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Mr. Andrew Stunell (Hazel Grove): As the hon. Member for West Dorset (Mr. Letwin) has said, the climate change levy was extensively debated in Committee. The Conservatives and the Liberal Democrats tabled amendments. The Liberal Democrats sought to improve and develop the tax. It is right to call it a tax-- I certainly agree with the hon. Gentleman on that point. The Conservatives were consistently ambiguous in their intentions and in the amendments that they tabled.

Mr. Jack: Does the hon. Gentleman accept that my amendment on a 100 per cent. exemption from the climate change levy for the horticulture industry was clear and utterly unambiguous?

10 pm

Mr. Stunell: The right hon. Gentleman is absolutely right, and he will recall that I supported that amendment.

Mr. Letwin: I hope that the hon. Gentleman will recognise that any ambiguity in our remarks in Committee was entirely due to our ineptitude as orators, because in fact our position is wholly unambiguous. We regard the climate change levy as an aberration that should never have been brought before Parliament.

Mr. Stunell: There we have it. That, in a nutshell, encapsulates why we cannot support the amendment.

Whatever the defects of the climate change levy--I shall mention one or two in a moment--the fact is that it is just about the Government's only visible policy for fulfilling our Kyoto obligations. Hundreds of consultation papers have been issued and many sensible proposals have been mooted, but nothing has been done. The levy, with all its defects, should in general terms be supported and developed rather than opposed and defeated.

We supported the principle on the Floor of the House and in Committee, but we voted against the schedule because of the manifest difficulties in its operation. The Conservative case against the tax is unclear. It is founded on an assertion about what is best for business, but entirely leaves out what might be best for the environment, and therefore for business too.

Substantial opportunities exist for United Kingdom businesses in the vigorous pursuit of climate change policy. There is the opportunity to be a world leader, and for jobs and investment to flow from a positive response to the Kyoto protocol. In all honesty, the climate change levy is only a small brick in the wall of such a policy, and it is by no means perfect--but the Conservatives owe it to themselves to say clearly whether they think there is a problem with climate change or whether they now repudiate the stance taken by the right hon. Member for Suffolk, Coastal (Mr. Gummer) when he first set the United Kingdom Government on the track of responding to this fundamental issue. If they do, they should say so, and if not, they should say what policies they think should be in place.

Mr. Letwin: We accept that there may be a serious problem in the long run, although we are currently

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meeting the Kyoto standards, but the hon. Gentleman should accept that we have specifically mentioned emissions trading and voluntary agreements as serious ways forward. We do not accept that the corner shop, which cannot turn off its lights and reduce its electricity use, or do anything else to achieve the Kyoto targets, should be subject to a levy with no environmental purpose whatever, designed solely to increase the amount of money in the Chancellor's coffers--although I admit that after this afternoon, that will be very necessary.

Mr. Stunell: This afternoon I had the benefit of meeting representatives of Sainsbury's--not exactly a corner shop, I concede, as it has about 800 premises in this country--and they made the point that some of the ways in which the levy is coming into force could have been improved, in particular by accepting some of the amendments tabled by Liberal Democrat Members in Committee.

I am thinking in particular of the need for the tax to be introduced at a low level, along with a clear long-term signal that the intention is to raise it. I know how businesses respond when they know the direction in which Government policy is going--when they see that it is starting at a level that is not punitive and will not damage competitiveness, but signals to them that they must make investment decisions that will take them in the right direction.

Every shop in the country can save energy, whether its current activity involves refrigeration, lighting, insulation or simply controlling the flow of heat from its premises through open doors in winter. There is a tremendous gap between good practice and bad practice. Most professional experts say that between 20 and 35 per cent. of the energy currently used could be saved, so we know that there is scope for savings. The first question is, "Is that necessary?" The hon. Gentleman has said he accepts that it is. The next question is, "If it is necessary, and if it is possible, is the climate change levy a useful vehicle?" The answer is that it is a vehicle with some use, but that it does not give the complete picture, and is certainly not perfect.

Liberal Democrats have criticisms of the climate change levy. We have pointed out, for instance, that it is not a tax on carbon emissions, which are what it was designed to prevent. We have also pointed out that it is being introduced at too high a level, and, in that sense, too abruptly, and that it gives no clear signals for the future.

We established in Committee that the Treasury expected the tax to rise by the rate of inflation--in other words, to be inflation-linked. We do not think that that is the right approach. We think that we should have introduced the tax at, say, 50 per cent. of its current level, and that the Bill should have indicated clearly that a series of steps were involved. We believe that it should be clear to industry and commerce that in 10 years' time--by 2010, which is becoming a magic environmental date--they will need to take the levy into account, because it will constitute a significant impost on their fixed costs.

We also criticised the proposal for another reason. Not only does it not tax carbon, it does tax some renewables--in particular, large-scale hydro-electricity generation schemes involving more than 10 MW. In Committee that consideration was dismissed as not being particularly important, but such schemes provide about half the country's current renewable energy resources.

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The Government do not seem to have recognised that in the new market--in the new electricity trading arrangements--those hydro schemes will be competing in a very different world from the world in which they were designed and built. At least some operators are concerned about their capacity to sell into that new market in a way that will enable them to remain viable. Because large-scale hydro schemes will be hit by the levy, there is a serious risk that they will be driven out of the market and replaced by the use of another fuel--inevitably, a fossil fuel. That would increase carbon emissions.

We have also criticised the tax because it is undoubtedly complicated. So far its provisions cover 83 pages, and I assume that subsequently, all the additional pages of Government amendments will be attached. I think that that will add up to 86 or 87 pages. Anyway, clearly this will be a phenomenally complex piece of legislation. It must also be said that we shall deal later with Government amendments responding to some of the criticisms made in connection with combined heat and power, and, to a limited extent, horticulture.

I find it surprising that, having decided to table just one amendment, the Conservatives should base that amendment on the assumption first that we do not need to start as soon as possible, because there is not enough evidence for us to know what we are supposed to be doing now, and secondly, apparently, that the longer we put off any action in the House, the better it will be for business and the environment.

The Liberal Democrats reject that completely. We do not accept an argument for delay--an argument that is founded on disbelief. We do not think that the House should accept an argument that is so disingenuous and self-serving. We shall vote against amendment No. 98 not because we think that the Government have come up with a perfect vehicle, but because the planet faces a situation in which any vehicle is better than no vehicle.

Mr. Alasdair Morgan: I should like to pick up on the points that were made by the hon. Member for Hazel Grove (Mr. Stunell) and to address--and to ask the Minister to respond to--the particular problems faced by Scottish and Southern Energy and those of its plants that formerly belonged to the North of Scotland Hydro- Electric Board. The board was set up to generate electricity from renewable resources, which in itself was unusual. It also had a specific social responsibility in the highlands of Scotland: to provide electricity to remote glens where electricity was not available.

The company has a significant number of small and medium hydro plants operating in the highlands; those are plants with between 10 and 25 MW capacity. It is my understanding--I have to take it on trust because, having read schedule 6, I am none the wiser about what it means--that plants under 10 MW will be exempted from the levy. From talking to Scottish and Southern Energy, I believe that it feels that plants of over 25 MW can compete commercially with the implications of the levy.

Most of the plants that we are talking about were built during the early 1950s; some were built in the late 1950s in the great spate of hydro building in the highlands of Scotland. Therefore, they are reaching the end of their useful life. It may come as a surprise to some tourists, but Scotland is not a particularly wet country. It certainly is not in terms of hydro generation; I was speaking to the

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chairman of the Scottish tourist board at the end of last week, and he wished me to emphasise that point about the weather. Those plants operate at a load factor of about 30 per cent. If the climate change levy is imposed on them, the renewal of their equipment--which is due as we speak and which would extend their life for a further 30 years--would not, in the estimation of Scottish and Southern Energy, be economic in current market conditions.

It would be tragic for the highlands if that investment, much of which was the brainchild of the first post-war Labour Government, elected in 1945, was lost. We would lose that valuable resource to the highlands. It would be ironic if a levy that was designed to encourage renewable energy led to the scrapping of some of the most significant and successful renewable energy schemes ever in this country.

Therefore, I urge reconsideration, if for no other reason than to avoid disappointment for the Scottish Executive--the Scottish Labour-Liberal Executive--which as recently as 11 July, issued a press release on an agreement that was signed at Lubreoch power station in Killin, near where I was brought up. If I remember rightly, that is one of the power stations that I am talking about: it has a fairly small capacity and was built in the early 1950s. The press release says:

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