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(b) involve the conversion of a dwelling by the installation into or on the dwelling of energy saving materials as defined under subsection (1F) below.'.

No. 31, in page 17, line 35, at end insert--

'(1F) For the purposes of subsection (1D)(b) above energy saving materials shall be such materials or products as are by Order designated by the Secretary of State and the materials or products so designated
(a) shall include all such materials or products which in his opinion are used solely for the purpose of improving the energy efficiency of buildings; and
(b) may include any material or product of which in his opinion, the primary purpose is the improvement in the energy efficiency of buildings.
(1G) The Secretary of State
(a) shall within one year of the passing of this Act make the Order referred to in subsection (1F) above; and
(b) may make further Orders designating other materials or products if in his opinion it is expedient to do so; and
any such Orders shall be subject to approval by resolution of the Commons House of Parliament.'.

Mr. Simpson: I am sorry if I misled the House a few moments ago with my enthusiasm to get on to this debate. This is not a probing amendment, but a genuine one. It aims to address an important energy conservation issue that I have attempted to raise in the House before.

The amendment is not the channel through which those of us who tabled it would have preferred to go. We were compelled to go through it to get an amendment on the Order Paper which was not ultra vires. During our proceedings, I have discovered that the other options--to propose a reduction in VAT or VAT relief--were not open to me as a Back Bencher to move.

I reflected on the fact that, although the Chancellor of the Exchequer and I are neighbours, there are important differences between us. He is Chancellor and I am a Back Bencher. I also understand that, in troubled times such as these, he often has cause to envy the security of my position. Although his occupation of the Chancellorship may be temporary, he has the opportunity to introduce proposals relating to VAT reduction and relief. Those opportunities were not available to those who have tabled these amendments. However, the issues and the principles at stake are the same. The principle underpinning the amendments is that it is quite wrong in tax law to pursue a policy of taxing energy conservation more heavily than energy consumption.

9.15 pm

I am not the first--and I suppose that I shall not be the last--to make that point. I always try to give credit where it is due, so I pay particular tribute to a former Chancellor of the Exchequer, the right hon. Member for Kingston upon Thames (Mr. Lamont). In his Budget speech on 16 March 1993, he said:

"For the first time, the rate of VAT on domestic fuel and power will be the same as that charged on goods like loft insulation material, which improve energy efficiency. This will bring to an end

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the current anomaly, which makes nonsense of any attempt to use the tax system to improve the environment".--[Official Report, 16 March 1993; Vol. 221, c. 183.]

In its infinite wisdom, the House decided to retain VAT on domestic fuel bills at 8 per cent., but it did not then address the anomaly to which the Chancellor had drawn our attention. So that anomaly--the "nonsense" to which the former Chancellor referred--remains. This group of amendments seeks to remove that anomaly and to restore a level tax field to environmental policies.

As the Treasury would not do that via VAT reduction or relief, we were forced to explore the possibility of VAT rebates. I am grateful to the present Chancellor of the Exchequer for introducing the administrative framework of a rebate system into the Finance Bill. The amendments slot quite comfortably into that system. It is not simply the administrative system that matters: I shall remind the House of the extent of public support for that sort of proposal.

I should not be coy, but attribute praise to all those who deserve it. In a way, they are not my amendments, as they were formulated on the basis of wide, cross-party support. In a matter of days, 201 right hon. and hon. Members put their names to the group of amendments. Over a slightly longer period last year, 343 right hon. and hon Members put their names to an early-day motion that said substantially the same thing. A majority of hon. Members have backed the principle that we should tax energy conservation no more heavily than energy consumption.

I pay particular tribute to the hon. Member for Exeter (Sir J. Hannam) and for Truro (Mr. Taylor) who have worked to ensure that the amendments before the House are of an all-party nature. It is also important to pay tribute to the 350 local authorities around the country that have given their support to the proposal. The Confederation of British Industry energy policy committee, the Builders Merchants Federation, local chambers of commerce, pensioners' rights organisations and Friends of the Earth support the measure. A national survey commissioned by the Association for the Conservation of Energy found that Conservative councillors around the country support the proposal by a ratio of six to one. That is the scale of public support for the measure around the country on a cross-party basis.

I have attended a number of public meetings up and down the country, and I have not met anyone who opposes the proposal. However, there is one exception: Her Majesty's Treasury. The Treasury has advanced four reasons why it objects to the amendments.

First, it says that they are too bureaucratic. I shall answer that charge in three parts. The amendments would not create any new bureaucracy, as they would slot into the rebate scheme as set out in clause 28 of the Bill. It is not cumbersome in relation to generating an unsupportable level of demand on a civil service, because the terms of the amendment are targeted to the trade.

Clause 28(1C) makes it clear that the measure is aimed at contractors, and it makes it administratively simple for that to take place. If the Government's objection is that it is not wide-ranging enough, it would be open to them to come up with a proposal that widened the basis of that uptake--they could introduce it on the basis of an across-the-counter refund system. New clause 19 gives an

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indication of how the Government might do this, if that were their preferred path. It is not beyond the wit of the House to extend it in simple, non-bureaucratic ways if that is what the Treasury wants to do.

The second objection is the problem of definition. How will people define what is or what is not an energy-saving material? The Treasury has said that it is not competent to define that list. The truth is that we would not be asking the Treasury to define that list; it is written into the amendment that we would be asking the Secretary of State for the Environment to draw up that list over the next year.

The list would be divided into two groups: products that are solely for the purpose of energy saving, and products that are primarily for the purpose of energy saving. The Secretary of State would come to the House with that list, and he would have a year to draw it up. The Government would have a year in which they would be free to come back with a better method of delivering that reduction in VAT. I am sure that that would be ample time and would be welcomed.

The third objection I have heard is precedent--that, if we were to go down this path, a whole series of good causes would come and say, "You have done it for one, so you ought to do it for us." They are not the conditions within which the amendment is being moved. We have an unprecedented position, in which energy saving is actually tax penalised. We are not asking for tax favouring; we are asking for the removal of a tax penalty that favours the wasteful use of energy rather than the safe and responsible use of energy--we are creating a level playing field, not tax favouring.

The fourth objection that I have heard is that, if we go down this path, we will upset Europe--the objection is probably couched around it being in breach of the sixth VAT directive. I know that there are other countries in Europe--Belgium and Greece, in particular--that already use different rates of VAT to tax-favour energy conservation. If it is sauce for Belgium, it is sauce for Britain. That is not a sense in which we would be in breach--the practices are already being carried out elsewhere in Europe.

Secondly, I have managed to get a letter from one of the European Commissioners that says that, in relation to the sixth VAT directive,

"Certain Member States do tax the construction, renovation or alteration of social housing at the reduced rate. In such cases it may be that the contract to construct, renovate or alter the house in question might include the incorporation of energy saving materials".

We are told that that is a possibility open to us. The Commissioner pointed out that it would not be an option on an individual basis, which reinforces the argument about targeting it on the trade.

My final comment in relation to this uncertainty about European rules and directives is this: what if we were challenged? If the European Commission told the House that its actions were VAT-illegal, surely that would be precisely the sort of ground on which Her Majesty's Government would want to challenge a European ruling. If European rules and directives prevent a country from tax-favouring energy conservation rather than the wasting of energy, surely that is the absurdity.

In the words of the right hon. Member for Kingston upon Thames, the former Chancellor of the Exchequer, that is "the nonsense" that the House has a

27 Mar 1996 : Column 1123

responsibility to tackle. If the nonsense resides at European level, it should be challenged there rather than consented to by the House. We hear much about subsidiarity, but if subsidiarity does not mean that a country has the ability to fend for its fuel-poor, it means nothing at all. The issue is as stark as that.

Against the detractors, I wish to focus on the positive points in the core of amendment No. 25, which represents a virtuous circle with four-way winners. One group of winners would be those who live in cold homes. The industry estimates that there would be a 10 per cent. increase in demand for home insulation products if we supported the amendment. It would be a real boost to the mileage of moneys left in the home energy insulation budget, which, as the House will remember, was cut by 30 per cent. despite assurances to the contrary, and it would target that greater mileage specifically on those who are suffering greatest hardship from fuel poverty.

The second beneficiary would be the environment. It has been estimated that the amendment would save 200,000 tonnes of carbon dioxide, 290 tonnes of nitrous oxide and 530 tonnes of sulphur dioxide by the year 2000.

The third group of beneficiaries would be the unemployed. Industry has estimated that the increase in demand, simply from passing the amendment, would be the equivalent of 10,000 job-years in jobs created and jobs sustained. Finally, the industry itself would benefit. The industry is desperate for the 10 per cent. increase in demand that it estimates would come from the amendment.

The House should hear some of the comments that I have received from sections of the industry. The chief executive of Owens Corning Building Products has said:

"Market demand is very disappointing with no sign of improvement".

More or less the same comment was made by Sheffield Insulations and Schlegel (UK) Engineering Ltd. The director of British Gypsum has said:

"Builders report that the past six months have been extremely difficult. We expect worse to come".

Pilkington Glass Ltd. has said:

"The first six months of the year were very flat and we forecast a decline from here on".

Dow Construction Products has said:

"Business is flat or even declining. The future looks bleak".

Similar comments have come from Vencel Resil Ltd. and the directors of Honeywell Control Systems Ltd. Those are some of the major home insulation contractors working in Britain and they back the amendment. They have urged us to support it tonight.

The one question with which the Treasury should concern itself is the cost. The estimate for the worst case scenario for costs is £10 million. In Treasury terms, that is no more than a cup of tea between the Chancellor and the Governor of the Bank of England. The figure assumes that there would be no increase in revenue to the Treasury from the increase in demand for products in the home insulation industry. It assumes that no savings would accrue from the retention and development of jobs in the industry.

The best case scenario suggests that the Chancellor would come out financially better off from the process. Even the worst case basis shows a minute price to pay for making serious inroads into the 50,000 avoidable deaths

27 Mar 1996 : Column 1124

of people in the United Kingdom every winter through fuel poverty. That is the real bottom line of the costs borne by this country.

The reason why the Treasury does not support amendment No. 25, and why it has not come up with any amendments that would achieve the same end, is very simple. The Treasury does not want this because it does not want it. It will not come up with a simpler proposal because it does not want one--but the public do.

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