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Climate Change Levy
10. Mr. Gordon Prentice (Pendle): What assessment he has made of the impact of the proposed climate change levy on (a) the aluminium industry and (b) other high-energy using manufacturing industries. [83198]
The Economic Secretary to the Treasury (Ms Patricia Hewitt): Following Lord Marshall's recommendation, the Government are not taking an across-the-board approach to the climate change levy. As my right hon. Friend the Chancellor announced on Budget day, we intend to set significantly lower rates of levy for those energy-intensive sectors that agree targets for improving their energy efficiency. My right hon. Friend the Deputy Prime Minister has had a useful initial meeting with the associations representing the energy-intensive sectors and detailed negotiations with those sectors, including the aluminium industry, are now under way.
Mr. Prentice: That is a very reassuring answer, but even with the 50 per cent. reduction for energy-intensive industries such as aluminium there are fears that production costs will rise dramatically. I have been told that the aluminium industry anticipates a rise of perhaps 12 per cent. per tonne, which would drive it offshore. I was reassured by what I heard about discussions and negotiations taking place, with a concluding date of 28 May, and I very much hope that my hon. Friend will take into account and give full weight to the concerns expressed by the industries.
Ms Hewitt: I am grateful to my hon. Friend for that question. The points that he makes are precisely those that we are taking into account in our discussions with the energy-intensive sectors. I stress that the 50 per cent. lower rate in the Customs and Excise consultation document is purely an illustrative assumption. It is not a statement about what the lower rate might be for any energy-intensive sector. That lower rate will depend on the stringency of the targets to which the sectors agree. In line with our published statement of intent on the principles of environmental taxation, international competitiveness is one of the key issues that we consider for any environmental tax, including the climate change levy.
Mr. John Bercow (Buckingham): Given that British Steel estimates that the climate change levy will add £200 million to its annual tax bill, whereas the offsetting reduction in national insurance is worth only £5 million a year to it, does the Economic Secretary acknowledge that the levy is yet another clear example of the Government's policy of taxation by stealth, which has served to throttle manufacturing industry in this country and plunge it into recession while she has been a Minister?
Ms Hewitt: The hon. Gentleman does not seem to appreciate that, as my right hon. Friend the Chancellor made clear, the new levy will entail no increase in the overall burden of tax on business: it will be revenue neutral. As I have already said on a similar point, we are now looking in detail at the different energy-intensive sectors, what each of them is willing to do to improve energy efficiency and how we should respond by introducing a significantly lower rate of climate change levy.
I am interested in the fact that the hon. Gentleman, judging from his remarks, seems to have abandoned the commitment that the Conservative Government made to meeting the Kyoto target. The climate change levy is an
essential part of meeting those targets. We estimate that it will save about 1.5 million tonnes of carbon a year by 2010.
Mr. Barry Jones (Alyn and Deeside):
May I tell my hon. Friend of the apprehension of the national leadership of British Steel plc and Shotton steelworkers in my constituency about the levy, not least in view of the ruthless foreign dumping of steel products and the high value of the pound? Will she receive a deputation to hear our fears? May I suggest that she can best assist manufacturing in my constituency by insisting that assisted area status be retained and that objective 2 status be given to us?
Ms Hewitt:
I am grateful to my hon. Friend for that question. I am always delighted to meet my hon. Friend and discuss this and other matters of particular concern to his constituents. Treasury Ministers and my right hon. Friend the Deputy Prime Minister are examining carefully the impact on competitiveness of the energy-intensive sectors. That will be the guiding principle when we come to set the significantly reduced rates of climate change levy in return for sector agreements to promote and deliver greater energy efficiency. I remind my hon. Friend of the significant reductions in corporation tax that we have delivered, which will be of great help to businesses in his constituency as well as across the country.
11. Mr. Edward Davey (Kingston and Surbiton):
If he will review his policy to abolish dividend tax credits for people with incomes below the level of the personal income tax allowance. [83199]
The Paymaster General (Dawn Primarolo):
No. We will not be reviewing the decision.
Mr. Davey:
That answer was, unfortunately, not surprising. May I tell the hon. Lady that she should be reviewing the decision? Will she consider talking to her predecessor, who at least appeared to show some sympathy for the hundreds of thousands of pensioners who will be hit by the policy? Will she consider meeting an all-party delegation of hon. Members who have expressed concern about the matter and want to see the poorest pensioners protected from this tax increase?
Dawn Primarolo:
The Government's record on helping poor pensioners is clear. The proposals in the Budget contained the winter fuel allowance and the minimum income guarantee. The minimum tax guarantee was also introduced. The question of helping poor pensioners has been discussed extensively in the House over nearly two years, and the hon. Gentleman will know the reasons for the reform. He should stop trying to make spending commitments, but should support the Government in ensuring that policies concentrate on the poorest pensioners.
Mr. Geoffrey Clifton-Brown (Cotswold):
Why do the Government insist on hitting those of our poorest pensioners who have a small amount of savings? The Government are not content with abolishing dividend tax credit for those pensioners who are below the personal
Dawn Primarolo:
As the hon. Gentleman knows, savings are dealt with very fairly in the tax system. The introduction of the 10p tax rate will benefit those pensioners who pay tax on their income. As a result of the Government's proposals, only about one third of pensioners will now pay tax. The hon. Gentleman knows full well that the Budget proposals, and especially the winter fuel allowance, did a great deal to help pensioners.
12. Mr. Richard Page (South-West Hertfordshire):
What estimate he has made of the change in the amount in national insurance payable by the self-employed in 2000-01 as a result of the March 1999 Budget. [83200]
The Paymaster General (Dawn Primarolo):
We estimate that the extra amount payable by the self-employed for 2000-01 is £240 million.
Mr. Page:
This is the second time that I have asked this question at Treasury questions. Last time, I got an appalling reply from the Financial Secretary, who completely avoided the question, and I thank the Paymaster General for coming up with the right answer this time--second time lucky.
What evaluation did the Treasury carry out of the effect that the change will have on the self-employed? Will they not be brutally hit by this large increase?
Dawn Primarolo:
I inform the hon. Gentleman--very gently--that his question today is different from his question at the previous Treasury questions. Last time, he asked about the amount paid, and my hon. Friend the Financial Secretary gave him the correct answer. Today, he asked about liability, and I have answered his question. Both the answers that he has received are correct. The changes to class 2 and class 4 national insurance for the self-employed will help them enormously by ensuring that their entitlement to benefits moves closer to that of those in employment. They also distribute national insurance liability much more fairly among the self-employed.
Ms Rosie Winterton (Doncaster, Central):
My hon. Friend will be aware that trade unions such as the Union of Construction, Allied Trades and Technicians have
Dawn Primarolo:
My hon. Friend raises a question about the construction industry scheme, and the 714 certificates. I am aware of the concerns among trade unions and the construction industry about the effectiveness of the scheme. We are constantly reviewing the successful registration of those in the construction industry who are required to register. Like me, my hon. Friend may have had the advantage this morning of hearing the radio information bulletins advertising to those in the construction industry that they are required to get the certificate. The clear message was, "No certificate, no pay."
Mr. Nick Gibb (Bognor Regis and Littlehampton):
The difference in the wording of the question put by my hon. Friend the Member for South-West Hertfordshire (Mr. Page) was between "paid" and "payable". Ministers are playing a dangerous game of semantics to avoid revealing to the House the extra taxes that they are imposing on people. Will the Minister confirm that, when all the Government's changes to employees' national insurance are taken into account, millions of people in middle Britain who earn £27,000 a year or more will pay significantly higher national insurance contributions? Is that not yet another stealth tax increase from a party that promised not to raise taxes at all?
Dawn Primarolo:
I cannot be held accountable if the hon. Gentleman does not understand how national accounting works or the difference between liability and the amount actually paid. He is an accountant, and I thought that he understood these matters, but perhaps he needs to grapple further with that point.
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