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10.26 am
Mr. Gareth R. Thomas (Harrow, West): I add my congratulations to my hon. Friend the Member for Peterborough (Mrs. Brinton) on securing this important debate. I congratulate also my hon. Friend the Member for Chatham and Aylesford (Mr. Shaw) specifically on his campaign to highlight the differences between VAT treatment of empty and new-build properties.
The Government, and particularly my right hon. Friend the Chancellor, have been enormously courageous in asking Lord Marshall to draw up a report on the business use of energy and possible tax measures to reduce business energy use. Like other hon. Members, I look forward to hearing the comments of my right hon. Friend the Chief Secretary on the Treasury's thinking on the Marshall report. As I, too, am a member of the Environmental Audit Committee, I should like to take this opportunity to welcome him to one of our meetings, so that he can tell us in detail how the Government will make progress on the energy tax agenda.
I shall concentrate this speech on measures that my right hon. Friend the Chief Secretary to the Treasury might take to encourage the renewable energy sector. The Government have already taken some important initiatives in supporting renewables. The Government's reversal of the previous Administration's cuts in renewables research and development spending--which they had planned to eliminate entirely by 2005--is very welcome. Investment in renewable technologies is essential for lowering their cost, and for ensuring that Britain will be in a position to reap the benefits of the global expansion in renewables, not only creating employment in the United Kingdom but realising the huge benefits of preventing climate change.
Other fiscal measures and tax incentives to stimulate the levering of private finance into the renewables industry could be usefully considered by the Treasury in helping us to meet our targets. The non-fossil fuel obligation has been successful in reducing costs of renewables, but many non-governmental organisations and the International Energy Agency have recommended that other measures to develop the green electricity market--both to complement the NFFO and to encourage the commercial take-up of energy generated by renewable sources--should be taken.
Some electricity companies offer a green tariff for those willing to pay extra for renewable energy. That may attract some subscribers, but I fear that they will be in a minority. It will be a significant time before sufficient funds are generated for substantial investment in renewables.
Countries such as the Netherlands have successfully levered private finance into renewable energy through simple tax incentives. Since the introduction of a green tax break in 1995, almost £200 million of private finance has been invested in funds established by Dutch banks for environmental projects. The majority of investment has been in renewables, although there have also been small investments in organic farming, eco-offices and the development of natural habitats and country estates. Similar tax breaks have been advocated by the New Economics Foundation and others to stimulate investment in initiatives, including environmental initiatives, to tackle social and financial exclusion. Other Treasury Ministers are considering such proposals.
The interest or dividends on the green funds are exempt from income tax, allowing the bank to pass on favourable terms to the investor and the project being financed. The initiative has been greeted with considerable enthusiasm by the Dutch public and financial institutions. The certificates of the first green interest fund issued by Rabo-Robeco bank to the value of £150 million were sold out in nine days. The ABN-AMRO fund for a £25 million wind farm was similarly popular.
The green funds have succeeded by harnessing the public's desire to invest their savings in an environmentally sound and ethical way while still receiving an acceptable return. They have also provided much-needed capital for renewable energy projects, which could not have been secured through public expenditure or other means. The green funds are carefully regulated through the Dutch central bank. Proposals by project developers are assessed by the Ministry of Housing and Environment. The initiative has already resulted in 25 new energy projects, mostly on wind energy.
There is a fund for investing in wind power in Britain, established by the Triodos bank, but it is on a small scale compared with the Netherlands and does not have the advantages of the Netherlands tax system. My hon. Friend the Minister for Energy and Industry has welcomed the fund as an example of extending community involvement in the planning and ownership of green energy schemes.
We must carry the public with us if we are to achieve our renewables target. The Dutch system has so far favoured large-scale projects, but attention must be given to promoting renewable energy at community level. Tax incentives for communities that want to invest in renewable technology should be actively promoted. It has been demonstrated in other countries that, where communities have a stake in renewable facilities--such as through a co-operatively owned structure--and can see the financial benefits, they are more positive about the development of renewables. Tax incentives for community-based renewable projects would help to stimulate interest in, and take-up of, renewable energy, particularly if any surplus electricity could be taken by the grid at a reasonable price.
Mr. Shaun Woodward (Witney):
I congratulate the hon. Member for Peterborough (Mrs. Brinton) on securing the debate. I should like to concentrate on why it is so important.
I recently became a trustee of an international body that is concerned with the crisis in the world's fisheries. The UN Food and Agriculture Organisation estimates that 60 per cent. of the world's fisheries require urgent management, and that 30 to 40 per cent. of them are about to be exhausted. It is essential that Governments take a lead and mean what they say. This should not be an issue of party politics. The previous Government passed on a good record on the environment to the new Government. However, more needs to be done. The link between the environment and taxation is crucial. I agree with the hon. Member for Truro and St. Austell (Mr. Taylor) that a serious tax reform must consider the role of the environment.
The Deputy Prime Minister recently returned from the conference on climate change in Buenos Aires. He went out with a great deal to say and high hopes, but most of us know that he returned with very little agreed. One of the major agreements was that 146 unresolved items would be deferred to a future climate change meeting.
The world must face up to the crisis. Countries such as the United Kingdom must take a lead and the Government must take action. The Government have shown a spirit of wanting to get on with addressing the problems of the environment. There has been a great deal of consultation. Indeed, as Charles Secrett of Friends of the Earth recently said, the Government's motto is fast becoming "Carry on Consulting". Lord Marshall's recent report on business energy use and the proposal for an energy tax is a start, but, for all the criticisms that might be levelled against the report, the Chancellor's response was that we must have more consultation.
Some of the problems require not just consultation, but action. The Marine Stewardship Council came into play because Unilever and the World Wide Fund for Nature put up about £1 million for urgent research on the state of the world's fisheries. That was not done with whole-hearted benevolence, but there was philanthropy involved. Unilever owns Bird's Eye. It realised that, in 10 years, there will be no more cod for its fish fingers. It is a long time since an 18th-century cabin boy could report that he was unable to get the boat out from the shore into the Baltic sea for three days because of the shoals of fish. Today, he would be lucky to find a fish in the Baltic.
The MSC wants to launch two major projects: one on the state of Alaska salmon and the second on South African hake. Those fisheries will soon be exhausted, but it is difficult for such bodies to find the funding that they need. There are suggestions of hypothecated taxation or the creation of an independent resource such as an environmental investment bank from which bodies such as the MSC or the Forest Stewardship Council could draw. Action is essential.
The Government's pre-Budget report has been criticised by many green bodies, including Friends of the Earth, because it fails to make core links between the environment and taxation. One of the projects mentioned in the pre-Budget report involves changes to vehicle excise duty. We have heard that there is to be a cut of £50 for cars with low emissions--a total incentive from the Treasury of £1.7 billion or £1.8 billion. However, we can guess that the Government will increase vehicle excise duty on other cars, which will net the Exchequer the same amount of money.
What will happen to that money? Will it be specifically linked to innovation in new technologies to protect the environment? Will it be made available to bodies such as the Marine Stewardship Council, which could use it to get on with the crucial work of certification, which has been agreed around the world? It has a set of principles that the whole world will sign up to, including the industries and the retailers involved.
The problem is that we cannot get the money to progress to the next stage. This is an opportunity for the Government. The environment needs to be at the heart of the economy, because we are talking about a common inheritance, as John Stuart Mill recognised. It should be at the heart of a civilised society to recognise its duty to husband the environment.
If the Government and the Chancellor are serious about the environment, they should use the change in vehicle excise duty as a way of helping the environment rather than a way of raising taxes. I am glad to see the Chief Secretary to the Treasury in his place, because his
presence is a recognition of the importance of the debate. Will he consider ensuring that the money is not used simply as a way of raising taxes for general revenue purposes, but will be hypothecated in some form, and find its way into environmental concerns, to help bodies such as the Marine Stewardship Council and the Forestry Stewardship Council?
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