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9.18 pm
Mr. Denis MacShane (Rotherham): I have an amazingly long speech, which I shall throw away to allow other hon. Members to contribute. However, I shall make a short declaration of interest, in that my constituency of Rotherham, in which steel has been made for some 300 years, has in it Europe's most advanced engineering steel plant. I am proud to say that I work closely with the industry, and with the Iron and Steel Trades Confederation, the main union.
The debate will have served some purpose. We have heard some remarkably lightweight speeches about heavy industry from Conservative Members, but I hope that my hon. Friend the Financial Secretary will take on board many of the comments that have been made.
To announce a tax and then discuss it for a full year is a remarkable fiscal innovation. No doubt my hon. Friend feels that she is getting all the pain and little of the gain, but I pay tribute to her and to my hon. Friend the Economic Secretary to the Treasury for their willingness to receive delegations and to speak either privately or formally. I am not necessarily the Treasury's biggest fan but they exemplify the new Labour listening Treasury, and I hope that some of the points made will be taken on board.
We need not take lessons from the Conservatives, whose main interest in manufacturing lies in manufacturing offshore tax havens to secure the flow of funds into the sleaze bag at central office. When in Government, the
Tories destroyed 150,000 jobs a year, and no Conservative Member from the asset companies and the financial sector could makes the same speeches in Rotherham as they give to the House.
My constituents were most offended by the article written by the hon. Member for Hazel Grove (Mr. Stunell) in The Parliamentary Monitor. He suggested that those concerned about the tax represented dinosaur interests, but manufacturing is sick and tired of being patronised by Liberal Democrats, Greens and the City boys from the Conservative party. Manufacturing is sick of being told that it represents the past; it is in fact the internationally traded competitive sector of our economy, and the men who work in manufacturing, from top management to new recruits, deserve much more time and attention than the Conservative party has given them over the past 20 years.
I find some of the language used in the debate disagreeable. There is an idea that we tax "bads" and give tax relief to "goods". We cannot moralise about taxation in that way. Manufacturing, particularly the steel sector, is full of good men who make good products. The hon. Member for East Worthing and Shoreham (Mr. Loughton) read us the British Steel handout, and I agree with it. If anything, it needs to be reinforced, because manufacturing trades competitively in international markets.
The biggest hit taken by the British steel sector in recent years will not come from the tax. The forced rise in the pound engineered by the previous Conservative Government during their last year in office put the pound up from DM2.17 in May 1996 to DM2.70 in May 1997. The pound has been stuck ever since at that rate, which ripped the guts out of British steel's profitability. The export-killing pound inherited by the Government has caused much damage. The utter hostility of the Conservatives to Europe reinforces it, although the hon. Member for Grantham and Stamford (Mr. Davies) is strongly pro-euro and pro-European and will doubtless set out minds at rest in his summing up of the debate.
I wish that our steel plants would paint themselves bright green. They are among the most ecologically minded sections of our heavy industry. They recycle 2 million cars a year and contribute massively to ensuring that British manufacturing is strongly committed to recycling. When compared with other sources of CO 2 emissions, industry since 1991 has reduced its energy input by 12.5 per cent. By comparison, since 1980--roughly during the 18 years of Conservative rule--road transport increased by 50 per cent. The Conservatives failed to tackle the problems.
Europe has much more integrated policies, and the contempt and indifference of Conservative Governments towards action to reduce energy sources and CO 2 emissions has left us with problems to clear up. When measured by the usage of end-users, the iron and steel sector's reduction per million tonnes of CO 2 energy since 1988 is about 12.5 per cent. while that of road transport has risen by 50 per cent. There has been a 150 per cent. increase in the use of diesel fuel since 1985. Let us name the bads in our economy, and let us accept that the steel industry can reasonably be defined as a good.
I shall not go through the figures that I have already presented to the Treasury. The hon. Member for East Worthing and Shoreham listed some of them. Let us be clear that the Treasury has been a little fox in the chicken
coop and over-alarmed and over-excited the industry. The figures quoted are indicative or illustrative. I am not sure what that means, but I have to say bluntly to my hon. Friend the Minister that they have alarmed many in the manufacturing sector and especially the steel industry.
We do not know what the final figures will be. I appeal to the Government in the continuing negotiations--months of negotiations and consultation that lie ahead--to practice joined-up government and combine the Treasury with the Department of the Environment, Transport and the Regions and the Department of Trade and Industry. Such a troika could work together so that when the final rate is set, and it will be set, it is set on the basis of consultation.
What needs to be done? I suggest a few simple measures. We need to focus on negotiated agreements based on reduction targets for different sectors. We need, not just revenue-neutral taxes, but fiscal neutrality. There is genuine concern about a cross-subsidy from the north to the south; from Labour heartlands to the asset management boys in the City; from steel to Whitehall Ministries. We need full transparency in pricing. That is a huge problem. We have the highest energy prices for industry. They have come down since 1990, but they started at such a high level as a result of the inefficient, racketeering way in which energy was privatised by the Conservative party.
Mr. Stunell:
Will the hon. Gentleman give way?
Mr. MacShane:
If the hon. Gentleman will forgive me, I want to finish. We need to permit trading to encourage more flexible market responses to energy reduction.
We also need to look at the broader EU approach. It was fascinating to hear the manic Europhobes in the Conservative party speaking up for Europe and citing European examples of support for industry through fairer taxation.
We need to involve our social partners in reducing emissions. The trade union movement is deeply concerned about the matter. It does not have a vote in the House, but it has a voice and I believe that it will make it heard.
We also need far more research into CO 2 reduction policies. Only a couple of years ago British Steel was making £2 billion profit and this year alone it has transferred £700 million to shareholders, including a cheque for £450 million that has gone across the Atlantic because only American investors have invested in British Steel. Money could be found for a private-public research institute to examine CO 2 reduction policies. We need much stronger public engagement from the manufacturing sector, the Confederation of British Industry, and the United Kingdom Steel Association. They should enter into a dialogue with the green lobby and people campaigning on environmental reduction policies.
Mr. Dominic Grieve (Beaconsfield):
The speech of the hon. Member for Rotherham (Mr. MacShane) was an example of casuistry. He moved from one position to another in the course of a few minutes. It defies emulation and I shall not attempt to follow it.
This is a non-partisan issue. It is quite apparent that all major parties in the House believe in the motherhood and apple pie idea of trying to improve the environment and tackling global warming. The only difference between the Government and the Opposition is that the Opposition know that the reality of motherhood in government is that one often has sleepless nights and the apple pie gets spilt on the floor. On the other hand, the Liberal Democrats--not having experienced motherhood in government for about the past 60 years--have no sense of realism when it comes to policy decisions and the problems of implementation.
As a Member of the Environmental Audit Committee, I have always turned what I hope is a constructive eye and ear to all the ideas on tackling global warming and to the evidence that I have heard during the past two years. When the measure was first floated before the Committee, it seemed to have some attractive features. It might succeed in constructing a taxation system whereby, although people would be taxed more on their energy costs, they would immediately be offered compensation through the reduction of their national insurance charges. That would leave them with the superficial possibility of having reduced national insurance charges, while cutting down their electricity and energy consumption to make themselves more efficient, thereby improving their profits.
However, when one considers the detail of the ratio between the amount of energy used and the number of employees, the problem is apparent: the figures do not add up. The measure is a good idea, but when one examines it closely, it does not work. As a result of this fiscal adjustment, vast amounts of money will be siphoned off from manufacturing industries--heaven knows that they have had a rough enough time in a competitive world environment, whether under this or the previous Government--and will go to public service industries, which are not wealth producers in this country. The proposed measure simply does not add up.
I am quite happy to hear Ministers' constructive suggestions--now and in the future--as to how adjustments might be made or exemptions granted. However, I have considered the measure and spoken to those in my constituency who will be the worst affected. In Taplow, there is a paper-mill, which already suffers enormous economic difficulties; after my recent visit to the mill, I am satisfied that it will become completely uneconomic. However hard the business tries, it is a major energy consumer and it will become uneconomic if the proposals are implemented.
I do not want to take up too much of the House's time; I hope that there will be time for other hon. Members to speak. However, the Economic Secretary to the Treasury rightly asked Opposition Members for their proposals. The problem is that, although we all believe in motherhood and apple pie, when it comes down to the detail and the reality, none of us is able to produce valid proposals.
I have some suggestions that may be more important than the wholly counterproductive proposals for an energy tax. First, we should face the fact that there is an
exponential growth in the domestic use of energy--whether it be in our homes or the motor car. That is a major political challenge--because the individuals are voters. We must address that challenge.
In relation to the point about VAT on fuel, I am most conscious of the problem of fuel poverty and that we must address it. I accept that it is a long-running national scandal. However, the problem can be solved in ways other than merely reducing the VAT rate, and refusing to contemplate its increase for most of the population, who are able to afford to pay it. The reduction in VAT was a counterproductive move and the Conservative Government made a considerable mistake by taking that route.
The whole culture in this country needs to be re-examined. What is the point in having a policy of telling people that they should save energy domestically, when all they have to do is go out for a drive to see that motorway lighting provided by the Government and road lighting generally provided by local authorities is in continuous growth, apparently for safety reasons? That contrasts with policies in Scandinavia: in Denmark, I noted with interest that, to make the point of energy saving, every second street light in Copenhagen is switched off. Those might be small things, but they add up. What is necessary energy use and what is unnecessary--if not decorative, something that we can do without?
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