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8.49 pm
Mr. Bob Laxton (Derby, North): The climate change levy is noble in intent. If we do not take action now to reduce greenhouse gas emissions, not only will future generations pay the price in the form of the consequent environmental damage but actions postponed will be necessarily more painful and burdensome than if we were to take them today.
Lord Marshall's report fashioned an economic instrument which sought to batten down the use of energy and its resultant carbon dioxide output. We must consider whether that instrument as currently fashioned is carefully calibrated or a bludgeon.
I suggest that a climate change levy that made British industry uncompetitive--and perhaps destroyed jobs and the capacity to create wealth--would not be very sensible; nor would it make any sense if it seriously distorted the British economy. Labour Members have traditionally championed the cause of manufacturing industry as the foundation of wealth creation, but I am concerned that this economic instrument may result in the large-scale transfer of resources from manufacturing to the public sector and, of course, the service sector.
Devising a system of incentives and, for that matter, disincentives that encouraged people to switch between fuels so that less polluting fuels are given a boost over more polluting fuels should not be beyond our capabilities. Lord Marshall has acknowledged that the economic instrument that he devised does not achieve that, and the Trade and Industry Committee, of which I am a member, was even confronted with evidence of some glaring anomalies in respect of the proposed levy. They could have had the perverse effect of encouraging the use of mineral oils over the less polluting liquid petroleum gas in rural areas and encouraging the switching of electricity generation from the relatively benign alternative of
gas-fired plant to the less friendly alternative of oil-fired plant. They are not marks of the well designed tax without undesirable side effects that Lord Marshall was commissioned to outline.
We need a careful rethink, not a simple, knee-jerk reaction, which is what we have seen from the Opposition. After all, if they had taken timely action when they were in government, we would not be facing such difficult choices. Other countries seem to have struck a better balance, and perhaps our Government should look more closely at some of the mechanisms that have been planned or put in place by them.
Mr. Snape:
I have to tell my hon. Friend that he is being less than fair to Conservative Members. They not only signed up to Kyoto but applied the fuel tax escalator year on year. The fact that they are seeking to rat on that now is entirely predictable. At least they made an effort at that time, but in their present guise of a pretty ineffective Opposition, they deny their past.
Mr. Laxton:
I agree with my hon. Friend; Conservative Members give the appearance of being 40-faced on this issue.
I have received correspondence from a company that operates close to my constituency of Derby, North. Accordis is a Dutch-owned international company, and I well know that it is facing some difficult market conditions. Although it may not be too well known--certainly not in the Derby area--it took over from Courtaulds. I have no reason or ability to check its figures, but I shall repeat what it has said for the benefit of the House. It calculates that, at the highest rate, the levy would cost it nearly £7.4 million in the United Kingdom and nearly £3.2 million at the Spondon site. Clearly and understandably, there is concern that the Dutch owners may consider switching production outside the United Kingdom. I certainly hope that that is not the case, and the Government are consulting on that issue.
Hon. Members will see from the Select Committee report that we have called for the Government to work closely with industry to achieve energy efficiency gains, but changing behaviour does not necessarily have to be all stick and no carrot. Most of the negotiations between the Government and energy-intensive industries, as I understand them, have revolved around credits for anticipating future lower use of energy, but we have the opportunity to be more creative here.
The Government are consulting on this tax. I believe that we should consider three points. First, we should recognise moves towards the use of less polluting fuels as well as the use of less energy. We should remove entirely any perverse incentives implicit in this levy as currently designed that encourage the opposite.
Secondly, there should be recognition, by some means or other, of industries that have recently invested to improve their record, so that they are not disadvantaged compared with industries that have cynically delayed such investment. There was some suggestion of that in the evidence given to the Select Committee on Trade and Industry.
Thirdly, there should be credits available for those who reduce their output of greenhouse gases, which are far more damaging than carbon dioxide in their environmental effects. The Iceland supermarket chain is
re-equipping its refrigeration with environmentallybenign hydrocarbons and is moving away from hydrofluorocarbons which, when they leak, are more than 2,000 times more environmentally burdensome than carbon dioxide. Why not let Iceland and other supermarkets chains that are fearful of the levy see the upside as well as the down?
Mr. Tim Loughton (East Worthing and Shoreham):
I am grateful for the opportunity to speak in the debate. I am a member of the Select Committee on Environmental Audit, and I have had a longstanding interest in green taxes and carbon tax, but what is on offer today is not a carbon tax. Let us dispense with all the spin. The climate change levy is nothing more than an energy tax, and that is rightly the title of the debate. It is a tax by stealth, another red herring of a green tax, and a masterful piece of political presentation by the Government.
Worse still, the proposals are indiscriminate and unfocused. As Labour Members have said, no allowance is made for businesses that have already heavily invested in energy efficiency, or for more environmentally friendly energy such as combined heat and power and liquid petroleum gas. This is a downstream tax with no regard to the carbon content of the production method used. It prompts the question whether a genuine carbon tax was ruled out because of the powerful vested interests in the coal industry.
In energy-intensive industries, energy is a raw material for the production processes. It is integral to those industries, which will be hit particularly hard. Industries will be constrained from switching to more environmentally friendly gas by the Government's moratorium on gas-fired power stations. The Economic Secretary to the Treasury had the audacity to suggest that there is no moratorium on gas-fired power stations. I fought long and hard to get such a power station built in my constituency in the teeth of opposition from the Government, so she cannot tell me the opposite.
This tax represents a massive cross-subsidy from manufacturing to service industries. One of the biggest beneficiaries will be the Government, as a major employer in the service industry. Contrary to what the Economic Secretary said, the proposals contain no safeguards to preserve competitiveness, which is not the case in the many European countries that have differing forms of energy tax. Despite all the Government's reassurances about the rebate on national insurance, it is highly arbitrary, and we have had no undertakings on how long the NI rebate will last. Is it a one-off? Will energy tax rates change in the future, while the rates of NI rebate, if they remain, stay static? My right hon. Friend the Member for Wells (Mr. Heathcoat-Amory) referred to the landfill tax, and the fact that the Government have been raking in more cash without recycling any of it, contrary
to the previous Government's intention when they introduced the tax in the first place. Can we expect from the Government, as we patently can from the Liberal Democrats, an energy tax escalator? I am sure that that would be just as counterproductive to the environment as the road fuel duty escalator is proving to be.
Mr. Grieve:
My hon. Friend will recollect the criticism of the Conservatives' change in stance on the fuel escalator. However, is not it the case that the Labour Government have ratcheted up the fuel escalator vastly higher than the Conservatives ever did? Furthermore, is not evidence emerging that, however well intentioned the tax may have been, its impact on road haulage is minimal and its impact on competitiveness considerable?
Mr. Loughton:
That point is well made. The Government have turned out to be past masters at escalating the escalators. Where companies and industries have no alternative, that must impact on their competitiveness, with resulting losses of jobs and profits to this country.
The Government set up the commission under Lord Marshall of Knightsbridge, but they seem to be ignoring his words. In his report, he said that any measures must be subject to careful design to protect the competitiveness of British industry and maximise the environmental benefit; any tax must be designed in a way that protects the competitiveness of British industry; the design of any tax should ensure that combined heat and power is not disadvantaged; and revenues should be recycled in full to business, with at least some of the revenues channelled into schemes aimed directly at promoting energy efficiency and reducing greenhouse gas emissions. On all counts, these proposals fail dismally, and they must be radically overhauled. That is despite the warm words from Treasury Ministers in support of Lord Marshall's report.
The Government have not thought this one through, as the words of the hon. Member for Ochil (Mr. O'Neill), the Chairman of the Select Committee on Trade and Industry suggest. The figures do not add up, and this is another example of an unlevel playing field. The Government claim that the measure is intended to raise £1.75 billion, but, on the anticipated rates of 0.21p per kWh for coal and gas and 0.6p for electricity, it will raise over £2.1 billion if it is applied evenly to all companies.
It was a bold measure by the UK Government to sign up to a 12.5 per cent. reduction in carbon dioxide emissions as our target by 2010. It was particularly bold when one considers that the average for our European neighbours was just 8 per cent. It was an even bolder measure for the Government to claim a 20 per cent. reduction in their manifesto, which may turn out to have been foolhardy.
Of those six or seven European countries which have some form of energy tax, all but one reflect a carbon content--which this proposal does not. Every one grants special treatment to some parts of industry--as much as 100 per cent. relief for the steel manufacturers of Belgium, France, Luxembourg and Spain.
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