Finance Bill

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Mr. Chope: The Economic Secretary says that he is looking at treating coal mine methane as a renewable source of energy. When he does that, will he look at what happens in Germany, where renewable resources legislation introduced in 2000 treats coal mine methane as a renewable source of energy? As a result, the industry receives an incentive worth 5p per kWh compared with the United Kingdom rebate

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of only 3p per kWh. Some 80 coal mine methane projects are being planned in Germany, and the industry says that it could be a case of a British technological lead in a new industry being lost to the Germans. Is the Economic Secretary concerned by that?

John Healey: Perhaps I can make it clear to the hon. Gentleman that we are looking at the support that we can give to aid the expansion of the industry. We have looked at the question whether coal mine methane should be a designated or renewable source of energy. In doing so we were aware of the situation in Germany, but concluded that that would not be the right step to take.

Question put and agreed to.

Clause 123 ordered to stand part of the Bill.

Clause 124

Climate change levy: incorrect certificates

Question proposed, That the clause stand part of the Bill.

John Healey: I shall be brief. The clause will enable Customs to apply a civil penalty where any relief entitlement for supplies at the reduced rate or to combined heat and power stations is incorrectly notified to suppliers. The clause will take effect in relation to certificates given in respect of supplies made on or after 24 April 2002.

I can reassure the Committee that the Government are committed to ensuring that eligible businesses are able to enjoy the benefit of any reliefs available to the full extent of their entitlement. That said, it is only right that businesses should be penalised for providing incorrect information and certification that causes an energy supplier improperly to relieve a supply from the levy. A gap in the law has meant that Customs was powerless to impose a penalty on businesses providing incorrect certificates for two particular climate change levy reliefs. The reliefs concerned relate to supplies to combined heat and power stations and to energy-intensive users at the reduced rate. There is no good reason for those reliefs to be afforded differential treatment and the measure provides for their inclusion within the penalty regime.

The Government are determined to treat businesses in a consistent and fair manner. The clause will ensure that incorrect certificates, regardless of the relief claimed, are subject to the same provisions.

Question put and agreed to.

Clause 124 ordered to stand part of the Bill.

Clause 125

Climate change levy: invoices

incorrectly showing levy due

Question proposed, That the clause stand part of the Bill.

Chris Grayling (Epsom and Ewell): The clause is obviously welcome because it will protect some of the businesses affected by the climate change levy. Will the Economic Secretary consider the fact that the climate change levy is reaching businesses that arguably it

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should not? I can give him one specific example of a butcher shop in Ewell village in my constituency which is subject to the levy. Although I understand the Government's motivations for the levy, a local butcher shop should not be caught in its net. Will he consider that over the coming weeks and months?

10.15 pm

John Healey: First, I shall directly respond to the hon. Member for Epsom and Ewell (Chris Grayling). I invite him to write to me with more precise details about the small butcher shop in his constituency to allow me to consider his case that such businesses should not be subject to the levy—that is his judgment call. I shall give the instance full consideration when I have more detail.

The clause introduces a civil penalty for the issuing of invoices that incorrectly charge levy, either by charging it where no levy is chargeable on the supply, or by overcharging. The provision is being introduced because such problems have arisen. The measure will take effect for invoices issued on or after the date of Royal Assent.

In recent months, we have become aware that some suppliers of goods are including a charge on their invoices which is purported to be the levy, but which is not accounted for to customers. That has happened in respect of supplies that are not taxable for levy purposes, either because they are not taxable commodities or because they have been relieved of the levy. It is not the Government's intention with the clause to prevent manufacturers recouping legitimate costs through their pricing structure, so long as customers are not deceived in that process. The inaccurate description by businesses, which are not energy suppliers, of charges as a climate change levy can bring both the tax and the Government policy that underpins it into disrepute. There is no good reason for businesses to pass on levy costs in that fashion; it would be rare for businesses to identify other costs in such a way.

The Government take a similarly dim view of the practice where bogus levy charges are raised by energy suppliers relieved of the levy, such as combined heat and power stations. We cannot stand by while the climate change levy reliefs are undermined in that way and certain suppliers make ill-gained profit at the expense of the tax.

To help prevent customers from being misled and to prevent levy reliefs from being undermined, the clause provides for the imposition of a penalty equivalent to the amount purporting to be the levy, which is subject to a minimum of £50. Similar provision exists for other taxes, such as VAT and landfill tax, so I suggest to the Committee that the new measure is necessary and consistent. For completeness, the penalty regime will apply to registered persons charging amounts by way of a levy on non-taxable supplies or overcharging on taxable supplies. I hope that the Committee will support the clause.

Question put and agreed to.

Clause 125 ordered to stand part of the Bill.

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Clause 126

Aggregates levy: transitional relief

for Northern Ireland

Mr. Chope: I beg to move amendment No. 257, in page 100, line 21, leave out 'in Northern Ireland'.

The Chairman: With this it will convenient to consider the following: Amendment No. 258, in page 100, line 24, leave out 'in Northern Ireland'.

Clause stand part.

Mr. Chope: The aggregates tax is turning out to be a disastrous, bureaucratic nonsense. If the Government ever wanted to ensure that unemployed officials were given employment, it is a good way of doing it. The tax generates no net benefit to the Revenue, but costs an enormous amount to administer and, because of its complexity and unworkable nature, is the subject of amendments, the first of which, in this clause, is designed to give some relief in the anomalous situation in Northern Ireland. My amendments would go further than the Government are going and give some relief to all the people who are suffering under the tax and give them a bit more time in which to adjust to it.

The biggest problem with the tax is that it does not even meet the Government's stated objectives. Their 1997 statement of intent on environmental taxation stated that

    ''environmental taxation must meet the general tests of good taxation. It must be well designed, to meet objectives without undesirable side-effects; it must keep deadweight compliance costs to a minimum; distribution impact must be acceptable; and care must be had to implications for international competitiveness.''

People in Northern Ireland who have quarries producing aggregates considered the implications for them of the tax and realised that it failed in all the objectives. It damaged their international competitiveness, because it gave an advantage to aggregates producers south of the border, and it had very high compliance costs and led to undesirable side effects such as smuggling. Smuggling of aggregates may seem a new problem, but it exists in the marketplace and is a direct result of market distortions that have been introduced by this ludicrous tax.

As I understand it, traditional quarries in the Fermanagh and South Tyrone areas have seen a 40 per cent. drop in output, the severity of which has been worsened by the relative ease with which untaxed aggregates can be smuggled across the border. The £1.60 unpaid tax in such cases effectively pays for aggregates to be smuggled 20 to 25 miles into Northern Ireland. Of course, that is not very good for the environment. Heavy-goods vehicles carrying lorry loads of aggregates are going much longer distances and, in so doing, are polluting the atmosphere, as well as avoiding tax and creating a new black market.

The whole situation is ludicrous. It is said that the temporary partial exemption for Northern Ireland does not address the root of the problem, which has been made clear in several hearings and reports from the Northern Ireland Affairs Committee. Underlying

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that is the revelation that is clear from the Red Book that the yield from the tax is much lower than had been expected last year. There was an idea that, nationally, employers would benefit from a 0.1 per cent. reduction in national insurance contributions. The folly of that has been exposed by the Government's increasing national insurance contributions on employers by a full 1 per cent.—10 times as much as the expected reduction—from next year.

The policy is in disarray and in tatters, and the Opposition think that it would be much better to scrap the whole business. Unfortunately, in considering legislation in the Committee, we cannot do that straight away. However, we can seek from the Government an explanation as to why there is a provision to help Northern Ireland and why it cannot be extended to the whole of the aggregates industry in the United Kingdom as a start in the process of eliminating this ludicrous tax altogether.

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