HL Deb 17 May 2000 vol 613 cc284-7

3.4 p.m.

Lord Campbell of Croy

ask Her Majesty's Government:

Whether they are still considering changes in the proposals for a climate change levy.

Lord McIntosh of Haringey

My Lords, the Government have developed the climate change levy in an open and consultative way. The views expressed by business have helped to refine the design of the levy. Legislation underpinning the levy is included in the Finance Bill 2000, which is currently passing through Parliament. Indeed, it was before the Standing Committee yesterday. The levy will come into effect from April 2001. As with all measures in the Finance Bill, the Government will naturally listen to any views expressed by interested parties.

Lord Campbell of Croy

My Lords, I thank the noble Lord for his reply. While some changes have been made, does the noble Lord accept that the present proposals would still damage certain manufacturing industries? As the Prime Minister confirmed last night that the Government are not prepared to try to alter the exchange rate for the euro and have left interest rates to the Bank of England, would not further changes in this levy be a timely way of assisting manufacturing in the face of an over-strong pound?

Lord McIntosh of Haringey

My Lords, the climate change levy is being introduced in response to a legal obligation which is imposed on us under the Kyoto agreements. We have said that we will reduce emissions of six greenhouse gases by 12.5 per cent between 1990 and 2008–12. Since business is responsible for 40 per cent of the emission of those gases, clearly something has to be done about business. It cannot be left to other energy users. The climate change levy is economically neutral in the sense that it is balanced by a reduction in business national insurance contributions. We will listen to arguments in detail at any time, but I believe that the climate change levy is a necessary consequence of our legal international obligations.

Lord Ezra

My Lords, is the noble Lord aware of the serious concern about the decision so far of the Government not fully to exempt from the impact of the levy electricity generated from combined heat and power plants? Such electricity as goes into the grid has to pay the full levy. The effect of that is already that a number of major plants contemplated by such firms as British Sugar have been postponed and that NHS hospital trusts, which are increasingly reliant on combined heat and power, are now becoming reluctant to build more plant because of the cost of exporting a proportion of the electricity, which they cannot avoid.

Lord McIntosh of Haringey

My Lords, there is a derogation in favour of high quality combined heat and power plants. It has to be said that, although combined heat and power is generally advantageous, it is not necessarily advantageous in all circumstances. That is why we have restricted the derogation to high quality plants.

Lord Geddes

My Lords, whatever changes may or may not take place in the climate change levy, can the Minister assure the House that no burden—particularly no financial burden—will be imposed on sources of renewable energy, including hydro-electricity, relative to the climate change levy?

Lord McIntosh of Haringey

My Lords, it would be too simple to say that all forms of renewable energy are necessarily good and all forms of non-renewable energy are necessarily bad. There is a spectrum in these matters. We have sought, within the terms of our international obligations, to provide as much protection for industry as we can, consistent with keeping the energy savings. That is why we have an 80 per cent discount for those companies with energy efficiency discount agreements and that is why we have a 50 per cent discount for horticulture.

Lord Mackay of Ardbrecknish

My Lords, perhaps I may press the Minister on the point made by my noble friend Lord Geddes about hydro-power, which of course is pollution free and is the major source of renewable energy available now and is likely to be in the future. Is the noble Lord absolutely satisfied that nothing in the climate change levy inhibits the generators from either going into new hydro- schemes or carrying out modernisation and upgrading work on existing hydro-schemes in order to increase the amount of energy we get from this excellent and, I should have thought, climate-friendly source?

Lord McIntosh of Haringey

My Lords, I do not believe that any terms in the climate change levy will have the effect that the noble Lord suggests. However, because I am not certain, I believe that I should write to him. Of course, hydro-electric power is not available everywhere. I noticed that one noble Lord introduced to the House today comes from Thorney Island in the City of Westminster. I do not think that there are many waterfalls around Thorney Island.

Lord Haskel

My Lords, is there any proof that directors and workers in manufacturing companies are not as concerned about climate change as those who work in other businesses? After all, does my noble friend agree that people involved in manufacturing breathe the same air as the rest of us and that they, too, have families? I believe that they are as concerned about climate change as everyone else.

Lord McIntosh of Haringey

My Lords, my noble friend is entirely right. However, I fear that each of us knows of the conflict between the person and the heart.

The Earl of Northesk

My Lords, will the Minister stand by his statement made two days ago in response to a Question that the climate change levy will be neutral in its effect on industry? Does that sanguine view extend to the prospect of energy-intensive industries relocating elsewhere in Europe to escape the strictures of the tax, thereby possibly creating the effect of exporting jobs and importing pollution?

Lord McIntosh of Haringey

My Lords, of course I stand by the view I expressed two days ago. In aggregate, the climate change levy is neutral in its effect on industry as a whole. However, it would have no effect at all if it did not cause some industries, notably energy-intensive industries and those which cannot or will not sign energy efficiency agreements, to suffer. The benefits will then be returned to other, more energy-efficient industries. If that means that occasionally decisions are taken to relocate, that would be regrettable. However, I should remind the noble Earl that the climate change levy and the Kyoto agreements are international agreements. They affect other European countries as well.