Mr. Letwin: Is my right hon. Friend aware that matters are worse than he suggests? If the climate change levy applied to profits, there would merely be a charge on profits such as he describes. However, because it is a marginal cost, it affects the marginal cost of sales and therefore impacts directly on the competitiveness of the product.
Mr. Jack: I am grateful for my hon. Friend's observation. I ask for the Committee's indulgence, as some growers have been kind enough to indicate that they do not mind their name being quoted while others have craved confidentiality. If it helps the Minister, even at this late stage, to discuss the matter with his colleagues, I am happy to let him see the relevant information in the privacy of his office. He will therefore see that it is valid testimony.
In the case of another substantial tomato grower, who has a turnover of £4 million and profitability of £75,000—tomatoes and cucumbers require much higher energy input than flowers—the climate change levy bill would be £50,000. If I have understood those simple figures properly, that enterprise's profitability would be lowered to £25,000. Any taxation should be underpinned by proper consideration of whether the taxpayer can bear the burden. It strikes me that, at this stage, the levy is a burden too far. The industry has been candid enough to acknowledge that there might be opportunities in the future for further energy saving. However, the examples that I have given of the application of the tax bear out my point that it is a difficult burden.
I shall refer to another east Yorkshire grower, who has a turnover of £976,000 and gross profit of £151,00. However, because of the circumstances of his business, he is making a loss of £90,000. His climate change levy bill would be £22,000.
The horticulture industry has a remarkable record—it is a bit like a man who climbs the north face of the Eiger with long fingernails and a pair of plimsolls and somehow gets to the top. It has tenaciously clung on and survived through difficult times. I am not saying that it cannot do so again, but is it right to burden such enterprises with an additional cost that it is not of their making?
A small enterprise in Bedfordshire, with a profitability of £20,000 and energy costs of £16,787, tells me that it would have to pay a climate change levy of £1,219. That may only be another £1,000, but the profit of the business is only £20,000—the levy would therefore reduce profitability by 5 per cent. That small grower may be supporting his family. If his income drops, he may become a burden on the working families tax credit. As the national insurance offset in many such enterprises is very small, the apparent revenue gain would not make a great difference. The man concerned might be forced to seek state help, which is not what the Government want.
I have made my point by referring to real-world examples—of which many more exist—rather than through a broad-brush appeal. Real businesses, with real figures, show the real impact.
Why is this important? I shall put my remarks in the context of the international competitiveness of United Kingdom horticulture. I want to look carefully at how other European Union countries are facing up to the climate change levy. Spain, which, as a competitor, is squeezing our season, has no climate change levy. Belgium, which has a protected horticulture sector, currently has no climate change levy, but is devising one along the lines of the Dutch. The Portuguese have no levy. The Irish, who are glasshouse competitors of ours, have no levy. The Dutch, who are our principal competitors, recently made changes—as the Minister said during Treasury questions. The latest information shows that the Dutch horticultural industry is exempt, but that is in exchange for an agreement on emissions that requires growers to make a further 15 per cent. increase in energy efficiency between 2000 and 2010, on top of the 50 per cent. increase that took place between 1980 and 2000.
It is worth recording that we would not be debating the horticultural industry if it had not been an energy-saving industry for the past 25 years. Ever since the Dutch have had the advantage of cheap natural gas, the only way in which our growers have survived is by continually pushing down the energy content as a cost of their operation. Governments recognise that more could be done, but growers need more breathing space than is allowed. In Germany, all firms must be charged the full levy, but interestingly, I understand that the German Government have recruited more civil servants—which I am sure will be music to the ears of some in this Room—to ensure that the climate change levy is revenue-neutral at the level of the enterprise. That is not so in the United Kingdom. France is exempting agriculture from the tax and the French Government are working with agriculturalists on a package of measures—including grants—to reduce emissions.
I realise that there are constraints in all those areas because of the state aid rules. The key word in the state aid rules that may, even at this stage, give the Minister some room for manoeuvre is ``degressive''. A 50 per cent. discount over five years has been adopted—an aid that be will phased out. We have also prayed in aid other measures to save energy. There may be a further opportunity, in discussion with Community officials, to see whether the boundaries of degressivity can be pushed wider in the light of that information. I pay tribute to Ministers at the Ministry of Agriculture, Fisheries and Food for listening to the horticulture industry and for—as is obvious communicating what they have heard to the Financial Secretary and his Treasury colleagues. Were it not for that, we would not be having a debate about a 50 per cent. rebate; there might have been no rebate at all.
Even if the Financial Secretary cannot agree instantaneously to my proposal, the industry still clings to the hope that he will be very sympathetic to further representations with a view to seeing whether anything—even in the short term—can be done to ameliorate the burden on the industry. He would then have the wholehearted support of Opposition Members and the undying thanks of Britain's horticulturalists. The hon. Gentleman would certainly be playing his part in safeguarding employment in many of Britain's rural economies.
Mr. David Heathcoat-Amory (Wells): The amendment would solve one problem, but more important, it illustrates yet another flaw in the Bill. I am not happy with a tax that requires constant new exemptions and rebates to make it fair or workable. There is a wider problem with the entire tax. Nevertheless, it is worth while for the Committee to dwell on the example of horticulture because it shows up several flaws in the Government's proposals.
I, too, have a horticulture industry in my constituency. The Cheddar valley was well known for the growing of early strawberries. Unfortunately, that has declined in recent years, chiefly as a result of foreign competition. That process will be accelerated if the industry is taxed in any way under the proposals. A horticulture industry is still based on the south-facing slopes of the Mendip hills. In addition, a number of farmers elsewhere in my constituency are diversifying out of traditional agriculture into things like horticulture, as the Ministry of Agriculture has urged them. The Government should help rather than hinder those firms.
To reinforce a point made by my right hon. Friend, many of the firms are small and are typically run by owner-managers with some part-time help. They will not benefit from the offsetting cut in national insurance contributions. The Financial Secretary regularly repeats the mantra about the tax being neutral. In a sense, all taxes are neutral because the revenue raised is returned in some way to other parts of the economy. However, the knowledge that they are being taxed while other people receive the offsetting benefits is no consolation to those firms. That point was made by the Association of Convenience Stores, which has written to us all. It states that the energy bills of convenience stores will rise, but that the stores will not be eligible for a discount because they, too, are mainly run by owners and employ part-time staff, who fall below the lower earnings threshold. The association reckons that each of its members will bear a direct net cost of £800 per store. They support the amendments to remove the climate change levy from the Finance Bill altogether. The horticulture industry is not alone in being badly treated by the present proposals.
I emphasise that horticulture uses up carbon dioxide. It does not add to the global warming problem, but actually helps to solve it. We will all remember from our school science that photosynthesis is a process that combines carbon with water in the presence of sunlight to produce complicated substances such as sugars, which enable plants to grow. The carbon is obtained from the carbon dioxide in the air. Therefore, a growing tree provides one of the best ways of reversing the threat of global warming because it removes carbon dioxide from the air and locks it into solid form.
The environmental lobby made a mistake a few years ago by criticising the use of wood, particularly hardwoods. It was a mistake because if a tree is harvested and made into furniture, it permanently locks the carbon up in solid form, whereas if a tree falls over and rots on the forest floor, the carbon will be returned more quickly to the atmosphere. The desks and chairs that we are using at present contain carbon that would otherwise be in the atmosphere. Therefore, forestry is in many ways an environmental industry.
Mr. Barry Gardiner (Brent, North): I know, Mr. Cook, that you will keep me strictly to the point.
Mr. Chairman: I am listening.
Mr. Gardiner: I wanted to ask the right hon. Gentleman whether he would accept that the environmental lobby's argument against harvesting trees, particularly hardwood trees, was correct in that trees were not being replaced. That was the issue of concern to that lobby.
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