Climate Change and Sustainable Energy Bill

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Mr. Mike Weir (Angus) (SNP): I also welcome you to the Chair, Mr. Benton, and apologise for being slightly late for the start of the Committee.

I also congratulate the hon. Member for Edinburgh, North and Leith on introducing the Bill. It is perhaps a testament to his ability that he has managed to get agreement between Scottish Labour Members and Scottish National party Members, who have been known to fall out on occasion.

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I was slightly alarmed to hear the Minister say that wind turbines were the new iPods, given my children’s constant demands for the latest iPod. I hope that that does not mean that we will constantly be paying for turbines as well.

It is regrettable that amendment No. 17 would remove the Prime Minister from the Bill. As I said in my intervention on the hon. Member for Bexhill and Battle, the matter is a cross-departmental one. Subsection (2)(b) talks about the

    “desirability of alleviating fuel poverty,”

and subsection (2)(c) about

    “the desirability of securing a diverse and viable long-term energy supply.”

Clearly those are matters for the Department of Trade and Industry rather than the Department for Environment, Food and Rural Affairs—indeed, the energy review is being carried out by the DTI. As the hon. Member for Edinburgh, North and Leith pointed out, the Treasury is also involved through fiscal instruments dealing with climate change and generation. The Chancellor’s pre-budget report made a great deal out of the £200 fuel payment to pensioners to alleviate fuel poverty. Many Government Departments are involved with the issue.

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There is cross-party support for the Bill, and I hope that it will progress successfully and evade any ambushes on Third Reading. It would be useful if the Prime Minister took the lead to show that Parliament is united on climate change and agrees that it is the greatest threat facing the country. A clear signal would be sent to the country if the Prime Minister were under a duty to report to Parliament, but unfortunately that is not to happen. Like the hon. Member for Bexhill and Battle, I want the Bill to proceed and so I will not press the matter to a Division, but I think that the amendment is regrettable.

Amendment agreed to.

Dr. Alan Whitehead (Southampton, Test) (Lab): I beg to move amendment No. 16, in clause 1, page 1, leave out line 13.

The Chairman: With this it will be convenient to discuss the following: Clause 3 stand part.

New clause 1—Fiscal and economic measures—

    ‘(1)   The Chancellor of the Exchequer must at least once in every year consider ways in which fiscal and economic measures may be used to assist with microgeneration and energy efficiency.

    (2)   The Chancellor of the Exchequer may, if he considers it expedient to do so, discharge his duty pursuant to subsection (1) as part of the budget process.

    (3)   The Chancellor of the Exchequer shall publish the results of his considerations pursuant to subsection (1) in any way that he thinks fit.

    (4)   This section shall come into force on 1st April 2007.’.

New clause 12——Annual reports by Chancellor of the Exchequer

    (1) The Chancellor of the Exchequer shall each year lay before Parliament a report on the CO2 impact of any fiscal or economic measures to promote energy efficiency and microgeneration introduced by him in the previous five years.

    (2)   In this section the term “CO2 impact” means the annual reduction or otherwise of emissions of carbon dioxide as a result of each specific measure.’.

Dr. Whitehead: I welcome you to the Chair, Mr. Benton. I, too, am in the latter stages of installing a wind turbine on my house, but unfortunately I already possess an iPod.

I congratulate my hon. Friend the Member for Edinburgh, North and Leith on getting the Bill to Committee stage. He has negotiated a careful passage over the shoals, tides and subterranean logs of controversy. I understand that he can see the Forth bridge from his constituency boundaries; that bridge might serve as a metaphor for the passage of the Bill over troubled waters and into Third Reading.

Amendment No. 16 follows the logic of the previous amendment in that it will remove subsection (3)(b) with its reference to the Chancellor of the Exchequer. However, the Chancellor will have specific duties under a later clause, which perhaps puts the deletion in a different light. The clause requires him to consider measures that might be taken and ways that he might discharge his duties under subsection (1) as part of the Budget process. Not only does the amendment follow the logic of my hon. Friend’s amendment relating to the Prime Minister, but it leads us on to new clause 1, to which my hon. Friend will be speaking this afternoon.

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Mark Lazarowicz: I think that I would be right to move new clause 1 at this stage. Perhaps you will advise me, Mr. Benton.

The Chairman: The advice is that new clause 1 is being taken with the amendment, so referring or speaking to it is appropriate; if and when you decide to move that it be added to the Bill, that will be done at the appropriate point of our proceedings.

Mark Lazarowicz: I appreciate that, Mr. Benton. I shall move the new clause at the appropriate stage. Before you correctly drew me to order in the discussions on the previous amendment, I expressed my view on the role the Chancellor of the Exchequer should play, so I will not reiterate what I said earlier.

I appreciate the fact that the Government have put measures to tackle climate change at the centre of many of their economic and fiscal policies. I do not wish to detract from that. I understand that one of the reasons that the Government are unhappy with clause 3, which we are debating, is that the requirement would be taken outside the Budget process. For that reason my new clause would make clear that the process of consideration of fiscal or economic measures could be undertaken in the Budget process, if the Chancellor so wished.

When we come to make a decision on new clause 1, I hope that the Government will have reconsidered the way forward. In any event, I appreciate that steps have been taken, but a focus would be helpful, as originally set out in my clause 3, but now in a revised format in new clause 1.

Gregory Barker: I should like to speak to new clause 3 and to refer to new clause 12, which I tabled, if that is in order. [Interruption.] I meant to say clause 3.

The Chairman: The items that we are discussing with amendment No. 16 are clause 3 stand part, new clause 1 and new clause 12.

Gregory Barker: Thank you for that clarification, Mr. Benton.

Clause 3 requires the Chancellor to

    “annually . . . prepare and publish a report on such fiscal measures he considers appropriate to assist with microgeneration and energy efficiency”.

The report should also have regard to dealing with climate change and fuel poverty.

We now understand that the Government want to delete the clause and not to replace it with anything at all. Repeated attempts by the Micropower Council and the Sustainable Energy Partnership to meet officials to try to agree a differently worded clause have been rebuffed. Why should that matter? It matters a great deal, because as we all know, the Treasury is the engine room of government. There is no Department that the Treasury’s tentacles do not reach into, and there is no agenda in government that will be advanced without the wholehearted support of the Treasury. That has nothing to do with the personality of the Chancellor of the Exchequer of the day, but is the reality. The Treasury is the be-all and end-all Department in Whitehall. If the Treasury does not will
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something, ultimately it will not happen. It is vital that climate change measures are wholeheartedly endorsed and properly agreed by the Treasury.

Let us begin by assessing the importance of the clause in terms of climate change. According to DEFRA figures, overall CO2 emissions between 1990 and 1997, the last seven years of Conservative government, dropped from 159.6 million tonnes to 150 million tonnes. From 1997 to 2004—I believe that this is the last figure available—emissions increased to 158.4 million tonnes. The 2005 projections are even higher. There is no room for backsliding or complacency. Treasury engagement is not only desirable, but essential.

Mark Lazarowicz: I want to put on record my appreciation of the hon. Gentleman’s support for my Bill, but in relation to the last point on carbon savings—my hon. Friend the Member for Southampton, Test asked the Prime Minister about this only a couple of hours ago—the Government’s policy on the climate change levy has resulted in millions of tonnes of carbon savings. It is a policy that the hon. Gentleman’s party still refuses to support—or at least it did at 3.10 pm today.

Gregory Barker: We are considering the climate levy now as part of a policy review. We have consistently opposed the levy in the past because we have not considered it effective: it has made little contribution to lowering carbon emissions and we have been concerned about its impact. However, we are willing to look at it again and are preparing to do so, and the matter will certainly be reviewed, so it is not strictly accurate to say that we continue to oppose the levy. However, given that the levy has not effectively tackled carbon emissions—the figures speak for themselves—it is right for us to look at the policy rigorously before changing tack.

Andrew Stunell: I wonder whether the hon. Gentleman has yet reached page 30 of the document that the Minister published yesterday, which states that the climate change levy

    “should save over 3.4 million tonnes of carbon . . . per annum by 2010, well above the estimates made at its introduction.”

Would that also contribute to the hon. Gentleman’s party doing a U-turn on this policy?

Gregory Barker: The hon. Gentleman makes a valid point. If what he refers to is the case—I am sure that it is, as it features in a Government document—it will be a contributing factor in reassessing the effectiveness of the climate change levy. We have no ideological objection. We are concerned about whether the levy has the right outcome on climate change and is a worthwhile trade-off for the additional burden that it places on business. That is the sole basis on which it will be judged, and further information will clearly be taken into account.

However, that is a slight red herring in this context. What we are now discussing, as I am sure you might like to remind me, Mr. Benton, is the clause that takes out the Treasury’s accountability in this matter. We seek to put it back.

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The Treasury has had a great deal to say on climate change and energy efficiency. Paragraph 7.21 of the 2002 Budget report states:

    “The Government recognises that energy-efficiency improvements in the domestic sector are key to reducing fuel poverty and carbon emissions.”

In 2003, the same paragraph of the Budget report said:

    “The Government recognises that energy-efficiency improvements in the domestic sector are key to reducing carbon emissions and alleviating fuel poverty.”

In 2004, the Budget report said:

    “The Government’s Energy White Paper highlights the key contribution that energy efficiency can make to the Government’s energy policy goals”.

It also said that improving energy efficiency was the most cost-effective way of reducing greenhouse gas emissions and reducing fuel bills. We would all agree with that. In 2002 and 2003, the Treasury held a consultation on economic measures to improve domestic efficiency. There was a further consultation in 2004 on such specific measures. In 2005, there was a stakeholder consultation on green landlords schemes to improve energy efficiency in the private sector.

For all those consultations, fine words and doffing the cap to the need to take real action, there has been very little follow-up. In the 2002 Budget, we saw enhanced capital allowances for investment in heat pumps, air heaters and solar heaters, 5 per cent. VAT on grant-funded installation of factory insulated hot water tanks, micro-CHP and renewable energy heating systems. That is welcome. The 2003 Budget, however, simply announced a second consultation on specific measures. The 2004 Budget announced 5 per cent. VAT on ground source heat pumps and micro-CHP, conditionally subject to trials. The landlord’s energy savings allowance—LESA—was also set up, although that was not exactly a radical approach. In 2005, 5 per cent. VAT on micro-CHP was confirmed on air source heat pumps, the LESA was extended to solid walls and further consideration was given to green landlord schemes.

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Important as those few initiatives are, they do not add up to a very great deal. They give some VAT relief for microgeneration, which is important, and they encourage energy efficiency among private landlords, which is also welcome and important, but those fiscal measures affect relatively few people. They certainly do not affect the vast majority of the public. At the moment, although we all hope the situation will change, microgeneration is still very much a niche product. Relatively few private landlords will act as a result of the green landlord scheme, and most householders are not even affected by the measures that the Treasury has taken during the past five years, despite the consultations and policy priority that the matter has been given.

Let us compare the Treasury’s fine words about how energy efficiency is key in its actions, which affect only a small proportion of people, with the emissions figures that I have quoted, which have gone up, up, up. On energy efficiency, there is an unanswerable case for
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the Chancellor to consider and report annually what steps he should take to improve the take-up of insulation and other measures by the vast majority of householders. All these schemes and initiatives must go mainstream. The time for small-scale, trialled niche offerings is over. We must mainstream such ideas, or we simply will not make progress.

We will soon have a microgeneration strategy, which I look forward to. The Government claim to support the Bill to help that nascent industry, but why should the Treasury be exempt? It will be key if the strategy is to work. Will the Treasury do nothing? This is not true joined-up government, and it does not put the environment at the heart of the Government’s agenda. At best, it is a piecemeal approach; at worst, some people would say that it is a sham. Bearing in mind the emissions figures, one would hardly take a charitable view.

Mr. Nick Hurd (Ruislip-Northwood) (Con): Does my hon. Friend agree that our current centralised energy system contains an enormous amount of waste, and that in the pursuit of energy efficiency, we should seek the lowest cost solution to the challenge of climate change? In that context, does he not share my puzzlement as to why any responsible Treasury Minister or Chancellor of the Exchequer should resist the opportunity to come to Parliament and make him or herself accountable for the pursuit of efficiency?

Gregory Barker: Absolutely. There ought to be tablets of stone with “efficiency” written across them at the Treasury portal. I am surprised that Treasury Ministers do not want to discuss on the Floor of the House efficiency measures that will procure long-term savings. It is regrettable that the Treasury and financial strategy will not be at the heart of climate change policy. They will not be at the heart of that policy unless the Treasury is held accountable on the Floor of the House.

Joan Ruddock: The hon. Gentleman might acknowledge that the Government as a whole are undertaking a climate change review designed specifically to put us back on track. Clearly, that will involve the Treasury and fiscal measures; we must assume that. The Treasury is also undertaking the Stern review of the economics of climate change. Does the hon. Gentleman support new clause 1, which would go a long way towards creating the proposals that he wishes to see in the Bill?

Gregory Barker: The hon. Lady is right. A number of measures have been introduced that seek to tackle climate change, for which we applaud the Government, and I do not doubt that there will be more measures in the future. Surely that is all the more reason why the Treasury, which has overarching responsibility for all such things, should be accountable. If so, it can give a joined-up account from the top of Government as to how measures will be implemented now and in future and what their fiscal impact will be.

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I agree with the hon. Lady that a range of measures are being implemented. We need more, and we need them to be implemented with greater urgency. Nevertheless, that simply reinforces the case that we need all the issues to be considered, taken together and deliberated on by the Treasury, that most important of Departments. Otherwise, by the very nature of having so many measures and initiatives, there will be a danger of incompatibility or of losing sight of what the Government have started. We need the Treasury to drive the whole process from the top.

Greg Clark: The hon. Member for Bishop Auckland (Helen Goodman) and I serve together on the Select Committee on Public Accounts. The removal of the clause would also remove the Treasury from the scrutiny of the Public Accounts Committee in terms of the execution of the policy. From time to time, that Committee finds an effective way of making sure that the Government deliver on their promises.

Gregory Barker: That is an excellent point, which goes to the heart of accountability.

New clause 12 states:

    “The Chancellor of the Exchequer shall each year lay before Parliament a report on the CO2 impact of any fiscal or economic measures to promote energy efficiency and microgeneration introduced by him in the previous five years . . . In this section the term ‘CO2 impact’ means the annual reduction or otherwise of emissions of carbon dioxide as a result of each specific measure.”

The Government support annual reports by the Secretary of State for Trade and Industry on microgeneration and by the Deputy Prime Minister on achieving the domestic energy efficiency target under the Housing Act 2004. In the Sustainable Energy Act 2004, the Government support annual reports to Parliament on measures to reduce CO2 by the Secretary of State for Environment, Food and Rural Affairs. There is not a principle at stake here.

Nowhere is there any requirement for the Treasury to report on its contribution. Seemingly, the Chancellor is unaccountable when we come to combating climate change. I am not speaking about whether that is deliberate, but as my hon. Friend the Member for Tunbridge Wells (Greg Clark) pointed out, it makes the Chancellor more unaccountable, which will help stifle debate.

Helen Goodman (Bishop Auckland) (Lab): Will the hon. Gentleman explain why he has included in the new clause the phrase:

    “introduced by him in the previous five years”?

Presumably, the hon. Gentleman is hoping that his hon. Friend the hon. Member for Tatton (Mr. Osborne) will be Chancellor of the Exchequer, but under the new clause, he would be reporting on the current Chancellor’s actions, not his own. The new clause makes sense only as long as we have a continuation of a Labour Government, which of course I hope and believe we will.

Gregory Barker: The hon. Lady raises an interesting drafting point, but it is not a serious one or what the debate is about. We are not here to consider the result
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of the next general election. We are trying to take a long-term view on the best way to tackle climate change.

All I am saying in the new clause is that if we are all serious in tackling climate change, then for goodness’ sake the Treasury must also play its role and be held accountable.

Joan Walley (Stoke-on-Trent, North) (Lab): Will the hon. Gentleman tell the Committee, in the context of the amendment that we are debating, how what he is saying is consistent with new clause 1? The new clause deals with the way in which the Chancellor of the Exchequer at least once in every year considers ways in which fiscal and economic measures might be used to assist microgeneration and energy efficiency. How are the hon. Gentleman’s comments consistent with the debates that we shall come to shortly?

Gregory Barker: I am speaking to new clause 12. I understand from you, Mr. Benton, that we may discuss new clause 12, and that it may be voted on a little later, depending on whether it is pressed. I hope that that clarifies the point for the hon. Lady.

I think that I have made my case. I simply feel that, for the Bill to be effective, the progress that it induces should be monitored, together with the Treasury’s success or lack of it in making advances to reduce climate change. The Treasury says that it already monitors those issues in the Red Book, but I have looked at the Red Book—I have copies of it here—and at no point does it replicate the specific accountability that my new clause addresses. There are areas where it comes close, but at no point does the Red Book in 2005, 2004 or 2003 address the key points in the new clause.

Malcolm Wicks: As we have heard, clause 3 requires the Chancellor to publish a fiscal and economic strategy for microgeneration and energy efficiency. Earlier, I put the case for not accepting that the Prime Minister should have a responsibility, and now I have a similar duty to suggest that the Chancellor of the Exchequer and the Treasury should not appear in the Bill. I realise that this could be seen as a political risk—at one stage I delete the Prime Minister and at the next the Chancellor of the Exchequer—but I think that both my colleagues will fully understand and support my motives.

The amendments and new clauses are good debating pegs on which to hang a number of arguments about the virtues or sins of government. With respect, I do not think that they are serious issues in terms of the machinery of government. As my hon. Friend the Member for Lewisham, Deptford pointed out, the Treasury is involved at ministerial and official level in the interdepartmental work on the climate change review. One of the team members in the new energy review, which I am leading, is seconded in from the Treasury, and we have good relations at ministerial level. As my hon. Friend said, the Chancellor has asked Nick Stern to conduct a report with global as well as national significance on the economics of
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climate change. To suggest that the Treasury is not fully involved is a useful debating point, but it bears no relation to the truth.

Gregory Barker: The point is not simply that the Treasury is not involved. Surely the point is that it is not fully accountable. The key is the Treasury’s accountability and our ability to monitor the progress or lack of progress of the various initiatives.

Malcolm Wicks: All Ministers are accountable to Parliament, and there are a number of different ways in which those matters can be tested.

Mr. Andrew Smith (Oxford, East) (Lab): Does my hon. Friend agree that every economic statement and Budget report since the Government have been in office has contained extensive reporting on progress against environmental objectives—indeed, much more extensive than from any previous Government?

Malcolm Wicks: Quite. Such reporting is a new and important feature of the pre-Budget report and so on. As the former Chief Secretary to the Treasury suggests, those of us who are interested can compare and contrast it with what was done by previous Administrations. Indeed, we may want to do that and to report on it in our next sitting, if the Chair allows us to do so.

The Government have already announced through the normal Budget process several fiscal and economic measures to support microgeneration and energy efficiency. To create an incentive at the point of purchase, the Government have reduced the rate of VAT from 17.5 per cent. to 5 per cent. on a variety of microgeneration technologies. I do not wish to be partisan, but I think that there might be a difference there with a previous Administration.

In April 2000, the Government introduced a reduced rate of VAT for solar panels, wind turbines and water turbines. The 2004 Budget announced a reduced rate of VAT for ground source heat pumps. The 2005 Budget extended that provision to cover air source heat pumps and micro combined heat and power, often known as micro-CHP. The pre-Budget report 2005 extended the provision further, to cover wood-fuelled boilers.

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Gregory Barker: The point that we are trying to make is that the Red Book does not report on the very measures that the Minister has just listed. It does not report on CO2 emissions and the VAT reduction given on ground source heat pumps in 2004 or on the 2003 Red Book. It does not report on the CO2 reductions resulting from the VAT reductions on the energy saving measures introduced in 2000. I applaud the Treasury for introducing those measures, limited though they were, but we want to know whether they are effective and the Treasury to answer for them. They are not in the Red Book, and at the moment there is not a specific mechanism with which we can get that information.

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Malcolm Wicks: It is important that the Government should answer for them. There a number of ways in which we are doing that and reviewing the issue, not least with the climate change review.

The Government have also introduced several measures as part of a wider programme to promote energy efficiency across all sectors of the economy, including reduced VAT rates for the professional installation of energy saving materials and the landlords’ energy saving allowance for the installation of insulation in the private rented sector. Additionally, the Government support the Energy Saving Trust and the Carbon Trust with £100 million a year in their aim of encouraging the uptake of energy efficiency measures in the domestic and business sectors. The pre-Budget Report announced a number of further measures that will help us to meet our climate change goals, including revolving funds to assist small and medium-sized enterprises and the public sector to install energy efficiency measures. To have a requirement for a separate report on fiscal measures promoting microgeneration and energy efficiency would prejudice the normal Budget process. I therefore oppose clause 3 standing part of the Bill.

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