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I refer the Financial Secretary to a further scheme that is based entirely on the Government's analysis. Again, it would do away with the necessity for the climate change levy in a wholly environmentally friendly way. It would boost the prospects of British agriculture and would be entirely environmentally friendly and CO ₂ neutral. How, one may already ask, is that piece of magic to be achieved? The answer appears in a publication produced by the Department of Trade and Industry, which is entitled "Wood Fuel for Electricity and Heat". From it we learn that when we burn wood, CO ₂ is released. However, if one then replants, that same CO ₂ is locked up. In other words, there is a carbon-neutral cycle.

I tabled a parliamentary question to the Minister of State, Ministry of Agriculture, Fisheries and Food, to inquire how much short rotational coppice would have to be planted to take up the full 2 million tonnes of CO ₂ that was the original target for the climate change levy. I received a letter in reply. I learned that 108,000 hectares would be required. That represents 0.58 per cent. of the cultivable land area in the United Kingdom. It so happens that the Treasury is funding the English rural development plan, and if we increase the hectarage from the current proposal in the plan by roughly a factor of four and spend about £120 million, we can subsidise farmers in the same way that the Government are already planning so as to produce the necessary 108,000 hectares of short rotational coppice.

I then turned to the Government's advisers to find out how much it would cost to have sufficient power stations to deal with the resulting electricity produced by that proposal. It would cost about £375 million--which is £1.5 million per megawatt of electricity produced--to burn the short rotational coppice. The Government's proposals assume that electricity producers will produce electricity from recyclable and renewable sources, so we can see that a model exists that would effectively make self-financing any additional marginal costs of the power produced in the way that I have described. The figure of 108,000 hectares, which has been confirmed by the Ministry of Agriculture, Fisheries and Food and borne out by the DTI's analysis, would be sufficient to do away with the climate change levy in a wholly environmentally friendly and beneficial way.

If I have managed to work that out, why has not the Treasury? If that scheme meant a marginal change in the cost of electricity to all users in the United Kingdom, everyone would feel that they were making their contribution to the reduction in carbon dioxide emissions. At that same time it would benefit farmers, be environmentally friendly and do away with all the complexity of the levy and the burden on manufacturing industry that it entails.

If that idea is ignored and is not investigated, that will suggest what I have thought for some time--namely, the Treasury could not give a fig about the DTI's work on

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renewables; all it wants is a nice little earner. I therefore urge the Financial Secretary to investigate the proposal that I have described. It is well thought out, well researched and backed by the Government's own analysis.

Finally, I support what my right hon. Friend the Member for Wells said about combined heat and power. He spoke about the situation of British Sugar, the reduction in its investment and its fears about the proposal.

I draw to the attention of the House a representation that I received from the Brunner Mond Company, which points out that although good-quality combined heat and power will somehow be exempt from the levy, in their wisdom the Government have not defined good-quality combined heat and power. A company could invest in beneficial technology only to find that, by a quirk of the rules, it is ruled ineligible for any benefits from the CCL. I shall certainly follow up the amendment proposals in Committee.

In summary, Opposition Members have advanced sufficient well-argued points to persuade the Government to think again about whether they want the clause to stand part of the Bill. Industry would be badly affected by it, and good alternatives exist. Given the availability of environmentally friendly ways of generating electricity--through combined heat and power--the Government's proposal fails.

Mr. Swinney: There is wide acceptance in the Committee of the importance of reducing greenhouse gas emissions, in line with agreements signed at the Kyoto summit. There is also a wide understanding of the importance of global climate change and a belief that every country should play its part in addressing the problem. However, there is considerable scepticism about whether the Government's policies of crude taxation on motorists or, in the case of the climate change levy, businesses, will satisfy those objectives. They seem to be crude measures for raising revenue, rather than sophisticated methods of tackling environmental problems.

The danger that I see arising from the Government's proposals is that competitiveness will be damaged, without the environmental objectives being achieved. I shall provide more details and examples of the specific impact of the Government's proposals on companies in the locality that I represent.

The levy has been a long time coming. It was first put out for consultation in March 1998. We must ask ourselves to what extent the Government have been listening to the results of the on-going consultation exercise. Undoubtedly, changes have been made to the original proposal since the pre-Budget report first touched on the subject, and some of the extremely harsh aspects of the levy have been watered down, but not sufficiently to meet the concerns that I shall raise tonight.

The Government claim that the levy will raise £1 billion, but that will be countered by the support given to energy efficiency measures by the recycling of revenues through a reduction of employers national insurance contributions, and through the system of first year capital allowances being allocated for energy-saving instruments. The Government have made it clear that the measure will be revenue neutral. The Financial Secretary confirmed that on the record tonight. The hon. Member

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for Hazel Grove (Mr. Stunell) gave a curious explanation of how the measure will be neutral, and we look forward to a more detailed explanation.

Some of the Government's comments have been contradicted by fairly substantial advisers. The firm of accountants Deloitte & Touche, whose material on the subject I have seen, states:

It cannot yet be known whether the amount raised from CCL and the amount to be handed back will be equal. Indeed it looks as though the amount to be raised will be considerably in excess, so it is not surprising that so many businesses are complaining that they will be net losers. In addition . . . there would be a redistribution between firms that was largely arbitrary, depending not only upon the amount and type of their energy consumption, but also on the structure of their wage bill.

That gets to the nub of some anxieties about the bluntness of the instrument that the Government propose to use.

I want to make several general points about the implications of the measure before citing some specific cases. First, let us consider competitiveness. The levy will significantly increase the energy bills of many companies and involve extra compliance costs for energy providers, thereby potentially placing them at a competitive disadvantage. Some substantial companies have been excluded from the exemptions from the climate change levy. They include glass, brick and paper manufacturers as well as the agriculture and whisky sectors. I shall say more about the latter sectors in a moment.

The measure could also undermine this country's competitiveness as a location for inward investors. The cost of energy is one of the calculations that is most closely scrutinised by inward investors when they decide on the appropriateness of individual countries as a location for their manufacturing bases.

My second general point is about red tape and bureaucracy. It is inevitable that the climate change levy will increase red tape and business costs. When the Government published their statement of intent on environmental taxation in 1997, one of the key criteria was that it

must keep dead-weight compliance costs to a minimum.

The hon. Member for Hazel Grove referred to schedules 6 and 7, which require a monumental amount of interpretation by individual companies in order to understand the full impact on their operation. When we take even a casual glance at schedules 6 and 7, the climate change levy cannot be described as a simple instrument. That will have implications for business costs.

My third general point is about environmental consequences. The Government place great emphasis on the environmental nature of the provision, but a representative of the Energy Saving Trust recently said:

Energy tax would have to be set at a politically unacceptable level in order to produce the required reduction in emissions

that the Government envisage. The Government claim some environmental benefit, but organisations that support that agenda say that the structure and the levels that the Government currently suggest will not provide the expected savings.

We should take note of the strength of opinion expressed in a report by the Select Committee on the Environment, Transport and Regional Affairs, which states:

We do not believe that the Climate Change Levy meets the tests of good taxation. The system of exemptions, negotiated agreements and reduced rates has produced an extremely complex and cumbersome market instrument which will result in a relatively modest emissions reduction.

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The report also suggests that small and medium-sized enterprises will experience deep problems because the way in which the scheme is devised means that it will concentrate on larger enterprises that can make pooling arrangements to negotiate deals. We ignore that Select Committee evidence at our peril.

I shall comment on the specific implications of the measure for groups of businesses that are important to Scotland as a whole and to my constituency. The right hon. Member for Fylde (Mr. Jack) spoke about the measure's impact on the horticulture sector. Many of those who work in agriculture, such as dairy farmers and those involved in cereal production or the pig and the poultry sector, are heavy energy users. However, the agriculture sector now has relatively few employees. The beneficial impact of the reduction in employers national insurance contributions is therefore minimised because there are not many employees to compensate and benefit. The National Farmers Union has suggested a direct link between the imposition of the levy, the agricultural sector's competitiveness and further hardship. The Government should take close account of that evidence. I have mentioned the small business sector and the fact that many of the exemption agreements will exist between the Government and large energy-intensive sectors. It is difficult to understand how small businesses can gain such access.

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