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Martin Horwood (Cheltenham) (LD) rose—

Mr. Edward Davey (Kingston and Surbiton) (LD) rose—

David Howarth (Cambridge) (LD) rose—

Alan Johnson: I will give way to the hon. Member for Kingston and Surbiton (Mr. Davey).

Mr. Davey: I thank the Secretary of State for giving way. I am sure that my hon. Friends have much better questions than I have, and that he will give way to them shortly. Given the Secretary of State's welcome statement on microgeneration, what is the cost of Budget resolution 47, which is entitled, "Corporation tax (nuclear decommissioning)"? Is it designed to help the proposed sell-off of British Nuclear Fuels Ltd., and why was a press notice not issued giving the details of the tax change?

Alan Johnson: I do not know whether all three Members wished to ask the same question but, on that resolution, we are the first Government to tackle seriously the problem of nuclear decommissioning. It is an horrendous task, and it is split between various agencies that have such a complicated connection to one another that it almost impossible to explain it on a grid. We must rationalise the issue and ensure that elements in public ownership that do not need to be in public ownership to meet our objectives on decommissioning are put into the private sector. We must ensure, too, that the Nuclear Decommissioning Authority has the right resources to carry out its important task.

Martin Horwood: The Secretary of State applauded the Chancellor's inclusion of microgeneration budgets for Government buildings, but he was curiously silent about the clear skies programme, which supported household microgeneration but has run out of funds. Will he confirm whether it will be abolished or replaced, perhaps by another scheme to encourage household microgeneration?

Alan Johnson: The hon. Gentleman was right about replacement, as we have made it plain that the clear skies scheme will be replaced by another scheme. Our microgeneration strategy will help schools and public
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buildings by removing problems with planning consent and so on. The money that has been provided will be used to encourage householders to become involved in microgeneration. A colleague who is much more deeply involved in microgeneration in his own home than I am has to pay £8 a therm to buy back the energy that he sells to the national grid. Such issues have to be tackled. The strategy is for microgeneration in schools, public buildings and the home.

Daniel Kawczynski (Shrewsbury and Atcham) (Con): The Secretary of State is outlining the steps that the Government are taking to reduce CO 2 emissions, and I look forward to his remarks. As the Prime Minister said on Australian television today, Great Britain accounts for only 2 per cent. of CO 2 emissions. China is the main polluter and will continue to be so in the future. What steps is the Secretary of State taking to have discussions with his Chinese counterpart to encourage China to take similar steps?

Alan Johnson: The hon. Gentleman makes an extremely important point. We cannot solve the problem domestically. The kind of initiatives that we have taken with the G8, which was extended to include Brazil, China, India and other developing countries, are continuing under the Russian presidency of the G8. The hon. Gentleman asks what steps I have taken. At the EU-China summit last year when the UK had the presidency, one of the important objectives of our trip to China was to begin to share with China some of the clean coal technology, such as carbon capture and carbon storage. It is crucial that we do not use the emerging carbon sequestration technologies only in Europe, and that we share our scientific lead with China and India.

David Howarth : May I bring the Secretary of State back to Budget resolution 47 and ask what precise changes in corporation tax are being proposed for nuclear decommissioning?

Alan Johnson: I have dealt with Budget resolution 47.

The microgeneration strategy will examine how we can tackle the obstacles to take-up. In particular, we will look at the planning regime, the potential rewards available from exporting electricity back into the grid and the possibility of developing an accreditation scheme, so that people know which products and installations to trust. We will also work with the industry to develop a scheme for installing microgeneration in schools so that we can educate the next generation about the need for energy efficiency and renewables.

It is vital that British business takes advantage of new energy-efficient technologies to reduce its costs and help the environment. Over the next 10 years up to £1 billion will be invested in a new national institute for energy technologies in a 50:50 partnership between Government and business. BP, EDF Energy, E.ON UK and Shell have already expressed interest in taking part.

We will also bring forward a detailed consultation on what more we can do to promote large scale commercial deployment of carbon capture and storage. As the Budget and the current energy review show, we are serious about tackling climate change and will take the
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tough decisions necessary to deliver real reductions in carbon. We have seized the agenda since 1997. As a result, we have beaten our Kyoto targets.

Stewart Hosie (Dundee, East) (SNP): The Minister says that the Government are serious about reducing carbon emissions and tackling global warming and climate change. Will he give a commitment to the House today to look again at the imbalance in connection charges between the north of Scotland and the south of England—the south of England being subsidised and the north of Scotland being charged about £24 per kilowatt to connect to the grid—to assist in making large scale off-shore wind production financially attractive?

Alan Johnson: I can give the assurance that in the energy review that is one specific aspect that we will be examining. I agree that the problem needs to be resolved.

The climate change levy package has saved over 28 million tonnes of carbon since it was introduced, and is expected to save a further 6 million tonnes a year, so that by 2010 it will account for 40 per cent. of the UK's total carbon reductions. The Budget announced that from next year the climate change levy will increase in line with inflation. Even after taking into account these increased rates, business will still benefit from the overall climate change levy package. The 0.3 per cent. reduction in national insurance contributions brought in at the same time as the levy saves business £900 million a year, whereas the levy costs about £600 million a year. The Conservative party remains opposed to that progressive measure. If we were to follow its approach, there would be a further 6 million tonnes of carbon a year in the atmosphere, which is equivalent to the combined emissions from Birmingham, Leeds, Manchester and Sheffield.

Climate change is not only an issue for business. The Budget includes measures to insulate a further 250,000 homes over the next two years, bringing forward annual carbon savings of 35,000 tonnes and reducing annual household bills by around £20 million. We will also put £5 million over the next two years into a new large-scale trial of smart metering, which will be matched by private sector funding. That will help us, as consumers, to understand and look harder at our own energy consumption.

In conclusion, this is a forward-looking Budget. It equips today's Britain for tomorrow's vital challenges. It reduces burdens, promotes competitiveness and raises productivity. It is a Budget for business and it is a Budget for industry, and I commend it to the House.

4.35 pm

Mr. Alan Duncan (Rutland and Melton) (Con): I have watched all 10 of the Budgets delivered by the Chancellor, and none of us who has watched him doubts that they are always skilfully honed. He is a master of propaganda rather than enlightenment. We have long since learned that what is in the Budget on the day is not what matters and that most of the pain lies in the small print that is not announced on the day.
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All Budgets need time to settle for everyone to digest them. This Budget does not involve great drama, because there is no fundamental restructuring or revolutionary changes of gear. There is no real point in engaging in an auction of hyperbole in which one side says that the Budget is all fabulous and the other says that it is all disastrous. This Budget needs a more dispassionate assessment of the context in which it has been designed. [Interruption.] Even in this House, there are moments to stand back and consider the long-term trends, which is exactly what I want to do today.

I shall admit something else to enliven the House. Some say that the two sides of this House have so converged that one can no longer tell us apart, but they are totally wrong. Labour has had to prove over the years that it understands and embraces market economics, while we have had to reassert our belief in social justice, but what divides us is tax and the power of the state. The Chancellor is inclined to tax anything that moves and do anything that he can get away with; we believe in lowering taxes wherever possible and that any new tax must be justified. The Chancellor believes that state action and centrally directed initiatives are the solution to most national problems; we believe that the creativity and aspiration of the individual, free from state interference, is the greatest engine of progress and improvement. We appreciate more than the Chancellor that only private prosperity can pay for public services—when we think of wealth, profit and prosperity, we say, "Go make it", while he says, "Go take it".

The Chancellor makes much of his fiscal rules: first, that he should balance the budget over the economic cycle, and secondly, that he should borrow for investment, not merely for spending. However, he took some pride in rejecting what he called a third fiscal rule, namely that spending should rise more slowly than growth. Perhaps that policy marks the difference between us, because it contains both a grave admission and the seeds of its own destruction. If spending increases more slowly than growth, then the state takes a smaller proportion of GDP. If spending increases ever faster than growth, which is the opposite of the fiscal rule that he has rejected, then the state takes an ever-larger proportion of GDP, which leads to more spending, higher taxes and greater borrowing—what was 40 per cent. can become 50, 60, 70, 80 or 90 per cent. The effect is a bit like flesh-eating bacteria: it is so self-consuming that if one were to carry the Chancellor's course to its logical outcome, the British economy would disappear up its own origins. But fortunately the people can stop it.

Everything is up against its limits. That is not my opinion, but that of the Minister for Higher Education and Lifelong Learning, the hon. Member for Harlow (Bill Rammell). I have a little clip that states:

[Interruption.] I am told that that was quite right. It continues:

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The Chancellor is running out of tricks and wheezes to expropriate any more revenue, but that admission signifies what is to come. With a majority of only 97 in Harlow, the Minister knows something about being up against his limits.

The danger is that the Chancellor will run out of flexibility. As The Economist said:

This is the Chancellor who has doubled the council tax and destroyed pensions. This is the Chancellor who is guilty of causing the pain of ever-rising council tax and who is guilty of the unforgivable larceny of seeing the best-funded pension provision in Europe reduced to ashes.

It is not the little announcements in the Budget that will be dwelt on, but the underlying trends and pressures that Britain faces. It is not a million quid here or there, but the incidence and burden of tax and our competitive position and skills base that will determine our prospects in the longer term.

Even now we can see that the Chancellor's favoured structures are coming under strain. NHS deficits are a major crack in his ill-crafted model of public services. He can boast about the extra billions, but not only do they have to be paid for, they are not solving the problem. We do not have a perfect national health service: we have deficits, closures and lay-offs. He may well have doubled his spending, but now he will have to double the size of the House of Lords to pay off the deficits.

Competition in the modern world is becoming more and more ferocious. Comparative weakness can be seized on, with the swift transfer of capital to better options. Comparative advantage is more and more difficult to define and retain. Mature economies such as ours, with higher welfare costs and high social standards, carry those costs while having at the same time to compete with the likes of India, China and eastern Europe—all at a different stage of development. Our fortunes will not be shaped in any sudden way by the contents of one Budget. They will be determined by the gradual and continuing force of global competition. Despite what the Secretary of State for Trade and Industry said a moment ago, there are some very worrying trends.

Britain has dropped from fourth to 13th in the World Economic Forum competitiveness table since 1997. Just today, we learn that The Economist intelligence unit survey of how favourable a country is for foreign investment shows that the UK has fallen from fourth to seventh, because of concerns about tax levels, regulation, poor transport infrastructure and low levels of productivity. It is no triumph to be overtaken by Finland, Holland and Ireland.

Productivity growth has slowed under this Labour Government and, last year, it actually fell to zero for a time. Under the last Conservative Government, we were catching up with France and the USA, but under this
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Government we are losing ground. Last year, business investment, at 9.1 per cent. of GDP fell to the lowest level since records began and the number of new companies registered actually fell.

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