CLIMATE CHANGE LEVY

HC Deb 18 July 2000 vol 354 cc320-35

Mr. Letwin

I beg to move amendment No. 98, in page 20, line 4, leave out from "until" to end of line 6 and insert— 'one year after the expiry of a twelve month period during which UK emissions of CO₂ show an increase on the previous year'.

I do not want to detain the House, not least because my voice is failing. The arguments on the climate change levy are well rehearsed, but we could not let pass this opportunity to explain to the House why the Opposition consider that the implementation of this dreadful new tax should be delayed. A much better solution would be its withdrawal. Given the mood of co-operation in the House, perhaps the Financial Secretary will have a Damascene conversion and withdraw this dreadful tax before the evening is out.

Page 108 of the Red Book contains chart 6.2, which shows the root of the conceptual problem with the climate change levy. The number of millions of tonnes of carbon released through greenhouse gas emissions has been falling steadily since 1990 and remains on a declining trend. The new levy is being introduced at a time when there is no need for it.

What is worse, it will be entirely ineffective, not least because all the industries most able to respond to it, through the elasticity of price in relation to production, will be exempt, for one reason or another. The levy is a classic example of a new tax that is misnamed and misdesigned. With the exception of the companies whose behaviour it might affect, it applies to all companies of all sizes. It will be widely regarded as a supreme example of a stealth tax. I doubt whether the Financial Secretary will, even now, be able to mention any small business in Britain that is yet aware of what is about to hit it—but hit it this tax will.

The tax is not neutral, particularly because the offsetting national insurance contributions reduction, even if that were real, would not be coincident with the effect of the tax. Firms will be either gainers or losers. As the Financial Secretary is well aware, we are by no means persuaded that the offsetting NIC reduction will remain as an effect of the introduction of this levy. In any event, the offsetting NIC changes could have been introduced without the levy.

The levy is a tax. It is not a neutral tax. It is not neutral either in its particular or in its general effects. Its effect will be to raise the Government's tax income.

The levy is complicated. We became aware, as we went through it in Committee, that it is probably the most complicated tax that the Government have ever introduced—and that is saying something. If I remember correctly, its provisions extended to 55 pages. The situation has been made worse rather than better by Government amendments, which have made the tax significantly more complicated.

This tax hits our competitiveness. As we explained repeatedly in Committee, it is not levied outside the European Union, and many EU states have exemptions from comparable taxes. It is unnecessary, and it is the more unnecessary because other more effective means, such as voluntary agreements and emissions trading, could have been used to achieve our Kyoto targets of further reductions in greenhouse gas emissions.

Most important, and most directly germane to the amendment, is the fact that the policy represents work in progress—actually, I am doing the Government undue justice in saying that, because it is actually a mess in progress. It may be making gradual progress towards coherence, but it certainly has not got there yet. No one knows how combined heat and power schemes will be affected, and no one understands how the rebate mechanisms will work. No one knows whether the EU clearances on state aid will work. In that connection, I draw the Financial Secretary's attention to a letter, which he may also have received, from the Chemical Industries Association. It states the real "showstopper" for industries such as chemicals is that the Government may be unable to get its existing package of Levy concessions…past the European Commission.

The tax is hugely complicated, not neutral, and does not achieve anything that needs achieving. Even if it were necessary to achieve something, the levy cannot achieve it as well as other measures could. It is also undeveloped both structurally and legally. All we seek with this modest little amendment is to delay this dreadful measure until there is evidence that it is required, that it has been sorted out and is legally feasible, and that it will work. Until that has been done, I do not see the slightest shred of justification for the application of the tax.

I hope that the Financial Secretary will have seen as much light as his colleagues have seen on double tax relief. By changing their minds, they have mercifully spared British industry from one of the worst disasters that could have befallen it. I hope that he will tell us that he will accept this amendment—this life-saving device that we have thrown him—with the open arms with which it would behove him to accept it.

Mr. Andrew Stunell (Hazel Grove)

As the hon. Member for West Dorset (Mr. Letwin) has said, the climate change levy was extensively debated in Committee. The Conservatives and the Liberal Democrats tabled amendments. The Liberal Democrats sought to improve and develop the tax. It is right to call it a tax—I certainly agree with the hon. Gentleman on that point. The Conservatives were consistently ambiguous in their intentions and in the amendments that they tabled.

Mr. Jack

Does the hon. Gentleman accept that my amendment on a 100 per cent. exemption from the climate change levy for the horticulture industry was clear and utterly unambiguous?

10 pm

Mr. Stunell

The right hon. Gentleman is absolutely right, and he will recall that I supported that amendment.

Mr. Letwin

I hope that the hon. Gentleman will recognise that any ambiguity in our remarks in Committee was entirely due to our ineptitude as orators, because in fact our position is wholly unambiguous. We regard the climate change levy as an aberration that should never have been brought before Parliament.

Mr. Stunell

There we have it. That, in a nutshell, encapsulates why we cannot support the amendment.

Whatever the defects of the climate change levy—I shall mention one or two in a moment—the fact is that it is just about the Government's only visible policy for fulfilling our Kyoto obligations. Hundreds of consultation papers have been issued and many sensible proposals have been mooted, but nothing has been done. The levy, with all its defects, should in general terms be supported and developed rather than opposed and defeated.

We supported the principle on the Floor of the House and in Committee, but we voted against the schedule because of the manifest difficulties in its operation. The Conservative case against the tax is unclear. It is founded on an assertion about what is best for business, but entirely leaves out what might be best for the environment, and therefore for business too.

Substantial opportunities exist for United Kingdom businesses in the vigorous pursuit of climate change policy. There is the opportunity to be a world leader, and for jobs and investment to flow from a positive response to the Kyoto protocol. In all honesty, the climate change levy is only a small brick in the wall of such a policy, and it is by no means perfect—but the Conservatives owe it to themselves to say clearly whether they think there is a problem with climate change or whether they now repudiate the stance taken by the right hon. Member for Suffolk, Coastal (Mr. Gummer) when he first set the United Kingdom Government on the track of responding to this fundamental issue. If they do, they should say so, and if not, they should say what policies they think should be in place.

Mr. Letwin

We accept that there may be a serious problem in the long run, although we are currently meeting the Kyoto standards, but the hon. Gentleman should accept that we have specifically mentioned emissions trading and voluntary agreements as serious ways forward. We do not accept that the corner shop, which cannot turn off its lights and reduce its electricity use, or do anything else to achieve the Kyoto targets, should be subject to a levy with no environmental purpose whatever, designed solely to increase the amount of money in the Chancellor's coffers—although I admit that after this afternoon, that will be very necessary.

Mr. Stunell

This afternoon I had the benefit of meeting representatives of Sainsbury's—not exactly a corner shop, I concede, as it has about 800 premises in this country—and they made the point that some of the ways in which the levy is coming into force could have been improved, in particular by accepting some of the amendments tabled by Liberal Democrat Members in Committee.

I am thinking in particular of the need for the tax to be introduced at a low level, along with a clear long-term signal that the intention is to raise it. I know how businesses respond when they know the direction in which Government policy is going—when they see that it is starting at a level that is not punitive and will not damage competitiveness, but signals to them that they must make investment decisions that will take them in the right direction.

Every shop in the country can save energy, whether its current activity involves refrigeration, lighting, insulation or simply controlling the flow of heat from its premises through open doors in winter. There is a tremendous gap between good practice and bad practice. Most professional experts say that between 20 and 35 per cent. of the energy currently used could be saved, so we know that there is scope for savings. The first question is, "Is that necessary?" The hon. Gentleman has said he accepts that it is. The next question is, "If it is necessary, and if it is possible, is the climate change levy a useful vehicle?" The answer is that it is a vehicle with some use, but that it does not give the complete picture, and is certainly not perfect.

Liberal Democrats have criticisms of the climate change levy. We have pointed out, for instance, that it is not a tax on carbon emissions, which are what it was designed to prevent. We have also pointed out that it is being introduced at too high a level, and, in that sense, too abruptly, and that it gives no clear signals for the future.

We established in Committee that the Treasury expected the tax to rise by the rate of inflation—in other words, to be inflation-linked. We do not think that that is the right approach. We think that we should have introduced the tax at, say, 50 per cent. of its current level, and that the Bill should have indicated clearly that a series of steps were involved. We believe that it should be clear to industry and commerce that in 10 years' time—by 2010, which is becoming a magic environmental date—they will need to take the levy into account, because it will constitute a significant impost on their fixed costs.

We also criticised the proposal for another reason. Not only does it not tax carbon, it does tax some renewables—in particular, large-scale hydro-electricity generation schemes involving more than 10 MW. In Committee that consideration was dismissed as not being particularly important, but such schemes provide about half the country's current renewable energy resources.

The Government do not seem to have recognised that in the new market—in the new electricity trading arrangements—those hydro schemes will be competing in a very different world from the world in which they were designed and built. At least some operators are concerned about their capacity to sell into that new market in a way that will enable them to remain viable. Because large-scale hydro schemes will be hit by the levy, there is a serious risk that they will be driven out of the market and replaced by the use of another fuel—inevitably, a fossil fuel. That would increase carbon emissions.

We have also criticised the tax because it is undoubtedly complicated. So far its provisions cover 83 pages, and I assume that subsequently, all the additional pages of Government amendments will be attached. I think that that will add up to 86 or 87 pages. Anyway, clearly this will be a phenomenally complex piece of legislation. It must also be said that we shall deal later with Government amendments responding to some of the criticisms made in connection with combined heat and power, and, to a limited extent, horticulture.

I find it surprising that, having decided to table just one amendment, the Conservatives should base that amendment on the assumption first that we do not need to start as soon as possible, because there is not enough evidence for us to know what we are supposed to be doing now, and secondly, apparently, that the longer we put off any action in the House, the better it will be for business and the environment.

The Liberal Democrats reject that completely. We do not accept an argument for delay—an argument that is founded on disbelief. We do not think that the House should accept an argument that is so disingenuous and self-serving. We shall vote against amendment No. 98 not because we think that the Government have come up with a perfect vehicle, but because the planet faces a situation in which any vehicle is better than no vehicle.

Mr. Alasdair Morgan

I should like to pick up on the points that were made by the hon. Member for Hazel Grove (Mr. Stunell) and to address—and to ask the Minister to respond to—the particular problems faced by Scottish and Southern Energy and those of its plants that formerly belonged to the North of Scotland Hydro-Electric Board. The board was set up to generate electricity from renewable resources, which in itself was unusual. It also had a specific social responsibility in the highlands of Scotland: to provide electricity to remote glens where electricity was not available.

The company has a significant number of small and medium hydro plants operating in the highlands; those are plants with between 10 and 25 MW capacity. It is my understanding—I have to take it on trust because, having read schedule 6, I am none the wiser about what it means—that plants under 10 MW will be exempted from the levy. From talking to Scottish and Southern Energy, I believe that it feels that plants of over 25 MW can compete commercially with the implications of the levy.

Most of the plants that we are talking about were built during the early 1950s; some were built in the late 1950s in the great spate of hydro building in the highlands of Scotland. Therefore, they are reaching the end of their useful life. It may come as a surprise to some tourists, but Scotland is not a particularly wet country. It certainly is not in terms of hydro generation; I was speaking to the chairman of the Scottish tourist board at the end of last week, and he wished me to emphasise that point about the weather. Those plants operate at a load factor of about 30 per cent. If the climate change levy is imposed on them, the renewal of their equipment—which is due as we speak and which would extend their life for a further 30 years—would not, in the estimation of Scottish and Southern Energy, be economic in current market conditions.

It would be tragic for the highlands if that investment, much of which was the brainchild of the first post-war Labour Government, elected in 1945, was lost. We would lose that valuable resource to the highlands. It would be ironic if a levy that was designed to encourage renewable energy led to the scrapping of some of the most significant and successful renewable energy schemes ever in this country.

Therefore, I urge reconsideration, if for no other reason than to avoid disappointment for the Scottish Executive—the Scottish Labour-Liberal Executive—which as recently as 11 July, issued a press release on an agreement that was signed at Lubreoch power station in Killin, near where I was brought up. If I remember rightly, that is one of the power stations that I am talking about: it has a fairly small capacity and was built in the early 1950s. The press release says: SSE will provide 100 per cent. of the Executive's requirements from renewable resources.

Mrs. Margaret Ewing (Moray)

On a point of order, Mr. Deputy Speaker. May I point out that no one on the Front Bench appears to be listening to the significant points being made by my hon. Friend the Member for Galloway and Upper Nithsdale (Mr. Morgan)?

Mr. Deputy Speaker (Mr. Michael J. Martin)

So long as I am listening, that is the important thing.

Mr. Morgan

I thank you for your attention, Mr. Deputy Speaker.

I continue with the quote from the Scottish Executive, which I am sure everyone on the Front Bench listens to: This is a first for central government and it underlines our commitment to the promotion of renewable energy as outlined in our draft Scottish Climate Change Programme. We are moving in the right direction and I am delighted to note that SSE are able to provide the public sector with a supply that is 100 per cent. renewable. I ask Ministers not only to spare the blushes of the Scottish Executive, but especially to encourage the renewal of existing renewable energy supplies by reconsidering their current approach to those particular power stations.

10.15 pm

Mr. Denis MacShane (Rotherham)

I should like to make a few comments on behalf of the United Kingdom's electric arc furnace users. Electric arc furnaces consume recycled material—scrap metal—to produce steel, but those steel producers are concerned about the climate change levy. I pay tribute to my hon. Friend the Financial Secretary for receiving many deputations and representations from the steel industry. However, although the levy has been negotiated down to help the industry—which is going through very great difficulties—one anomaly remains. I had planned to table an amendment on the anomaly, but prefer to make a few comments about it. I hope that my hon. Friend will reply to them.

I ask the Minister to consider narrowly the very few companies that use electric arc furnaces, which consume scrap metal—which is recycled material. There is a fear that, as currently formulated, the climate change levy will force the sector to close those furnaces and to use iron ore. It would be perverse if the tax, instead of encouraging the use of recycled material, caused the sector to return to raw iron ore to produce the steel that our economy wants.

I ask my hon. Friend the Minister to consider whether—when fine-tuning the Bill, before it goes to another place and becomes law—he might receive a delegation of me and other hon. Members representing the steel communities where electric arc furnaces are being operated, to discuss whether the legislation might take on board those considerations.

Mr. Jack

May I remind the hon. Member for Hazel Grove (Mr. Stunell)—who chastised Conservative Members for having no alternative to the climate change levy—not only of my own remarks in Committee, but of the answer to a parliamentary question that elicited the fact that we would save 2 million tonnes of CO₂, which was the original target of the climate change levy, if the gas-fired power station moratorium were lifted and only one third of those power stations were built? If we achieved that saving, the Government would have no need for the bureaucracy that they are proposing. Conservative Members take entirely seriously the state of the planet. However, lifting the gas moratorium would deliver in a much more straightforward manner what the Government's great cumbersome tax is supposed to do.

In Committee, I also proposed a biomass alternative which, admittedly, needs more work. However, the conversion of 0.05 per cent. of the cultivable land area of the United Kingdom to short rotational coppice would, at a stroke, save more than 2 million tonnes of CO₂. Recently, I received a letter from Shell International in support of that proposition.

Therefore, Conservative Members need no lectures from Liberal Democrat Front Benchers that we do not take the subject seriously and that we have no alternatives. I shall not make a lengthy speech now about the virtues of nuclear power—fuel for which comes from my own constituency—but simply say that nuclear power is CO₂-free. However, the Government do not have a proper nuclear strategy.

I am speaking to this amendment to record once again, despite Government amendments, my deep disappointment that Ministers have done nothing to relieve the horticulture industry of a wholly unnecessary new tax. I am delighted to see my hon. Friend the Member for Broxbourne (Mrs. Roe) in the Chamber. On 15 June 2000, in an Adjournment debate, she reminded the House that the National Farmers Union had estimated that the climate change levy was effectively a tax of £3,750 per acre on glasshouses in this country.

The Government talk about competitiveness; I heard the Chancellor's speech today. If representatives of the glasshouse industry were in the same room as the Chancellor, they would think that he was from another planet. The climate change levy has visited on the glasshouse industry a tax that is wholly unnecessary for an industry that consumes its own output of carbon dioxide and has the potential for saving more.

The levy really does not apply and it makes the industry uncompetitive. There is no levy in Spain, Belgium, Ireland or Portugal. In the Netherlands, negotiations are taking place with the industry to reduce emissions, but no tax is envisaged. Here, however, the Government are imposing a tax on our horticulture industry which will diminish its competitiveness. At the same time, they claim to have the interests of British industry and commerce at heart.

In areas where the horticulture industry is important in employment terms, the levy is disproportionately important. When the Financial Secretary argues the case for the levy, he will put yet another nail in the coffin of the British horticulture industry. We and the industry will know who is responsible.

In Standing Committee, I put on the record, enterprise by enterprise, a list of small-scale businesses. The Chancellor said this afternoon that small-scale businesses were the engine room of our economy. It seems to me that the Government are stripping out the oil and the pistons, and they will soon be getting rid of the operator because the engine-room companies in the horticulture industry will have to bear a substantial extra burden which, as I said in Standing Committee, they cannot and should not bear. Even at this late stage, I make this appeal on behalf of the British horticulture industry. Instead of providing little tiny bits of help which do not address the issue, the Minister should recognise that the horticulture industry is genuinely a special case and find some way of absenting it from more than the proposed 50 per cent. reduction.

Mr. Christopher Gill (Ludlow)

I shall speak briefly in support of the amendment. I find the case for the climate change levy quite unsatisfactory. We keep hearing from Ministers that it will be revenue neutral. It may be revenue neutral as far as the Government are concerned, but it certainly will not be for individual businesses. Although it could be claimed to be revenue neutral in respect of companies that are eligible for the rebate and employ a large number of people, as my right hon. Friend the Member for Fylde (Mr. Jack) has just said, it will be far from revenue neutral for companies that employ very few staff.

The hon. Member for Kingston and Surbiton (Mr. Davey) said that the climate change levy would not affect competitiveness. That is absolute bunkum. Any tax affects competitiveness. Last Thursday at Question Time, the Minister for Energy and Competitiveness in Europe tried to maintain that the levy would not affect competitiveness. The Government are living in cloud cuckoo land if they think that they can impose a tax that will not affect British businesses.

In effect, the climate change levy will impose a poll tax on employment, and its effect will be to export production that is currently carried out in Britain, and the jobs associated with it, to other parts of the world where environmental considerations are ignored. My right hon. Friend the Member for Fylde rightly mentioned other European countries where there is no equivalent of the climate change levy, or if there is, it is not being imposed in such a dramatic way.

As was made clear on Second Reading, there are anomalies. For example, in several industries the prime producer is eligible for the 80 per cent. rebate, but processors in the same industry are not. That is totally unacceptable. The Liberal Democrat spokesman was good enough to admit that the tax was complicated. To my mind, that makes it a bad tax in any case, but the Government's assumption that companies and employers are not doing their level best to reduce the cost of energy is equally spurious. Everyone in business today realises that they have to keep bearing down on overheads. As energy is one of the most significant overheads, companies automatically bear down on energy costs without the incentive of the proposed tax.

This is a bad tax. It is a poll tax on jobs in this country, and I shall support the amendment.

Mr. Simon Thomas (Ceredigion)

I say, with much regret, that Wales is plenty wet enough for hydroelectricity schemes. That is why, in my constituency, I have the largest hydro-electricity scheme in Wales and England.

I support the comments made by the hon. Members for Galloway and Upper Nithsdale (Mr. Morgan) and for Hazel Grove (Mr. Stunell). Hydro-electricity has been overlooked in the workings of the climate change levy, and I hope that the Government will review how the tax impacts on hydro-electricity schemes and the renewable energy that comes from it.

However, I hope that the Government will resist the amendment. I am sure that they need no encouragement from me to do that. The hon. Member for West Dorset (Mr. Letwin) correctly pointed out that the rate of carbon dioxide emissions was going down, but he did not go on to say that the emissions are expected to rise significantly again after 2005. That is not in the Red Book, but it is in the Government's predictions. That has been borne out by the royal commission on emissions, which issued its report last month.

Mr. Swayne

Part of that rise may be consequent on the strangling to death of British horticulture and the importation of the products that it previously produced by air, with a great use of aviation fuel, which is one of the most serious carbon dioxide pollutants.

Mr. Thomas

I accept the hon. Gentleman's latter point, but his former point was somewhat peripheral to the argument, although I support the point made by the right hon. Member for Fylde (Mr. Jack) about the horticulture industry. There is an obvious carbon-negative factor that should be taken into account in the workings of the tax.

The tax is complicated, and it is right to call it a tax, not a levy. However, none of the complicated difficulties with it persuade me to oppose it in principle. In fact, having heard the comments of the Opposition Front-Bench Treasury spokesman, I feel even more strongly that we should put the tax through as a marker of the changes that we need to see in this country. The amendment tabled by the Opposition is poorly drafted from a party that purports to want to form a Government at some stage in the countries of the United Kingdom. It shows a lack of understanding of what the Kyoto targets mean and of how we can move to achieve that international obligation.

The time scale for the changes that we want to see in the environment and in carbon dioxide emissions is between 15 and 25 years. The magic year 2010 has been mentioned and 2020 is increasingly coming on the horizon in working out the targets. Legislation that pivots around some environmental blip from year to year would send out a tremendously bad signal to business, the public at large and our international partners.

The poor understanding within the Conservative party is reflected in the way in which it has approached the issue. It has not come up with an alternative scheme for meeting the Kyoto targets. Many of us who have serious doubts about the complexity of the climate change levy and what it leaves in and leaves out would have liked to hear alternative methods of achieving the Kyoto targets, but I regret to say that that has not come forward from the Opposition party.

Mr. Letwin

Is the hon. Gentleman seriously advancing the proposition that lifting the gas moratorium would not do more to achieve the targets than this tax?

Mr. Thomas

It would in the very short term, but we are talking about a 25-year period. As the hon. Gentleman knows, there would not be the natural gas to pump into stations in 25 years' time. We have to start planning now for the changes that we want to see in 20 or 25 years. That is why the right hon. Member for Fylde was correct in referring to biomass and short coppice rotation. Elephant grass, willow or whatever might be grown, but that is not an answer to the situation that we are in now. I spent three hours with a biomass group in my constituency on Monday morning discussing how we could get a biomass plant established in the area. The members of the group were arguing strongly that they need a lead-in of four to seven years for the coppice rotation to take effect before the plant can be efficient.

10.30 pm

I say to those on the Government Front Bench that I hope that Energy Ministers will be informed that there are still pieces missing in the Government's picture on renewables, especially in terms of renewable energy and the price that may be involved. I understand that the Department of Trade and Industry will be discussing next week how it might address the issue. It is part of meeting our climate change obligations that the left hand knows what the right hand is doing. The Government are pressing on with the levy without necessarily bringing in all the other benefits that need to come on stream. For that reason, they are giving the impression that they are introducing a tax without the benefits that should accompany it. It is incumbent upon them to work hard over the summer to produce for industry ideas about the use of renewable energy that will fit the jigsaw and produce a much more complete picture.

The Government's view is at least robust, if nothing else, and linked to environmental aims. I welcome the later amendments on combined heat and power. I hope that they will improve a deficiency in that area.

I hope that everyone in the House accepts that there is climate change and that it brings problems. Certainly the occupants of the Conservative Front Bench are starting to accept that, although they do not accept the levy. However, climate change demands vision and political bravery. It is regrettable that, on the whole, we politicians are short-termist. We do not like to plan ahead for 10 or 15 years, because on the whole we shall not then be around to reap the benefits. However, the Government have shown a little bravery in this context and I hope that they will resist the amendment, stick to their guns and review the workings of the climate change levy to ensure that some of the other points that have been raised are taken into account, particularly the future of renewable energy.

Mr. Timms

The hon. Member for West Dorset (Mr. Letwin) asked me to withdraw the tax. I wish I could withdraw the huge problem of climate change which faces the world and requires an effective response throughout the world. The hon. Gentleman said in an intervention on the hon. Member for Hazel Grove (Mr. Stunell) that it might be a problem. Well, it is a problem. That is the reality that we face, and we are taking effective action to respond to it.

The hon. Member for West Dorset seems to be labouring under some straightforward misapprehensions, and in a brief contribution I shall attempt to correct them. He said that the problem could be solved alternatively by lifting the restrictive consents policy. We have announced that that policy will be lifted, and that is reflected in chart 6.2 of section 6 of the Red Book about the projections for carbon dioxide emissions. The levy is needed in addition to that to meet our objectives.

Annual emissions are expected to be about 15 per cent. below 1990 levels this year, but it is forecast that they will start rising again as a result of continuing economic growth and because of factors such as the decommissioning of nuclear power stations. The projected increase in emissions takes into account the expected impact of the levy. That is why it is vital that the levy and all the other measures within the climate change programme are implemented in full to prevent any slippage.

The hon. Member for Ceredigion (Mr. Thomas) rightly said in an effective contribution that a wide range of measures is required, of which the levy is one.

Mr. Letwin

If the Minister believes—I am sure that he is right—that the decommissioning on a substantial scale of nuclear power stations will have a significant effect on emissions, why is it that the so-called climate change levy does not exempt power produced from nuclear stations?

Mr. Timms

I do not know whether it is the policy of the Conservative party to promote new nuclear development. We know what is happening to nuclear power over the next 10 or 15 years, and that is one of the factors that we should take into account in projecting the future of carbon dioxide emissions. It is not a matter, as the amendment suggests, of watching some statistics to check whether we might need to take action to deal with climate change. That is wilfully to ignore the seriousness of the problem of climate change when, in reality, urgent action is imperative.

The hon. Member for Galloway and Upper Nithsdale (Mr. Morgan) asked about hydro-electric plants with a capacity of more than 10 MW. He is right to say that the exemption for renewables in the climate change levy applies to hydro schemes with a capacity of less than 10 MW. That is because we want to promote new renewable energy sources. There is a great deal of scope for new forms of renewable energy generation, and that is what the exemption is designed to promote. We want to incentivise new activities rather than subsidising existing activities that have competed successfully with other forms of generation for a long time.

I have had a number of discussions on the issue with the organisation that the hon. Gentleman mentioned and others, and no one has suggested to me, as the hon. Member for Hazel Grove did, that big hydro-electric operators will shut down when the levy comes into effect. It would be wrong to suggest that. I recognise that there is a concern about a band of hydro-electric schemes, perhaps in the 10 to 25 MW capacity range, that, at some point in the future, they may want to carry out refurbishment, and that may well be a point that needs to be considered at that stage. But we are right to focus the exemption for renewable generation on new forms of renewable energy so that we can substantially increase the extent of that.

Mr. Stunell

Will the Minister give way?

Mr. Timms

I shall not give way again as I need to make some progress.

My hon. Friend the Member for Rotherham (Mr. MacShane) raised some questions about electric arc furnaces for steel. I do not anticipate the problems that he fears because the 80 per cent reduction will be available. There will also be significant reductions in the price of electricity because of the new electricity trading arrangements. There is not an amendment on the subject before the House tonight, so the Bill represents the position that will prevail when the levy takes effect next April, but I shall be glad to meet my hon. Friend and others to discuss the concerns of the steel industry.

To the right hon. Member for Fylde (Mr. Jack), I would say that we have fully recognised the special case of horticulture. The 50 per cent. concession that we have announced is unique. No other industry will enjoy the benefit of that, and that is being extended through a later group of amendments tonight to include lighting and heating. Belgium is working up an energy tax, and I anticipate that most, if not all, of the EU states will, in due course, need to introduce such a measure to meet their Kyoto objective. That trend is clear.

As I have said, I welcome the support of the hon. Member for Ceredigion. He is right to recognise the importance of taking the step that is contained in the climate change levy. We are permanently improving energy efficiency across the business and private sectors, providing a continuing incentive to innovation aimed at improving energy use.

The burdens on business will be kept to a minimum. I repeat what I am sure I have already said many times to the hon. Member for West Dorset, that we are recycling all the revenues from the levy in full to business through equivalent cuts in employer national insurance contributions and schemes to promote energy efficiency, including additional support for renewable sources of energy. There is no net gain to the Exchequer from the levy package.

If the projection of an increase in carbon dioxide emissions after 2000 is correct, the amendment could delay the onset of a levy only until 2002, but we need the levy in our fight to reduce greenhouse gas emissions. Any delay in implementation of whatever duration would prove deeply damaging to our aims. The problem of climate change remains a great challenge and a challenge that the Government are prepared to face up to. I am pleased that, on this occasion at least, the hon. Member for Hazel Grove can support us in taking the levy forward.

I have one last point. The hon. Member for West Dorset talked about emissions trading as an alternative to the levy. It is not an alternative; it is a complement. We are taking forward an emissions trading scheme.

The amendment is inconsistent with our key long-term goal of reducing greenhouse gas emissions and improving energy efficiency in business. I urge the House to reject it.

Mr. Letwin

We have tried to save the Government from themselves. Alas, we have failed. Although this is sad for the country, it is marvellous politically. We look forward with glee to the moment when literally hundreds of thousands of businesses up and down the country discover that they will be subject to this ghastly tax, and we look forward to the Financial Secretary's doing little else for months than dealing with them.

Question put, That the amendment be made:—

The House divided: Ayes 127, Noes 345.

Division No. 277]	[10.40 pm
AYES
Amess, David	Fraser, Christopher
Ancram, Rt Hon Michael	Garnier, Edward
Arbuthnot, Rt Hon James	Gibb, Nick
Baldry, Tony	Gill, Christopher
Beggs, Roy	Gillan, Mrs Cheryl
Bercow, John	Gorman, Mrs Teresa
Beresford, Sir Paul	Green, Damian
Boswell, Tim	Greenway, John
Bottomley, Peter (Worthing W)	Grieve, Dominic
Bottomley, Rt Hon Mrs Virginia	Hamilton, Rt Hon Sir Archie
Brazier, Julian	Hammond, Philip
Brooke, Rt Hon Peter	Hawkins, Nick
Browning, Mrs Angela	Hayes, John
Bruce, Ian (S Dorset)	Heald, Oliver
Burns, Simon	Hogg, Rt Hon Douglas
Butterfill, John	Horam, John
Cash, William	Howard, Rt Hon Michael
Chapman, Sir Sydney (Chipping Barnet)	Howarth, Gerald (Aldershot)
	Jack, Rt Hon Michael
Chope, Christopher	Jackson, Robert (Wantage)
Clappison, James	Jenkin, Bernard
Clifton-Brown, Geoffrey	Key, Robert
Collins, Tim	King, Rt Hon Tom (Bridgwater)
Cormack, Sir Patrick	Kirkbride, Miss Julie
Cran, James	Laing, Mrs Eleanor
Curry, Rt Hon David	Lait, Mrs Jacqui
Davies, Quentin (Grantham)	Leigh, Edward
Davis, Rt Hon David (Haltemprice)	Letwin, Oliver
Donaldson, Jeffrey	Lewis, Dr Julian (New Forest E)
Dorrell, Rt Hon Stephen	Lidington, David
Evans, Nigel	Lilley, Rt Hon Peter
Faber, David	Lloyd, Rt Hon Sir Peter (Fareham)
Fabricant, Michael.	Loughton, Tim
Fallon, Michael	Luff, Peter
Flight, Howard	MacGregor, Rt Hon John
Forth, Rt Hon Eric	McIntosh, Miss Anne
Fowler, Rt Hon Sir Norman	MacKay, Rt Hon Andrew
Fox, Dr Liam	Maclean, Rt Hon David

McLoughlin, Patrick	Stanley, Rt Hon Sir John
Madel, Sir David	Steen, Anthony
Major, Rt Hon John	Streeter, Gary
Malins, Humfrey	Swayne, Desmond
Maples, John	Syms, Robert
Mawhinney, Rt Hon Sir Brian	Tapsell, Sir Peter
May, Mrs Theresa	Taylor, Ian (Esher & Walton)
Norman, Archie	Taylor, John M (Solihull)
O'Brien, Stephen (Eddisbury)	Taylor, Sir Teddy
Ottaway, Richard	Townend, John
Paice, James	Tredinnick, David
Paterson, Owen	Trend, Michael
Prior, David	Tyrie, Andrew
Randall, John	Viggers, Peter
Robathan, Andrew	Waterson, Nigel
Robertson, Laurence	Whitney, Sir Raymond
Roe, Mrs Marion (Broxbourne)	Whittingdale, John
Ross, William (E Lond'y)	Wilkinson, John
Ruffley, David	Willetts, David
St Aubyn, Nick	Wilshire, David
Sayeed, Jonathan	Winterton, Mrs Ann (Congleton)
Shephard, Rt Hon Mrs Gillian	Winterton, Nicholas (Macclesfield)
Shepherd, Richard	Yeo, Tim
Simpson, Keith (Mid-Norfolk)	Young, Rt Hon Sir George
Soames, Nicholas
Spelman, Mrs Caroline	Tellers for the Ayes:
Spicer, Sir Michael	Mr. Stephen Day and
Spring, Richard	Mr. Peter Atkinson.

NOES
Abbott, Ms Diane	Chaytor, David
Adams, Mrs Irene (Paisley N)	Chidgey, David
Ainger, Nick	Chisholm, Malcolm
Ainsworth, Robert (Cov'try NE)	Clapham, Michael
Allen, Graham	Clark, Rt Hon Dr David (S Shields)
Anderson, Janet (Rossendale)	Clark, Paul (Gillingham)
Ashton, Joe	Clarke, Charles (Norwich S)
Atkins, Charlotte	Clarke, Rt Hon Tom (Coatbridge)
Austin, John	Clelland, David
Ballard, Jackie	Clwyd, Ann
Banks, Tony	Coaker, Vernon
Barnes, Harry	Coffey, Ms Ann
Barron, Kevin	Cohen, Harry
Battle, John	Coleman, Iain
Bayley, Hugh	Colman, Tony
Begg, Miss Anne	Connarty, Michael
Beith, Rt Hon A J	Corbett, Robin
Benn, Hilary (Leeds C)	Corbyn, Jeremy
Benton, Joe	Corston, Jean
Bermingham, Gerald	Cousins, Jim
Berry, Roger	Cox, Tom
Betts, Clive	Cranston, Ross
Blackman, Liz	Crausby, David
Blears, Ms Hazel	Cryer, Mrs Ann (Keighley)
Blizzard, Bob	Cryer, John (Hornchurch)
Boateng, Rt Hon Paul	Cummings, John
Borrow, David	Cunningham, Rt Hon Dr Jack (Copeland)
Bradley, Keith (Withington)
Bradley, Peter (The Wrekin)	Cunningham, Jim (Cov'try S)
Bradshaw, Ben	Cunningham, Ms Roseanna (Perth)
Brand, Dr Peter
Brown, Russell (Dumfries)	Curtis-Thomas, Mrs Claire
Browne, Desmond	Dalyell, Tam
Bruce, Malcolm (Gordon)	Darling, Rt Hon Alistair
Burden, Richard	Darvill, Keith
Burgon, Colin	Davey, Edward (Kingston)
Burnett, John	Davey, Valerie (Bristol W)
Butler, Mrs Christine	Davidson, Ian
Caborn, Rt Hon Richard	Davies, Rt Hon Denzil (Llanelli)
Campbell-Savours, Dale	Davis, Rt Hon Terry (B'ham Hodge H)
Cann, Jamie
Caplin, Ivor	Dawson, Hilton
Casale, Roger	Dean, Mrs Janet
Caton, Martin	Denham, John
Cawsey, Ian	Dismore, Andrew
Chapman, Ben (Wirral S)	Dobbin, Jim

Doran, Frank	Jones, Ms Jenny (Wolverh'ton SW)
Dowd, Jim
Drew, David	Jones, Jon Owen (Cardiff C)
Dunwoody, Mrs Gwyneth	Jones, Dr Lynne (Selly Oak)
Eagle, Angela (Wallasey)	Jones, Martyn (Clwyd S)
Eagle, Maria (L'pool Garston)	Keeble, Ms Sally
Edwards, Huw	Keen, Alan (Feltham & Heston)
Efford, Clive	Keen, Ann (Brentford & Isleworth)
Ellman, Mrs Louise	Kennedy, Jane (Wavertree)
Ennis, Jeff	Khabra, Piara S
Ewing, Mrs Margaret	Kidney, David
Fearn, Ronnie	Kilfoyle, Peter
Field, Rt Hon Frank	King, Andy (Rugby & Kenilworth)
Fisher, Mark	Kirkwood, Archy
Fitzpatrick, Jim	Kumar, Dr Ashok
Flint, Caroline	Ladyman, Dr Stephen
Flynn, Paul	Lammy, David
Foster, Michael Jabez (Hastings)	Lawrence, Mrs Jackie
Foster, Michael J (Worcester)	Laxton, Bob
Fyfe, Maria	Lepper, David
Galloway, George	Leslie, Christopher
Gardiner, Barry	Levitt, Tom
George, Andrew (St Ives)	Lewis, Ivan (Bury S)
Gerrard, Neil	Lewis, Terry (Worsley)
Gibson, Dr Ian	Liddell, Rt Hon Mrs Helen
Gidley, Sandra	Linton, Martin
Gilroy, Mrs Linda	Livsey, Richard
Godsiff, Roger	Lloyd, Tony (Manchester C)
Goggins, Paul	Lock, David
Golding, Mrs Llin	Love, Andrew
Gordon, Mrs Eileen	McAllion, John
Gorrie, Donald	McAvoy, Thomas
Griffiths, Jane (Reading E)	McCabe, Steve
Grogan, John	McCafferty, Ms Chris
Hain, Peter	McCartney, Rt Hon Ian (Makerfield)
Hall, Mike (Weaver Vale)
Hall, Patrick (Bedford)	McDonagh, Siobhain
Hamilton, Fabian (Leeds NE)	McDonnell, John
Hancock, Mike	McFall, John
Hanson, David	McGuire, Mrs Anne
Harman, Rt Hon Ms Harriet	McIsaac, Shona
Harris, Dr Evan	McKenna, Mrs Rosemary
Harvey, Nick	Mackinlay, Andrew
Heal, Mrs Sylvia	McNamara, Kevin
Healey, John	McNulty, Tony
Heath, David (Somerton & Frome)	MacShane, Denis
Henderson, Doug (Newcastle N)	Mactaggart, Fiona
Henderson, Ivan (Harwich)	McWalter, Tony
Hepburn, Stephen	McWilliam, John
Heppell, John	Mahon, Mrs Alice
Hesford, Stephen	Marsden, Gordon (Blackpool S)
Hewitt, Ms Patricia	Marshall, David (Shettleston)
Hinchliffe, David	Marshall, Jim (Leicester S)
Hodge, Ms Margaret	Martlew, Eric
Home Robertson, John	Meale, Alan
Hood, Jimmy	Merron, Gillian
Hopkins, Kelvin	Michael, Rt Hon Alun
Howarth, Alan (Newport E)	Michie, Bill (Shef'ld Heeley)
Howells, Dr Kim	Michie, Mrs Ray (Argyll & Bute)
Hoyle, Lindsay	Miller, Andrew
Hughes, Ms Beverley (Stretford)	Mitchell, Austin
Hughes, Simon (Southwark N)	Moffatt, Laura
Humble, Mrs Joan	Moonie, Dr Lewis
Hurst, Alan	Moore, Michael
Hutton, John	Moran, Ms Margaret
Iddon, Dr Brian	Morgan, Alasdair (Galloway)
Illsley, Eric	Morgan, Ms Julie (Cardiff N)
Jackson, Ms Glenda (Hampstead)	Morley, Elliot
Jackson, Helen (Hillsborough)	Morris, Rt Hon Ms Estelle (B'ham Yardley)
Jamieson, David
Jenkins, Brian	Mountford, Kali
Johnson, Miss Melanie (Welwyn Hatfield)	Mowlam, Rt Hon Marjorie
	Mudie, George
Jones, Rt Hon Barry (Alyn)	Mullin, Chris
Jones, Mrs Fiona (Newark)	Murphy, Rt Hon Paul (Torfaen)
Jones, Helen (Warrington N)	Naysmith, Dr Doug

O'Brien, Bill (Normanton)	Steinberg, Gerry
O'Hara, Eddie	Stevenson, George
Olner, Bill	Stewart, David (Inverness E)
O'Neill, Martin	Stewart, Ian (Eccles)
Öpik, Lembit	Stinchcombe, Paul
Organ, Mrs Diana	Stoate, Dr Howard
Osborne, Ms Sandra	Strang, Rt Hon Dr Gavin
Palmer, Dr Nick	Stringer, Graham
Pearson, Ian	Stuart, Ms Gisela
Pickthall, Colin	Stunell, Andrew
Plaskitt, James	Taylor, Rt Hon Mrs Ann (Dewsbury)
Pollard, Kerry
Pond, Chris	Taylor, David (NW Leics)
Pope, Greg	Temple-Morris, Peter
Pound, Stephen	Thomas, Gareth (Clwyd W)
Prentice, Ms Bridget (Lewisham E)	Thomas, Gareth R (Harrow W)
Prentice, Gordon (Pendle)	Thomas, Simon (Ceredigion)
Primarolo, Dawn	Timms, Stephen
Prosser, Gwyn	Todd, Mark
Purchase, Ken	Touhig, Don
Quin, Rt Hon Ms Joyce	Trickett, Jon
Quinn, Lawrie	Truswell, Paul
Radice, Rt Hon Giles	Turner, Dennis (Wolverh'ton SE)
Rammell, Bill	Turner, Dr Desmond (Kemptown)
Rapson, Syd	Turner, Dr George (NW Norfolk)
Reid, Rt Hon Dr John (Hamilton N)	Turner, Neil (Wigan)
Rendel, David	Twigg, Derek (Halton)
Rooker, Rt Hon Jeff	Tyler, Paul
Rooney, Terry	Tynan, Bill
	Vaz, Keith
Ross, Ernie (Dundee W)	Vis, Dr Rudi
Rowlands, Ted	Walley, Ms Joan
Roy, Frank	Ward, Ms Claire
Ruane, Chris	Wareing, Robert N
Ruddock, Joan	Watts, David
Russell, Bob (Colchester)	Webb Steve
Russell, Ms Christine (Chester)	Welsh, Andrew
Ryan, Ms Joan	Whitehead, Dr Alan
Salter, Martin	Wicks, Malcolm
Sanders, Adrian	Williams, Rt Hon Alan (Swansea W)
Sarwar, Mohammad
Savidge, Malcolm	Williams, Alan W (E Carmarthen)
Sawford, Phil	Williams, Mrs Betty (Conwy)
Sedgemore, Brian	Willis, Phil
Shaw, Jonathan	Wills, Michael
Sheerman, Barry	Winnick, David
Shipley, Ms Debra	Winterton, Ms Rosie (Doncaster C)
Short, Rt Hon Clare	Woodward, Shaun
Simpson, Alan (Nottingham S)	Woolas, Phil
Skinner, Dennis	Worthington, Tony
Smith, Miss Geraldine (Morecambe & Lunesdale)	Wray, James
	Wright, Anthony D (Gt Yarmouth)
Smith, John (Glamorgan)	Wright, Tony (Cannock)
Smith, Llew (Blaenau Gwent)	Wyatt, Derek
Smith, Sir Robert (W Ab'd'ns)
Snape, Peter	Tellers for the Noes:
Soley, Clive	Mr. Gerry Sutcliffe and
Southworth, Ms Helen	Mr. Kevin Hughes.

Question accordingly negatived.