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Mr. MacShane: If the index is 100 for United Kingdom electricity and energy prices for steel, what is the price of energy electricity in Germany, France or in any other major European competitor country?
Mr. Stunell: That is an interesting point. I draw the attention of the House to a logical conclusion of the Conservatives' argument: there should be a level playing field for energy taxation across the world. Six--perhaps seven--European Union countries are moving to introduce, or have introduced, either a carbon tax or an energy tax. I was prompted to intervene on the right hon. Member for Wells to ask whether he was, rather unusually, arguing in support of an EU-wide tax system in order to ensure that the United Kingdom does not lose its competitive advantage. However, the right hon. Gentleman drew back from that logical consequence.
Mr. Tim Loughton (East Worthing and Shoreham): Will the hon. Gentleman acknowledge that all but one of the EU countries that is contemplating introducing, or has introduced, energy taxes have taxed carbon content? All but one of those countries have introduced large rebates for high-intensity users, including 100 per cent. rebates for steel producers in Belgium and Luxembourg. That is a very different kettle of fish from what is on offer here.
Mr. Stunell: The hon. Gentleman points to the extremely important difference between an energy tax and a carbon tax. The Liberal Democrats believe that we should base our levy regime on the carbon content of fuel. The hon. Gentleman also points out that we should ensure that exemptions take account of the competitive environment--and I have made that point myself.
We welcome the levy in principle because it will reduce carbon emissions to some extent. It will help to slow down the rate of climate degradation and will perhaps direct investment into green technologies. However, we have some major reservations. Perhaps the most important of those is the one to which the hon. Gentleman referred: the levy does not discriminate between carbon-based and non-carbon-based fuels. That means that the environment for renewables will become increasingly difficult.
I was impressed to see a press notice from the Office of Gas and Electricity Markets--I suppose we should call it Ofgem--which stated that it will reduce the rate of the fossil fuel levy in England and Wales from 1 October and that
A second criticism is the levy's lack of transparency. The Inland Revenue has published a consultation document. We are surely not short of consultation documents. We could have a refuelling and recycling exercise with that paperwork alone. The Inland Revenue's document recommended against showing the energy levy on the bills that consumers receive, so they will not know that they are paying it. There are built into the proposals serious disincentives for the business sector to make changes that would improve efficiency.
Businesses face a situation in which their prices are down; in which the marginal, invisible cost of the levy will not appear on their bill; and in which the grant that will be recycled from that to provide an incentive to them to improve their efficiency is trivial. The tax will raise £1.75 billion, and only £50 million will be recycled to improve the efficiency of businesses. That is less than £40 per firm per year, which will never provide an incentive for small firms to reinvest to get rid of inefficient plant or to reduce heat loss from their buildings.
We have reservations also about the shotgun approach for major energy users. The debate has already covered that point. We strongly believe that adapting to the Kyoto targets, and beyond to the further reductions in carbon use, can and should be a job-promoting transition, not a job-destroying one.
Mr. Loughton:
Why, in the Liberal Democrats' amendment to the motion, is there no mention of the hon. Gentleman's article in The Parliamentary Monitor, in which he says that the levy should be
Mr. Stunell:
My article does not appear in the amendment, first, because I am too modest, and secondly, because the amendment would have been too long. I am very happy to talk about the future direction in which the tax should go, although I am not sure that that is the point that the Conservatives are making. If you will permit me,
I repeat that the amount of money being recycled to business to promote that efficiency is far too small. The Government should clarify how they will support investment by industry in increased efficiency and the promotion of renewable sources of energy. What moves are they prepared to fund to ensure that the switch to renewables takes place?
Mr. Peter Snape (West Bromwich, East):
It is always a pleasure to be lectured by the Liberal Democrats about what we should do. Motherhood and apple pie are second nature to them, and dispensing them is what they are here for. A good dollop of both does the House no harm. Personally I find the apple pie a bit sickening, although I have listened to such talk for many years.
At least the Government are consulting on their proposals for the climate change levy. It would be remiss of me not to point out that there are, to say the least, misgivings about the likely proposals among industrialists in the west midlands, part of which I represent. I shall come to the detail of those misgivings in a moment, but first I must say to my hon. Friend the Financial Secretary that she will have to tell us exactly what a revenue-neutral tax is. I have been in the House for a long time--too long, perhaps, in the opinion of some--but that is a creature that I have never yet come across in my 25 years here. It is a one-legged fish, a Loch Ness monster or a mythical figure.
Mr. Grieve:
Will the hon. Gentleman give way?
Mr. Snape:
I cannot be interrupted while I am talking about mythical figures. The revenue-neutral tax is a very odd creature. The best brains in the Treasury have been putting together a tax that is revenue neutral, but the very words are contradictory. This is the first such tax that will have emerged from the Treasury if it proves to be truly revenue neutral.
Mr. Grieve:
On the assumption that taxation that is raised is not used to line Ministers' own pockets--one rather hopes, and I am prepared to accept, in the context of this House, that that does not happen--there is in fact no such thing as revenue-neutral taxation. As with any
Mr. Snape:
I suspect that this is the last time that the hon. Gentleman and I will agree this evening, but I am similarly inclined to think that revenue neutral is an unnatural description for any tax levied by the Treasury. If it turns out to be revenue neutral in the truest sense, it will be a first. I cannot speak for Ministers in the previous Government, but I am sure that Ministers in this Government will not seek to line their pockets in the manner that the hon. Gentleman mentioned.
I want to ask my hon. Friend the Financial Secretary a couple of questions about the impact on companies such as British Steel of possible proposals in next year's Budget. I find the Conservative party's expressions of concern hypocritical--I speak collectively, Mr. Deputy Speaker--if only because those of us who were around in the 1980s saw the damage that the Conservatives' policies did to companies such as British Steel. We witnessed the decimation of the steel industry, particularly in the west midlands, south Wales and Scotland, which was regarded as being part of the Thatcherite pattern that was prevalent at the time. Conservative Members' present expressions of great concern strike me as a deathbed repentance.
Is it true, as British Steel says, that it is likely to come off worse than its rivals in the system of rebates under the climate change levy? The company's view is that the most that it can hope for is a 50 per cent. rebate, whereas elsewhere in Europe the rebates will be between 60 and 100 per cent. If British Steel is right, it is, as the company says, unfair that it has, by voluntary means, cut its greenhouse gas emissions by 6 per cent. since 1990, but those reductions will not be taken into account for the purposes of any rebate under the climate change levy. That would obviously render British Steel pretty uncompetitive compared with, for example, the Dutch and the Germans.
British Steel makes a genuine point. As my hon. Friend the Member for Rotherham (Mr. MacShane) implied in his intervention on the hon. Member for Hazel Grove (Mr. Stunell), energy costs for British industry are already higher than for other European countries such as Holland and Germany. To load additional costs--if that is what is likely to happen--on British Steel is, to say the least, likely to be pretty damaging to its competitiveness.
Of course, it is not only the bigger companies that are fearful of the likely impact of the climate change levy on their profitability. I have in my constituency a company called Sandwell Castings Ltd., which employs 200 people. It was part of a large group and would undoubtedly, like many similar companies, have gone to the wall had it remained so. It was bought out by its management some years ago, led by the then managing director, who is now sadly deceased, Mr. Alan Wilson, who worked very hard to turn around the company's prospects. Although he has died, the company still regards itself--understandably--as successful and is anxious to continue in business for years to come.
The sales and marketing director wrote to me last month about what he calls "an energy tax". It is all very well calling this measure a climate change levy, but it is a little like the poll tax being called the community charge. A climate change levy will be seen and described
as an energy tax and there will be no point in Ministers sending out directives instructing people to call it by its proper name. The sales and marketing director said:
I wrote back to try to allay the fears of Mr. Green, the sales and marketing director. He sent me a further letter, breaking down the likely impact, in his opinion, of the climate change levy on his company. He envisages a total increase--obviously, melting aluminium is a particularly energy-intensive business--in costs of more than £72,000, and a 14.4 per cent. increase in fuel costs.
Against that we must set the proposed 0.5 per cent. reduction in the company's national insurance charges under the--I have to keep checking the phraseology--revenue-neutral tax, which amounts to a fraction over £17,000. The company believes that that will leave it worse off to the tune of £55,723. That is a precise figure for the imposition of a tax, the details of which have not yet been published, although I think that my hon. Friend the Financial Secretary will get my drift. These are the genuine concerns of a company that has been successful. It was saved from the brink of closure but now very much fears that its future will be imperiled unless the climate change levy is handled differently from the way it is rumoured.
I have one suggestion on the levy, however it is introduced. The House will know--as a former railwayman, I have bored hon. Members for many years with such sagas--how I think that the railway can better compete in various areas. Since rail generates less than 25 per cent. of the CO 2 emissions produced by road transport, what about a rebate on the climate change levy proportional to the amount of additional freight that companies move by rail instead of by road? I hope that that constitutes at least one constructive suggestion in my speech which the Minister will be able to take on board.
As I said, I welcome the opportunity to express some of the fears of industry, both large and small, about the impact of the climate change levy on profitability. I know that it is the Government's avowed intention to ensure that no legislation has an adverse effect on the profitability of companies such as British Steel, or smaller ones, like Sandwell Castings Ltd. During the consultative period, I hope that my hon. Friend the Financial Secretary will take on board the very genuine fears that exist. If she wants, I will send her a copy of the letters to which I have referred so that she can see for herself just how concerned such companies are about the future.
"The reduction follows a slow-down in the expected rate of commissioning schemes approved at the last rate setting exercise."
In other words, renewables are already finding the going tough. For example, an aluminium smelter that would otherwise be able to draw on renewable fuel to bypass the levy will be unable to do so. The incentive to invest in renewables will be cut as much as the incentive to invest in carbon-based energy sources.
"introduced at a modest level, but with a very clear signal that it will be raised progressively year-on-year."?
Will he now confirm that the Liberal Democrats' policy is to have an energy tax escalator, as he stated in black and white a few days ago?
"We are now faced with an ENERGY TAX which I understand will add 12 per cent. on our melting costs. At this company we are using the very latest technology to melt aluminium but the imposition of this tax compromises the existence of companies such as ours and the 200 people we employ.
the G8--
My request is simple, please make sure your colleagues, many of whom I believe have never been in a foundry, understand the implications of this tax because at this rate Mr. Blair will not have the credentials to sit at the G7"--
"table as an industrial nation."
Those are some of the fears expressed locally.
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