HL Deb 27 November 2001 vol 629 cc136-8

2.52 p.m.

Baroness Miller of Hendon asked Her Majesty's Government:

What is their response to the prediction that the climate change levy will raise the costs of the engineering industry by a total of about £90 million a year at a time when the industry's contraction is predicted to reach double figures in percentage terms.

Lord McIntosh of Haringey

My Lords, the climate change levy is integral to the UK's Climate Change Programme. The levy package is broadly revenue neutral for manufacturing and services. But the impact on individual firms will depend on actions taken to improve energy efficiency, including measures qualifying for levy-funded enhanced capital allowances. Firms can also gain benefit by switching to renewable energy or locally produced combined heat and power which are levy free. The Engineering Employers' Federation ignores these factors and bases its findings on a self-selecting sample of less than 10 per cent of its members who responded to a postal survey.

Baroness Miller of Hendon

My Lords, I thank the Minister for what I consider to be a not very satisfactory Answer. I am sure that he will not be disappointed that I do not agree with him.

However, will he agree that the climate change levy falls heavily on the engineering industry, which only shares 8 per cent of the market and yet pays 17 per cent of the climate change levy? That of course is just another tax. As the engineering employment forecast suggests that next year at least 70,000 jobs will he lost—that is a 3.7 per cent swing—perhaps he will tell the House what the Government intend to do about it, rather than simply saying that he does not agree with the EEF report.

Lord McIntosh of Haringey

My Lords, the climate change levy is not a tax. It is revenue neutral. Everything that is gained from the climate change levy is returned to the manufacturing and service industries in the form of a rebate on employers' contributions. If it were neutral for every single firm, there would be no point in having it. The idea is quite specifically to push heavy energy users towards forms of energy efficiency. That applies to the engineering industry as well as to any other industry.

Lord Ezra

My Lords, the Minister has emphasised the revenue neutrality of the climate change levy. Would it not be better if that neutrality were achieved by recycling the whole of the proceeds from the levy for energy-saving purposes? If that were done, the objective of the levy would be much more effectively achieved.

Lord McIntosh of Haringey

My Lords, considerable sums have been put aside for improving energy efficiency out of the proceeds of the levy. If there is any evidence that industry is capable of using more—in other words, more could be given for that purpose rather than in the form of employers' contribution rebate—I am sure that the Government would listen sympathetically to that argument.

Lord Jones

My Lords, does my noble friend recollect the Government's very positive response to the pleas of the steel company, Corus? That positive response saved that great steel company nearly £200 million.

Lord McIntosh of Haringey

I do indeed, my Lords. The complementary point to that made by the noble Baroness, Lady Miller, is that for very heavy energy users there are indeed 80 per cent discounts because it is recognised that some very heavy energy users would go out of business unless they were given a discount. Of course that is in return for serious efforts to achieve energy efficiency, which is the object of the exercise.

Baroness Thomas of Walliswood

My Lords, will the Minister agree that many of the solutions to excess use of energy are engineering solutions? That in itself can actually make a contribution to employment.

Lord McIntosh of Haringey

My Lords, that is a very constructive point. It is certainly true that there are opportunities for the engineering industry in manufacturing goods—engines, valves and so on—which contribute to energy efficiency. Indeed, a substantial sum of money from the energy levy—something like £30 million—is set aside to encourage work in that area.

Lord Saatchi

My Lords, does not the climate change levy show why the noble Lord, Lord Bruce of Donington, was right the other day to raise again the question of the exclusion of your Lordships' House from scrutiny of money Bills? I do not know whether the Minister has had a look at the 83 pages of Schedule 6 of the Finance Act which enacted this particular levy. Perhaps he can help me with its language. Further, does he not think that the expertise in this House may have been able to improve it? This is a provision related to electricity rebates. It states: [They] are to be calculated by treatment of supply as a reduced rate supply to the extent, if any, that the exempt renewable supplies made by the supplier in the averaging period would have been reduced rate supplies if they had not been made on the basis that they were exempt". I defy anyone to say what that means. Is it not pure gobbledegook?

Lord McIntosh of Haringey

My Lords, I think that the noble Lord, Lord Saatchi, will find that that is entirely comprehensible to tax lawyers, to which group neither he nor I have the privilege of belonging.

Lord Razzall

My Lords, will the Minister not accept that even those of us who are sympathetic to the objectives of the Government with regard to the climate change levy regard it as being in many cases bureaucratic, unworkable and unfair? Further, will he not accept that it would be better to impose taxation on carbon emissions rather than this rather unworkable levy?

Lord McIntosh of Haringey

No, my Lords. The Government commissioned the noble Lord, Lord Marshall, to carry out a review of the options. They also considered the possibility of taxation of carbon emissions, the scope for trading emissions and many other solutions. The noble Lord came to the conclusion, with which the Government agreed—I thought that the Liberal Democratic Party at the time agreed—that this was the right way to deal with emissions in manufacturing industry. After all, we are talking about 5 million carbon tonnes per annum.