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“energy efficiency...microgeneration...small scale local energy generation”
“conservation of water by householders.”
It asks also that in producing his report
“the Chancellor...shall...consult local authorities and such persons”
“have an interest in...enhancing the United Kingdom contribution to combating climate change...alleviating fuel poverty and conserving water supplies.”
To the Opposition, that seems to be a sensible and balanced way of speeding up the plans that the Government announced in March to increase local level energy production and to reduce carbon emissions. I suspect that many Members across the House share that view. The direction of travel outlined in the microgeneration strategy in March is welcome but it does not go far enough, so we believe that new clause 9 is helpful in pushing those plans forward.
After eight years, Ministers are still reviewing planning policy and debating the potential of microgeneration technologies. The new clause is a positive response to the exciting potential of emerging microgeneration technologies. A most serious and robust strategy should have been an integral part of the energy review, not a precursor to it. Rather than laying down a challenge to the industry, we believe that the Government are following in its wake. Rather than setting the international pace, they are reacting to developments abroad. As it stands, the strategy will do little to address the sizable advantage that our international competitors enjoy in this sector or make a meaningful impact on carbon dioxide emissions before 2010.
I mentioned economic growth on the one hand and environmental gain on the other, because the two go hand in hand. The choice for the future is not between slower growth and lower emissions and faster growth and increased emissions. As the hon. Member for Nottingham, South said, between the option of either a highly centralised and extremely wasteful energy system in which power is, in effect, monopolised in the hands of a few producers, or a more decentralised and energy efficient system in which power generation is put into the hands of households and consumers lies an energy market in which other countries are leading the way. By the end of 2004, 200,000 Japanese homes had fitted photovoltaic cells, while 300,000 micro-renewable systems have been installed in Germany. As the hon. Member for Nottingham, South said, Germany is one of the countries that is giving a lead on such energy generation. More than 10 per cent. of householders in Sweden already use micro-renewable technology to heat their homes. Furthermore, the global market for new energy products and services, including micro-renewables, may be worth trillions of pounds over the course of this century. German companies already generate half the entire turnover of the global wind industry, while Japanese firms are at the forefront of fuel cell and hybrid engine technologies. American companies are leading the way in bringing affordable renewable technologies to the market. That is why my hon. Friend the Member for Tatton (Mr. Osborne) recently visited silicon valley to examine the work of pioneering green companies, which are building on ideas coming out of Stanford university.
10.15 pm
I concede that new clause 9 will not in itself make our micro-renewables sector more competitive or have
a serious short-term impact on reducing emissions, but it has the potential to allow the Chancellor to return to the House in due course and on a regular basis with not only a series of fiscal measures and incentives, but a framework within which those measures should fit. My hon. Friend the Member for Tatton set out that framework in three parts shortly before his visit to silicon valley.
First, the Government should consider how the planning system might take into account the benefits of micro-renewables while also recognising the need to protect the local and wider environment. As hon. Members know, the planning system is not always friendly to micro-renewables.
Secondly, the Government should address the lack of information available to consumers. We need a clear and stable policy for micro-renewables, so consumers can make long-term predictions whether the cost of fitting a wind turbine or solar panel makes financial sense.
Thirdly, the Government must tackle the inadequate infrastructure and regulatory framework. As well as the need to buy less electricity, part of the attraction of micro-renewables is the potential to make money by selling any excess electricity back into the national grid. In summer, for instance, photovoltaic cells—this comment is apposite given the current weather—may well generate more electricity than a household needs, especially if the occupiers are away on holiday. At the moment, however, that is being made much too difficult by inadequate infrastructure and burdensome regulations.
I would doubtless go wide of new clauses 9 and 10 if I were to describe in detail how the national grid is largely configured for one-way energy flows, but we would like to see the grid operate more flexibly, which is why my hon. Friend the Member for Tatton has asked the quality of life policy group to examine the experiences of other countries that have introduced feed-in tariffs.
In summary, we shall support new clause 9, since it makes a sensible and practical proposal which is enactable now. Since we will produce our own proposals in due course on the fiscal framework in relation to microgeneration and energy efficiency, we will not support the tax cut in new clause 10 and new schedule 1. I am sorry to disappoint the hon. Member for Nottingham, South in that regard, but if he presses new clause 9 to a vote, we will certainly support him.
Julia Goldsworthy: The Liberal Democrats sympathise with what the hon. Member for Nottingham, South (Alan Simpson) is seeking to achieve with new clause 10 and new schedule 1.
I want to refer to early-day motion 214, which has attracted nearly 270 signatures and which relates to new clause 10. The hon. Member for South-West Bedfordshire (Andrew Selous) has added his name to it, so I shall be intrigued to see how the Whip on the Finance Bill advises his troops to vote.
New clause 10 would add complication to the stamp duty system, if the discounts were to operate in the same way as the already complex slab system. Furthermore, I am not sure whether I would be happy
to subsidise improvements, environmentally laudable as they may be, to the home of the right hon. Member for Witney (Mr. Cameron).
It is a good opportunity to press the Government on how they intend to improve environmental standards in existing buildings. Like, I am sure, many other hon. Members, I look forward to the Financial Secretary’s response. However, I have a couple of queries about enforcement.
I understand that, if people say at the point of purchase that they wish to undertake improvements, they would qualify for a lower rate of stamp duty. However, what would happen if they did not carry out the improvements? Furthermore, with the Government proposing many plans to build many new houses, what incentives will there be to ensure that environmental measures are included when they are built?
Alan Simpson: The hon. Lady’s initial questions were legitimate but matters were left open because it would be for the Chancellor and the Treasury to set a framework. It is inappropriate to try to nail everything down in the new clause—it does not try to do that.
The process of operating a rebate is relatively simple. The Chancellor and the Treasury would devise the criteria against which a rebate could be claimed. One would define a period in which the works were to be undertaken and the process of reclaiming. There would therefore be a straightforward process of compliance. There are technical details to iron out but the problem is simply whether one wants to choose what I have described as an intervention point and whether one believes that it would work.
Julia Goldsworthy: I thank the hon. Gentleman for that clarification.
New clause 9 highlights many of the issues that I raised on Second Reading about the strategy for dealing with environmental measures—or its lack— in the Budget and the Bill, even though, in the week of the Budget, the Chancellor described lack of action on the environment as a scar on his conscience. New clause 9 tries to make explaining the strategy a requirement.
Clearly, we have a fundamental problem. As the hon. Member for Nottingham, South pointed out, emissions are rising. Between 1997 and 2004, carbon dioxide emissions rose from 150 million tonnes to 158 million tonnes, of which domestic carbon dioxide emissions now account for 41.2 million tonnes. That figure, too, is increasing. There is a problem that must be tackled and the Government are not dealing with it at the moment.
Whatever action the Government are taking, there is no shortage of words and consultation. The Treasury has spoken plenty of fine words. The Budget report of 2002 states:
“The Government recognises that energy-efficiency improvements by the domestic sector are key to reducing fuel poverty and carbon emissions”.
The Budget report of 2003 states:
“The Government recognises that energy-efficiency improvements in the domestic sector are key to reducing carbon emissions and alleviating fuel poverty.”
The Budget report of 2004 states:
“The Energy White Paper highlights the key contribution that energy efficiency can make to the Government’s energy policy goals.”
The Budget report of 2005 states:
“Improving energy efficiency is the most cost-effective way of reducing greenhouse gas emissions and reducing the costs of fuel bills.”
In addition, there has been plenty of consultation. In 2002-03, there was consultation on the economic measures to improve domestic energy efficiency. In 2003-04, further consultation took place on those measures and, in 2004-05, stakeholder consultation took place on green landlord schemes to improve energy efficiency in the private sector.
The Government and the Treasury have also made several proposals. In 2002, they introduced enhanced capital allowances for investment in heat pumps, air heaters and solar heaters and a 5 per cent. VAT rebate on grant-funded installation of factory insulated hot water tanks, micro-combined heat and power and renewable energy heating systems. In 2003, there was an additional consultation on specific measures. I could go on. However, the list ends in 2006, with the allocation of an additional £50 million to the low-carbon buildings programme.
Of course, those changes are welcome but they hardly constitute a strategy. They are piecemeal. They encourage energy efficiency but only among a small number of people. Most householders will not be affected. We therefore need a strategy that means that the improvements will have an impact on a much wider group of people.
The Department of Trade and Industry’s own microgeneration strategy and low-carbon building programme consultation identified the wider benefits that microgeneration could bring. It showed that a clearer strategy would have the benefit of reducing carbon dioxide emissions as well as creating a series of other positive impacts on the people who would benefit from the improvements. The renewables innovation review suggests that buildings contribute about 47 per cent. of such emissions, and microgeneration has the potential to reduce that figure.
The DTI’s consultation paper also suggests that microgeneration would help to ensure reliable energy supplies, because its widespread use would reduce the load on the distribution network. More diverse local generation would also reduce transmission losses and, if deployed on a widespread scale, would help the UK to avoid becoming over-dependent on energy imports. Furthermore, microgeneration would help to promote competitive markets by introducing an additional aspect to the energy markets, giving people a wider choice of products from which to obtain their electricity and heat.
Microgeneration would also offer the opportunity for affordable heating for all. Many people in my constituency face fuel poverty but do not have access to gas, so their only option is to install oil-fired central heating. Microgeneration would be a more environmentally friendly alternative and a more cost-effective way of tackling fuel poverty.
For all those reasons, I welcome new clause 9. It represents a clear way for the Treasury to set out a strategy on this issue. It would have no financial implications and I will have no problem in supporting it. I shall also encourage my colleagues to do so, and I hope that the Minister will take the same approach.
Joan Walley (Stoke-on-Trent, North) (Lab): I shall speak only briefly on new clause 9. In response to the hon. Member for Wycombe (Mr. Goodman), I regard myself not as an accomplice but as part of a team that needs to drive through the agenda for tackling global warming. I congratulate my hon. Friend the Member for Nottingham, South (Alan Simpson) on ensuring that we have an opportunity to debate this most pressing issue in our deliberations on the Finance Bill. My only hope is that everyone understands these issues and that we can gain the support of the nation for these proposals on a similar scale to the support that they give to what happens on the football pitch. It is critical that these matters should be debated not only here in Parliament but right across the country.
I have just two questions on these proposals for my hon. Friend the Financial Secretary. What are we waiting for? How can we move more quickly? I was encouraged by the comments made about these proposals by my right hon. Friend the Secretary of State for Environment, Food and Rural Affairs to the all-party group on the environment earlier this evening. He said that he intended to put environmental issues centre stage, and that he was taking the lead at DEFRA to enable all Government Departments to play their part in tackling global warming. I desperately want the Treasury to do even more than has already been done to make progress.
We have to ensure that we meet our targets, and to do that we must drive forward this agenda at national and local level. The Government have done a certain amount of reporting so far, but they could do more. New clause 9 will not cost the earth. It simply asks for an annual report from the Treasury so that we can have an informed national and local debate on the fiscal measures needed to speed up energy efficiency and introduce systems for microgeneration, small-scale energy generation and the conservation of water. That would signal to local authorities that they, too, were part of the team, and that their work in the local strategic partnerships was important in this regard. When the Environmental Audit Committee visited Woking, we saw the work that had been done there. Admittedly, it had perhaps been done on the basis of market initiatives rather than of environmental concerns, but it had nevertheless been done. We have also seen the work that has been done in Nottinghamshire. It is important that local authorities should be part of the UK’s collective effort to address climate change. I do not see why we should not all sign up to that as quickly as possible—hence the important debate that we are having now.
10.30 pm
Let me say something about energy efficiency. My constituency has very low standards of heating and insulation, and a very high incidence of fuel poverty. The Government are spending a massive amount on initiatives to improve health through warmth. They
should take great credit for improving building regulations, and for seeking to make improvements through the code for sustainable homes. However, as our Environmental Audit Committee’s report on sustainable housing points out, even more could be done. The steps that the Government have taken could be greatly reinforced by a review of fiscal measures, as paragraph 50 of our report explains.
We should take each and every opportunity to promote microgeneration, but we will need capital grant assistance to promote such technologies and help low-income households to benefit. The new Department for Communities and Local Government has already announced its intention to end planning restrictions on the domestic installation of wind turbines and solar panels. The Government are starting to make a great deal of progress. What is needed now is a way of overcoming the barriers to microgeneration, and securing the incentives that supply companies can provide for innovative action. It is vital for the Treasury to be part of all that.
I welcome the opportunity to debate stamp duty. Our report said that the next steps should involve more support for the 70 per cent. of households that are owner-occupiers and mostly not in fuel poverty. We recommended that the Treasury should consider reducing both stamp duty and council tax in the case of houses built to higher environmental standards, and asked for consultation on the issue, to be completed by September 2007 as part of the spending review.
I acknowledge that the Government have made a huge amount of progress, but we must accelerate it. It is vital to have a time frame consistent with consultation, but we also want to see real progress on the Select Committee’s recommendations.
Mr. Elliot Morley (Scunthorpe) (Lab): It is a pleasure to follow my hon. Friend the Member for Stoke-on-Trent, North (Joan Walley). I agree with much of what she said. I also welcome the new clause tabled by my hon. Friend the Member for Nottingham, South (Alan Simpson). The issues are important—there is a real debate to be had about how fiscal measures can encourage the developments that society needs, such as increased energy efficiency and the combating of climate change.
The Treasury and, indeed, the Chancellor have an excellent record. The Chancellor has not been afraid of innovation through fiscal measures. The climate change levy, for instance, has been extremely successful. Climate change agreements have reduced emissions from major users. The pioneering of carbon trading in the United Kingdom has greatly influenced the European Union’s scheme, and is a great success. Even measures that do not receive the attention that I think they deserve, such as the reforms of company car taxation, are having a huge impact on emissions and the buying habits of the companies that are major purchasers of cars in our country. That decision alone was a bold one. The fact that the Treasury took that decision demonstrates that it has not shied away from the bold and radical use of fiscal measures to encourage environmental improvements. I greatly welcome that and the thrust behind the new clauses will continue it.
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