Climate Change Levy (Hansard, 30 June 1999)

§ Lord McIntosh of Haringey
My Lords, the Government recognise the need for special consideration to be given to the position of energy-intensive industries under the climate change levy proposals, given their high energy usage and exposure to international competition. The Government intend to set significantly lower rates of the levy for those energy intensive sectors that agree targets for improving their energy efficiency. Detailed negotiations are now under way with the sectors concerned. The Government will work closely with business on the detailed design and implementation of the climate change levy.

§ Lord Hardy of Wath
My Lords, I am exceedingly grateful to my noble friend for that Answer and for the information given in Question Time earlier this week. I wonder whether my noble friend can go a little further and cover two points. First, can he make it clear that the Government are well aware of the investment and priorities served in a number of high-energy using industries, especially in engineering steel where a marked environmental advantage has already been secured? Secondly, can the Government make it clear that no British industry will be faced with particular disadvantage or threat of closure by having to bear burdens which are not shared or matched by those in competing industries, either in Europe or elsewhere? Would it not be a great tragedy if cleaner industry in Britain was closed in order that dirtier industry abroad could prosper?

§ Lord McIntosh of Haringey
My Lords, in response to the first question raised by my noble friend, yes indeed, the Government are appreciative of the efforts already made by industry to cut damaging carbon emissions. However, as I stated in response to a similar Question on Monday, the demands of the Kyoto agreements are very strict. We have to produce a 20 per cent cut in carbon emissions by 2010. In response to the second question, that is a target accepted by all industrialised countries. The competitive position of energy-intensive industries in all countries of the world will be affected by their commitment to the Kyoto agreements.

Lord Campbell of Croy
My Lords, in their attempts to reduce emissions of climate change gases, will the 275 Government reconsider some of the anomalies in their present proposals, such as applying the levy where the sources are nuclear or hydro-electric and therefore produce no gases—bearing in mind that half the electricity in Scotland comes from nuclear sources—but exempting from the levy hydrocarbon oils which, on combustion, do release the offending gases?

§ Lord McIntosh of Haringey
My Lords, in response to the first question raised by the noble Lord, yes, we are aware of different levels of emissions from energy-intensive industries. Of course, we are prepared to discuss those matters with the industries concerned. We are considering, in particular, a low rate or no rate for renewable energy sources. I have forgotten the second question raised by the noble Lord!

Lord Campbell of Croy
My Lords, I asked about hydrocarbon oils.

§ Lord McIntosh of Haringey
Yes, my Lords, that is an important point. However, those are dealt with by fuel duties rather than by the climate change levy.

§ Lord Ezra
My Lords, can the Minister indicate whether at the end of the consultative process on the document dealing with the climate change levy, the Government will give serious consideration to making more of the proceeds of the levy available for energy-saving purposes? Does he recall that at present, out of the £1.7 billion raised by the levy, only £50 million will be made available for that purpose, apart from whatever arrangement is made with the intensive energy users?

§ Lord McIntosh of Haringey
My Lords, the levy is intended to be fiscally neutral; in other words, all the proceeds from the levy will be returned to business in the form of reductions on national insurance contributions. Our activities in energy conservation, which are not insignificant, are in addition to that return.

§ Lord Paul
My Lords, I declare an interest as chairman of an engineering company. The manufacturing industry has become very efficient. However, at present the main problem it faces is the high rate of the pound. That prohibits more investment which is needed for it to be competitive. Can the Minister confirm that there will be no extra levy, which would add to its costs, and that instead they will allow the industry to spend money on increasing efficiency?

§ Lord McIntosh of Haringey
My Lords, we have to achieve the targets to which we agreed at Kyoto, as do all other countries. The competitive position which they have vis-à-vis our industry is the same as that of other countries because the commitments they made at Kyoto.

§ Lord Saatchi
My Lords, I thank the Minister for his gracious welcome the other day. Does he accept that the root of the Government's difficulty with this proposed 276 levy lies in the statement made by the Prime Minister in another place on 9th June? He said: Any money raised by the climate change levy is given back to industry through cuts in national insurance costs".—[Official Report, Commons, 9/6/99; col. 645] Is the Minister aware of the estimate which shows 17 major industries paying £742 million more in tax and saving only £64 million in national insurance contributions? I expect the Minister will say that the Government will provide reliefs from this extra tax. However, is it desirable to introduce a new tax and then promptly mitigate its effect by adding a whole new layer of complicated allowances, reliefs, deductions, indexations, exemptions, and so on?

§ Lord McIntosh of Haringey
My Lords, neither I nor the Prime Minister has said that the reduction in national insurance contributions would go back exactly to those businesses and industries which were being charged the climate change levy. If that were the case, it would not be worth doing at all. The purpose of the exercise is to reduce emissions, of carbon dioxide in particular. We have to achieve that by increased efficiency, energy saving and emission reduction in the industries which are energy intensive. There is no way round that.