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That is why taxation is the way to bring incentives to bear on people’s behaviour. A Nordic Council report, which I recommend to anyone who needs a little help getting to sleep at night, is excellent on the subject of economic instruments. Under this Government, we have been going backwards since 1999 on green taxes,
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which have fallen from 3.6 per cent. of gross domestic product to 2.9 per cent. last year—I prefer to use that figure.

Emily Thornberry: Surely the point of green taxes is to change behaviour, but the revenues from a successful green tax will decrease. Does the hon. Gentleman not agree that the congestion charge is an example of a successful tax from which income has fallen, because fewer people are driving into central London? Why is the Liberal party’s central economic policy based on such peculiar economics?

Chris Huhne: I can assure the hon. Lady that it is not peculiar economics at all. The reality is that often an ongoing tax, with an ongoing change in price, is needed to bring about an ongoing change in behaviour. We find that with traditional sin taxes, such as tobacco tax, and indeed with the congestion charge. There is no real conflict of the sort that she suggests; one can, for example, calculate what the behaviour of car buyers will be in response to what happens on vehicle excise duty. The Energy Saving Trust—and, I believe, the Department for Transport, but the Secretary of State will correct me if I am wrong—commissioned work from MORI that suggests that our proposals, which we introduced during the Finance Bill, and for which we voted for recently at the Liberal Democrat conference, would help two thirds of new car buyers to achieve lower emissions. Clearly, that would still leave a substantial amount of revenue, and I am grateful to the hon. Lady for pointing that out, as it means that we can direct that revenue towards lifting the low-paid out of income tax altogether and cutting the income tax burden.

Dr. Whitehead: Does not the hon. Gentleman accept that cap and trade taxes are used not only in Europe but, in other circumstances, in the UK? Examples include the landfill allowance trading scheme and packaging regulations. To some extent, renewables obligations are a version of that tax, too. If he is making claims and calculating figures about taxes, surely he should include the quasi-tax represented by buy-outs from those arrangements, as against the trading that reduces any buy-out obligation. Does he accept that the principle of cap and trade, along with taxation, is a good domestic mechanism for ensuring a reduction in climate change as well as an international one?

Chris Huhne: I strongly agree that cap and trade schemes are superior to straightforward taxation. They provide an ongoing incentive to companies to continue and deepen their saving of carbon emissions, for example, in the case of climate change. If we can develop those schemes, that is clearly a preferable option to straightforward taxes. However, despite the Secretary of State’s dalliance with the idea of personal carbon allowances, it is recognised across the House that we must deal with these issues extremely urgently, and the current state of technology does not allow us to move to personal carbon budgets or to introduce cap and trade schemes outside the areas where such schemes operate at present. The hon. Gentleman is right in principle, but in practice there are difficulties.


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Mr. Hurd: The hon. Member for Eastleigh (Chris Huhne) spoke about the evidence supporting the purpose and effectiveness of green taxation. If a constituent of mine can fly to Malaga for a weekend for £30, how much additional tax is required to change that behaviour?

Chris Huhne: The hon. Gentleman knows that at the margin one can calculate elasticities on the basis of performance. When that is done, there will be an effect at the margin. In English, that means that some people’s behaviour will not change, but enough people’s behaviour will change to take off the growth. On aviation, one of the key issues that we must face is that if the sort of growth that we are discussing takes place, in a short time we will not be able to indulge in any form of activity that emits carbon other than aviation. There is clear evidence that if the price of goods or services is increased, demand is reduced.

James Duddridge (Rochford and Southend, East) (Con): Perhaps the hon. Gentleman’s elasticity will enable him to express an answer in pounds and pence, which is what my hon. Friend the Member for Ruislip-Northwood (Mr. Hurd) was looking for.

Chris Huhne: The proposal that we have advanced is to change the air passenger duty. When the Conservative Government introduced air passenger duty, they made no estimates of its likely impact on the growth of passenger numbers, but clearly there was some. We are suggesting that we abolish the air passenger duty and restructure it so that it is a duty on the emissions of flights. We proposed a package of £8 billion extra in green taxes overall. I am happy to deal with that in more detail later.

The first area that shows the lack of joined-up government is the Treasury. The Government have been going backward on green taxes. That is a crucial part of the explanation for the rise in carbon emissions since 1997. The second area in which policy is dysfunctional is public spending. The DEFRA budget overruns in farming are one-offs, but the Treasury is still insisting on cuts in DEFRA’s budget—for example, in flood defences and the maintenance budget for flood defences, as the Secretary of State admitted earlier. When we know that one of the effects of climate change is rising sea levels and more extreme storms and weather events, that seems little short of irresponsible madness. There is clearly an appropriate degree of concern from the Association of British Insurers about that, given the understanding that the ABI reached with the Secretary of State’s predecessor about covering households that were to benefit from the introduction of flood defences, but may now be deprived even of the proper maintenance of those that already exist.

The third area that demonstrates a lack of joined-up government is public expenditure within the Department of Trade and Industry. The fact that the Government, through the Natural Environment Research Council, are closing the centres for ecology and hydrology—in particular, the centre at Wool in Dorset, which I recently visited—is extraordinary given the importance of that centre’s work in understanding the impact of climate change on biodiversity in the United Kingdom.


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A recent article by Chris Thomas and his colleagues in one of the leading scientific journals projected that 18 per cent. of all species sampled would be, as the article somewhat euphemistically put it, “committed to extinction” on currently projected levels of global warming. There is a clear need for the Government to address that issue, because we need to maintain the expertise that has been built up at centres such as Wool, and the long data sets of natural phenomena, if we are to understand the impact of climate change.

My fourth example concerns the Department for Communities and Local Government, which—I hope that this is contrary to the advice of the Secretary of State—is planning no fewer than 108,000 new homes on flood plains. That is a crazy policy, given the likely impact of climate change.

The hon. Member for East Surrey (Mr. Ainsworth) has mentioned procurement, so I will not labour the point. However, I will mention the Chancellor of the Exchequer’s extremely high-handed abandonment of the operating and financial reviews in the current Companies Bill.

There is no evidence that there is an effective Cabinet Committee, let alone an effective Cabinet, on global warming or climate change. Does such a Committee meet? Who chairs it? Should the chair be the Deputy Prime Minister? How will it be made far more effective in linking the efforts of the Government on climate change? And is there anybody other than the Secretary of State for Environment, Food and Rural Affairs who is committed to the agenda?

Mr. David Heath (Somerton and Frome) (LD): May I give my hon. Friend a small example of the left hand not knowing what the right hand is doing in government? As he knows, I am enthusiastic about microgeneration for small-scale hydroelectric plants in old water mills. No abstraction licence for water is required at the point of generation, which is good, but somebody has decided that an abstraction licence is required for water to enter the mill race from the stream, despite the fact that the water returns to the stream further down its length, which has resulted in a huge extra charge for microgeneration plants. Does that make sense to my hon. Friend?

Chris Huhne: It certainly does not. I am grateful to my hon. Friend for raising that point. Perhaps Ministers will look into the matter and remonstrate with the Environment Agency to sort out the problem.

Given the situation, it is not surprising that the Government have been missing their climate change targets and meeting others only by accident. As I have said, carbon emissions are up, but the only reason why we are still just meeting our Kyoto targets is the accident of the dash for gas, which was not Government policy. Because we generated electricity from natural gas rather than coal, greenhouse gas emissions from the generating sector fell by one quarter.

If we are to take the challenge of climate change seriously, which we must, the lurching, lolloping policy must stop. Instead, we need a systematic policy framework for all the areas of Government that affect climate change: on transport, we need green taxes such as vehicle excise duty; on aviation, we need to change air passenger duty into an emissions charge; and on households,
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we need ambitious new building regulations, which is the responsibility of the Department for Communities and Local Government.

We need a household energy efficiency scheme that works better than DEFRA’s Warm Front. Warm Front has done a few more than 1 million homes, and the pace is so slow that it would take 125 years to reach all the UK’s current homes, which belies the urgency of reducing carbon emissions from the residential sector. In terms of businesses, we have already heard from other hon. Members about commercial property.

It is crucial that we become much more ambitious in moving forward. I have mentioned in particular electricity generation through renewables. Nuclear power cannot fill the gap or stop us becoming more dependent on natural gas on a 10 or 15-year view, so for heaven’s sake let us not pretend that it can. Let us invest in the renewables that will ensure that we are not writing an open cheque to investors in nuclear power plants.

Since the Secretary of State asked from a sedentary position whether I agree with him rather than with the Conservatives, I have to say that Liberal Democrats agree with neither. We do not believe that nuclear has a part to play in the energy generation future of this country. Anyone who thinks that that is an implausible prospect need only look at what is happening in Germany and Sweden. I would particularly commend to the Secretary of State Sweden’s objective of not just a non-nuclear but a non-fossil fuel future. It is time for the Government to raise their sights and ambitions a little in tackling what they say, rhetorically, is the most important policy challenge of our time.

As for joined-up Government, the aid budget at the Department for International Development needs to be reshaped. Adaptation is urgent, particularly as regards sub-Saharan Africa, in some of the poorest countries in the world. The Foreign and Commonwealth Office needs to regard that as its top priority, as a world interest that is also a British interest. If we can exercise any influence on the Administration of George Bush—which will, after all, be there for another two years—please let us do so, but first and foremost the Government need to get their own act together. All the evidence is that we suffer from a lack of joined-up government in this respect, and that is a measure of the Government’s failure on climate change.

3.26 pm

Colin Challen (Morley and Rothwell) (Lab): I hope that today we will see the end of a long retreat from Rio. That sounds a bit like a Bob Hope film, but in this case the tears will not be of laughter but only of pain. We should remind ourselves of what was said at Rio in 1992. In articles 2 and 3 of the United Nations framework convention on climate change, it was agreed that we

It called for a system that would benefit


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and said that

while

Almost every country in the world—about 180, including the United States—signed up to that. It is a matter of great regret that we seem to have lost sight of some of those original principles.

Let me introduce a note of cross-party consensus by saying that it is a greater matter of regret given what our Prime Minister of the day, Margaret Thatcher, said three years before Rio. I will not make a habit of quoting from her, and I know that Conservative Front Benchers cannot do so nowadays because they have been told that they are not allowed to use her name in any speech. She said:

Those words were true then and they are true today.

As I said, we have experienced a long retreat from Rio. We have engaged in a great many displacement activities. After the conference in Monterrey in Mexico, we still talk of a lack of consensus on how to tackle climate change. Human beings often engage in displacement activities when they cannot deal with the big problem that faces them. Some Members present may have involved themselves in tidying up the house and hoovering the carpet rather than dealing with the great issue that confronts them in their lives. To a certain extent, that is what we have been doing these past 15 years in terms of climate change.

We should not be so uncritical when we consider some of the activities in which we have been engaging. When we consider the role of markets in tackling climate change, we should ask ourselves a few questions about their effectiveness. I believe that they will be effective, but only if we have a framework-based set of markets, not a market-based set of frameworks.

I commend an excellent report, “Carbon Trading”, by the Dag Hammarskjold Foundation, which was recently published on the internet. It provides a detailed analysis of markets and their role in tackling climate change. It states:

We are not even considering such time scales. The European Union emissions trading scheme operates over five years and the first review of it started only one year after it began.

Some of the prices in other markets have swung enormously. The report states:


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Are we going to try to create a stable framework to tackle climate change on that basis? We should study markets carefully before fully embracing and uncritically accepting them as being capable of dealing with the problem on their own.

Mr. Drew: Given that my hon. Friend is the undoubted expert on climate change in this place, apart from Front Benchers, I listen to him carefully. We have had the debate in private and in public. There must be alternatives to markets, which can achieve only so much. I would always argue that we must have direct intervention, and only the state can do that. The state must be open and transparent about what it expects from its citizens, businesses and communities. Why cannot we be open about that? Why cannot we demand of people that this generation should not fetter the next? That has never previously happened in the history of mankind.

Colin Challen: I am grateful for that intervention. The simple answer is that we are afraid of being booted out and replaced by a Government who are not prepared to confront that issue. We must have framework-based markets. I agree with the hon. Member for Eastleigh (Chris Huhne) that capitalism is the most powerful force for change in the world. Whether that should be the case is another matter—I shall not go down that route. We must tell capitalism how to respond and not simply try to replace it, because we do not have the capacity to do that.

Some of the issues must be tackled through a global framework. Contraction and convergence has already been mentioned and I want to dwell on that for a little because I introduced a Bill on it last December. Contraction and convergence form the framework in the articles of the United Nations framework convention on climate change—UNFCCC—that I mentioned earlier. There are many objections to a single global framework for tackling climate change.

A recent Department for Environment, Food and Rural Affairs report, which responded to the continuing Environmental Audit Committee inquiry into the post-Kyoto frameworks, stated that we could not have a single framework and that it was impossible to achieve. There are one or two samples of attempts to understand the reason for that sort of psychology. The Prime Minister said at a G8 climate change conference in November last year:

That could be an objection to some sort of global framework on which we all agree. Some people, perhaps especially in the United States, believed that it would be a straitjacket on the development of their economies.

Martin Horwood: I am grateful to the hon. Gentleman for the expertise and leadership that he has shown on the matter. What is his view of the problem, which we face in constructing that global framework, of western developed countries now effectively exporting their manufacturing capacity to countries such as China, thereby imposing a greater carbon emission burden on them?


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Colin Challen: It is one of the sad realities of the world that, when the Doha development round collapsed and pushed back any hope of achieving the millennium development goals or a fair trading system, it showed the great disconnect between the liberalisation and globalisation agenda and that of climate change. There is no connection whatever between those two parallel tracks. There was no connection between Hong Kong last year and Montreal—no discussion, no cross-fertilisation of ideas. The EAC conducted an inquiry into that subject, and what we have discovered so far is rather depressing. In the WTO, the environment is sidetracked, outflanked all the time and is treated as almost an unpleasant little add-on that will prevent the WTO from achieving its objectives. However, the two issues must be addressed hand in hand. That would deal with some of the issues raised.

There is another kind of objection to contraction and convergence. A World Resources Institute report, “Navigating the numbers: greenhouse gas data and international climate policy”, states:


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