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Energy Tax
[Relevant documents: The Ninth Report of Session 1998-99 from the Trade and Industry Committee on the Impact on Industry of the Climate Change Levy, HC 678.]
Mr. Deputy Speaker (Mr. Michael J. Martin):
Madam Speaker has selected the amendment in the name of the Prime Minister.
7.14 pm
Mr. David Heathcoat-Amory (Wells): I beg to move,
- That this House notes that the proposed energy tax represents a huge transfer of cash from manufacturing and energy intensive industries to the public and service sectors; threatens to drive large energy users out of the United Kingdom altogether and is a badly targeted and inefficient way of reducing CO 2 emissions; believes this is another stealth tax on industry and notes the Government has increased the Landfill Tax without applying the revenue to offsetting cuts in National Insurance Contributions as was done by the last Conservative Government; and calls on the Government to consult on alternative ways of meeting Britain's international commitments to counter global warming and to withdraw this damaging threat to industry.
The Government talk of supporting the family, but they tax the family. They talk about encouraging savings, but they tax savings. They talk of encouraging competitiveness in industry, while regulating industry and taxing it. Halfway through this Parliament, British industry already faces £30 billion in extra taxation over the lifetime of the Parliament. That is not my figure but that of the British Chambers of Commerce.
Now the Government plan another new tax--an energy tax, which was announced this year, will be enacted in next year's Finance Bill, and will come into effect in 2001. It is designed to raise an extra £1,750 million a year--a figure recorded in the Red Book.
Mr. Alan W. Williams (East Carmarthen and Dinefwr):
I am grateful to the shadow Minister for giving way at this early stage. Does he accept that the proposal is revenue neutral, because all the money raised will be given back in cuts in national insurance contributions?
Mr. Heathcoat-Amory:
Later I shall deal specifically with the untested assertion that the tax is in some sense revenue neutral. It is anything but revenue neutral for the companies and sectors that pay it.
The Government are building on what they have already done to the British haulage industry, which faces annual escalating rises in diesel duty. The rise amounts to 12 per cent. for this year alone. The haulage industry has been made uncompetitive in the single market, and to the extent that it can pass on its costs to British industry as a whole, it has made the rest of British industry uncompetitive too.
All those increases in diesel taxes and other taxes are being made behind an environmental smoke screen, but the real reason is to raise revenue. Not content with what they have already done, the Government plan to raise
another extra £1.75 billion. They claim that that is revenue neutral, because they will cut employers' national insurance contributions by an equivalent amount.
Ms Joan Walley (Stoke-on-Trent, North):
The right hon. Gentleman talks about a smoke screen, but does he agree that we desperately need an international agreement to deal with carbon dioxide emissions and global warming? Does he not realise how important it is to ensure that the United Kingdom plays a leading part in that?
Mr. Heathcoat-Amory:
It may be news to the hon. Lady, but there already is an international agreement; it was signed at Kyoto. What she wants has already been done. Those are binding legal commitments, and the Conservatives agree that we must meet our international commitments. Later in my speech I shall explain how we will do that.
First, however, I shall deal with the point raised by the hon. Member for East Carmarthen and Dinefwr (Mr. Williams) about the so-called revenue neutrality. No one believes in that. Let us consider what the Government have already done in terms of other environmental taxes. An instance would be the landfill tax introduced by the previous Conservative Government. We applied all the revenue--a smaller sum but substantial nevertheless--to an offsetting cut in national insurance contributions. The then Labour Opposition supported us.
What happened when Labour took office? The Labour Government put up the tax on landfill from £7 to £10 a tonne. Not a penny is going back to industry in offsetting cuts. Moreover, they have announced a new tax escalator. The landfill tax will now go up every year for the next five years, but none of that extra revenue will be returned to industry. The Government will have more than doubled that tax, and none of the revenue will be recycled.
Mr. David Chaytor (Bury, North):
Will the right hon. Gentleman give way?
Mr. Heathcoat-Amory:
No; I want to ask the Economic Secretary a question, as she will answer the debate. Will she confirm now that all the revenue, now and in the future, will be used to cut employers' national insurance contributions? Such a simple question demands a simple answer.
The Economic Secretary's silence is very eloquent, and we are entitled to draw one conclusion from it--that the Government will do to the energy tax what they did to the landfill tax. They will introduce it at a lower rate, and then they will put it up, forgetting all their promises and waffle about tax neutrality. That is the Government's game, and we are now forewarned.
However, even if we accept that the revenue will be applied to an offsetting cut, the proposed tax represents a massive transfer of cash from the manufacturing and energy-using sectors of the economy to the service sector, and to the public sector in particular. The public sector alone will benefit to the tune of about £150 million a year, even if it takes no action to cut energy bills.
Mrs. Anne Campbell (Cambridge):
Is the right hon. Gentleman aware of the report from Cambridge Econometrics, published on 6 July? It states that the
Mr. Heathcoat-Amory:
That prediction takes no account of job losses in industries hit by the levy, nor of the jobs that will be exported as firms migrate away from the United Kingdom to avoid the levy.
Mr. Desmond Swayne (New Forest, West):
Is my right hon. Friend aware that agriculture--and especially the protected horticultural sector, which recycles all its carbon dioxide--will be disproportionately hard hit by this perfidious tax?
Mr. Heathcoat-Amory:
My hon. Friend is right. Many sectors and industries will be badly hit, and I shall give some more detail about one in particular. Sir Brian Moffatt, the chairman of British Steel, estimates that that company will pay a net £220 million a year under this tax. He says that British Steel will be forced
Mr. Llew Smith (Blaenau Gwent):
I represent a steel community. Can the right hon. Gentleman explain why British Steel is bleating about the financial costs of the energy tax when recently it was able to return about £700 million to shareholders? It has also been making people redundant and throwing them on the scrap heap, in an area of Wales with one of the highest levels of unemployment.
Mr. Heathcoat-Amory:
I should have thought that the hon. Gentleman would have welcomed the renaissance in steel making plants since privatisation and the other industrial reforms introduced by the previous Government. It is a British success story. However, the British Steel chairman should know something about the industry. His point was that that renaissance is being put at risk because of a badly targeted and ill considered tax that will drive plants overseas.
Mr. Denis MacShane (Rotherham):
I hope to be able to make some points about steel if I catch your eye later, Mr. Deputy Speaker, but the right hon. Gentleman will be aware that he is describing the worst case. Last week, one of British Steel's most senior executives came to the House and talked about a tax of £55 million. The eventual level that is set may be higher or lower, but the right hon. Gentleman must use accurate and honest figures, not the worst-case projection.
Mr. Heathcoat-Amory:
I am glad that the hon. Gentleman admits that the industry will be damaged. We are now talking merely about the extent of that damage.
"to close plants here which will be replaced by inefficient plants in other parts of the world."
That answers the point raised by the hon. Member for Cambridge (Mrs. Campbell). If efficient British plants are replaced by inefficient plants in other parts of the world without environmental control, the global atmosphere will suffer and British industry will be grievously hurt.
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