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Energy Taxation

4. Mr. Tim Boswell (Daventry): What recent representations he has received on energy taxation. [121373]

7. Mr. Damian Green (Ashford): What recent representations he has received from businesses on the climate change levy. [121377]

The Financial Secretary to the Treasury (Mr. Stephen Timms): We have been in discussions with business interests and others on the climate change levy since the early planning work by Lord Marshall. We have recently consulted on the draft legislation underpinning the levy, the support for energy efficiency measures that is part of the package, and the definition of good quality combined heat and power plant. Throughout the process, we have received many representations that have helped to finalise the design of the levy.

Mr. Boswell: I thank the Minister for that reply, but is he not a little concerned that such responsible bodies as the Aluminium Federation and the Chemical Industries Association are still far from satisfied with the outcome of those negotiations, and in some respects feel that they are further back than they were last December? Is he aware that even with the concessions that have been achieved to date, the likely burden on different sectors of the important aluminium industry will total £6 million, and that the concessions have still not been cleared by Brussels under the state aid provisions? Does he feel that

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that is the right way to treat an industry that is typical of heavy manufacturing industry--for which the Government are said to care--and is exemplary in its use of recycling?

Mr. Timms: Both sectors to which the hon. Gentleman has referred welcomed the changes announced in the pre-Budget report last November, and nothing has happened since to undo those. We are making good progress in our discussions with the EU on the state aids issue. The levy package and the negotiated agreements together will save at least 5 million tonnes of carbon dioxide emissions by 2010. The levy will be revenue neutral for the private sector because all proceeds will be recycled back to business through the cut in national insurance contributions. Many manufacturing firms will benefit from the levy package and will want the lower rate of national insurance contributions. The levy is broadly neutral between manufacturing and service sectors, and is the right way forward. Climate change is a huge issue that we need to tackle, and that is what we are doing in the right way with the levy.

Mr. Green: Can I give the Minister another business representation on the levy, which, incidentally, gives the lie to what he has just said about the horticulture industry? Mr. Peter Wensak, who runs a nursery, has written to the climate change levy secretariat to say:

He has an unanswerable case. Does not that show that the levy has nothing to do with reducing carbon dioxide emissions and everything to do with finding new ways to extract taxes from productive industries?

Mr. Timms: No. The levy is revenue neutral, and we have responded to the particular situation of the horticulture sector as I have described. The levy is revenue neutral for the private sector; no revenue is going to the Exchequer. I have referred Opposition Members to the views of the former Secretary of State, and it is sad that those views are not shared by Opposition Members any longer. I am aware that the previous shadow Environment Secretary, the right hon. Member for Wokingham (Mr. Redwood)--who is in his place today--was awarded the booby prize in the green ribbon political awards. The citation said that the judges felt that the right hon. Gentleman had

I know that the right hon. Gentleman has been sacked since then--but unfortunately, not for his views on the environment; they seem to be shared by most of the Conservative party.

Mr. Tom Clarke (Coatbridge and Chryston): Does my hon. Friend accept that many people feel that, far from making tax reductions for fat cats a priority, we should discourage electricity companies from abusing the

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regulator's attempts to reduce prices by their policies of huge job reductions and cutting essential services for consumers?

Mr. Timms: The emphasis that we have placed on promoting consumers' interests means that utility companies are under pressure to increase efficiency. That is a good thing, and it is in the interests of my right hon. Friend's constituents. In some cases, that could mean job losses, but those companies will have to meet all the health, safety and environmental obligations that are placed upon them. Non-regulated companies are facing similar pressures. Many utilities are diversifying into other businesses, thus providing scope to grow the companies and offer improved opportunities for their employees.

Mr. Bill O'Brien (Normanton): I congratulate my hon. Friend the Minister on the way in which he has handled this issue; I was impressed by his appearance before the Select Committee on the Environment, Transport and Regional Affairs. The negotiated agreements are bringing satisfaction to some industries. However, this is a question of industry reaching certain targets and reducing emissions. Will my hon. Friend consider the idea that where those targets have been achieved, there should be negative payment of the climate tax because capital will have been spent to reach those targets? It would be an incentive for an industry if when it met the targets set by the Government, it would not pay the tax.

Mr. Timms: Of course the arrangements that we have made for negotiated agreements--we are making good progress with the negotiations--mean that firms and sectors that sign up to demanding targets will be entitled to a reduced rate of the levy, with an 80 per cent. discount. That is the basis of the approach that my hon. Friend suggests, and it is right. I have said already that about 60 per cent. of manufacturing energy will be covered by those negotiated agreements and by the reduced rates of levy that will apply as a result. Manufacturing, as well as the rest of business, wants the reduced rate of employers' national insurance contributions--the 0.3 percentage point cut that we have introduced--because it will promote jobs and be good for every part of the country.

Mr. Eric Forth (Bromley and Chislehurst): If the Minister justifies the swingeing rates of tax on vehicle fuel on environmental grounds, how does he justify the reduction in tax on domestic fuels, which cause even greater environmental damage?

Mr. Timms: My right hon. Friend the Chancellor has cancelled the escalator on vehicle fuel duty, which was introduced by a Conservative Chancellor. We are adopting a range of measures to improve energy efficiency in the domestic sector: we have increased the incentives for people to cut their energy usage, we have expanded the home energy efficiency scheme, and we have introduced concessionary treatment for home energy insulation services. It is important that every part of the economy makes a contribution to achieving our climate change objectives.

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5. Mr. Phil Sawford (Kettering): What assessment he has made of the impact of the fall in unemployment and rise in employment during the last 12 months on the national economy. [121374]

The Chancellor of the Exchequer (Mr. Gordon Brown): Cuts of 167,000 in the unemployment claimant count over the past year have freed up savings of £800 million in social security benefits. That has increased the scope to make money available for public services. Unemployment is at its lowest level for 20 years.

Mr. Sawford: I thank my right hon. Friend for that answer. Is he aware that in my Kettering constituency the number of young people on the dole has fallen by 87 per cent., long-term unemployment is down by 78 per cent., and overall unemployment is down by more than 3 per cent.? Does he agree that those figures clearly illustrate the difference between the new deal from this Government and the raw deal that the people of Kettering got from the previous Government?

Mr. Brown: My hon. Friend is right. The Conservative party would abolish the new deal and the working families tax credit, which is making work pay. The Conservatives were responsible for the biggest rise in unemployment that this country has seen since the war. Unemployment in my hon. Friend's constituency is now 2.5 per cent.--and I can understand why the shadow Chancellor keeps congratulating us, because unemployment in his constituency is now 1.5 per cent.

Mr. Matthew Taylor (Truro and St. Austell): With 250,000 jobs lost in manufacturing since the Government was elected, with 100,000 jobs lost in the past year, with farming in crisis, and with the TUC and the CBI united in pointing the finger at the high level of sterling as fundamental to the economic difficulties experienced by our manufacturing exporters, does the Chancellor agree with the Conservative shadow Chancellor that the high level of sterling is a mark of success, which business should simply learn to live with?

Mr. Brown: I understand the difficulties that manufacturers and exporters face, and I said only a few days ago that the exchange rate of the euro to the pound does not reflect the fundamental underlying conditions. However, the measures that the hon. Gentleman's party and others propose to deal with the situation would create the same conditions as the Conservative Government created in the late 1980s, and return the economy to boom and bust. In particular, the reckless attempts by the Liberals to put money into everything without showing how they would pay for all their different programmes would endanger fiscal and monetary stability in this country. Both Opposition parties must face up to the fact that we are creating stability, but their policies would create boom and bust.

Mr. Derek Foster (Bishop Auckland): May I shock my right hon. Friend by congratulating the Government on their supply side labour policies, which are the best that I have seen in 30 years in politics? Nevertheless, I ask him to acknowledge the wide discrepancy in employment rates

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between regions, especially for men aged over 50. The employment rate for that group is 53 per cent. in the north-east, but 73 per cent. in the south-east. I urge my right hon. Friend to do even more about that problem than the Government are already doing.

Mr. Brown: It is precisely for the reason that there are men and women over 50 who want to get back to work but who find it difficult to do so that we have introduced the new deal for the over-50s in the past few weeks. That scheme gives special help to enable people who have been unemployed for a year to return to work, by giving them a supplement of between £50 and £60 to their wages for their first year back at work. I hope that my right hon. Friend and others will welcome what the Government are doing in that regard.

I agree entirely with my right hon. Friend that if we were to return to the policies pursued by the previous Government and abolished the new deal, unemployment would be higher. I have been given a copy of the minutes of a meeting of the Conservative party's economic sub-committee. Its members thought that they would be able to look at the new deal but, unfortunately, the minutes state that while the committee is a useful sounding board, it has proved difficult to get the right group together and much work is now having to be undertaken by individuals. The committee's aim was to produce a paper on the failure of the new deal prior to announcing Conservative proposals, to be published in early April. We have yet to see any such paper.

Mr. John Redwood (Wokingham): This is the Chancellor who has presided over the destruction of more than 200,000 manufacturing jobs and of much of British agriculture. He has driven road hauliers out of business or into overseas offices. He has watched as boom and bust have occurred at the same time. Far from getting rid of boom and bust, he is the one who can make sure that some people are driven into unemployment, while spin doctors and others prosper.

In view of the big role played by high taxes in the matter, will the Chancellor answer one simple question? What is the current pump price of a litre of petrol, and how much of that price is tax?

Mr. Brown: If I may say so, the right hon. Gentleman is now more on-message with the Leader of the Opposition than is the shadow Chancellor. Also if I may, I would add that the right hon. Gentleman should welcome the fact that in his constituency, since the general election--[Hon. Members: "Answer the question."] Well, the right hon. Gentleman is asking about jobs and manufacturing industry. Since the general election, unemployment in his constituency has fallen by 34 per cent., and the new deal has meant a fall in youth unemployment of 69 per cent. [Hon. Members: "He does not know the answer."] I should have thought the right hon. Gentleman would have welcomed the fact that we have removed the fuel escalator that he and his colleagues introduced, and that we have created 900,000 jobs.

Mr. Dale Campbell-Savours (Workington): Given the link between unemployment and the value of the euro, and on the assumption that he wants the euro's value to increase over the coming months, will my right hon.

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Friend say what measures he believes his counterparts in the various other European countries can take to increase the euro's value in the immediate future?

Mr. Brown: The Finance Ministers of the European Union issued their statement after the meeting 10 days ago. They said that they would be reporting that growth in the EU this year would be of the order of 3 per cent. Growth in France is 3.7 per cent.; in Germany it is nearly 3 per cent.; and in most countries it is just under or around 3 per cent. That is a very big improvement on last year and the year before.

The Finance Ministers also said that they would continue to pursue the process of reform in the European Union so that they would be in a position to make their economies create jobs. Unemployment is falling in Germany, France and the other economies. I believe that when EU growth rates catch up with those in the American economy and in economies in other parts of the world, people will understand the truth of my contention that the relationship between the euro and the pound does not reflect a fundamental, long-term aspect of the economy.

Mr. Richard Ottaway (Croydon, South): No matter how good the employment figures are--[Interruption.] Unemployment was falling under the previous Government and has continued to fall under this Government. The new deal has made not a shred of difference; in fact the decline in unemployment has slowed down. So far the new deal has cost £1.5 billion--enough to pay for 15 new hospitals or 15,000 policemen on the beat. At £20,000 a job, is not the new deal a huge waste of money?

Mr. Brown: Now we know--not only would the Conservative Opposition abolish the new deal, but they would not have gone ahead with the windfall tax on the utilities that raised the £5 billion to make it possible. They would not provide the public services for the many, but would prefer to give tax cuts to the few large companies which we had to tax with our windfall levy to provide the money for jobs.

The hon. Gentleman may think that the new deal has been a failure, but in that case, why has unemployment among young people fallen from the 200,000 that we inherited to 50,000 today? That is a 70 per cent. fall in youth unemployment under the Labour Government, as a result of the fact that 400,000 young people have managed to get on to the new deal. It is all very well the Conservative party calling the new deal an expensive failure and a colossal waste of money. We now know that they will argue at the election that the new deal should be abolished. That is the dividing line between a Labour Government who support stability, employment and public services for the many, and a Conservative party which is irretrievably identified with boom and bust, unemployment and tax privileges for the few.

Mr. Dennis Skinner (Bolsover): Is my right hon. Friend aware that when the pits were closing in the 1960s, 1970s, 1980s and 1990s, they were closing when the pound was high and they were closing when the pound was low? The shipbuilding industry went down the same pan, and the state of the currency did not matter. I suggest that it is not the level of the pound that is the problem.

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There is a problem with manufacturing; there is a problem with textiles right across the British Isles, but it has nothing to do with this euro madness that we hear from the Liberal Democrats and one or two others. The very idea that Britain will get allied to the weak, pathetic euro at this time is like asking David Beckham to sign on for Shrewsbury to get it out of the Conference.

Mr. Brown: It is also interesting that the shadow Chancellor has said, contrary to some of the views of his Back Benchers:

As a result of what we have heard today, it is now very difficult for the Conservative Opposition to criticise us on any aspect of our economic policy.

My hon. Friend will know that in the past few weeks £100 million has gone into the coal industry, because we believe that it is right that the resources that the coal industry can produce for our country are harvested properly, and that the Ministry of Defence has been and will be announcing orders for the shipbuilding industry.

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