Energy Taxation (Hansard, 18 May 2000)

§ 4. Mr. Tim Boswell (Daventry)
What recent representations he has received on energy taxation. [121373]

§ 7. Mr. Damian Green (Ashford)
What recent representations he has received from businesses on the climate change levy. [121377]

§ The Financial Secretary to the Treasury (Mr. Stephen Timms)
We have been in discussions with business interests and others on the climate change levy since the early planning work by Lord Marshall. We have recently consulted on the draft legislation underpinning the levy, the support for energy efficiency measures that is part of the package, and the definition of good quality combined heat and power plant. Throughout the process, we have received many representations that have helped to finalise the design of the levy.

§ Mr. Boswell
I thank the Minister for that reply, but is he not a little concerned that such responsible bodies as the Aluminium Federation and the Chemical Industries Association are still far from satisfied with the outcome of those negotiations, and in some respects feel that they are further back than they were last December? Is he aware that even with the concessions that have been achieved to date, the likely burden on different sectors of the important aluminium industry will total £6 million, and that the concessions have still not been cleared by Brussels under the state aid provisions? Does he feel that 446 that is the right way to treat an industry that is typical of heavy manufacturing industry—for which the Government are said to care—and is exemplary in its use of recycling?

§ Mr. Timms
Both sectors to which the hon. Gentleman has referred welcomed the changes announced in the pre-Budget report last November, and nothing has happened since to undo those. We are making good progress in our discussions with the EU on the state aids issue. The levy package and the negotiated agreements together will save at least 5 million tonnes of carbon dioxide emissions by 2010. The levy will be revenue neutral for the private sector because all proceeds will be recycled back to business through the cut in national insurance contributions. Many manufacturing firms will benefit from the levy package and will want the lower rate of national insurance contributions. The levy is broadly neutral between manufacturing and service sectors, and is the right way forward. Climate change is a huge issue that we need to tackle, and that is what we are doing in the right way with the levy.

§ Mr. Green
Can I give the Minister another business representation on the levy, which, incidentally, gives the lie to what he has just said about the horticulture industry? Mr. Peter Wensak, who runs a nursery, has written to the climate change levy secretariat to say: The CO₂…generated within my glasshouses is consumed by the plants … The net effect to the outside atmosphere is nil. Your proposal is that I should pay a charge that will encourage me to discharge less CO₂…to the outside atmosphere. How much lower can I get than nil? He has an unanswerable case. Does not that show that the levy has nothing to do with reducing carbon dioxide emissions and everything to do with finding new ways to extract taxes from productive industries?

§ Mr. Timms
No. The levy is revenue neutral, and we have responded to the particular situation of the horticulture sector as I have described. The levy is revenue neutral for the private sector; no revenue is going to the Exchequer. I have referred Opposition Members to the views of the former Secretary of State, and it is sad that those views are not shared by Opposition Members any longer. I am aware that the previous shadow Environment Secretary, the right hon. Member for Wokingham (Mr. Redwood)—who is in his place today—was awarded the booby prize in the green ribbon political awards. The citation said that the judges felt that the right hon. Gentleman had amply lived up to his reputation as a man who seems to understand little and care less about the future of life on earth. I know that the right hon. Gentleman has been sacked since then—but unfortunately, not for his views on the environment; they seem to be shared by most of the Conservative party.

§ Mr. Tom Clarke (Coatbridge and Chryston)
Does my hon. Friend accept that many people feel that, far from making tax reductions for fat cats a priority, we should discourage electricity companies from abusing the 447 regulator's attempts to reduce prices by their policies of huge job reductions and cutting essential services for consumers?

§ Mr. Timms
The emphasis that we have placed on promoting consumers' interests means that utility companies are under pressure to increase efficiency. That is a good thing, and it is in the interests of my right hon. Friend's constituents. In some cases, that could mean job losses, but those companies will have to meet all the health, safety and environmental obligations that are placed upon them. Non-regulated companies are facing similar pressures. Many utilities are diversifying into other businesses, thus providing scope to grow the companies and offer improved opportunities for their employees.

§ Mr. Bill O'Brien (Normanton)
I congratulate my hon. Friend the Minister on the way in which he has handled this issue; I was impressed by his appearance before the Select Committee on the Environment, Transport and Regional Affairs. The negotiated agreements are bringing satisfaction to some industries. However, this is a question of industry reaching certain targets and reducing emissions. Will my hon. Friend consider the idea that where those targets have been achieved, there should be negative payment of the climate tax because capital will have been spent to reach those targets? It would be an incentive for an industry if when it met the targets set by the Government, it would not pay the tax.

§ Mr. Timms
Of course the arrangements that we have made for negotiated agreements—we are making good progress with the negotiations—mean that firms and sectors that sign up to demanding targets will be entitled to a reduced rate of the levy, with an 80 per cent. discount. That is the basis of the approach that my hon. Friend suggests, and it is right. I have said already that about 60 per cent. of manufacturing energy will be covered by those negotiated agreements and by the reduced rates of levy that will apply as a result. Manufacturing, as well as the rest of business, wants the reduced rate of employers' national insurance contributions—the 0.3 percentage point cut that we have introduced—because it will promote jobs and be good for every part of the country.

§ Mr. Eric Forth (Bromley and Chislehurst)
If the Minister justifies the swingeing rates of tax on vehicle fuel on environmental grounds, how does he justify the reduction in tax on domestic fuels, which cause even greater environmental damage?

§ Mr. Timms
My right hon. Friend the Chancellor has cancelled the escalator on vehicle fuel duty, which was introduced by a Conservative Chancellor. We are adopting a range of measures to improve energy efficiency in the domestic sector: we have increased the incentives for people to cut their energy usage, we have expanded the home energy efficiency scheme, and we have introduced concessionary treatment for home energy insulation services. It is important that every part of the economy makes a contribution to achieving our climate change objectives.