Energy Tax: EC Proposal (Hansard, 5 November 1991)

§ The Parliamentary Under-Secretary of State, Department of Social Security (Lord Henley)
My Lords, the Commission has put forward a wide-ranging communication to the Council, which includes ideas for a mixed carbon/energy tax. The Commission's ideas for such a tax provide a useful basis for discussion, but much more work is needed before decisions can be taken, not least on the implications for the competitiveness of Community industry and on the international context.

Lord Campbell of Croy
My Lords, I am grateful to my noble friend for that reply. Will he confirm that all the other members of the EC are also in favour of this proposal? Such a situation would make a change. Will the British Government ensure that the way in which such a tax is applied does not put British industry at a disadvantage?

§ Lord Henley
My Lords, I can confirm that all the other member states are interested in the proposals and believe they warrant further discussion. Nevertheless only four member states were prepared at the energy council discussion held on 29th October to support the introduction of a tax exactly on the lines put forward by the Commission. We shall have to take into account the final point made by my noble friend. There would be no point in introducing such a measure if we merely made British or European industry uncompetitive and thereby caused carbon dioxide emissions to be emitted in other parts of the world.

§ Lord Molloy
My Lords, will the Minister give an assurance that all these matters will be thoroughly discussed by Britain's two Houses of Parliament before any action is finalised?

§ Lord Henley
My Lords, I can assure the noble Lord that this House is discussing this matter today. I am sure the noble Lord and his honourable friends in another place will find adequate opportunities to discuss these measures.

Lord Bruce of Donington
My Lords, will the Minister give an unequivocal reply to the House on whether the Government support the European proposals for an energy tax? The answer to that question must surely be either yes or no.

§ Lord Henley
My Lords, it could also be "maybe". What I am trying to say is that a carbon/energy tax could—I stress the word "could"—in principle be a cost effective way of reducing CO₂ emissions. It is certainly worth considering. However, I cannot say at the moment that we definitely support the proposals as put forward by the Commission. Nevertheless those proposals might represent a way forward.

§ Lord Peston
My Lords, I welcome the replies given by the Minister, in particular the "maybe" reply. Does the Minister agree that all the evidence shows that, if we wish to economise on the use of energy, a carbon tax of this kind is far and away the best method of doing so? Does the Minister also agree that there is absolutely no reason why such a tax should place an extra burden on British industry because in theory the proceeds of that tax could be offset against other taxes? In other words, simply changing the tax structure need place no extra burden on industry while an energy tax can achieve the objective of reducing energy demand.

§ Lord Henley
My Lords, the noble Lord is correct. An energy tax could achieve the objective we are discussing and it is certainly a measure that should be considered. However, the matter is not as simple as the noble Lord thinks when he says that there need be no extra burden on industries. Some industries use far greater amounts of energy than others and therefore a carbon/energy tax would affect them much more than industries that use less energy. There is the danger of introducing such a tax purely in Europe and thereby merely shifting industry to other parts of the world and consequently shifting emissions of CO₂ from Europe to other parts of the world.

Lord Bruce of Donington
My Lords, I hope the Minister will provide a little more information on this matter. On the assumption that the Government support this tax, or take the attitude that they may adopt it, to whom would the tax be paid? Will the European Community receive the tax revenue as part of its "own resources", or will the tax be paid to the British Treasury?

§ Lord Henley
My Lords, I can give the noble Lord a categorical answer on this occasion. Should such a tax be introduced—as I have said already, a great many matters would need to be considered before taking such a step—it would be paid to Her Majesty's Treasury.

Lord Campbell of Croy
My Lords, with reference to the questions of the noble Lord, Lord Bruce, did not Ministers in the environmental council of the EC, including the United Kingdom Minister, cautiously accept this proposal as one to be pursued?

§ Lord Henley
My Lords, my noble friend is entirely correct, but this matter goes beyond simply the environment Ministers. This matter concerns ECOFIN and energy Ministers.

§ Lord Bonham-Carter
My Lords, further to the reply given to the noble Lord, Lord Peston, did I understand the Minister to say that some industries use more carbon than others? Is not the whole point of this tax to discourage them to do so?

§ Lord Henley
My Lords, the noble Lord is absolutely correct. The noble Lord, Lord Peston, made the point that this tax need not place an extra burden on industry collectively as other tax reductions could be made. However, the tax would certainly affect some of the high energy users in industry. The 146 noble Lord is correct to say that those are the industries we wish to encourage to reduce their energy consumption. However, if in doing that one merely shifts emissions of carbon dioxide to other parts of the world, one achieves absolutely nothing.

§ Lord Donoughue
My Lords, when looking positively at this tax will the Government bear in mind the potential damaging impact it could have on the poorest sections of our society, as ultimately they would have to pay a higher price for their fuel? In many cases they cannot afford that fuel at present. It is not clear that the suggested offsetting measures will benefit those people. If the offsetting measures comprise tax rebates, they will not necessarily benefit the poorest sections of our society.

§ Lord Henley
My Lords, the noble Lord makes a further important point. We can appreciate that the Commission's present proposals need to be given considerably more thought and need further discussion before we or the Commission can move forward in this matter.