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Julia Goldsworthy (Falmouth and Camborne) (LD): I thank the Chief Secretary for his kind welcome, and congratulate the Chairman of the Treasury Committee on an excellent report and on his quiet, unassuming—but devastating—analysis of the Bill. For me, the Bill's significance lies mostly in what it omits, not what it includes. There were great opportunities in the Bill, but they have been wasted. Perhaps the Chancellor is becoming a little slapdash in his impatience to move next door in Downing street.

It is the Government's failure to act on the environment that is the biggest opportunity wasted by the Bill—a point already touched on by the right hon. Member for West Dunbartonshire (Mr. McFall). Last week, both the Chancellor and the Leader of the official Opposition made speeches about the importance of the environment. The Chancellor spoke of the "moral duty" of the developed world to tackle climate change and the right hon. Member for Witney (Mr. Cameron) spoke of the need to reduce carbon emissions by a third. But the    Chancellor's Finance Bill contains very few environmental measures and the Conservatives have made no hard and fast commitments to explain how they would achieve such cuts.

Mr. Redwood: How big an increase in tax would the hon. Lady's party place on flights and cars?

Julia Goldsworthy: My party has always been clear about the need for fairer, not higher taxation. Under this Government, we have seen a fall in the proportion of the tax take from environmental taxes, and that is not helping the environment.

Mr. Henderson: Following the question put by the right hon. Member for Wokingham (Mr. Redwood), can the hon. Lady tell us whether it would be fairer to increase taxes on gas-guzzling cars by 10 per cent.? If air travel cost 5 per cent. more due to environmental taxes, would that be fairer?

Julia Goldsworthy: We support aviation fuel duty and those increases would be fair, because the vast majority of gas-guzzling cars are expensive cars such as Ferraris that consume huge amounts of petrol.

If words are to have an impact, they must be followed by action, but so far we have seen little more than posturing. Indications from the public, however, are
 
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that they want action. A Guardian poll of 22 February found that 63 per cent. of respondents approved of green taxes to discourage behaviour that harms the environment. People accept that we will have to change, so why do we delay the inevitable? It seems that the Government have yet to come round to that way of thinking. The fall in green taxes as a percentage of our national tax take should be reversed if we are serious about tackling carbon emissions.

The headline issue in terms of environmental measures in the Bill, which was trumpeted in the Budget, related to changes to vehicle excise duty in clauses 13 to 15. However, the environmental impact of those provisions will be laughable. For many gas-guzzling cars, the new higher band will cost less than half a tank of petrol—a rise from £165 to £210 a year. The Energy Saving Trust calculated that the differential needs to be worth more than £2,000 to have an impact on behaviour. The changes proposed in the Bill fall far short of that.

My hon. Friend the Member for Cambridge (David Howarth) received a written answer about the impact of the proposals on carbon emissions, which stated that the estimated carbon savings will be 0.06 metric tonnes of carbon emitted by 2010,

Can the Minister tell us on what basis the Treasury judged the proposal a good idea? How many drivers of gas-guzzling cars will no longer purchase such cars as a result of the measures? Were they intended to be only an eye-catching initiative rather than actually having an impact on behaviour?

Another area where urgent change is needed is air passenger duty, which was highlighted by the right hon. Member for West Dunbartonshire, yet the Bill proposes no changes in the structure of that duty. It should rise by at least as much as inflation and should be replaced by a charge on aircraft movements, not on passengers. That will encourage more fuel-efficient aircraft and discourage half-empty planes. I urge the Government to accept the recommendation in paragraph 102 of the Select Committee report, which states:

Although we support some of the environmental measures in the Bill, the Government need to take a more systematic and fundamental approach if they are significantly to change behaviour.

We support the revalorisation of fuel duty this year in line with inflation. Since 2000, when fuel duty began to fall, the rate of increase in greenhouse gases from transport has doubled. The revalorisation is not a rise in real terms, but merely halts the real-terms fall over recent years. Should not the Government have taken that opportunity to look at other options that will have a more direct impact on individuals' behaviour? Should not there have been a move towards road user charging, or at least a more detailed and serious Government investigation of that option?

Similarly, we support the revalorisation of the climate change levy in line with inflation—again because it halts real-terms cuts in the levy—but the Government should
 
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have looked at alternatives that might have a greater impact on behaviour and which are less complicated and cumbersome, such as a carbon tax. The introduction of the climate change levy was a welcome move in the right direction, but it is complicated. A carbon tax would be simpler and would reflect the importance of the principle that the polluter pays, but because of that it must be combined with energy efficiency measures and winter fuel payments for the elderly to ensure that vulnerable groups are not hit disproportionately hard. Although the Liberal Democrats are pleased that the Conservatives seem to be coming round to that point of view, I wonder whether they have grasped the fundamental point of the system. The Conservative leader seems to be proposing a carbon tax on general taxation, so there is no link to the polluter paying and I am not sure that he has thought through the consequences of his proposal. So at least the Bill may go some way towards halting the decline in revenues from green taxation as a proportion of the tax take, but it will not increase the tax take.

Rob Marris: The hon. Lady seems to be trying to have it both ways: she wants the proportion of general taxation raised from environmental taxes to rise, but she also wants behaviour to change. Surely, if behaviour changes and, for example, people take fewer flights or drive cars that are more fuel efficient, the proportion of taxation from environmental taxes will fall, and most hon. Members would regard that as positive. She seems to be having it both ways: she wants taxation to change behaviour, but taxation falls because behaviour changes, and she does not like it.

Julia Goldsworthy: But of course we need incentives to change. We are talking not about increasing the overall burden of taxation, but about trying to change behaviour.

Moving away from the environment, another key omission is the failure to address the ticking time bomb in our economy that is personal debt. The Chancellor made no mention of it in his Budget statement, nor is there any mention of it in the Bill, yet personal debt now stands at £1.2 trillion—roughly equivalent to the UK's gross domestic product—and the legacy could be a disaster for many families, as one fifth of household income is now used to service debt. That is back at the level it reached when the country crashed under the Tories in the early 1990s. The immediate signs of stress are clear—we are seeing rising bankruptcies and repossessions. What would counteract that is a network of advice centres, financial education in the curriculum, steps to prevent the mis-selling of mortgage payment protection insurance and action on non-income verified mortgages, for example.

More generally, instead of creating a simpler and fairer taxation system, the Bill creates greater complication, confusion and uncertainty for individuals and businesses. That has become the hallmark of the meddling Chancellor.

On the measures for businesses, even the changes we    broadly welcome bear the Chancellor's sticky fingerprints. For example, the changes to corporation tax outlined in clauses 24 to 26 will remove the zero starting rate of corporation tax. We hope that that signals the end of a long and meandering journey that
 
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the Chancellor has taken to end up virtually back where he started. In 1999, he introduced a 10 per cent. rate to encourage investment and enterprise. In 2002, he introduced the zero rate to provide further support to new and growing companies. In 2004, the zero starting rate was restricted to profits retained within the company. The 2005 pre-Budget report signalled the end of the zero starting rate. So we are back to where we were in 1998. Given that chain of unintended consequences, the Chancellor has effectively been forced to close a loophole that he created. We hope that that will be the end of a long run of uncertainty and complexity, but given the track record, what confidence can businesses have that that will be the case?

For some very small organisations, those changes will, yet again, create more complication. For example, many small clubs and societies that have taxable income from bank and building society interest will have to fill in corporation tax returns once again, even though very small amounts might be involved. That detail needs more discussion in Committee, but it shows how such changes have many unintended consequences and can often set off a chain reaction that prompts the need for further changes, and we end up in a downward spiral.

Of course, those changes to corporation tax will cross cut other changes proposed in the Bill, such as those to first-year capital allowances, thus continuing the pattern of small and short-term change. The key issue is whether the benefits of those changes are offset by the regulatory impact of uncertainty in the tax rates and the need for businesses to keep up with the changes.

Research from Manchester and Nottingham business schools indicates that, except for the most generous capital allowances, most capital investment tax advantages are investigated only after the decision to invest has already been made. It seems therefore that those short-term changes may not always change business behaviour and, more importantly, undermine confidence in the stability of the taxation system. So the general picture is one of complexity and uncertainty, and another problem is caused by the speed with which the changes are introduced and the fact that they are unexpected.

Clause 61, on the home computer initiative scheme, is an example of how proposals can be totally unexpected, by not just businesses but even departments. Research undertaken by the Home Computing Initiatives Alliance shows that more than 500,000 employees benefit from the scheme, of which more than 75 per cent. are lower paid.

Why was the scheme scrapped without any prior consultation or warning? Many businesses have already sunk costs preparing schemes for beyond 6 April. That is also true of the Department for Work and Pensions and the Department of Trade and Industry. In fact, I understand from the HCI Alliance that it went to see the Low Pay Commission and the DTI just a week before to investigate ways to help people on low incomes to access the scheme. From further discussions, it appears that the decision to scrap the scheme was taken only the day before the announcement was made. Will the Minister confirm that and explain the justification behind the decision? Were there any meetings across Departments
 
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to consider the implications? What notice was given to other Departments that the changes were about to take place?

I understand that the Government now intend to focus resources on those who are not in employment or do not have access to a computer through their employer, but, as yet, they have put forward no alternative proposals. As has already been mentioned, the explanatory notes state:

Reference is made to MP3 and computer consoles being obtained through salary sacrifice rather than borrowing. However, surely it would be possible to propose changes to the existing regime that would make it more affordable and attractive to those on lower incomes, while at the same time closing the loopholes that I have just mentioned. Is this a case of throwing the baby out with the bathwater? Those issues will be further explored in Committee.


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