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My conclusion on the Chancellor’s 10 years is this: there has been no major disaster, and for that we are very grateful. The inheritance was strong and good. For the first three years he did not do too much
damage to it apart from the huge mistake over pension funds. For the next five years, he proved beyond doubt that just spending huge sums of money does not sort out the public services sufficiently. At the same time, it damages Britain’s ability to compete, in turn damaging our ability to employ those 5.3 million people who do not have jobs and our ability to raise our living standards as quickly as America, Ireland or the other success stories around the world.
This Chancellor has put Britain at the bottom of the pack of English-speaking countries—the pack to which the Chancellor never refers—though from time to time he has put us at the top of the European pack. That has not been very difficult, as Europe has gone through a dreadful time with the wrong model, showing once again that the high-tax, high-waste, high-spend approach does not produce a happy country or even good public services.
This Budget is based on a central con on the income tax proposition. Most people will feel very let down when they read their newspapers tomorrow and see that they are not better off in the way that the Chancellor was perhaps trying to hint with his famous announcement at the end of his speech.
When it comes to the corporate sector, the Government should not run away with the idea that they have done enough. They have acknowledged the problem and will have helped some companies a little, but we need a considerably better tax package if we are to stop more Shells and Barclays either going abroad or thinking of going abroad, or if we are to bring more large companies into Britain, saying, as they do with respect to Ireland, that this is the place where they wish to come.
If Labour Members believe that we also need a social compact in order to attract them, I look forward to their setting out the details so that we can debate them. I think that most of them already know in their hearts that what will bring the punters in from around the world and from the global marketplace is a much more competitive tax system. Unfortunately, this Budget does not deliver it.
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Alan Simpson (Nottingham, South) (Lab): It is normal on these occasions for me to follow the Chancellor’s Budget statement and fill in the conventional gaps that I feel he has overlooked. I pay tribute to the Chancellor’s specific section on the environment and green taxation and to the efforts of the Conservative party and its leader in moving the issue up the political agenda. I should like to take this opportunity to present the green Budget that I think Parliament should have been offered.
Before I do so, however, I would like to preface my speech with a couple of fairly conventional remarks. The House should put on hold the points that the right hon. Member for Wokingham (Mr. Redwood) made in his speech and use as a point of reference the IMF report that is due to come out this week, which I understand will say that the UK is the fastest and strongest growing economy within the G7. In the context of that strength we should have the courage to
make much more profound changes in the nature and shape of our economy. We should not pretend that we would be asked to make those changes—I will take the House through them later—from a position of weakness.
Mr. Mark Field: The hon. Gentleman makes an entirely fair point, but does he not recognise that many Conservative Members feel that comparisons only with G7 countries show a great paucity of aspiration? Such comparisons also fail to recognise what is going on in the global economy, with two economic superpowers such as India and China rapidly emerging. That should be the comparator for the future, rather than just looking at six other nations, many of which—particularly in the European area—have performed extremely badly over the past decade or so.
Alan Simpson: I accept that, and I shall make most of my remarks in the context of what is happening in the wider global economy. It might not surprise the hon. Gentleman to know that I take a quite different view of the fragility of the global economy. When hon. Members say that we have to strip this country bare to try to compete with China and India, I ask them to begin from a different audit position.
If we look at those two countries and the dilemmas that they are currently grappling with, we see that they begin with quite different questions. They are already asking themselves where on earth they will find the water resources to sustain their current levels of production or the domestic requirements of their citizens. They are asking where they can find the energy resources needed to continue to underpin those levels of production. All the major growth areas in the developing world are already in deep environmental crisis in respect of access to those sustainable resources. In the coming decade we shall have to take a quite different view of what holds the global economy together, and the way in which we approach global ecology will determine that.
The one more conventional point that I must make before I launch into the specifics of my green Budget is to recognise today’s lobby of Parliament by some extremely cold pensioners who were stripped of their pensions—125,000 of them—and who continue to make the point that a massive injustice has been inflicted on them by denying their rights to full restoration of their stolen pensions. Although I was grateful for the Chancellor’s reference to the strengthening of the financial assistance scheme, the reality is that when it comes down to the core figures of what it would take for this House, this Government, this Parliament to restore those pensions in full, we are not talking about £15 billion, which was the figure originally quoted. We are talking about a current sum of only £45 million a year between now and 2011. Between 2011 and 2020, the worst-case scenario is that that would rise to £100 million a year.
To put that in the context of the existing Department for Work and Pensions budget, just the error factor in last year’s administration of pension credit came to £120 million a year. I do not believe that we should wait for a further court judgment in favour of the pensioners and against the Government’s claim that it is not their fault and they are not in a position to do
anything about it. The honest, decent and principled legal duty is to restore those pensions in full—and it would be bought for a sliver of the costs from the Exchequer cake that the Chancellor took us through today.
Mr. Field: I would like to associate myself personally with everything that the hon. Gentleman has said in this regard. I suspect that he speaks for many hon. Members on both sides of the House. It has been an appalling injustice and the ombudsman’s inquiry and the court cases were pretty straightforward. As the hon. Gentleman rightly says, a number of very cold, aged pensioners cannot go back to work to earn more money, so we need to ensure that they are properly looked after during what is likely to be the relatively few years before they pass away.
Alan Simpson: I hope to take the opportunity to address those concerns by amending the Pensions Bill. I hope that we succeed in doing so.
Let me focus, as promised, on the shape of what I believe would be a genuinely green Budget. The Chancellor went through a number of points about the success of different measures in the Government’s programme for achieving carbon savings, but the core national picture, however, is far less rosy and comfortable than any of us have a right to claim.
The 1980 assessment of UK carbon emissions was 161.5 megatonnes. By 2005, the figure had gone down to 151.5 megatonnes—a 6.4 per cent. reduction on the 1990 figure and well below the 20 per cent. domestic targets for carbon reduction that we set for ourselves by 2010. In fact, for the last three years, the level of carbon emissions has been relatively static across the UK. The progress made on carbon reductions in the early 1990s was an accidental result of a disengagement with manufacturing and the dash for gas. We see now that there were carbon gains from that, but it would be quite wrong to try to rewrite history as though that were the intention.
Mr. Redwood: Does not that show that there was a better reason for privatisation than even I dreamed up—that it is the greenest policy yet developed?
Alan Simpson: I would respond to that by referring to something that my dad said, which was that any idiot can run down an industry by selling off its assets. That makes a profit in the short term, but we are left with nothing in the long term. That is the approach to privatisation that the Conservatives drove through this country, leaving us with a wretched legacy of destruction and abandonment. Simply shifting the responsibility for contamination offshore does not add anything to the UK’s contribution to tackling nationally what is a global problem.
If we are to take seriously the invitation that scientists are pressing us to address—we have identified the need for a 60 per cent. reduction target in carbon emissions by 2050; scientists have identified the need for an 80 per cent. reduction—the scale of what we do within the shape of the UK economy has to be transformed. It will mean reducing our carbon emissions to 32 million tonnes by 2060. That would require a national carbon savings programme delivering savings of about 3 million
tonnes a year, every year between now and 2050. Given that our record over the past 15 years has been to save less than 0.6 million tonnes of carbon a year, achieving that target would require a transformation.
I suggest to the House and to the Government that we need to establish a new set of golden rules and a new set of specific policy initiatives. The golden rules should begin with one that recognises what the Stern report said—that the Government should henceforth seek to ensure that the UK economy as a whole commits a minimum of 1 per cent. of UK gross domestic product to the climate change mitigation programmes. That should happen not just across government but across every sector of the economy.
As a long-term commitment, all parts of the UK economy would then be required to make annual carbon reductions consistent with the 80 per cent. carbon reduction target, based on 1990 emissions levels. In the short term, however, it would require existing UK target commitments to climate change and fuel poverty to have a rolling programme of a 5 per cent. reduction each year. Again, that should apply to all sectors of the UK economy.
For the Chancellor’s second new golden rule, I would suggest that borrowing within the economic cycle should be reinterpreted as borrowing that should be prioritised to restore the ecological capital of the country, specifically in respect of renewable energy generation and water recycling.
To deliver all that, we need specific policies, which I would address in three areas: energy, the built environment and transport. The Government must begin by transforming energy market rules. The Chancellor made a welcome commitment today, saying that income received by customers who install energy generating systems in their homes should be tax free. Although that is welcome, it does not address the fact that most of the companies that buy back energy in that way pay a pittance for it.
In that regard, by far the most successful intervention approach is the one already in use in Germany, which introduced a renewable energy sources Act in 2000. It requires the energy industry to pay customers four times the current market rate for the renewable energy that they put back into the system. The effect has been transformational. The measures resulted in a cavalry charge of German citizens seeking to become part of the renewable energy generating process, and produced a renewables industry that, last year alone, delivered 214,000 new jobs into the German economy, and 24,000 in the last year alone. In that last year, 90 million tonnes of carbon savings were delivered—a huge quantum increase on the combined levels of carbon savings of all the UK schemes.
The German system has been successful because it was citizen-driven. It recognised that the role of the Government was not to abolish markets but to change the rules so as to create markets that are ethically competitive and ethically sustainable. The cost to German energy customers has amounted to €1.40 a month on the average energy bill.
The impact of the German scheme has been profound, and our Government ought to establish a similar scheme here in the UK. We should require industry to set out the terms of the preferential
buy-back arrangements. We should also designate the period—perhaps 15 or 20 years—within which the preferential pay-back tariffs will remain in existence. We should also define which tariffs should apply to the specific technologies that are available in the marketplace at any given time.
The next important job for the Chancellor would be to address how we deliver all those measures. If we look across the landscape of Europe, we see that local authorities are by far the most efficient vehicles for delivering sustainability agendas. They are given specific powers and duties to co-ordinate and drive the sustainability agenda that is defined by their central Governments. We need to make exactly the same provisions in this country, and at the same time remove many of the obstructions that stand in the way of developing decentralised local energy networks. That has already been done on a wide scale across Europe; only the UK’s own intransigence stands in the way of a much more coherent approach to energy investment and sustainability.
On the back of a serious commitment to the promotion of energy services companies, the Chancellor should change Ofgem’s terms of reference. At the moment, the UK is locked into an impossible position, in which all the major energy companies talk about their desire to get into sustainability programmes but say that achieving that is hopeless. They say that they are required to compete with one another on short-term lowest-price terms. Nothing allows them to break out of the 28-day contract rule in order to get into the long-term energy services contracts that those same companies have in other parts of Europe. It is the obstacles of our own rules base that are getting in the way of the transformation that we need.
Andrew Stunell (Hazel Grove) (LD): I entirely agree with the hon. Gentleman. Does he acknowledge that the 28-day rule works strongly against the sensible installation of smart meters?
Alan Simpson: I do, but I also have strong views on smart metering. The energy sector is desperately keen to get smart metering entitlements, simply to allow it to bill us more effectively. The really smart meters on which we ought to be insisting are the kind that would empower the Royle family. I am not talking about the royal family down the road, but the Jim Royle family, in which people barely get out of their armchairs except to get a cup of tea. Such people would look at the meter clicking away on the wall and shout to the rest of the family, “What are you doing? Have you left the doors open again? Are you drying your tights with the hairdryer? Am I made of money? Switch that thing off!” In a sense, the meters must inform and empower the public rather than just empower the energy companies to bill us more effectively. I agree with the imperative, but the House needs to make an important decision about the function of those meters and about whom they make smart.
That takes me on to the built environment. I welcome the commitments on building zero-carbon homes by 2016. At best, however, that might involve 200,000 houses a year, which prompts the question of
what we will do with the 25 million homes that we have already. Unless the same standards and requirements are applied to the upgrading of existing stock, a new build programme will not address the fact that 25 per cent. of carbon emissions come from existing homes. To do that, we need to enhance some of the measures already in place and introduce new ones.
As part of our legislative commitment to eradicate fuel poverty by 2016, the Government introduced the Warm Front initiative along with the energy industry’s complementary energy efficiency commitment. The difficulty with the funding of those two programmes is that, according to current assessments, in 2016—by which time fuel poverty should have been completely eradicated from UK housing—there will still be 2 million fuel-poor households. The only way to address that is to bring Warm Front and the energy efficiency commitment and its increments into a single coherent programme, delivered through, or under the auspices of, local authorities. Such a concerted and co-ordinated programme would upgrade all our housing stock to a standard assessment procedure rating of 65—the threshold set for modern, well-insulated housing—and dramatically reduce carbon emissions.
It is not enough, however, to give local authorities additional money to deliver the programme; we must give them additional powers. We cannot just set higher standards in building regulations for the materials used. There must be a conceptual shift in our thinking about the built environment. We must move to the notion of our houses being not just consumers but generators of energy, as has happened dramatically in Germany. To do that, we need to give local authorities unrestricted powers to set sustainability standards for every part of the built environment, including planning and building regulation requirements to incorporate energy generation in every upgrading of a property and in every development of new properties. That must apply to the domestic, commercial and industrial sector.
We should learn from other parts of Europe and consider the recycling of water—which will also be a part of the climate change crisis that will affect our lands, irrespective of how desperately it affects those in other lands—as well as energy. Those issues ought to be part of the regulatory framework in which we plan for a more sustainable environment for the 21st century.
What can the Chancellor do to enhance that? First, people who have properties with a minimum SAP rating of 65 should be exempt from 50 per cent. of the stamp duty that they would normally pay on property transfers. Secondly, properties that have incorporated energy regeneration and water recycling as well as the SAP rating of 65 could be offered 100 per cent. exemption from stamp duty. That would transform the way in which people thought about the nature of their property transfers.
To cover the most vulnerable sector of our housing environment, we must also address what would happen to properties that are currently let with the poorest of insulation. We must give local authorities the power to set precisely the same standards and requirements as a condition of the right to let. If we do not set those standards, we will retreat into an era of Rachmanism. That is not to oppose people’s right to acquire
properties to let, but to say that in a civilised society people should not have a right to let properties that are in a state of squalor to those who are too poor to exercise any other housing choices. We must set standards of sustainability in the built environment that will make homes fit for people to live in today, and fit for our children to occupy and acquire tomorrow.
Those are the ways in which we can transform one part of the built environment; but even in the commercial and industrial sectors, each business occupies its own part of that environment. One of the conditions that should attach to access to the array of tax incentives and allowances that the Chancellor has made available today and in previous years is acceptance by businesses, whatever their nature or size, of the duty to play their part in meeting the Stern report’s requirement of a 1 per cent. contribution of turnover to climate change mitigation measures. They too must adhere to the Government’s national target of a 5 per cent. reduction in carbon emissions year on year between now and 2020. They do not have to do that, but they should not expect to receive any tax subsidy or allowance if they choose not to, because if they choose not to, someone else will have to step in to clear up the mess that they have created.
Allowances must be made conditional on a different ethical contract between business and society, between commerce and society, and between domestic development and society: commitment to an agenda that will enable our children to survive, rather than be left scrambling in the wake of climate chaos.
As for transport, there are a number of things that the Government can and should now do, in every Budget. The basic starting point is to set a self-denying ordinance: the amount of capital invested in private transport infrastructure should never be greater than the amount invested in public transport infrastructure. The starting point should be parity. In the context of motoring, however, there is a compelling case for learning one of the lessons from the Conservative Governments that we succeeded. I refer to the introduction of the fuel price escalator.
We will not make major differences by changing the rates of road tax on different types of vehicle. What we must do, as motorists, is accept that we will have to pay a price premium for the carbon that our vehicles emit. It is not good enough to drive twice the mileage and produce a net addition to carbon emissions in a vehicle that, although more efficient in theory, ends up doing more damage in practice.
Mr. Redwood: Can the hon. Gentleman give us some idea of the level of fuel tax that he thinks would be required to start reducing the number of car journeys that people make?
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