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Climate Change Levy
10. Mr. David Chaytor (Bury, North): What responses he has received to the changes that he announced in his pre-Budget report to the proposed climate change levy. [112222]
The Financial Secretary to the Treasury (Mr. Stephen Timms): The refinements to the design of the climate change levy announced by the Chancellor of the Exchequer in November will further both our aims for the levy: to increase its environmental effectiveness, while protecting the competitiveness of UK firms. Those changes were welcomed by both business leaders and environmental groups.
Mr. Chaytor: I thank my hon. Friend for that reply. First, does he think that we now have the right balance between the need to protect the environment and the need to support industry? Secondly and quite specifically, will he look again at the operation of the combined heat and power exemption, particularly the definition of what constitutes high-quality CHP, as I understand that there is a debate about that?
Mr. Timms: The climate change levy forms an important part of our climate change programme, which, as my hon. Friend may know, is published today. One feature of the package in the pre-Budget report that has been particularly welcomed has been the trebling of support for business energy-efficiency measures, including combined heat and power. That underlines our determination to tackle the huge challenge of climate change, but to do so in partnership with business and other interested parties.
We are getting the balance right. We are consulting on the right definition for good-quality combined heat and power systems. It is important that we get it right and provide incentives for the right type of power generation. I will look carefully at the responses to the consultation when it is completed.
Mr. David Heathcoat-Amory (Wells):
Why are the Government persisting with that damaging energy tax, which will be levied on all firms, whatever their size, in all sections of industry? Will the Minister confirm that the same firms that will have money taken off them through the tax are being blocked from installing gas-fired electricity generating plant, which would itself reduce carbon dioxide emissions and counter the threat of global warming? Why do not the Government start to practise joined-up government, instead of just talking about it? As usual, it is all talk and no delivery.
To put that contradiction beyond dispute, will the Minister confirm the fact--the calculation has been made by the House of Commons Library--that the entire carbon dioxide saving that is hoped for under that tax could be achieved simply by permitting those firms to generate electricity through gas-fired plant, which would render the entire tax, with all its expense and complexity, completely unnecessary?
Mr. Timms:
I can certainly reassure the right hon. Gentleman that we are delivering the climate change levy. The problem of climate change is huge and a major programme is required to tackle it. That is why we are publishing the programme today. It makes it clear that the climate change levy will make an important contribution to achieving our Kyoto targets. It will save 2 million tonnes of carbon a year by 2010, and there will be at least as much again in negotiated agreements. That is a big contribution towards meeting our objectives. The right hon. Gentleman asks about the stricter consents policy. That policy addresses entirely different issues about the security and diversity of UK energy supply. Both policies are right.
Mr. David Taylor (North-West Leicestershire):
How would my hon. Friend compare the energy tax rates in the UK with those of our main competitors in the European Union, and what impact might such rates have?
Mr. Timms:
Many other EU countries have introduced carbon or energy taxes--eight of them so far. France and Belgium are working up their proposals at the moment. My hon. Friend asks about the rate of the climate change levy. The headline rate is around the middle of the rates in the eight EU states that have already introduced such taxes, so we are about in the middle.
11. Mr. Philip Hammond (Runnymede and Weybridge):
What estimate he has made of the incremental amount of tax that will be paid in the next financial year as a result of measures announced since 1 May 1997. [112224]
12. Mr. Tim Boswell (Daventry):
How much extra tax will be paid per annum as a result of his Budget measures to date. [112225]
The Chief Secretary to the Treasury (Mr. Andrew Smith):
All changes to the tax system are included in the relevant Budget reports, which are publicly available. As a result of those Budgets, the direct tax rate on an average family with children will fall below 20 per cent. for the first time since 1979, and will be at its lowest level since 1972.
Mr. Hammond:
The Chief Secretary focuses on direct taxes, of course. Is it not a fact that, if the total tax burden as a percentage of GDP had remained at the 1996-97 level--which applied before the general election and before the Chancellor started introducing his stealth taxes--in the coming financial year, the British people
Mr. Smith:
No. Conservative Members are the last people who should focus on indirect taxes--they are the ones who put VAT on fuel, in breach of their election promises. The hon. Gentleman would do well to heed the advice of the shadow Chancellor, who, on 20 September, said:
Mr. Boswell:
Is it not remarkable that, whereas other Ministers are so keen on adjectives such as "new", "modern", and even "joined-up", Treasury Ministers become sensitive--they dislike it--when a particular noun is used in relation to tax changes, which are otherwise commonly known as "tax increases"? For the sake of argument, let us call them tax changes. Will the Chief Secretary tell us what assessment he has made of the impact on ordinary people of those tax changes? What is the effect, for example, of an annual petrol tax hike of £178 on people in rural areas and on heads of families on the national minimum wage? What is the impact on pensioners with incomes below the income support level, but who have small savings incomes, whose payable tax credits have been withdrawn?
Mr. Smith:
The hon. Gentleman should remember who it was who introduced the automatic petrol tax escalator, which we have now abandoned. Who was it who imposed VAT on fuel, which did the damage to pensioners? The answer to his question is that families with children are £740 a year better off as a consequence of our tax changes.
Mrs. Anne Campbell (Cambridge):
Many of my constituents are paying more tax than they were prior to May 1997, and they are doing so because they are earning a great deal more than they were prior to May 1997. Would my right hon. Friend like to take the opportunity to congratulate some of the high-tech entrepreneurs in my constituency--such as Mike Lynch, of Autonomy--who have done so well with the economic stability that the Government have created?
Mr. Smith:
Yes, I do join my hon. Friend in congratulating those high-tech and other firms in her constituency, and across the country, that are making an investment in, and success of, the crucial sphere of the knowledge economy and high-tech industries. We have been helping those companies by cutting corporation tax to the lowest level. We are also helping them by introducing research and development incentives and the management enterprise initiative, and by operating the economy so that there is stability, enabling businesses to plan and invest with confidence for the future.
Mr. Denis MacShane (Rotherham):
Is my right hon. Friend aware that, in 1949, the great socialist Government of Clement Attlee cut income tax by 10p in the pound,
Mr. Smith:
Yes indeed. As I said earlier, all Budget representations are carefully considered. The good socialist record of the Labour party in ensuring fair and low taxes is commendable, and stands in stark contrast to the record of the Conservatives, who were responsible for the highest tax burden in the past century when they took the tax take above 39 per cent. We shall not follow that example.
Mr. Howard Flight (Arundel and South Downs):
Will the Minister stop trying to conceal the truth about tax increases? As he well knows, the Government's Red Book figures show a 2 per cent. increase over this Parliament. If we count the fiddle on the working families tax credit, that becomes 2.5 per cent. The latest wheeze is to quote figures on average families that exclude the increases in indirect taxes. Ordinary people well know that their taxes have gone up, while the health and education services that they receive have declined. They are paying more and getting less. The Prime Minister has--[Interruption.]
Madam Speaker:
Order. It is about time that I heard a question.
Mr. Flight:
Will the Government at last come clean on taxes, before we have to apply the same edict when referring to them as the Prime Minister has applied to all references to the hon. Member for Brent, East (Mr. Livingstone): stop using the "L" word and call him untrustworthy?
Mr. Smith:
I shall give the figures again. Last year, the tax take was 37.4 per cent. of gross domestic product. This year it is 37 per cent. Next year, on present measures, it is projected to be 36.8 per cent. That is a falling tax burden, not a rising one. Coupled with the record increases in real take-home pay, it is a conclusive demonstration that people are better off with Labour.
Conservatives have become increasingly connected with uncaring social attitudes, selfish behaviour and sleaze. It is not easy for the party to strike the right tone. Of course it should be apologetic for mismanaging the economy.
However much they apologise, their record will not escape them.
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