friend the Chancellor announced on Budget day, we intend to set significantly lower rates of levy for those energy-intensive sectors that agree targets for improving their energy efficiency. My right hon. Friend the Deputy Prime Minister has had a useful initial meeting with the associations representing the energy-intensive sectors and detailed negotiations with those sectors, including the aluminium industry, are now under way.

Mr. Prentice

That is a very reassuring answer, but even with the 50 per cent. reduction for energy-intensive industries such as aluminium there are fears that production costs will rise dramatically. I have been told that the aluminium industry anticipates a rise of perhaps 12 per cent. per tonne, which would drive it offshore. I was reassured by what I heard about discussions and negotiations taking place, with a concluding date of 28 May, and I very much hope that my hon. Friend will take into account and give full weight to the concerns expressed by the industries.

Ms Hewitt

I am grateful to my hon. Friend for that question. The points that he makes are precisely those that we are taking into account in our discussions with the energy-intensive sectors. I stress that the 50 per cent. lower rate in the Customs and Excise consultation document is purely an illustrative assumption. It is not a statement about what the lower rate might be for any energy-intensive sector. That lower rate will depend on the stringency of the targets to which the sectors agree. In line with our published statement of intent on the principles of environmental taxation, international competitiveness is one of the key issues that we consider for any environmental tax, including the climate change levy.

Mr. John Bercow (Buckingham)

Given that British Steel estimates that the climate change levy will add £200 million to its annual tax bill, whereas the offsetting reduction in national insurance is worth only £5 million a year to it, does the Economic Secretary acknowledge that the levy is yet another clear example of the Government's policy of taxation by stealth, which has served to throttle manufacturing industry in this country and plunge it into recession while she has been a Minister?

Ms Hewitt

The hon. Gentleman does not seem to appreciate that, as my right hon. Friend the Chancellor made clear, the new levy will entail no increase in the overall burden of tax on business: it will be revenue neutral. As I have already said on a similar point, we are now looking in detail at the different energy-intensive sectors, what each of them is willing to do to improve energy efficiency and how we should respond by introducing a significantly lower rate of climate change levy.

I am interested in the fact that the hon. Gentleman, judging from his remarks, seems to have abandoned the commitment that the Conservative Government made to meeting the Kyoto target. The climate change levy is an essential part of meeting those targets. We estimate that it will save about 1.5 million tonnes of carbon a year by 2010.

Mr. Barry Jones (Alyn and Deeside)

May I tell my hon. Friend of the apprehension of the national leadership of British Steel plc and Shotton steelworkers in my constituency about the levy, not least in view of the ruthless foreign dumping of steel products and the high value of the pound? Will she receive a deputation to hear our fears? May I suggest that she can best assist manufacturing in my constituency by insisting that assisted area status be retained and that objective 2 status be given to us?

Ms Hewitt

I am grateful to my hon. Friend for that question. I am always delighted to meet my hon. Friend and discuss this and other matters of particular concern to his constituents. Treasury Ministers and my right hon. Friend the Deputy Prime Minister are examining carefully the impact on competitiveness of the energy-intensive sectors. That will be the guiding principle when we come to set the significantly reduced rates of climate change levy in return for sector agreements to promote and deliver greater energy efficiency. I remind my hon. Friend of the significant reductions in corporation tax that we have delivered, which will be of great help to businesses in his constituency as well as across the country.