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Session 1999-2000
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Standing Committee Debates
Finance Bill

Finance Bill

Standing Committee H

Tuesday 16 May 2000


[Part II]

[Dr. Michael Clark in the Chair]

Finance Bill

(Except clauses 1, 12, 30, 31, 59, 102

and 113)

[Continuation from column 150]

8.30 pm

On resuming—

The Chairman: Order. For the convenience of members of the Committee, I shall remind them where we were before we broke for dinner. We are discussing amendment No. 34 to schedule 6, which was proposed by Mr. Jack. Mr. Heathcoat-Amory had just finished speaking.

Mr. Timms: One interesting aspect of working on the climate change levy has been that, in the midst of all the representations about its various aspects and how it can be improved and modified, there has been a steady flow of letters from ordinary individuals calling on their Members of Parliament to ensure that the Government did not back down on the levy. Those letters have been forwarded to me, and I have enjoyed reading them. On 8 October, the hon. Member for Ludlow (Mr. Gill) wrote to me attaching a letter from a constituent, who wrote:

    It is vital that the levy is not watered down.

I was able to reassure the hon. Gentleman that the levey would not be watered down, but that we would be sticking to our guns. No doubt my letter was forwarded to his constituent, although whether the hon. Gentleman told his constituent that his right hon. and hon. Friends might try to water it down, I do not know. Much concern has been expressed that the levy should go on the statute book, as a result of which benefits would be achieved for the environment.

The right hon. Member for Wells asked me for data. The best that I can do is to refer him to the figures under chapter 6 of the Red Book under the heading ``Protecting the Environment''. Chart 6.2 sets out our projections for greenhouse gas emissions and shows that we are on track to achieve the Kyoto objective in 2010, but only by a small margin. It also demonstrates that the emissions will at that point be on a rising trajectory. The chart incorporates the expected effects of lifting the stricter consents policy. I can answer several of the points made by Opposition Members by observing that, as far as I can establish, the impact of the three years that we have had of the stricter consents policy in 10 years' time—in 2010—will be so small that it will make no impact at all on chart 6.2.

Mr. Jack: I am grateful to the Financial Secretary for drawing attention to chart 6.2. Will he go into a little more detail? He surprised me when he said that the consents moratorium that was being lifted was already factored in. It would be interesting to know when that information entered the equation. Given my earlier comments, how much of the target has been factored in from the lifting of the moratorium?

Mr. Timms: There has possibly been a misunderstanding on the part of Conservative Members. The stricter consents policy was always presented as a temporary measure pending the introduction of the new electricity trading arrangements. That was made clear from the outset. The lifting of that policy is not a U-turn, as the right hon. Member for Wells suggested. It was always the case that it was to be lifted once the arrangements were in place and an announcement was made to that effect. The expectation therefore was that the policy would be lifted to allow new gas-powered stations to be built in the two or three years after the turn of the millennium. When that chart was put together, we were expecting that 2004 would be the first full year in which the effect of the new power stations would be included. But the other elements in this equation are not static. Other changes are going on. A significant increase in emissions is expected from the transport sector.

Mr. Jack: The Department of Trade and Industry states that 42 billion kWhours of generating capacity is affected by the moratorium. How much of that moratoriumised capacity is factored into chart 6.2 on page 108 of the Red Book?

Mr. Timms: All the extra gas-powered capacity that we expect to occur between now and 2010 is factored into that. I do not have the figures to hand. Our draft climate change programme that we issued for consultation in March assumed that the current consents policy would end in sufficient time for some new plants to be built to operate for the whole of 2005. I apologise; I think that I said 2004 a few moments ago. It was assumed that the new plant would operate for the whole of 2005 and, given that the policy is to be lifted later this year, that is broadly in line with what we now expect will happen. The DTI view is that the announcement on the stricter consents policy will have little effect on the level of emissions by 2010. I hope that I have been able to make that clear. Chart 6.2 shows that we are on track to meet the Kyoto objective, although not by a large margin. It fully reflects the lifting of the stricter consents policy. There is no alternative that would allow us to meet the objective without the other measures that we are taking.

Together with the negotiated agreements with the energy-intensive sectors, the levy is estimated to save at least 5 million tonnes of carbon a year by 2010. It is therefore an important part of our draft climate change programme. We have always made it clear that the stricter consents policy was a temporary measure. We have, and must have, a long-term goal of reducing greenhouse gas emissions and improving energy efficiency in business. That task will not be finished by 2005 or even by 2010. It must be a long-term commitment. We need to work together with business to achieve that. I hope that the Committee will reject the amendment and leave the schedule as it stands.

Mr. Jack: I have listened carefully to the Financial Secretary. I thank him for his courteous reply. I have looked carefully at the words in paragraph 6.9 on page 107 of the Red Book, which is the descriptive precursor to the content of chart 6.2. There is no mention of the gas moratorium in that section of the report. I am always ready to admit to a sin of omission and of not seeing something that may be in another part of the document, but that section enunciates the principal areas of energy saving, which the Government believe will help them to be broadly on track to meet their Kyoto targets. The moratorium is not mentioned.

It is difficult to judge whether what the Financial Secretary said undermines the amendment, when we do not know—and he is unable to supply the Committee with the figures at this stage—how much of the 42,000 million kW hours represented by the 15 proposals for gas-fired capacity is factored in. As I told the Committee earlier, the 42,000 kW hours represents—

Mr. Clapham: Six gigawatts.

Mr. Jack: Indeed—the hon. Gentleman is an expert in this field. It represents double the generating capacity of gas that would be required to meet the Government's own target for the climate change levy. We should remember that these 15 proposals were real proposals put forward by real business people who saw an opportunity to develop new sources of electricity generation. We are not talking about an airy-fairy, untried technology. Fifteen proposals were notified to the Department of Trade and Industry, so they were obviously the subject of its consideration when granting consents.

One proposal was for a station not far from my constituency in Fleetwood, which would have used a novel form of gas storage in the former salt mines of the ICI works. I know how far advanced that local project was. I am sure that many others caught by the postponement of the consents must be included as realistic projects among those before the Committee. I am not minded to leave matters where they are unless the Financial Secretary can give me more comfort about the numbers involved.

The Financial Secretary should, in a way, support me because his data related to gas coming onstream by 2005. I was heartened that I had chosen to include that year in my amendment. Given the complexity of the Bill—as we shall see later, subsequent amendments probe aspects that are not yet specified, especially in the context of combined heat and power—it may be in the Government's interest to buy themselves more thinking time. If they insist on pursuing this method of saving energy, they could then carry it out in a less burdensome, less bureaucratic, less complex and better thought out way. The lifting of the gas moratorium and the amendment would provide the Government with that opportunity.

The Financial Secretary went to some length in telling us what right hon. and hon. Members had written to him about. In his reply, he said that everyone was committed to achieving the objectives of the climate change levy. I share that view, but he did not read out any paragraphs from those letters that commented on the logic behind those statements. If all right hon. and hon. Members had seen some of the representations that Conservative Members had received, they would realise that many responsible members of British industry are arguing cogently about the drawbacks of the Government's approach.

The amendment is sensible, simple in application and would leave the Government the option of legislation while providing them with a moratorium on thinking, so that the gas-fired capacity coming on stream can start the process of reducing carbon-dioxide emissions in a much less complex way than under the schedule.

Mr. Heathcoat-Amory: I support my right hon. Friend even more enthusiastically in the light of the Financial Secretary's wholly inadequate response to our specific questions. He drew our attention to chart 6.2, which remarkably shows that carbon emissions were falling steeply during the period of office of the previous Government, but about now they suddenly flatten out and then start to rise again—even in the light of the Government's proposed tax. The Government therefore presumably recognise the failure of all their other energy efficiency programmes or are trying to justify the tax by showing, without any supporting documentation or figures, a sudden upturn—or at least a flattening out followed by an upturn—in carbon emissions.


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