HC Deb 29 January 2004 vol 417 cc375-6
6. Mr. Bill Tynan (Hamilton, South) (Lab)

What the revenues to the Exchequer were from the climate change levy in (a) 2002 and (b) 2003. [151547]

The Economic Secretary to the Treasury (John Healey)

The climate change levy raised £863 million for the Exchequer in 2002. Provisional receipts for the whole of 2003 will be published by the Office for National Statistics in February's "Financial Statistics".

Mr. Tynan

I thank my hon. Friend for that response. In 1999, the reason that we introduced the climate change levy was to meet the obligations under the Kyoto agreement. Will he explain to the House why we apply the climate change levy to the nuclear power industry, which does not produce CO2? Will he consider removing that unfair burden from the nuclear industry, because it is a major problem for that industry at the present time?

John Healey

I pay tribute to my hon. Friend, particularly for his role as chairman of the all-party parliamentary group on nuclear energy, but I have to disappoint him. He is right to say that we announced the introduction of the climate change levy in 1999, but we made it clear that nuclear generation would not be exempt from the levy, and we have no plans to change that position now. The reason is that the levy is not a carbon tax; it is a tax on energy use, designed to encourage not only greater energy efficiency, but the development of new renewable forms of energy generation, such as solar, wind and wave power, which is why those are exempt from the levy and why the nuclear industry is not.

Mr. Henry Bellingham (North-West Norfolk) (Con)

When the Government introduced the levy, they said that it would almost certainly be fiscally neutral. Why is the CBI now saying that the net annual cost to manufacturing is running at £142 million? That is hitting smaller firms particularly hard, and with offshoring growing apace, can the Minister do anything to make the levy fiscally neutral?

John Healey

From the start, the levy was designed to be fiscally neutral to the Exchequer, but it is not possible to make it fiscally neutral for each and every sector. Let me make it clear that there is no financial gain to the Exchequer from the climate change levy. All revenues are recycled back: first, through the 0.3 per cent. cut in national insurance contributions that benefited all employers; and, secondly, through a series of energy efficiency programmes and support, ranging from enhanced capital allowances to the work of the Carbon Trust. The hon. Gentleman is concerned about the position of businesses in competition with those in other countries. There is an 80 per cent. discount on the levy for those that are exposed to international competition and that are intensive energy users in sectors that are willing to negotiate with the Government to improve energy efficiency.

Dr. Alan Whitehead (Southampton, Test) (Lab)

In line with the principles of green taxation that my hon. Friend's Department set out in last year's publication, does he intend to review further the operation of the climate change levy to ensure that its proceeds add positive leverage to the reduction of industrial CO2 emissions by supporting more directly the development of lower-emission and renewable industrial energy practices?

John Healey

I can tell my hon. Friend that we keep all taxes constantly monitored and under review. Above that, we are undertaking a full review of the first couple of years of the operation and impact of the climate change levy. That review is being led by Customs and it will indeed take account of the kind of factors about which he is concerned.