CLIMATE CHANGE LEVY

HC Deb 02 May 2000 vol 349 cc86-119

Question proposed, That the clause stand part of the Bill.

Mr. Heathcoat-Amory

In the absence of the clause having been moved, I think that I might make a few remarks about climate change, which is an important matter. It behoves the Government to explain the clause.

The Temporary Chairman (Mr. Frank Cook)

Order. For the benefit of the House, I ought to clarify a point that seems to be causing some confusion. The clause does not have to be moved in the normal fashion, as the Question proposed by the Chair is that the clause stand part of the Bill.

Mr. Heathcoat-Amory

If the Government have so little confidence in the clause, I shall explain why the House should not incorporate it into the Bill. However, it would have been a courtesy to the House had the Treasury Front Bench explained why the Government wish to impose a new tax on the country. We will be interested in the Government's response in due course, but the debate would have proceeded in a more orderly manner if they had given their view of the merits of their energy tax.

Opposition Members are used to dotty new tax proposals, but the energy tax is the stupidest to date. It is a completely unnecessary new tax. The environmental objectives that it purports to deliver could be achieved far more easily by several other means.

The tax is also extremely complicated. The schedule attached to the clause is more than 80 pages long. We shall not debate that this evening, although we shall turn to it in due course in Committee Upstairs. However, I have already tried to understand it, as have the businesses that will be affected by it. The Government are still committed to their tax simplification project, but it has had no influence over the language and structure of the schedule, which describes the energy tax in detail.

That is a serious matter, as every business in the country, regardless of size, will have to try and make sense of the new tax and its provisions. The tax is unnecessary and complicated, as I have said, but it will also have a perverse effect on the industries and businesses affected by it.

I have said that all businesses, of whatever size, will pay the tax. I declare an interest here: I am a director of two companies, and we will be paying the tax. I think that those businesses will in fact be net beneficiaries of the tax, so they are in an unusual position. In that sense, I have a negative interest to declare, but for the sake of good order, I remind the House of my registered interests.

What is particularly striking about the new tax is the damage that it will do to manufacturing industry. The Labour party has long given up its traditional support for the manufacturing sector. There was a time when almost all Labour Members had at least some lingering attachment to the cause of manufacturing industry. New Labour, clearly desperate to sever itself from its past, has pretty well abandoned that mission and clearly regards support for manufacturing as something of an embarrassment. There is no other way of explaining away the succession of hammer blows that the Government have directed towards the manufacturing sector. We have already seen how diesel duty—diesel being the fuel of industry—has become the most expensive in Europe because of successive increases in duty. That has made the British haulage industry uncompetitive and raises the cost of every manufactured product that has to be physically transported.

Furthermore, we have seen a mass of regulations. It has been reported to the House before that even according to the Government's own regulatory impact assessment, the cumulative costs of regulation have totalled more than £10 billion over the course of this Parliament. I am grateful to the British Chambers of Commerce for that information. The bulk of those regulations are directed towards the manufacturing sector.

We will be debating other matters tomorrow, such as the changes to the double taxation relief. The Government pretended at the time of the Budget statement that such changes would levy an additional burden on British businesses of only £300 million. The Confederation of British Industry has given a figure today, estimating that the burden will be £750 million on only 40 member firms. The Government are in retreat on that issue. Again, such a change will damage British competitiveness and the attractiveness of this country for overseas investments.

Perhaps the most stupid proposal is the new energy tax. Rebates will be available to some firms and industries, which can negotiate a rebate of up to 80 per cent. The catch is that only some privileged sectors and businesses will be eligible for those negotiated rebates. Some 40 per cent. of the energy used in manufacturing will not be eligible for rebates. The reason is that they are confined to those businesses subject to the European Union integrated pollution prevention and control directive. That directive was designed for a completely different purpose. It covers pollution control, but the Government are using it for another purpose—to decide the level of energy tax on business and industry.

Vehicle manufacturers, for example, will not be eligible for negotiated rebates. They will have to pay the full amount. That information comes from a parliamentary briefing on the energy tax produced by the CBI in the past few days. It points out that farming, micro-electronics, packaging, industrial films and brewing industries will all have to pay the full energy tax, regardless of their energy efficiency.

A curious and rather damaging item has come to light. Each vehicle manufacturer in the United Kingdom will have to pay annually at least £1 million net in energy tax. That is a very unwelcome development because it affects Rover and its possible rescue. The Department of Trade and Industry is, in its clumsy way, now trying, along with the Prime Minister, to help the Phoenix bid for Rover, and it is talking about an emergency aid package. Meanwhile, the Treasury is planning to impose a new tax on that company of at least £1 million a year. So the new consortium is £1 million down even before it starts. That is another spectacular example of how one Department is working against the interests of another. One wonders whether they even talk to each other. It is no wonder that businesses are exasperated with the Government's pretended partnership with the business community.

Mr. Tim Loughton (East Worthing and Shoreham)

Is not the point that the energy tax pays no regard to all the investment and effort that companies have made in the past in improving their energy efficiency? There was virtually nothing in the Budget about capital allowances for re-equipping by companies that gave any advantage to environmentally friendly capital investment in new equipment by companies such as car manufacturers.

Mr. Heathcoat-Amory

My hon. Friend, who knows a great deal about this, is spot on. Vehicle manufacturers in this country have already reduced carbon dioxide emissions by a quarter between 1990 and this year. My hon. Friend is absolutely right: they made great efforts to cut emissions, they are environmentally responsible, but there is no recognition of that in the design of the new tax. Not only that, they will be ineligible even for the reductions and rebates for which other industries may be eligible.

Mr. Swayne

The situation that my right hon. Friend described is all the more unwelcome for being unexpected. Those of us who have been making representations to Ministers on this question for the past 18 months were informed that there would be negotiation on rebates. Only now do we discover that those industries are not eligible for the rebates. That point has been made recently and unexpectedly.

Mr. Heathcoat-Amory

My hon. Friend is absolutely right. That is why the CBI briefing document also says about the proposals instanced by my hon. Friend: So far, all of these proposals have been rejected with little explanation. That is the point. It rankles with business and its representatives that these ideas are simply being dismissed without the Government even explaining why.

There are many other lunatic things about the construction of the tax. I take as an example its treatment of combined heat and power. CHP has been of great interest to me ever since I served in the Department of Energy. It makes business and environmental sense. CHP plants that produce electricity also use the heat that would otherwise go to waste. The most familiar CHP process is that of the motor car and its heater. Every time we switch on a car heater in the winter, we experience the productive use of waste heat from an internal combustion engine.

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On a larger industrial scale, the double use of energy brings great environmental benefits. One might have thought that it would be encouraged by the new energy tax, but it is not so. The Combined Heat and Power Association, a responsible and energetic body, states: The treatment of CHP under the Levy is causing grave concern both, among CHP developers and wider industry which seeks to utilise it…CHP has not yet been granted the fair access to this market that it was promised by Ministers. The House might ponder on the final few words. People have been led up the garden path. They were assured by the Government that CHP would be given fair access to the market, but that is not the case.

Mr. Swinney

The right hon. Gentleman's final point has answered a question with which I was wrestling. A company in my constituency, which faces a particularly severe impact from the climate change levy, has been advised that going down the combined heat and power route would save it some costs. A briefing document from a firm of consultants says that CHP has exemptions to the levy. Does the right hon. Gentleman suspect that people have been encouraged to believe that and that that advice has been given to companies although it is not correct?

Mr. Heathcoat-Amory

I am afraid that I must draw that conclusion. Various assurances have been given in principle, including perhaps to the hon. Gentleman's constituent company. The small print reveals matters to be different. I shall give way to the Minister so that he may give us an assurance to the contrary.

Mr. Timms

The right hon. Gentleman is in danger of unintentionally misleading the House. The advice given to the firm referred to by the hon. Member for North Tayside (Mr. Swinney) is absolutely right. Combined heat and power systems will be exempted from the climate change levy. There has been a call for a wider exemption for power generated by CHP systems where it is sold from the firm that generates it to the grid. Our view is that the most generous arrangement for exemptions should apply to renewable energy sources, and that is what we propose in the levy. A firm using its own CHP will be free from the levy.

Mr. Heathcoat-Amory

That will not do. Anyone who knows anything about CHP knows that only some schemes entirely use the power on the plant site without importing or exporting some electricity. Most bigger schemes rely on fluctuations: at some stages, they import electricity from the grid, and at others, they export it to the grid. Unless that process is exempt, the entire scheme will be in danger of being uneconomic.

Let me give a specific example. British Sugar has made extensive use of CHP in the past. In fact, all nine of its factories use CHP, and have done so since the 1920s, making the company something of a pioneer. British Sugar recognises the high energy efficiencies gained by those plants—about 80 per cent., compared with under 50 per cent. for conventional power stations. The company is anxious to renew and extend its CHP plants, but has written that despite Government assurances that the climate change levy would not apply to CHP, it is now clear that it will apply to electricity sales made to licensed suppliers and subsequently sold on to business consumers. It adds: this application of the CCL…will make further commercial investment in large projects to install new technology CHP uneconomic. British Sugar has therefore decided to defer our decision to proceed with investment for replacement CHP at our York and…(Norfolk) sites for which we already have Section 36 consents. We will also defer further feasibility studies. We deeply regret this outcome, as we firmly believe in the contribution that CHP can make to the reduction in CO₂, emissions. The trade association has described the damage that the half-baked new tax will cause, and a possible user of a new generation of CHP plants is not going ahead with two planned sites and will not undertake further feasibility studies.

Mr. Michael Jack (Fylde)

My right hon. Friend may be aware that the same company was encouraged in its endeavours by the Financial Secretary himself who has said that CHP can make a valuable contribution to achieving emissions reductions.

Mr. Heathcoat-Amory

My right hon. Friend is absolutely right. It is appalling that companies have heard lots of warm words telling them that the levy would treat CHP helpfully and give a green light to new schemes when that is not so. When we read the small print and examine the clauses and schedules, we find that new plants will not be economic and will not happen.

The Government are damaging an environmentally beneficial technology. They are taxing firms for using energy, but discouraging the very technologies that would enable the firms to reduce their energy consumption and avoid the tax. That is absolutely crazy. In fact, it is more than that—it is a political and economic crime.

I do not know whether the muddle over the new tax, which has lasted more than a year, is due to ignorance or arrogance. I genuinely do not know whether the Government simply do not understand what they are doing, or understand but do not care. They have been told about the difficulties by many industries. One more example is the Engineering Employers Federation, which said: We are concerned that a sizeable proportion of EEF member companies will be substantial net 'losers' under the levy/NI rebate system. This will cause many UK engineering and manufacturing companies to become uncompetitive in international markets. Yet the Government waffle on about the need for productivity gains and competitiveness that will conquer world markets. It is all just talk. In reality, in a succession of badly designed taxes, they are reducing competitiveness.

Mrs. Jackie Lawrence (Preseli Pembrokeshire)

Is the right hon. Gentleman aware of the Cambridge Econometrics report that makes it clear that the climate change levy will benefit competitiveness in all sectors by increasing productivity with respect to energy inputs, by encouraging innovation, by improving energy management and by preparing relevant firms to exploit future markets?

Mr. Heathcoat-Amory

I am afraid that that is just not the case. Firms who are in the best position to undertake an assessment are convinced that they will be made uncompetitive in world markets. I have given the House one example of a representative body which says so.

Mr. Clapham

The right hon. Gentleman will be aware of the relationship with the new electricity trading arrangements that will come into being this autumn. There will be a change in the pool system, and the competitiveness of British industry will be stimulated because electricity will be cheaper.

Mr. Heathcoat-Amory

Actually, the change in the pool system is specifically referred to in the representations to which I have referred, but I have not gone into it because it is not part of this debate. I assure the hon. Gentleman that those changes are fully taken into account in the overall assessment made by the firms and associations that the new and unwelcome tax will damage British competitiveness, a matter that should concern the whole House.

What is particularly dotty is that the tax is not necessary on environmental grounds. There has always been an alternative route: to commit to more gas-fired electricity generation. That is another way to achieve reductions in carbon dioxide. Of course, when the tax was announced the Government were operating a moratorium; they had blocked 15 power station consents. We pointed out many times that, if they unblocked that moratorium, emissions could be reduced more efficiently and in a way that was less industrially damaging.

The Government never denied that point, but they would not budge on their energy policy until two weeks ago, when the Department of Trade and Industry issued a statement that the gas moratorium had been lifted. The 15 power stations that were refused consent can now proceed. That is a welcome U-turn, but it means that the energy tax is completely unnecessary. Even though all those 15 power stations might not be built, it is nevertheless calculated that merely a proportion of them would deliver a carbon dioxide saving equivalent to the one that the energy tax is designed to make.

It is clear that a policy mix of voluntary agreements, which were going ahead anyway, an emissions trading system, which is being designed, more combined heat and power and more gas-fired electricity generation would more than meet the required target for carbon dioxide reductions. We are committed to that internationally and the Conservative party certainly supports it.

In summary, the tax is thoroughly bad. It gives a further twist to the regulatory spiral; it damages British competitiveness and deters inward investment. It has perverse and arbitrary effects on industry; some processes, businesses and industries qualify for exemptions or rebates while others do not. Furthermore—perhaps the most spectacular point—the tax is unnecessary on environmental grounds. That is why we oppose it.

Mr. Stunell

I was rather disappointed that the Financial Secretary to the Treasury did not feel it necessary to introduce the debate on the clause. Other hon. Members can only take on trust—or as an expectation—the arguments that he will deploy when he winds up the debate.

There is no doubt that the provision is extremely important, but it has a much broader context than the Bill. Although we welcome the Chancellor's commitment to tackling the environmental problems faced by our country, we have some deep reservations about the form in which the climate change levy is presented, especially in schedules 6 and 7.

The Bill comprises 85 pages, which will make for interesting work in the Standing Committee. We shall be tabling amendments to change the overall design of the Bill, to improve its environmental effectiveness and to mitigate its impact on employment and investment.

There is a bigger picture against which the tax should be judged. Despite some of the comments of the right hon. Member for Wells (Mr. Heathcoat-Amory), we should acknowledge that the UK must respond to climate change not only as a legal but as an environmental obligation, if we are to play an active part in the world as a mature democracy.

8.15 pm

We must acknowledge that climate change, as it affects our country and the whole planet, is largely human-induced. It has been produced mainly by the consumption of fossil fuels and also by the loss of absorption mechanisms—deforestation has had a major impact on the planet's capacity to absorb carbon emissions. Various industrial technologies and processes have contributed to the problem.

That release of greenhouse gases is having a significant effect; it is changing the climate. Perhaps one problem is that the phrase "climate change" sounds rather neutral. In many cases, we are talking about climate degradation, not merely climate change. If we do not respond with effective policies, in this country and internationally, there will be severe consequences.

I give credit to the Government for the spirited way in which they participated in the Kyoto talks, for their willingness to enter a Europewide agreement and for the broad consultations that they have set in hand during the past two years. Although I have criticised the slowness of the process, one cannot deny that much ground has been covered. The consequences of climate change have certainly been acknowledged in the Government's thinking and, to some extent, in the climate change levy.

If there are no policy alterations in this country, in other EU countries and worldwide, we face the degradation of the planet's biodiversity, a worsening of the human condition in many parts of the world—to a considerable but, fortunately, not a major extent in this country—and economic disruption that could certainly spill over to affect this country directly.

Mr. Andrew Tyrie (Chichester)

I support compliance with Kyoto, but I should be grateful if the hon. Gentleman could tell me where there is any evidence that an increase in the temperature of the planet would necessarily result in a reduction of biodiversity.

Mr. Stunell

We are in danger of going wide in the debate. However, in a densely populated planet, a large number of habitats are isolated communities. If the conditions in which those communities can exist migrated—for example, to the north—there would be no space that was not already occupied by human habitation to which the ecosystems could also migrate. That biosystem would thus be extinguished. I should be happy to provide the hon. Gentleman with more details, but you might rule me out of order, Mr. Cook.

We welcome the provision in principle, but we have some criticism of the detail. We applaud the aims of the climate change levy. As we understand them, they are primarily to reduce greenhouse gas emissions. Secondly, they would put the UK at the leading edge of conservation technology; there is a large world market to be exploited if we can achieve that. A further aim is to safeguard employment and investment in the UK—that flows from the second point. The final aim is that the levy should be revenue neutral: that is rarely sought and even more rarely achieved in taxation proposals.

Although those aims are laudable and we welcome them, the means to achieve them remain flawed. Despite the repeated fixes that have been applied to the proposal by the Departments of the Environment, Transport and the Regions and of Trade and Industry and, latterly, by the Treasury, the fact remains that the details are not satisfactory. I hope that the Liberal Democrats can play a constructive part in improving the climate change levy as it proceeds through the House.

The first of our criticisms is that the levy is on the wrong thing at the wrong point. If the levy is designed to cut greenhouse gases, especially carbon dioxide, it would be better applied upstream, where the oil, coal and gas are first burned. If the aim is to save carbon dioxide discharges in particular, it would be more sensible to apply the climate change levy to just that—not, for instance, to electricity generated from hydro power—and, to take the point made by the right hon. Member for Wells, to make adequate provision for combined heat and power to flourish.

Mr. David Drew (Stroud)

Would the hon. Gentleman like to add nuclear to his list?

Mr. Stunell

No, I would not.

I draw the attention of the Committee to the fact that the Government have proposed several ways in which combined heat and power can come to the market and be a significant part of the generating capacity. In fact, they have a target of 10,000 MW of installed CHP by the year 2010. The climate change levy will slow down that process. It will make it more difficult for combined heat and power projects to justify themselves in the pecking order of investment by companies that are looking at the options.

I had the opportunity to attend a seminar that was addressed by the hon. Member for Leeds, West (Mr. Battle)—who was Minister for Energy and Industry before he moved to the Foreign Office—and by the leading exponents of CHP in the industrial community. Having received their public reward and award for installing CHP, they were then asked a direct question—would they proceed to install the next phase? They said that they would not—not just because it would not save them money but because, in a world in which enterprises compete for investment, CHP did not produce as good a return for that company as some of the other things that it could do. A move like the introduction of the climate change levy in its present form will make the possibility of investment in CHP by that company that bit more remote.

Therefore, our first criticism is that the climate change levy is a levy on the wrong thing at the wrong point. Our second criticism is that the levy is too rough and ready, when it should be smooth and progressive.

Originally, the levy was published as being designed to raise £1.8 billion. That has wisely been scaled down to about £1 billion, but Liberal Democrats believe that that could well prove to be a damagingly large abstraction of money from manufacturing at a time when it can ill afford it. In many companies, profitability—even viability—is under severe threat, and we would prefer a climate change levy to be introduced at a lower rate but with a clear built-in escalator, so that progressively tougher targets are set during the period up to 2010.

A low start-up rate will avoid the damage to companies that may occur with the abrupt introduction at the level that the Government propose. The announcement, well in advance, of a progressive escalator up to a higher value over the next 10 years will give the right signals for those who are planning investment and development within their companies, and would take account of the time frame that is needed for those investment decisions to be run in, installed and matured. We need a climate change levy that takes some account of the business cycle and of the speed of investment decision taking and installation.

Our third concern relates to the recycling mechanism. Other hon. Members may want to explore how the national insurance reduction will impact on productive industry and on the service industries. The first, on average, would be losers; the second, on average, beneficiaries.

The Minister may want to comment on the fact that the fastest growth sector in the use of energy is not manufacturing but the service sector, which, perversely, will get extra money to spend as a result of the introduction of the climate change levy although it is the most rapidly expanding and profligate user of energy.

Mr. Timms

I look forward to responding to the hon. Gentleman's arguments, but I just say to him that—contrary to what he is suggesting—the levy package will be broadly neutral between the manufacturing and service sectors and, broadly speaking, bring about no fiscal shifts.

Mr. Stunell

I shall follow, with great interest, the Minister's detailed explanation, as it might possibly justify that statement, although it is hard to credit at the moment.

I did not want to focus on the national insurance issue tonight, because those matters could be well explored in Committee Upstairs, but I wanted particularly to deal with the green recycling element of the mechanism—the £150 million that the Government are making such a song and dance about. Initially that was to be £50 million, and a great deal of noise was made about the fact that it was being trebled to £150 million.

I hope that the Minister will be prepared to acknowledge that the £150 million is "funny money". A hundred million pounds of that is simply bringing forward the investment allowances of companies in conservation and efficiency measures. I understand that the cost to the Exchequer is anything but £100 million; it is more like £5 million.

Mr. Swinney

I want to bring forward some further information on the constituency case that I raised with the right hon. Member for Wells (Mr. Heathcoat-Amory). The investment that that company has been recommended to make to improve its energy efficiency is £1 million, so, if that is to be a claim for one company out of this supposedly £150 million fund, there will obviously be a severe impact across a range of companies that are affected by the costs of such investment.

Mr. Stunell

The hon. Gentleman makes an important point, which is perhaps about the overall size of the fund that is being made available. Leaving aside whether it is "funny money", is £150 million sufficient to trigger off the investment that is needed? I believe that experience has shown, over many years, that companies respond better to incentives to invest than they do to penalties if they do not invest, so there is every reason to consider whether £150 million is the right amount.

However, whether or not £150 million is the right size for the fund, the Government should acknowledge and understand that what they propose is not actually £150 million of recycled money but simply capital allowances with very little public expenditure impact. I suggest that it will not be a sufficient spur for companies to invest.

The right hon. Member for Wells commented on the so-called IPPC deals in the energy-intensive industrial sector. Those of us taking part in this debate are at a disadvantage, in that we have not seen the agreement that has been reached. We have heard rumours. We are told that we shall get an excellent deal—plenty of bangs for our bucks—and we are eagerly waiting to hear the outcome. However, even if the conclusion of the deals in those energy-intensive sectors means that enough money is recycled and available for those industries to achieve the efficiency improvements to which they are committed, the incentives to invest in the industries that are not included are not nearly sufficient.

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The right hon. Gentleman said that the tax is not necessary, but we do not agree. We need a levy or a carbon tax; we need a stick as well as a carrot; we need to give a clear signal to industry and to make a clear commitment internationally to fulfil our obligations.

Letting gas generation take over from coal is not a let-out. Certainly, that will reduce carbon emissions in the short term, but as the hon. Member for Stroud (Mr. Drew) indicated, in what is a short time in the energy market, nuclear generation capacity will end, and, if we replace that with gas or coal, we will increase carbon emissions. We must have in mind the future beyond 2010 when we set our policy on the climate change levy. We need a policy that allows us to do more than reach the Kyoto target by 2010. If, on 2 January 2010, when we start to confront the targets that lie beyond the Kyoto limits, we have no policies on the stocks, no research, no investment plans being developed, no export industries and no plans for beyond 2010, this country will find that it has failed the test.

Liberal Democrat Members welcome the intentions behind the climate change levy, but we have deep concerns about much of the detail embedded in the massive schedules. We shall support the principle tonight, and fight to correct the all-important details later in the Committee proceedings.

Mr. Jack

I hope that I do not do the hon. Member for Hazel Grove (Mr. Stunell) a disservice when I say that he sounds like a man who has not had to make hard decisions in business about how to save money and keep within one's budget. I declare my business interests, which have been properly lodged in the Register of Members' Interests, in that I maintain the interests in horticulture and fresh produce which I had before I entered the House. That industry would not exist today if it had not, by virtue of the fact that energy is a key factor in its activities—certainly in the protected horticulture sector—fought year in, year out to keep down its energy costs. The industry's track record on energy saving is second to none.

The extent to which the Government have thought through the climate change levy is evident from the fact that in Budget 2000, the financial statement and Budget report, the best that we read is that the Treasury has, after many representations from the horticulture industry, produced a 50 per cent. reduction in the effect of the CCL on that industry. Only last Friday, the hon. Member for South Ribble (Mr. Borrow) and I attended a meeting with west Lancashire growers, who again made the point that all areas of the industry, including protected edible crops and the hardy ornamental sector, will be dealt another body blow if the CCL is imposed, even with the 50 per cent. reduction. At a time when there are cosy summits in Downing street between the Prime Minister and the fanning industry, it is ironic that this most vulnerable part of the agriculture sector is again being hit hardest by the Government.

Horticulture has a disproportionate influence in certain parts of the country, such as the north-west of England and the west midlands. It is interesting that in the vale of Evesham horticulture employs many people, but the cross that the west midlands is bearing at the moment is the demise of the Rover car company. The Government say that they will fight for every job in the west midlands, but they are going about it in a strange way, because at the same time that Rover's problems are occurring, they are clobbering a major user of energy—the horticulture industry. That little cameo clearly demonstrates why we should not allow the clause to stand part of the Bill. The Government should think again about their objective of meeting the Kyoto target.

I am in favour of saving energy, but I am deeply suspicious about the way in which the Government have decided to go about it. When they came to office in 1997, they were bequeathed perhaps the first working environmental tax—the landfill tax. When that was introduced by my right hon. Friend the Member for Wells (Mr. Heathcoat-Amory), it was fiscally neutral and acknowledged as such. Shortly after coming to office, however, this Government started the process of creep. The landfill tax suddenly went up, but where was the parallel rebate? There was no rebate. As a former Treasury Minister, I am, perhaps, experienced enough to know that once one has made the bridgehead, one can do much with the tax that has been established. This tax is a Trojan horse to give the Government another nice little earner.

Mr. Loughton

Is not it true that for every £1 increase in the landfill tax under this Government, not a single penny has been hypothecated back to local community environmentally friendly schemes, as was the vast majority of the tax when it was introduced by my right hon. Friend the Member for Wells (Mr. Heathcoat-Amory)?

Mr. Jack

My hon. Friend makes a powerful point that reinforces my own. We have heard nothing from the Government to indicate that they have any intention of sticking to what they say is broad fiscal neutrality for the climate change levy.

The Financial Secretary tried in an intervention to carry the Committee in an argument for the measure on the basis that, broadly, there would be neutrality. I am intrigued by the number of representations—which I shall later describe—from companies which have been mentioned in the debate by my right hon. and hon. Friends. Company after company, in manufacturing, horticulture and other industries, has pointed out the inequalities in the proposal. In their judgment, the national insurance rebate does not touch their industry. It would have been interesting to see how this distribution of national insurance rebate worked out. In the words of a famous beer advertisement, it is a rebate that seems not to be reaching a vulnerable part of the economy, which is manufacturing—hence the representations that Members have received.

Mr. Stunell

Does the right hon. Gentleman share my incredulity at the Minister's claim that there was complete neutrality within the sectors?

Mr. Jack

I am grateful to the hon. Gentleman, who underscores my point. Perhaps the Financial Secretary will enlighten us on the bland statement of justification for the fiscal impact of the tax.

I do not think that the Minister will respond to my next point, but I shall make it. Given the way that legislation is framed in government, little notes go around Whitehall inviting Departments to make their comments on proposals. I shall be grateful if the Financial Secretary will consider being candid with the House, lifting the veil a little and letting us know what exactly the Minister of Agriculture, Fisheries and Food said on behalf of the horticulture industry, and what exactly the Department of Trade and Industry said in its more candid moments about the burden on industry.

The way in which an environmental tax has been half-inched by the Treasury is remarkable. It has suddenly become the great environmental arbiter of taxation. The Department of the Environment, Transport and the Regions is no longer in that position. The Deputy Prime Minister lost that battle a long time ago. In terms of environmental legislation, the Treasury is the powerhouse. We have not been told whether the rest of government, in a more candid moment, agreed with the proposal that we are discussing.

Mr. Swayne

Over the past two years, I have had extensive correspondence with Ministers on the disproportionate effect of tax on the protected horticulture sector. Appropriately and properly, I targeted the correspondence at the Minister of Agriculture, Fisheries and Food and the Secretary of State for the Environment, Transport and the Regions. It ended up being answered by the Financial Secretary.

Mr. Jack

My hon. Friend makes the point. I think that we are owed a candid description of what happened.

I read the "Financial Statement and Budget Report". Paragraph 6.25 on page 111 states: The Government recognises the case for giving special treatment to energy intensive sectors because of their high energy costs and their exposure to international competition. If ever there was a travesty of the English language, those two sentences are it.

Only today I received a letter from the British Oxygen Company stating that the full effect of the levy on it will be £8.4 million in the first year. It says that it will receive only £500,000 from the rebating of national insurance contributions, so it is £500,000 down in the highly environmentally friendly activity of gas separation. Where are we at? Who are the gainers in achieving this degree of fiscal neutrality? I see that the Financial Secretary is looking rather bored in response to that remark. It is clear that he does not have a clue how to respond to my point.

The British Oxygen Company went on to say: We are deeply concerned about the effect on the international competitiveness of British companies as a result of these proposals. I do not think that BOC is known as a whingeing company, but it is careful with its analysis.

There are other inconsistencies. I draw attention to a representation that I received from Calor Gas Ltd. Before doing so, however, I shall refer to paragraph 6.33 on page 112 of the "Financial Statement and Budget Report". The Government, in a moment of reckless generosity, said that they proposed to halve the rate of the levy applying to liquefied petroleum gas. If that was supposed to be earth-shattering encouragement to those involved with one of the most environmentally friendly fuels in the land, why is it that Calor Gas has written to me and other colleagues who are members of the Finance Bill Committee to point out that, despite that proposal, there is serious distortion that will encourage people away from LPG to other hydrocarbon fuels?

I shall not bore the Committee by going through all the arguments advanced by Calor Gas; perhaps that will be for another place at another time. However, it says: The Levy means LPG users paying an extra £5m/yr for the privilege of using a highly environmentally beneficial fuel. It is a strange tax that takes out such a fuel.

My right hon. Friend the Member for Wells was kind enough to refer to some work that I undertook to illustrate that if the gas moratorium had been lifted there would be no need for the climate change levy. As a result of an analysis prepared for me by the Library and of answers to parliamentary questions, it was shown conclusively that a reduction of 13 per cent. in energy generation by coal and an increase of 14 per cent. in the production of electricity by gas-fired power stations would achieve the initial target of a reduction of 2 million tonnes of carbon dioxide. If that is the case and more gas-fired power stations come in over and above the number required to remove the 2 million tonnes of CO₂, why have the Government not factored in that point and made substantial changes at this juncture to the climate change levy? They are in grave danger of double or treble counting the effect when my analysis suggests that there is no need for the levy.

8.45 pm

I refer the Financial Secretary to a further scheme that is based entirely on the Government's analysis. Again, it would do away with the necessity for the climate change levy in a wholly environmentally friendly way. It would boost the prospects of British agriculture and would be entirely environmentally friendly and CO₂, neutral. How, one may already ask, is that piece of magic to be achieved? The answer appears in a publication produced by the Department of Trade and Industry, which is entitled "Wood Fuel for Electricity and Heat". From it we learn that when we burn wood, CO₂ is released. However, if one then replants, that same CO₂ is locked up. In other words, there is a carbon-neutral cycle.

I tabled a parliamentary question to the Minister of State, Ministry of Agriculture, Fisheries and Food, to inquire how much short rotational coppice would have to be planted to take up the full 2 million tonnes of CO₂ that was the original target for the climate change levy. I received a letter in reply. I learned that 108,000 hectares would be required. That represents 0.58 per cent. of the cultivable land area in the United Kingdom. It so happens that the Treasury is funding the English rural development plan, and if we increase the hectarage from the current proposal in the plan by roughly a factor of four and spend about £120 million, we can subsidise farmers in the same way that the Government are already planning so as to produce the necessary 108,000 hectares of short rotational coppice.

I then turned to the Government's advisers to find out how much it would cost to have sufficient power stations to deal with the resulting electricity produced by that proposal. It would cost about £375 million—which is £1.5 million per megawatt of electricity produced—to burn the short rotational coppice. The Government's proposals assume that electricity producers will produce electricity from recyclable and renewable sources, so we can see that a model exists that would effectively make self-financing any additional marginal costs of the power produced in the way that I have described. The figure of 108,000 hectares, which has been confirmed by the Ministry of Agriculture, Fisheries and Food and borne out by the DTI's analysis, would be sufficient to do away with the climate change levy in a wholly environmentally friendly and beneficial way.

If I have managed to work that out, why has not the Treasury? If that scheme meant a marginal change in the cost of electricity to all users in the United Kingdom, everyone would feel that they were making their contribution to the reduction in carbon dioxide emissions. At that same time it would benefit farmers, be environmentally friendly and do away with all the complexity of the levy and the burden on manufacturing industry that it entails.

If that idea is ignored and is not investigated, that will suggest what I have thought for some time—namely, the Treasury could not give a fig about the DTI's work on renewables: all it wants is a nice little earner. I therefore urge the Financial Secretary to investigate the proposal that I have described. It is well thought out, well researched and backed by the Government's own analysis.

Finally, I support what my right hon. Friend the Member for Wells said about combined heat and power. He spoke about the situation of British Sugar, the reduction in its investment and its fears about the proposal.

I draw to the attention of the House a representation that I received from the Brunner Mond Company, which points out that although good-quality combined heat and power will somehow be exempt from the levy, in their wisdom the Government have not defined good-quality combined heat and power. A company could invest in beneficial technology only to find that, by a quirk of the rules, it is ruled ineligible for any benefits from the CCL. I shall certainly follow up the amendment proposals in Committee.

In summary, Opposition Members have advanced sufficient well-argued points to persuade the Government to think again about whether they want the clause to stand part of the Bill. Industry would be badly affected by it, and good alternatives exist. Given the availability of environmentally friendly ways of generating electricity—through combined heat and power—the Government's proposal fails.

Mr. Swinney

There is wide acceptance in the Committee of the importance of reducing greenhouse gas emissions, in line with agreements signed at the Kyoto summit. There is also a wide understanding of the importance of global climate change and a belief that every country should play its part in addressing the problem. However, there is considerable scepticism about whether the Government's policies of crude taxation on motorists or, in the case of the climate change levy, businesses, will satisfy those objectives. They seem to be crude measures for raising revenue, rather than sophisticated methods of tackling environmental problems.

The danger that I see arising from the Government's proposals is that competitiveness will be damaged, without the environmental objectives being achieved. I shall provide more details and examples of the specific impact of the Government's proposals on companies in the locality that I represent.

The levy has been a long time coming. It was first put out for consultation in March 1998. We must ask ourselves to what extent the Government have been listening to the results of the on-going consultation exercise. Undoubtedly, changes have been made to the original proposal since the pre-Budget report first touched on the subject, and some of the extremely harsh aspects of the levy have been watered down, but not sufficiently to meet the concerns that I shall raise tonight.

The Government claim that the levy will raise £1 billion, but that will be countered by the support given to energy efficiency measures by the recycling of revenues through a reduction of employers national insurance contributions, and through the system of first year capital allowances being allocated for energy-saving instruments. The Government have made it clear that the measure will be revenue neutral. The Financial Secretary confirmed that on the record tonight. The hon. Member for Hazel Grove (Mr. Stunell) gave a curious explanation of how the measure will be neutral, and we look forward to a more detailed explanation.

Some of the Government's comments have been contradicted by fairly substantial advisers. The firm of accountants Deloitte & Touche, whose material on the subject I have seen, states: It cannot yet be known whether the amount raised from CCL and the amount to be handed back will be equal. Indeed it looks as though the amount to be raised will be considerably in excess, so it is not surprising that so many businesses are complaining that they will be net losers. In addition…there would be a redistribution between firms that was largely arbitrary, depending not only upon the amount and type of their energy consumption, but also on the structure of their wage bill. That gets to the nub of some anxieties about the bluntness of the instrument that the Government propose to use.

I want to make several general points about the implications of the measure before citing some specific cases. First, let us consider competitiveness. The levy will significantly increase the energy bills of many companies and involve extra compliance costs for energy providers, thereby potentially placing them at a competitive disadvantage. Some substantial companies have been excluded from the exemptions from the climate change levy. They include glass, brick and paper manufacturers as well as the agriculture and whisky sectors. I shall say more about the latter sectors in a moment.

The measure could also undermine this country's competitiveness as a location for inward investors. The cost of energy is one of the calculations that is most closely scrutinised by inward investors when they decide on the appropriateness of individual countries as a location for their manufacturing bases.

My second general point is about red tape and bureaucracy. It is inevitable that the climate change levy will increase red tape and business costs. When the Government published their statement of intent on environmental taxation in 1997, one of the key criteria was that it must keep dead-weight compliance costs to a minimum. The hon. Member for Hazel Grove referred to schedules 6 and 7, which require a monumental amount of interpretation by individual companies in order to understand the full impact on their operation. When we take even a casual glance at schedules 6 and 7, the climate change levy cannot be described as a simple instrument. That will have implications for business costs.

My third general point is about environmental consequences. The Government place great emphasis on the environmental nature of the provision, but a representative of the Energy Saving Trust recently said: Energy tax would have to be set at a politically unacceptable level in order to produce the required reduction in emissions that the Government envisage. The Government claim some environmental benefit, but organisations that support that agenda say that the structure and the levels that the Government currently suggest will not provide the expected savings.

We should take note of the strength of opinion expressed in a report by the Select Committee on the Environment, Transport and Regional Affairs, which states: We do not believe that the Climate Change Levy meets the tests of good taxation. The system of exemptions, negotiated agreements and reduced rates has produced an extremely complex and cumbersome market instrument which will result in a relatively modest emissions reduction. The report also suggests that small and medium-sized enterprises will experience deep problems because the way in which the scheme is devised means that it will concentrate on larger enterprises that can make pooling arrangements to negotiate deals. We ignore that Select Committee evidence at our peril.

I shall comment on the specific implications of the measure for groups of businesses that are important to Scotland as a whole and to my constituency. The right hon. Member for Fylde (Mr. Jack) spoke about the measure's impact on the horticulture sector. Many of those who work in agriculture, such as dairy farmers and those involved in cereal production or the pig and the poultry sector, are heavy energy users. However, the agriculture sector now has relatively few employees. The beneficial impact of the reduction in employers national insurance contributions is therefore minimised because there are not many employees to compensate and benefit. The National Farmers Union has suggested a direct link between the imposition of the levy, the agricultural sector's competitiveness and further hardship. The Government should take close account of that evidence. I have mentioned the small business sector and the fact that many of the exemption agreements will exist between the Government and large energy-intensive sectors. It is difficult to understand how small businesses can gain such access.

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The third general industry to which I shall refer is the Scotch whisky sector, which has vociferously lobbied Members of Parliament who represent Scottish constituencies about the implications of the levy. The industry has referred to its energy efficiency record and its support for achieving the Kyoto targets, making substantial points about the anomalies and distortions in the Government's proposals. It has said that although distilling operations are eligible for exemption, on-site bottling may qualify only if deemed to be "technically linked". However, the Government have not defined that term and we await further clarification. I hope that the Financial Secretary will explain, and tell us when the information will be provided.

Off-site packaging operations without links to a distillery, which are common in the Scotch whisky industry, especially in relation to huge blending or bottling sites, will be ineligible for exemption from the levy. The industry estimates that that will increase its costs by approximately £400,000 per annum. It is also concerned that the Government can give no guarantee that the European Commission will give state aid clearance to the exemptions that are being discussed. This important sector is still awaiting clarification of those issues, so I hope that the Financial Secretary will say something about them tonight.

I have mentioned a successful company in my constituency, and do so again. Don and Low has invested heavily in its operations in Forfar—a successful county town in Angus—and is about to open an entirely new plant that will bring all its production under one roof. It has specifically designed that plant to be energy-efficient. However, the company is in the textiles sector, which has not been included in the industries to be exempt from the levy.

I quote a letter from the managing director of the wovens division of Don and Low. On 14 April, Mr. Stewart Baxter wrote to me to express the company's deep concern about the Government's proposals for the climate change levy. We note that the textile industry has been excluded from the list of industries that will receive a rebate on this levy. I enclose a report from our energy consultants which indicates that this levy will costs Don & Low an additional £197,390 per annum on our electricity. As a company that prides itself on its energy conservation programme, we find this hard to swallow. We trade in very competitive markets mainly in Europe and are being significantly disadvantaged through the strength of the pound and the cost of transport to our key markets. That is a triple whammy—the level of the pound, the cost of transport and the cost of the climate change levy—for one of the largest private sector organisations in my constituency.

The company's energy consultants have considered the details of the climate change levy, and I am sure that they will take another look at schedules 6 and 7 to determine whether they can elicit any further details. [Interruption.] The schedules may be impenetrable, but I am sure that that is what the consultants will try to do. Their advice is that that company will not be eligible for the energy-intensive user rebate because it does not occupy a site covered by the integrated pollution prevention and control directive, and is not a member of a negotiated agreement sector.

There is evidence that Don and Low will face difficulties as a result of the Government's proposals, and I urge Ministers to consider those details carefully. I have sent them to the Financial Secretary so that he may consider them, and the suggestion about making a full report. Such matters affect the competitiveness of some of the companies that will face the levy, and the Government ignore that evidence at their peril.

Mrs. Lawrence

I shall not speak for long, because I know that Opposition Members are anxious to make all their points and I do not want to hold them up. Having heard their comments so far, however, I conclude that they are based on one principle—an outdated principle with which the British public do not agree, and which evidence increasingly shows to be wholly wrong.

The Opposition's argument is based on the supposition that environmental protection measures cost jobs, but a company in my constituency proves the opposite by providing a wonderful example of the way in which, by adopting what could in business terms be described as "unnecessary" measures—in this instance, working for the benefit of the environment in a national park—it is possible for a company to gain a competitive advantage, and to secure its future in a highly competitive market.

When the Tories came to power in 1979, there were five oil refineries in Pembrokeshire. When they lost power in 1997, there were two. Part of the site occupied by the one in my constituency—Elf, a French refinery—is in a national park, and as a consequence the refinery has had to make extra investment. For example, I understand that storage tanks in most refineries are made of a shiny metal, because it is the cheapest material. Elf has had to employ painting techniques to make the tanks blend with the beautiful national park on the Pembrokeshire coast, and that has involved extra cost. It has also had to consult in detail on the placement of plant, chimneys and other items, and that too has meant additional expense.

Having made the extra investment, the company maintained its forward-looking approach, and took advantage of the Government's changes in tax on ultra-low-sulphur fuel. Its investment then secured its future, at least in the medium term. Only two years ago, that future was very much in the balance. Elf provides a good example of how—contrary to what the Opposition say—investment in the environment creates jobs rather than destroying them.

According to the 1998 Cambridge Econometrics document "Industrial Benefits from Environmental Tax Reform in the UK", it is estimated that the sectors that would experience either a reduction or no change in industrial unit costs as a result of a tax of the sort proposed by the Government currently account for 91 per cent. of employment in the UK. That includes manufacturing as well as service industries, and I think that, on both counts, it is a good illustration of what I said earlier—that environmental protection will preserve jobs, not destroy them.

Mr. Jack

Can the hon. Lady explain why an industry such as horticulture, which is carbon neutral and has a marvellous record for saving energy in order to survive and to maintain jobs, should now bear the extra tax?

Mrs. Lawrence

I thought that I had finished my speech when the right hon. Gentleman intervened, but now I shall add something. My point, although general, was nevertheless pertinent. The right hon. Gentleman has clearly had his own experience in his industry, but according to my experience the rules that the Government propose to protect the environment and work towards the Kyoto targets will increase productivity, and increase the ability of British industry to improve in the future.

Mr. Christopher Gill (Ludlow)

I preface my remarks by saying that, as someone who is interested in forestry and who has more than a passing interest in trying to ensure that there is a future for the countryside and a possibility of diversification, I hope that the Committee has listened carefully to the remarks of my right hon. Friend the Member for Fylde (Mr. Jack). He spoke a lot of good sense. Both Treasury and Agriculture Ministers would be well advised to make a further study of what he said.

It was unfair of the hon. Member for Preseli Pembrokeshire (Mrs. Lawrence) to categorise Opposition Members as believing that environmental measures all cost jobs, when my right hon. Friend made such an excellent presentation illustrating how measures could be taken to improve the environment in a cost-free manner, to the benefit of the countryside and the rural economy. Nothing that we have heard in the debate so far has done anything to convince me that the climate change levy is not a thoroughly bad tax. I suppose that it is to the hon. Lady's great credit that she has been the only Labour Member to say something in its defence.

I regret that we have not had the benefit of hearing from the Minister, who might at the beginning of the debate have explained why he feels that it is such a thoroughly good measure, so that we could address our remarks to his points and specifically deal with them, as well as make our own points.

My right hon. Friend the Member for Wells (Mr. Heathcoat-Amory) rightly pointed out that the climate change levy is an unnecessary measure and that the tax's objectives could be achieved by other means. It will not have escaped any hon. Members who are taking part in the debate that the tax occupies no fewer than 85 pages of the Bill. It is enormously complicated. That in itself will impose burdens on industry of every description: it will have to study the measure and try to find a way through. My right hon. Friend spoke about the tax's perverse and arbitrary effects and stressed the damage to the manufacturing industry. The tax's consequences will be higher prices for the product of industry, leading to a loss of competitiveness and inevitably, sooner or later, job losses too.

At this point, it is perhaps worth pointing out that at the moment, British industry enjoys one great benefit, which I think we are all taking for granted: with sterling as strong as it is relative to other currencies, British manufacturing industry is able to import its raw materials at a relatively cheap price. In the normal course of events, that situation will not exist for ever more because currencies fluctuate—they go up and down. When our currency comes down, as inevitably it will do sooner or later—

Mr. Drew

Is the hon. Gentleman buying euros, then?

Mr. Gill

No, nor must we join the euro—[Interruption.] That would be catastrophic for the whole country.

When our currency does depreciate, industry will find that the cost of its raw materials from abroad will be higher and a lot of the competitive advantage that allows the Government to impose taxes with a degree of impunity will no longer exist. In those circumstances, industry will find that the extra taxes imposed through, for example, the climate change levy and other measures, added to the increased cost of raw materials, will make our businesses very uncompetitive.

As has already been mentioned in the debate, 40 per cent. of the energy used in manufacturing will not be eligible for rebate. I think that my right hon. Friend the Member for Wells was quite right to instance the very topical issue of the current situation—which we all know about—in the motor industry. My right hon. Friend the Member for Fylde also rightly highlighted the situation in horticulture.

9.15 pm

The hon. Member for North Tayside (Mr. Swinney) mentioned the situation in farming. He briefly mentioned the pig and poultry sectors, which will be very adversely affected by the integrated pollution prevention and control regulations charges. I must point out to Ministers the very real danger that the imposition of even greater overhead costs and burdens on those two agriculture industries will simply result in the export of those two industries. If that happens, the United Kingdom will be driven to import ever more pigmeat, egg and poultry products.

The hon. Member for North Tayside also correctly said that the cut in employers national insurance in the agriculture industry will be but a drop in the ocean compared with the charges that they will have to pay. The number of people employed in agriculture has been drastically reduced, especially in the past few years. Therefore, the scope for the industry to recover a reasonable sum by a cut in employers national insurance simply does not exist.

In my constituency there is relatively little manufacturing industry. However, I do have one big employer—a most substantial manufacturer which is involved in converting aluminium. Two weeks ago, on Second Reading, I drew attention to the fact that aluminium converters will not be eligible for rebate, although aluminium smelters will be eligible. In much the same way, the hon. Member for Barnsley, Central (Mr. Illsley) was able to explain how glass manufacturers would be eligible for the rebate, whereas glass benders would not.

In the past 48 hours another example has been brought to my notice. In metal forging, there is a process in which two types of equipment—a hammer or a press—can be used. Under the IPPC, sites using the hammer-based process will be eligible for a negotiated agreement, whereas those who use presses will not, although the latter process is more efficient and is used by 70 per cent. of the industry. Those are but three examples, but they demonstrate how nonsensical the situation will be in various industries.

Mr. Loughton

Does my hon. Friend think that those nonsensical inconsistencies have anything to do with the fact that one of the United Kingdom's largest aluminium smelting plants is next to the Chancellor of the Exchequer's constituency?

Mr. Gill

That is an interesting point. However, I think that aluminium smelters would be in the category of industry that I described a moment ago as currently benefiting from relatively cheap imported raw materials. That situation will change, and the climate change levy, on top of the overheads that that industry already bears, will be the straw that breaks the camel's back. I think that my hon. Friend would confirm that aluminium smelters in other countries—I think that Iceland leads the field—have many natural advantages that do not exist in the United Kingdom. The aluminium smelters, and therefore probably the converters as well, are already in a parlous situation without the imposition of this tax.

The Government make great play of consultation. Whenever they face a difficult problem, they put it out to consultation. Talking to people, finding out their views and giving them an opportunity to be involved in the decision-making process may seem entirely reasonable, but it is all too evident in the Bill and many other aspects of the Government's work that, although an enormous amount of time and energy is spent on consultations, they are virtually disregarded when it comes to settling the Budget.

There are three clear examples in the Budget of industries that have been ignored after a consultation process: the small brewing industry, the quarrying industry and the manufacturing industry, which is the subject of this debate. There was a lot of consultation, but the Government have done nothing to meet the representations from industry.

This is a thoroughly bad tax. The basis for the eligibility for rebate is deeply flawed. It will exclude 40 per cent. of the energy used by manufacturing and will lead to distortions between and within industrial sectors. I have illustrated that for the industries to which I have referred. For individual firms operating in highly competitive international markets, such as the aluminium converter in my constituency, whose margins have already been tightly squeezed by the value of sterling, the tax will mean increased costs and thus pressure on competitiveness and jobs. I heard what the hon. Member for Preseli Pembrokeshire said about that, but I disagree with her. If any business has its overheads increased, they eventually become unsustainable and either the business folds or it reduces its costs. The first cost to be looked at is generally the labour cost and if reductions are made, it means job losses.

The Confederation of British Industry has pointed out that before the Budget, business made constructive proposals to the Treasury for modifications that would extend eligibility for the rebate, allowing more firms to help reduce emissions by signing up to legally binding agreements, delivering real energy efficiency improvements in return for the 80 per cent. rebate. So far all those proposals have been rejected with little explanation. Business is keen to bring forward revised proposals to address the concerns that the Government might have, but cannot do so without knowing fully the reasons for rejection. That is why it is regrettable that the Minister has not yet given us the Government's reasons for the tax. The CBI also believes strongly that the Government should give priority to explaining to sectors the detailed reasons why they have rejected business proposals for extending negotiating agreement eligibility. There is more that could be said on that subject, but others wish to speak.

I conclude by saying that our proposal is the most appropriate change that could be made in the circumstances. This is a bad tax, and the only sensible thing for the Government to do is to withdraw it.

Mr. Loughton

I am a member of the Select Committee on Environmental Audit, which produced a report on the energy tax and had the interesting experience of interviewing the Financial Secretary before the Budget. I found it odd that the Financial Secretary did not open this part of the debate with some words in support of the climate change levy. It was even more odd that so few Labour Members wanted to contribute to the debate, despite the fact that the proposal takes up more than 80 pages of the Bill.

The history of the energy tax has been one of complete fudge for the last 18 months, when it first appeared on the radar screens. One of the worst examples of the fudge and muddled thinking was given by my right hon. Friend the Member for Fylde (Mr. Jack) in respect of the horticulture industry. That industry—which absorbs carbon dioxide and emits oxygen, and is one of the biggest contributors to the Kyoto targets on its own—is severely threatened. The Government have had to climb down, but only partly, in the Budget to prevent the horticulture industry from moving lock, stock and barrel to Holland, in particular, where the industry is exempt from energy tax.

Another example concerns liquid petroleum gas, and we have all received memos from Calor Gas. Again, there was only a 50 per cent. climbdown by the Government on an environmentally friendly fuel. The Government have been entirely inconsistent with last year's Budget, in which they recognised the environmental benefits of LPG by reducing fuel duty for vehicle LPG by 29 per cent.—only to clobber LPG for non-vehicular uses with the energy tax this year.

The main point, which the Minister continues to duck, concerns competitiveness. A classic example is the effect of the tax on the British steel industry. We are at the stage where the majority of steel used in this country is imported from overseas, with a large quantity coming from countries such as Korea, South Africa and India, none of which is bound by the terms of the Kyoto protocol.

Does the Financial Secretary seriously think that, under such uncompetitive terms, British steel production will remain in Britain when it can move to anywhere in the world, including the three countries to which I have referred where there is no energy tax on steel production and the costs are much lower? Closer to home—and much worse—the industry could move to the continent; in Belgium and Luxembourg, for example, there is a 100 per cent. exemption for steel production.

In the Environmental Audit Committee, I pointed out that even after the full rebates on offer to the British steel industry, there will be a tax equivalent to £2.40 per tonne of steel produced in this country, which compares with 4p per tonne in Germany and an average for Europe as a whole of 40p per tonne. When I pointed out that that might just impact on the competitiveness of the British steel industry, the Financial Secretary said that he imagined that the industry was pleased with the much more favourable position in which it finds itself. That was woefully inadequate.

Some 72 per cent. of car components used in new cars in the UK are now imported from overseas—a major component being steel. That is an increase of more than 10 per cent. over the last three years. Despite all the good work done in reducing fuel consumption by the British steel industry over a number of years and despite signing a memorandum of understanding with the Department of the Environment, Transport and the Regions on energy savings in December 1999, the British steel industry will be caned heavily.

The Financial Secretary pretends that countries such as Korea, South Africa and India—which would benefit from the production of steel moving abroad—can exist in some sort of environmental dome; that the carbon dioxide emissions that they produce in a much less regulated system than that of this country can be contained within their own airspace. That is a complete nonsense, of course, and if the Government are serious about global environmental improvement, they need to take account of the competitive advantage they will give to less environmentally friendly countries on the other side of the planet.

9.30 pm

Mr. Timms

I am slightly concerned by the hon. Gentleman's line of argument. Does he believe that the UK should meet its Kyoto targets?

Mr. Loughton

I agree entirely that this country should meet its Kyoto targets, if not the extended target as well. Those targets could be met by a raft of other measures that have already been put in place, many by the previous Government. It could have been met even faster if we had not had the moratorium on gas-fired power stations that the Government introduced two years ago for no other reason than pandering to the coal mining lobby, regardless of the environmental impact. They were trying to have their cake and eat it.

The other inconsistency in the Government's approach has been the use of the IPPC criteria for those companies that will be exempt. We are the only country in the EU which uses those criteria for determining who will be subject to an energy tax. It will be the non-polluting businesses which stand to suffer the most. I fail to see, despite the Minister's constant protestations, how the measure can be a sector-neutral tax. The same sectors will experience great divergences.

One sector that will not be exempt is glass, but a major part of the glass industry produces double glazing, which has a great environmental benefit. It will still be 100 per cent. liable for the energy tax. Some two thirds of the energy bill of a supermarket chain such as Sainsbury's goes on chiller cabinets for chilled and frozen foods. That cannot be reduced by new technology. The textile industry in the east midlands has lost half its work force in the past 10 years and Coats Viyella has just announced the closure of another factory with the loss of 200 jobs. That industry will not benefit from the exemptions to the tax.

BOC has already been mentioned, and it is one of the largest employers in my constituency. Some 78 per cent. of the cost of the industry is electricity, and it is one of the five largest users of electricity in the UK. It stands to lose £8.5 million through the energy tax charges, and will gain only £500,000 through the national insurance changes. What will happen to BOC, a company in the throes of a takeover by a European and American consortium? As the company itself has pointed out, it will be able easily to remove production of those gases to alternative countries or to increase the prices to the consumer, both of which will have knock-on effects on British manufacturing industry, including the steel and chemical industries, supermarkets and retailers who use its products. That is despite the fact that BOC has voluntarily improved its energy efficiency by some 13 per cent. over the past five years.

So much of the detail of this new and harmful tax is still shrouded in secrecy. We have not seen the terms of the agreements. We have not seen how it can be sector neutral. We do not know how long the rebate will last after the initial few years. How will the second wave of companies to be exempt be decided? We have had no details of how the emissions permit trading system will operate. We have no further details—which were promised by the Minister when he appeared before the Environmental Audit Committee—on other possible criteria for exemption instead of the IPPC criteria. We also have no details about how the negotiated agreements will be monitored.

The entire tax has been a fudge, a mess and a muddle for the past 18 months. The Government still do not know what they are doing, and the details in the Finance Bill are a triumph of quantity over quality. A red herring of green taxation is being used as an excuse for another revenue-raising power, which will destroy the competitiveness of so much of British industry, for which the Budget has done little indeed.

Mr. Swayne

My hon. Friend the Member for Ludlow (Mr. Gill) spoke about how the effect of the tax might be masked for a while by the competitive exchange rate enjoyed by companies that import a disproportionate amount of the raw products that they need. However, that will not be true of the protected horticulture sector, which will be exposed to the full force of this disastrous tax from the outset.

I have raised the problems faced by the protected horticulture sector in questions, correspondence and debate for the past two years. Recently, my correspondence has focused on the industry's attempts to secure the 80 per cent. rebate that was to be available on detailed issues to do with the progress of negotiations, and on how agreements could be enforced technically.

After all that correspondence, and all the words written to me by the Financial Secretary, we now discover that the protected horticulture industry is not eligible for any rebate because it is not covered by the European Union's IPPC directive. When he winds up the debate, I hope that the Financial Secretary will explain how that confusion, which has caused so much fruitless correspondence, arose.

As it applies to the protected horticulture sector, this is a daft tax. As my hon. Friend the Member for East Worthing and Shoreham (Mr. Loughton) said, the horticulture sector consumes carbon dioxide, and is therefore an environmentally friendly industry. However, it is highly exposed to competitive pressure from the rest of Europe, and from Holland in particular.

The consequence of the industry's destruction would be that this country would have to import produce from elsewhere. Those imports, to a very great extent, would arrive by air and thus use aviation fuel—one of the worst forms of pollution, and one of the worst generators of greenhouse gases. That would be a ridiculous situation for this country.

The Government acknowledge that competition abroad provides a generous regime for energy taxes, and have therefore agreed a temporary 50 per cent. rebate for protected horticulture. I have never believed that a rebate of 50 per cent. would be enough—from the start, I have argued that the rebate should be of 100 per cent—but why is it to be temporary? Why is a sunset clause to be built into the proposal to ensure that, as an absolute maximum, the rebate will last for only five years? Is it because the Government recognise that no protected horticulture industry will exist in five years? Is that why they consider that the arrangement can be discarded then?

Mr. Tyrie

I shall be brief, as time is getting on. This proposed tax is extraordinary. I have seen nothing like it since the poll tax first appeared in the mid-1980s. [Interruption.] When I first saw the details of it, in 1985, the poll tax was called the residents' charge, and I fought a bitter—and, I am afraid, fruitless—battle against it. Some Labour Members laugh now, but they will wring their hands. I hope that they will do their best to fight this extraordinary levy when they start receiving complaints from manufacturing firms in their constituencies.

I am not even sure that this is a tax. A tax, according to any definition of taxation, needs a degree of certainty, but there is no certainty built into this. The levy will be negotiated individually with firms. There is no precedent for a measure with so much uncertainty built in. I even wonder—and perhaps this would better be made as a point of order—whether it would qualify as a money Bill. The House of Lords might like to consider that at a later stage, if it has not been completely neutered by further reform.

The main objections to the tax have already been raised. It will not target the people who produce the CO₂ emissions—if, indeed, the objective is to cut down CO₂ emissions. Gas generation should be encouraged and coal-fired generation of electricity discouraged. The levy will not achieve that. To believe that a tax can be devised that is not only neutral overall but neutral with respect to manufacturing stretches credulity. I cannot believe that that is achievable. Officials must have been working overtime to think of a way of squaring that circle so that the Minister could say what he said a moment ago.

For the tax to have the intended effect, there must be a massive restructuring of British industry. I do not believe that the Government have the stomach for that, but I believe that they have the stomach for tax increases. A measure cloaked in an environmental guise will turn into a revenue-raising measure that will have little, if anything, to do with Kyoto.

The heart of the case is built around some of the points made by my hon. Friend the Member for East Worthing and Shoreham (Mr. Loughton) and my right hon. Friend the Member for Wells (Mr. Heathcoat-Amory). The medium-term effect of the tax must be that a significant proportion of British industry will go abroad to places not covered by the Kyoto agreement. Its net effect may be to increase global emissions of CO₂ overall. If the Government have not even estimated what the net reduction in global CO₂ emissions would be as a consequence—and I have seen nothing on the Government's capacity to fulfil the Kyoto agreement—they should withdraw the measure.

Mr. Drew

I am confused about how removing the climate change levy will convince countries that have not yet signed up to Kyoto to do so.

Mr. Tyrie

I find it ludicrous that we should embark on a massive restructuring of British industry, with a possible huge economic disbenefit to many people in Britain, merely in the hope that other countries will finally sign up to Kyoto. If we are to reduce CO₂ emissions globally, we must act globally. We must move forward with the main producers on board. The main producers of CO₂ emissions are not on board: the United States will drag its feet, and China has given no indication that it is prepared to implement the Kyoto agreement.

This is an extraordinary, ill-thought-out tax, and I sincerely hope that before it is too late, the Government will rethink the measure and get rid of the 83 pages of schedule 6.

Mr. Timms

There was some procedural confusion among Opposition Members at the outset of the debate. We have not been debating an amendment—this is a clause stand part debate, which I am responding to in the normal way.

In opening the debate, the right hon. Member for Wells (Mr. Heathcoat-Amory) made a series of wild and uncharacteristically ill-informed generalisations criticising the climate change levy. He made several inaccurate comments, and I look forward to putting them right in Committee.

9.45 pm

Having made some wild generalisations, the right hon. Gentleman fastened on a couple of specific complaints, but no amendments have been tabled on combined heat and power, the integrated pollution prevention and control basis for negotiated agreements or any of his points. That is why I found his speech confusing. The hon. Member for Hazel Grove (Mr. Stunell) rightly said that the right hon. Gentleman did not refer to the seriousness of the problem of climate change, and nor did he refer to the Kyoto objectives, which we have a statutory obligation to meet. By those omissions, he reflected the Tory party's dreadful record on the environment.

The hon. Gentleman was right to acknowledge those points and to support the principle of introducing the levy, which should be supported by everyone concerned about climate change and global warming. The levy is strongly supported by environmental organisations, and there has been a steady and encouraging stream of letters from constituents to Members of Parliament saying that the Government must stick to their guns on the climate change levy. That is what we shall do.

Mr. Tyrie

Will the Minister give way?

Mr. Timms

I will not give way at this stage.

Climate change is the single greatest environmental threat facing the world today. Globally, average temperatures are rising by about 0.15 deg C per decade, and 1998 was the warmest year on record. The intergovernmental panel on climate change predicts that if no action is taken to limit greenhouse gases, global average temperatures could rise by up to 3.5 deg C by the end of the next century. That would cause extreme changes in weather patterns, rising sea levels, damage to agriculture and population displacement with potentially catastrophic effects in some parts of the world.

Mr. Swayne

Will the Minister give way?

Mr. Timms

I should like first to make some progress.

At the Kyoto Summit in 1997, the developed countries agreed a legally binding commitment to reduce greenhouse gas emissions. The UK's contribution was set at a 12.5 per cent. reduction in emissions on 1990 levels. Following that agreement, in March 1998 my right hon. Friend the Chancellor asked Lord Marshall—then president of the Confederation of British Industry—to produce a report on economic instruments and the business use of energy. His report was published in November 1998 and said that there probably is a role for a tax if businesses of all sizes and from all sectors are to contribute to improved energy efficiency and help meet the UK's emissions targets.

In the light of that report and further consultations, the Chancellor announced in the March 1999 Budget that we would introduce a climate change levy on business use of energy, to take effect from April 2001. The levy forms a key part of our climate change programme and our drive towards environmental modernisation. It will make a significant contribution to meeting our legally binding Kyoto target and, moving beyond that, towards our domestic aim of a 20 per cent. reduction in CO₂ emissions. I was pleased to hear the hon. Member for East Worthing and Shoreham (Mr. Loughton) support that, even if I disagreed with much of the rest of his speech.

Revenues from the levy will be recycled to business through cuts in employer national insurance contributions and additional support to promote energy efficiency, including renewable sources of energy.

Mr. Tyrie

Would the Minister substantiate the point that he made early in his remarks that the recycling of the money—implying fiscal neutrality—would be achieved within the manufacturing sector? How can that be ensured?

Mr. Timms

It has been ensured. It was set out in the pre-Budget Report last November. I am surprised that more hon. Members were not aware of that. However, I shall address that point as several Members have referred to the matter.

We made it clear that the climate change levy will be charged on the industrial and commercial use of energy. It is aimed at maximum environmental effectiveness while safeguarding the competitiveness of UK firms. We also wanted to make it as simple as possible to administer and, thanks to extensive consultation, we have achieved that. The tax is well designed as a result both of the wide discussions that have taken place since the Chancellor's announcement a year ago and of the changes that we made subsequently.

For social policy reasons, the levy will not be charged on the domestic use of energy, because of our concern at the current high rate of fuel poverty. The existing rules used to establish which supplies of fuel and power are charged at the lower rate of 5 per cent. value added tax will be used to determine domestic consumption. As a consequence, the non-business use of energy by charities will also not be subject to the levy.

Mr. Swinney

Will the Minister clarify whether local authorities, as public sector bodies, will be liable to pay the climate change levy?

Mr. Timms

Yes, they will. They will also benefit substantially from the reduction in national insurance contributions. For that reason, the package is an attractive one for many local authorities.

Several hon. Members referred to combined heat and power. As I pointed out in an intervention, the exemption from the levy for combined heat and power will create a favourable environment for the development of such systems. I anticipate that many firms—to some of which I have spoken—will invest in CHP as a result.

I am aware of the case of British Sugar, which intends to defer decisions on a couple of CHP systems because it would prefer an even more favourable environment. However, it is right that the most favourable regime under the levy should be for renewable energy sources; renewable energy is much less well established in the UK and, critically, it produces zero emissions, whereas there are emissions from CHP.

However, the levy will provide a significant boost for good-quality CHP systems. We shall certainly see many new schemes of that sort as a result.

Mr. Stunell

Is the Minister assuring the Committee that the introduction of the levy in its current form will accelerate the achievement of the 10,000 MW target for CHP by 2010, or slow it down?

Mr. Timms

The levy will provide a significant additional boost for investment in CHP—I think that is the point that the hon. Gentleman was making. It is good news for CHP. The hon. Gentleman also suggested that some funny money was involved in the package of support for energy efficiency measures. That is not true. The 100 per cent. capital allowances are certainly not funny money; they will cost the Exchequer £100 million in year one and rather more in year two. Of course, the real incentive for extra investment and for extra effort to save energy is provided by the levy itself. It will increase the incentives for people to reduce energy usage. I can assure him that there is a genuine and substantial Exchequer cost in the capital allowance part of the energy efficiency fund as well as in the £50 million to which he also referred.

Mr. Loughton

The Minister told the Select Committee on Environmental Audit that the £100 million was purely capital allowances that are now available in year one rather than later, so the actual amount of tax that companies will pay is no less—the matter relates only to the timing of the payment of the tax.

Mr. Timms

I made the point that in year one there is a £100 million cost to the Exchequer as a result of that package of allowances. Of course, as the hon. Gentleman will know, capital allowances are extremely popular among firms and undoubtedly have a significant effect in encouraging investment of that kind.

Mr. Stunell

rose—

Mr. Timms

I will not give way for a moment. I want to make some more headway.

The right hon. Member for Fylde (Mr. Jack), in his customarily well-informed, engaging way, made a point about the strict consents policy that I have heard him make a couple of times now. The lifting of the strict consents policy has already been announced. It was only ever intended to be a temporary policy—that was always made absolutely clear—and the three years of its application will not have a measurable impact on emissions by 2010. Therefore I hope that we can dispose of that argument, ingenious although it is.

The right hon. Gentleman made the slightly idiosyncratic suggestion that we should put all our eggs in one basket, the basket in question being short-rotation coppicing. I believe that there is a role for short-rotation coppicing. I have visited the first power station to make use of such coppicing; it is being developed by Kelda in the constituency of my hon. Friend the Member for Selby (Mr. Grogan). I do not know whether the right hon. Gentleman has been there; I recommend him to go if he has not been. It is an interesting visit. There are some issues surrounding the cost of producing energy in that way, but I believe that there is a role for it, alongside other renewable power generation methods. The levy will help; that perfectly illustrates its importance. The levy is precisely the type of measure that is needed to stimulate new and renewable energy generation methods, because they are completely exempted from the levy whereas conventional methods are not. That will provide an incentive effect.

However, the right hon. Gentleman seemed to suggest that there was some easy, obvious, painless solution, which no one would ever notice, to address the problem of emissions in the United Kingdom. There is not. That is illusory, and I do not think that that view should be expressed.

My hon. Friend the Member for Preseli Pembrokeshire (Mrs. Lawrence) made some important points about the commercial opportunities for the UK in the development of these new techniques, and in environmental modernisation. She is absolutely right about that.

The right hon. Member for Fylde asked me about the Treasury's work with other Government Departments. Unlike the Government he was a member of, ours is a joined-up Government, and that is certainly the case in this area, as in every other.

Several hon. Members asked me to go into more detail—in fact, the hon. Member for Chichester (Mr. Tyrie) just asked me to do so—about revenue neutrality. All the proceeds of the levy will be recycled to business, but beyond that, the levy will indeed be broadly neutral between the manufacturing and services sectors. That means that the impact of the combination of payments under the levy, the reduction in employer's national insurance contributions and the additional support for energy-saving measures in the £150 million fund on the manufacturing sector or on the services sector will broadly balance each other out. That was spelt out in the pre-Budget report in November. Very many firms will be net beneficiaries from the package. I was pleased that the right hon. Member for Wells said that he was a director of two of them.

Of course, the effect of a levy such as this, which is revenue neutral overall but shifts the burden on an unchanged overall sum in tax from employment to energy use, will be a further boost for employment in the UK. That is another reason why the levy is such good news.

Finally, I want to respond to the points that the hon. Member for New Forest, West (Mr. Swayne) and others made on horticulture. The Bill would provide the horticulture sector with a uniquely favourable arrangement. Opposition Members should have welcomed that. It is a significant change on what was said in November. I did not notice much of a welcome. It is a very favourable step from the viewpoint of the horticulture sector. There will be a ring-fenced fund, within the wide range of the efficiency package, to help energy-efficient investments in horticulture. Thermal screens will be eligible for help from the fund. Finally, the levy will be set at the 50 per cent. rate for up to five years.

10 pm

By the time the levy comes into effect next year, it will have been two years since it was announced, and longer still since Lord Marshall's report. That long period of preparation was adopted to ensure that we could get the details right and to enable everybody involved to prepare adequately for the change. That has been achieved. It has been an impressive exercise, and I thank everyone who took part. I know that some would have liked more change, and I do not blame anyone for continuing to lobby for lower tax bills, which is everyone's prerogative. The great majority of the concerns that were expressed have now been wholly addressed and substantial changes have been made in response to the consultation. I commend this important clause to the Committee.

Mr. Flight

We do not object to the Kyoto targets or our obligations, but as my hon. Friend the Member for East Worthing and Shoreham (Mr. Loughton) has pointed out, the clause has a history of fudge, muddle and pork-barrel politics. This is a crackpot proposal. Its impact will be unfair and arbitrary. The 1PPC guidelines are not suitable, and the Kyoto objectives can be achieved by other means such as increased use of gas power and coppicing. It is nonsense not to exempt all combined heat and power processes, as almost all have to sell electricity to the grid and buy it back. As the hon. Member for Hazel Grove (Mr. Stunell) pointed out, the subject of the levy is wrong, and it should be targeted upstream on CO₂ emissions.

Conservative Members do not believe that the levy will be tax neutral. As hon. Members have pointed out, it is inevitable that it will become a nice little earner.

BOC has been cited as an example of a sound, environmentally friendly British company that will suffer, and indeed it will. Its bill, net of its rebate, will be just under £8 million. It spends £60 million per annum, or 78 per cent, of its production costs, on electricity. Its air separation process is environmentally friendly, and it has spent a considerable amount on environmentally friendly investment in this country. It will be placed at a major competitive disadvantage to businesses in the Netherlands and Germany, where industrial gases companies are exempt from such taxes.

The clause will cause enormous damage to British manufacturing, including the steel industry. We are grateful for the sop that has been thrown to horticulture, but I assure the Minister that present exchange rates mean that the substantial horticulture industry in my part of the world believes that it will not exist in a year and a half if the clause is passed.

In the motor car industry, the Government are giving to Rover with one hand, and imposing a £1 million tax with the other. As the hon. Member for Preseli Pembrokeshire (Mrs. Lawrence) pointed out, environmental change produces jobs, but they will be nothing compared with the jobs that will be lost in British industry and engineering and in the heartland of Labour constituencies. The clause is absolutely typical of elitist, politically correct new Labour. The Minister calls it good news. He should tell that to British industry. This will be a disaster for British industry.

Question put, That the clause stand part of the Bill:—

The Committee divided: Ayes 309, Noes 122.

Division No. 175]

[10.4 pm

AYES
Abbott, Ms Diane	Benn, Rt Hon Tony (Chesterfield)
Adams, Mrs Irene (Paisley N)	Bennett, Andrew F
Ainger, Nick	Bermingham, Gerald
Ainsworth, Robert (Cov'try NE)	Berry, Roger
Allen, Graham	Best, Harold
Anderson, Janet (Rossendale)	Betts, Clive
Armstrong, Rt Hon Ms Hilary	Blackman, Liz
Ashton, Joe	Blears, Ms Hazel
Atherton, Ms Candy	Boateng, Rt Hon Paul
Atkins, Charlotte	Borrow, David
Austin, John	Bradley, Keith (Withington)
Ballard, Jackie
Barnes, Harry	Brinton, Mrs Helen
Bayley, Hugh	Brown, Rt Hon Nick (Newcastle E)
Beard, Nigel	Brown, Russell (Dumfries)
Beckett, Rt Hon Mrs Margaret	Browne, Desmond
Beith, Rt Hon A J	Bruce, Malcolm (Gordon)
Bell, Stuart (Middlesbrough)	Burstow, Paul
Benn, Hilary (Leeds C)	Butler, Mrs Christine

Campbell, Rt Hon Menzies (NE Fife)	Hall, Patrick (Bedford)
	Hamilton, Fabian (Leeds NE)
Campbell, Ronnie (Blyth V)	Hanson, David
Campbell-Savours, Dale	Harman, Rt Hon Ms Harriet
Caplin, Ivor	Heal, Mrs Sylvia
Casale, Roger	Healey, John
Caton, Martin	Heath, David (Somerton & Frome)
Chaytor, David	Henderson, Doug (Newcastle N)
Clapham, Michael	Henderson, Ivan (Harwich)
Clark, Rt Hon Dr David (S Shields)	Heppell, John
Clark, Dr Lynda (Edinburgh Pentlands)	Hill, Keith
	Hinchliffe, David
Clarke, Charles (Norwich S)	Hodge, Ms Margaret
Clarke, Eric (Midlothian)	Hoey, Kate
Clarke, Rt Hon Tom (Coatbridge)	Hood, Jimmy
Clarke, Tony (Northampton S)	Hoon, Rt Hon Geoffrey
Clelland, David	Hope, Phil
Clwyd, Ann	Hopkins, Kelvin
Coaker, Vernon	Howells, Dr Kim
Coffey, Ms Ann	Hughes, Ms Beverley (Stretford)
Colman, Tony	Hughes, Kevin (Doncaster N)
Connarty, Michael	Hughes, Simon (Southwark N)
Corbett, Robin	Humble, Mrs Joan
Corbyn, Jeremy	Hurst, Alan
Corston, Jean	Hutton, John
Cox, Tom	Iddon, Dr Brian
Cranston, Ross	Illsley, Eric
Crausby, David	Jackson, Ms Glenda (Hampstead)
Cryer, Mrs Ann (Keighley)	Jackson, Helen (Hillsborough)
Cryer, John (Hornchurch)	Jamieson, David
Cummings, John	Johnson, Alan (Hull W & Hessle)
Cunningham, Rt Hon Dr Jack (Copeland)	Johnson, Miss Melanie (Welwyn Hatfield)
Cunningham, Jim (Cov'try S)	Jones, Rt Hon Barry (Alyn)
Dalyell, Tam	Jones, Helen (Warrington N)
Darling, Rt Hon Alistair	Jones, Ms Jenny
Davey, Edward (Kingston)	(Wolverh'ton SW)
Davey, Valerie (Bristol W)	Jones, Jon Owen (Cardiff C)
Davidson, Ian	Jones, Dr Lynne (Selly Oak)
Davies, Rt Hon Denzil (Llanelli)	Jones, Martyn (Clwyd S)
Dawson, Hilton	Jowell, Rt Hon Ms Tessa
Dean, Mrs Janet	Kaufman, Rt Hon Gerald
Denham, John	Keen, Alan (Feltham & Heston)
Dobbin, Jim	Kemp, Fraser
Donohoe, Brian H	Khabra, Piara S
Doran, Frank	Kidney, David
Drew, David	Kilfoyle, Peter
Dunwoody, Mrs Gwyneth	King, Ms Oona (Bethnal Green)
Eagle, Angela (Wallasey)	Kirkwood, Archy
Edwards, Huw	Ladyman, Dr Stephen
Ennis, Jeff	Lawrence, Mrs Jackie
Etherington, Bill	Laxton, Bob
Fearn, Ronnie	Lepper, David
Field, Rt Hon Frank	Leslie, Christopher
Fisher, Mark	Levitt, Tom
Fitzsimons, Lorna	Lewis, Ivan (Bury S)
Flint, Caroline	Linton, Martin
Flynn, Paul	Livsey, Richard
Foster, Rt Hon Derek	Lloyd, Tony (Manchester C)
Foster, Don (Bath)	McAvoy, Thomas
Foulkes, George	McCafferty, Ms Chris
Gardiner, Barry	McDonagh, Siobhain
George, Andrew (St Ives)	Macdonald, Calum
George, Bruce (Walsall S)	McDonnell, John
Gerrard, Neil	McFall, John
Gibson, Dr Ian	McGuire, Mrs Anne
Godman, Dr Norman A	McIsaac, Shona
Godsiff, Roger	McKenna, Mrs Rosemary
Goggins, Paul	Mackinlay, Andrew
Golding, Mrs Llin	McNamara, Kevin
Gordon, Mrs Eileen	McNulty, Tony
Griffiths, Win (Bridgend)	MacShane, Denis
Grocott, Bruce	McWalter, Tony
Grogan, John	McWilliam, John
Gunnell, John	Mahon, Mrs Alice
Hain, Peter	Marsden, Gordon (Blackpool S)

Marsden, Paul (Shrewsbury)	Smith, Miss Geraldine (Morecambe & Lunesdale)
Maxton, John
Meacher, Rt Hon Michael	Smith, John (Glamorgan)
Meale, Alan	Smith, Llew (Blaenau Gwent)
Michael, Rt Hon Alun	Smith, Sir Robert (W Ab'd'ns)
Michie, Bill (Shef'ld Heeley)	Snape, Peter
Michie, Mrs Ray (Argyll & Bute)	Soley, Clive
Miller, Andrew	Southworth, Ms Helen
Mitchell, Austin	Spellar, John
Moonie, Dr Lewis	Squire, Ms Rachel
Moore, Michael	Starkey, Dr Phyllis
Moran, Ms Margaret	Steinberg, Gerry
Morgan, Ms Julie (Cardiff N)	Stevenson, George
Morley, Elliot	Stewart, David (Inverness E)
Morris, Rt Hon Ms Estelle (B'ham Yardley)	Stewart, Ian (Eccles)
	Stinchcombe, Paul
Mullin, Chris	Stoate, Dr Howard
Murphy, Denis (Wansbeck)	Strang, Rt Hon Dr Gavin
Murphy, Rt Hon Paul (Torfaen)	Straw, Rt Hon Jack
Naysmith, Dr Doug	Stringer, Graham
Norris, Dan	Stuart, Ms Gisela
O'Brien, Bill (Normanton)	Stunell, Andrew
O'Brien, Mike (N Warks)	Sutcliffe, Gerry
O'Hara, Eddie	Taylor, Rt Hon Mrs Ann (Dewsbury)
Olner, Bill
O'Neill, Martin	Taylor, David (NW Leics)
Organ, Mrs Diana	Taylor, Matthew (Truro)
Osborne, Ms Sandra	Temple-Morris, Peter
Palmer, Dr Nick	Thomas, Gareth (Clwyd W)
Pearson, Ian	Timms, Stephen
Pickthall, Colin	Tipping, Paddy
Pike, Peter L	Todd, Mark
Plaskitt, James	Tonge, Dr Jenny
Pond, Chris	Touhig, Don
Pound, Stephen	Trickett, Jon
Prentice, Ms Bridget (Lewisham E)	Truswell, Paul
Prentice, Gordon (Pendle)	Turner, Dennis (Wolverh'ton SE)
Prescott, Rt Hon John	Turner, Dr Desmond (Kemptown)
Prosser, Gwyn	Turner, Dr George (NW Norfolk)
Purchase, Ken	Turner, Neil (Wigan)
Quin, Rt Hon Ms Joyce	Tyler, Paul
Quinn, Lawrie	Tynan, Paul
Radice, Rt Hon Giles	Vis, Dr Rudi
Rapson, Syd	Walley, Ms Joan
	Ward, Ms Claire
Raynsford, Nick	Watts, David
Rendel, David	Webb, Steve
Roche, Mrs Barbara	White, Brian
Rooker, Rt Hon Jeff	Whitehead, Dr Alan
Ross, Ernie (Dundee W)	Wicks, Malcolm
Rowlands, Ted	Williams, Rt Hon Alan (Swansea W)
Roy, Frank
Ruane, Chris	Williams, Alan W (E Carmarthen)
Ruddock, Joan	Williams, Mrs Betty (Conwy)
Russell, Bob (Colchester)	Willis, Phil
Russell, Ms Christine (Chester)	Wills, Michael
Ryan, Ms Joan	Wilson, Brian
Salter, Martin	Winnick, David
Sanders, Adrian	Wood, Mike
Sarwar, Mohammad	Worthington, Tony
Savidge, Malcolm	Wray, James
Sawford, Phil	Wright, Dr Tony (Cannock)
Sedgemore, Brian	Wyatt, Derek
Sheerman, Barry
Skinner, Dennis	Tellers for the Ayes:
Smith, Rt Hon Andrew (Oxford E)	Mr. Jim Dowd and
Smith, Angela (Basildon)	Mr. Mike Hall.

NOES
Amess, David	Bottomley, Peter (Worthing W)
Ancram, Rt Hon Michael	Bottomley, Rt Hon Mrs Virginia
Arbuthnot, Rt Hon James	Brady, Graham
Bell, Martin (Tatton)	Brazier, Julian
	Brooke, Rt Hon Peter
Bercow, John	Browning, Mrs Angela
Blunt, Crispin	Bruce, Ian (S Dorset)
Boswell, Tim	Cash, William

Chapman, Sir Sydney (Chipping Barnet)	McIntosh, Miss Anne
	MacKay, Rt Hon Andrew
Clappison, James	Maclean, Rt Hon David
Collins, Tim	McLoughlin, Patrick
Cormack, Sir Patrick	Malins, Humfrey
Cran, James	Mates, Michael
Davies, Quentin (Grantham)	Maude, Rt Hon Francis
Davis, Rt Hon David (Haltemprice)	Mawhinney, Rt Hon Sir Brian
Donaldson, Jeffrey	May, Mrs Theresa
Dorrell, Rt Hon Stephen	Moss, Malcolm
Duncan Smith, Iain	Norman, Archie
Faber, David	Ottaway, Richard
Fabricant, Michael	Page, Richard
Fallon, Michael	Paice, James
Flight, Howard	Paterson, Owen
Forth, Rt Hon Eric	Pickles, Eric
Fowler, Rt Hon Sir Norman	Portillo, Rt Hon Michael
Fox, Dr Liam	Prior, David
Gale, Roger	Randall, John
Garnier, Edward	Redwood, Rt Hon John
Gibb, Nick	Robathan, Andrew
Gill, Christopher	Robertson, Laurence
Gillan, Mrs Cheryl	Ross, William (E Lond'y)
Gray, James	Rowe, Andrew (Faversham)
Green, Damian	Ruffley, David
Greenway, John	Sayeed, Jonathan
Grieve, Dominic	Shephard, Rt Hon Mrs Gillian
Hague, Rt Hon William	Simpson, Keith (Mid-Norfolk)
Hamilton, Rt Hon Sir Archie	Spicer, Sir Michael
Hammond, Philip	Stanley, Rt Hon Sir John
Hawkins, Nick	Steen, Anthony
Heald, Oliver	Swayne, Desmond
Heathcoat-Amory, Rt Hon David	Swinney, John
	Syms, Robert
Hogg, Rt Hon Douglas	Tapsell, Sir Peter
Horam, John	Taylor, Ian (Esher & Walton)
Howard, Rt Hon Michael	Taylor, John M (Solihull)
Howarth, Gerald (Aldershot)	Taylor, Sir Teddy
Jack, Rt Hon Michael	Townend, John
Jackson, Robert (Wantage)	Tredinnick, David
Jenkin, Bernard	Trend, Michael
Key, Robert	Tyrie, Andrew
King, Rt Hon Tom (Bridgwater)	Waterson, Nigel
Kirkbride, Miss Julie	Whittingdale, John
Laing, Mrs Eleanor	Wigley, Rt Hon Dafydd
Lansley, Andrew	Wilkinson, John
Leigh, Edward	Willetts, David
Letwin, Oliver	Wilshire, David
Lewis, Dr Julian (New Forest E)	Winterton, Mrs Ann (Congleton)
Lidington, David	Winterton, Nicholas (Macclesfield)
Lilley, Rt Hon Peter	Yeo, Tim
Lloyd, Rt Hon Sir Peter (Fareham)	Young, Rt Hon Sir George
Llwyd, Elfyn
Loughton, Tim	Tellers for the Noes:
Luff, Peter	Mr. Geoffrey Clifton-Brown
Lyell, Rt Hon Sir Nicholas	and
MacGregor, Rt Hon John	Mr. Peter Atkinson.

Question accordingly agreed to.

Clause 30 ordered to strand part of the Bill.

To report progress and ask leave to sit again.—[Mrs. McGuire.]

Committee report progress: to sit again tomorrow.