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Mr. Michael Clapham (Barnsley, West and Penistone): The hon. Gentleman is using various arguments to request justification of the fossil fuel levy. Can he tell the House what justification was given when the levy was first introduced, in 1990? If he can, he is certainly a better man than the previous President of the Board of Trade, the right hon. Member for Henley (Mr. Heseltine).
Mr. Fallon: The hon. Gentleman will recall that the levy was originally introduced at the time of electricity privatisation. Indeed, it was introduced in the statute that gave effect to the original White Paper on electricity. It was felt that it was worth continuing to support non-fossil fuel sources of energy, including the nuclear and renewables options. That was the purpose of the levy, and successive orders have slowly developed and encouraged different forms of renewable energy in particular and have ensured that they play their part in providing the electricity available to generators. That is why we are a little surprised that the Minister is taking a power--he is being fair to the House and is not, I presume, proposing to exercise it immediately--to tax the very renewables that we have encouraged through the levy. We are hoping for an explanation of that.
I was concluding the list of reviews whose results we need to see before we proceed with the levy. The fifth is the Minister's own review, which is a welcome review of the electricity pool arrangements. The Minister will admit that one of the objectives of that review almost certainly is to see whether the price of the base load effected through the electricity pool needs to be changed and whether it can be made more transparent and competitive by reducing the dominance of the base load by only a handful of generators. Again, we should have the results of that review before we go any further with the business of extending the levy.
The final and sixth relevant review is the Finance Act review, a duty imposed by the House through the Finance Act on the Chancellor of the Exchequer to review the consequences of reducing value added tax on all energy-saving materials. The Chancellor promised us the results of that review by 31 October. That is important because it is only through the results of that review that we shall be able to see how the Government reconcile their target, which is a welcome target, of reducing CO 2 emissions by 20 per cent. by 2025--25 per cent. of those
emissions come from residential homes--with their decision to cut VAT to 5 per cent., a decision which will increase residential emissions by some 250,000 tonnes of carbon every year. That decision will cost the Government some £485 million in the forthcoming financial year, a sum equal to nearly twice the amount that will be raised by the levy under discussion. We need to be told how the Minister is going to reconcile those two policies.
Unless the Minister can give us an explanation, we will be bound to say that the Government are confused. On the one hand, they want to encourage the greater use of energy by cutting VAT on energy; on the other, they are committed to reducing it. The Government are now proposing to tax non-nuclear sources. If I was feeling uncharitable, I could describe the Bill as a pretty anti-green Bill. I wonder how the Minister's greener friends would welcome a Bill which, for the first time, gives him the power to tax the very sources of renewable energy that we have been trying to encourage for so long.
We might be more charitable towards the Minister and the Bill if he were doing something about the fossil fuel industry. I suspect that the very good attendance for this debate, especially by Labour Members, reflects a widespread concern about what the Minister is doing about our coal industry. While he tinkers with the levy, as Members with closer connections to mining constituencies than I know better than I, some 50,000 jobs are at stake--20,000 in the coal industry and 30,000 in related services.
Mr. Battle:
When the hon. Gentleman was previously a Member of Parliament representing, I think, Darlington, he was the parliamentary private secretary to the Secretary of State for Energy. Later, in 1993, he appeared on a programme called "The Power Game" on Tyne Tees Television and said:
Mr. Fallon:
Let me make it clear to the Minister that I do not withdraw one of those remarks. Had we introduced private finance into the coal industry earlier, the industry would certainly be in better health than it is now. I remind the Minister what happened the last time British Coal came to a Government with a list of proposed closures. The Conservative Government did not wash their hands of the industry. On the contrary, they imposed a moratorium on pit closures, as those in the House at the time will remember. They encouraged negotiations with the generators on new coal contracts. We did not simply say, as the Minister is now saying, that we hoped that the contracts would be concluded; we encouraged the generators to reach a successful conclusion of those contracts. Indeed, that was the purpose of the moratorium that we imposed on pit closures. We also introduced private finance into the coal industry, something which I wish we had done earlier, to give pits a better chance of being saved.
Mr. Clapham:
The hon. Gentleman refers to colliery closures. Is he aware that in 1993, the Select Committee
Mr. Fallon:
No, I do not accept that. In fact, it was the President of the Board of Trade who imposed the original moratorium on the list of pit closures presented to the House.
I ask hon. Members to choose whose words they support. Last Wednesday, there was a rather truncated Adjournment debate on the coal industry secured by my hon. Friend the Member for Stone (Mr. Cash). The Minister replied to that debate. Hon. Members would have had a better chance to contribute had it not been for the extraordinary scenes that we witnessed during the debate on the Wireless Telegraphy Bill, which involved Labour Members reading out telephone directories.
In The Times of 24 October, Rev. John Roden, the industrial chaplain for the coal areas of Selby, is reported as describing the Government's position on energy policy as pathetic. He said:
Mr. Fallon:
I am happy to accept that challenge. I hope that the miners whom the hon. Gentleman represents are happy with the Minister's intervention and with what is allegedly being done, or not done, to save the collieries now at risk. It is getting very late in the day to save some of those collieries, and I should like the Minister to be a little more active in that respect. Indeed, if the Minister has a fossil fuel policy, let us not have it in dribs and drabs--a few words in last Wednesday's Adjournment debate and some words of comfort tucked away in his speech today. Instead, let him publish his policy and then organise a debate on it so that the hon. Member for Selby (Mr. Grogan) and other Labour Members who have a genuine and long-standing interest in the coal industry can consider what can be done to help the coalfields. I accept that those hon. Members might want to criticise our performance in government--that is fair enough--but the Labour party is in government now.
Mr. Michael Clapham (Barnsley, West and Penistone):
The fossil fuel levy should have been called the nuclear subsidy, because it is clearly a subsidy to the
I asked the Conservative spokesman why the fossil fuel levy had been introduced, because when the Select Committee on Trade and Industry considered the issue for its report, "British Energy Policy and the Market for Coal", published in January 1993, we asked the then President of the Board of Trade and the chairman of Nuclear Electric the same question. There was a great deal of confusion in the comments made then and people appeared to be unaware of the purpose of the levy. The report says, on page 62, paragraph 121:
When the Select Committee started to look at Nuclear Electric's balance sheet, we saw that £3 billion of the levy income available to it from 1990 to 1998 was used for other purposes. It is, in fact, being used to fund an investment programme. We know that a huge capital investment programme was launched from the levy. Sizewell B was built with money raised on the levy. The levy has enabled Nuclear Electric to fund its large capital programme without incurring debt. It was clearly a subsidy to provide the nuclear industry with cash for investment and to ensure a positive cash flow.
The Select Committee was concerned about the huge amounts of money being raised and used in that way and recommended that there should be other uses for the levy. Paragraph 127, on page 64 of the report, says:
"With hindsight, we privatised things in the wrong order. Perhaps we ought to have privatised the coal industry first.
Now let the hon. Gentleman read out his list of the unemployed to me.
It should be run like a business and I wish we had handed it over to the great mining companies in this country, like RTZ.
It is all about going out and finding the cheapest source of power, not about employing people in mines."
"There is widespread disillusionment--95 per cent. of miners voted for a Labour Government. I doubt if they will again."
Mr. Vernon Coaker (Gedling):
I challenge the hon. Gentleman to come to the coalfield areas in and around Nottingham that I represent and to those represented by other Labour Members and to ask people there whom they choose to run the coal industry--the Tories or a Labour Government who are trying to deal with the mess left by the previous Government.
"The President told us that it is 'a charge on the consumer in order to enable the nuclear industry both to clean up and to provide for cleaning up the old nuclear plants.'"
When the same question was put to the chairman of Nuclear Electric, he said:
"The purpose of the Levy is really two-fold: to comply with the Secretary of State's 9 November 1989 statement that Nuclear Electric should be cash positive and, secondly, to help fund pre-existing liabilities."
That was added to by the finance director of Nuclear Electric, who said that
"the Levy was never attached to any particular cash flow that Nuclear Electric has to pay. It was specifically described to ensure that Nuclear Electric remained cash-positive."
In other words, nobody knew what the purpose of the levy was.
"Our recommendation would make it possible either to reduce the Levy or to use an average of £380 million a year during the remaining five years of the Levy for other purposes".
Those "other purposes" were clean-coal technology. When the report was debated in the House, the President of the Board of Trade rejected all 39 recommendations. We are facing the current dilemma because the money that could have been made available for investment in clean-coal technology was never realised.
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