HC Deb 11 November 1999 vol 337 cc1282-5
10. Mrs. Ann Winterton (Congleton)

What assessment his Department has made of the impact on chemical industries of the proposed climate change levy. [96999]

The Financial Secretary to the Treasury (Mr. Stephen Timms)

We have studied the impact very carefully. Together with the Secretary of State for Trade and Industry and the Minister for the Environment, I recently met representatives of all the energy-intensive industries including the Chemical Industries Association Ltd. Last week, I had a useful discussion with members of the all-party parliamentary chemical industry group.

The chemical industry will have the opportunity to benefit from the 80 per cent. discount for energy-intensive sectors that sign energy-efficiency agreements with the Government, and from exemptions for electricity for good quality combined heat and power plant, which is widely used in the chemical sector.

Mrs. Winterton

I welcome the fact that the climate change levy will not be as punitive, as announced in Tuesday's statement, although it should be noted that there will be an annual increase of £1 billion a year, starting next year. What other measures do Treasury Ministers envisage taking to assist the competitiveness of the chemical industry as the UK's top manufacturing export earner?

Mr. Timms

All the £1 billion will be refunded through the reduction in employer national insurance contributions.

I do not know whether any of the hon. Lady's constituents work for ICI Chlor-Chemicals—I suspect that they may.

Today, my hon. Friend the Member for Halton (Mr. Twigg) has been talking to the chief executive there who said that he was encouraged by the way in which the Government have responded to his company's concerns about competitiveness. He said that the Government had clearly listened and made a significant and intelligent response. Those views will be widely shared by people in the chemicals industry and hon. Members who represent constituencies with substantial employment in chemicals, like that of the hon. Member for Congleton (Mrs. Winterton). The two aims for the climate change levy are to maximise environmental benefit and not to pose a threat to the competitiveness of UK firms. We have made progress on both this week with the announcements of my right hon. Friend the Chancellor of the Exchequer: there will be substantially greater environmental benefits, which have been welcomed by environmental organisations, and we have taken steps to protect competitiveness in the chemical sector and other industries.

Dr. Alan Whitehead (Southampton, Test)

I welcome the exemption of renewables from the climate change levy announced by my right hon. Friend the Chancellor of the Exchequer in his pre-Budget statement. What appraisal has my hon. Friend made of the effect on growth and competitiveness of the United Kingdom renewables industry that the exemption will produce?

Mr. Timms

My hon. Friend makes an important point. The renewable energy industry is important and the UK has considerable strength there already. The combined heat and power industry is also important and we have some leading technologies in that area, too. Both industries will benefit from the exemptions that my right hon. Friend announced this week, so that is good for British business and technology.

Mr. David Heathcoat-Amory (Wells)

Will the Minister confirm that despite the Government's climb-down on the energy tax on Tuesday, major sectors of industry will continue to pay in net amounts of tens of millions of pounds which their overseas competitors will be exempt from? Has he seen that, as well as the chemical industry, the Steel Association said yesterday that the tax will still result in more steel being produced overseas, often by producers using less environmentally friendly plant than those in the United Kingdom"? According to that association, the tax is bad for industry, jobs and the global environment. Will Ministers stop mouthing slogans about competitiveness, fairness and enterprise, and start listening to those who work in industry and can deliver all the necessary reductions in these damaging gases, and so meet our international obligations without exporting British jobs, as the energy tax will do?

Mr. Timms

No, the energy tax will certainly not do that. First, there is no climb-down because the new package will have substantially greater environmental benefits than the package that was outlined earlier in the year. We said in the Budget that the levy would save 1.5 million tonnes of carbon emissions a year by 2010. Under the new proposals that figure will rise to at least 2 million tonnes, and the negotiated agreements could easily provide the same amount again. The steel industry is a big winner from this week's announcements. It will benefit from the 80 per cent. discount for sectors that reach energy efficient agreements with the Government. There is one being dealt with in the steel sector. It will also benefit from the exemptions for feedstocks—fuel used as feedstock.

Mrs. Anne Campbell (Cambridge)

Is not the climate change levy to be welcomed, saving 2 million tonnes of carbon each year? Has my hon. Friend heard anything from the other side of the House that would meet these commitments to the environment and be just as warmly welcomed by environmental groups as my hon. Friend's proposal is today?

Mr. Timms

My hon. Friend is absolutely right. The climate change levy is a big winner for Britain in terms of the environment and our industry. We have always said that protecting the environment goes hand in hand with building the economy. It must be good to tackle pollution—to work to reduce emissions. Surely even Conservative Members support that aim. We are delivering it.

11. Mr. Peter Atkinson (Hexham)

What estimate he has made of the net financial gain to Government Departments as a result of the introduction of the climate change levy. [97000]

The Financial Secretary to the Treasury (Mr. Stephen Timms)

Education, health and other public services will gain, along with the majority of firms, from a reduction in employers' national insurance contributions that will exceed their payments under the climate change levy. My right hon. Friend the Chancellor made it clear in his statement on Tuesday, however, that the net gain to public services will be wholly offset by the additional support he has announced for energy efficiency measures in the private sector. There will therefore be no net financial gain to the public finances from the introduction of the levy.

Mr. Atkinson

The people who will lose, of course, are the unemployed in the north-east of England, because it is estimated that foreign inward investors will be put off by that billion pound energy tax. What assessment has the Financial Secretary made of the damage that will be caused to inward investment by the imposition of that new tax?

Mr. Timms

We have protected the competitiveness of UK firms and we have made big progress with the announcements that have been made this week. We want to provide additional incentives at the margin in every sector to reduce emissions, because everybody has a role to play in meeting our legally binding targets, which also have to be met by other countries in the same way. That is the right thing to do, because we all want to cut down on pollution and that is the effect that the levy will have.

Mr. David Kidney (Stafford)

With last year's pre-Budget report, Lord Marshall's report, the Customs and Excise consultation and the wide consultation meetings held by my hon. Friend the Financial Secretary, does he agree that vast consultation has taken place about the design of the levy before it was introduced? My right hon. Friend the Chancellor promised when he was appointed that our financial affairs would be managed with openness, good practice and transparency, and does my hon. Friend agree that the levy is a good example of his promise being kept?

Mr. Timms

My hon. Friend is right and the process that we have followed is a model for how such things should be done. We had Lord Marshall's report, the initial announcements in March, the following consultation, and the announcements this week. Of course, the levy itself will only be introduced a year from next April. That is in contrast to the imposition of VAT on fuel under the previous Government.

Mr. Owen Paterson (North Shropshire)

What is the gain to this country of closing large sectors of the horticultural industry and flying in cut flowers on jumbo jets that do not pay duty on fuel?

Mr. Timms

The horticultural industry will also gain from what has been announced this week. It is a big user of combined heat and power plants and it will therefore benefit substantially from what my right hon. Friend the Chancellor has announced.