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Alan Simpson:
That is almost like asking what is the length of a piece of string. I do not know the answer. What I will say is that we need to learn some of the lessons that were not addressed in the first round of the fuel price escalator. At that time it was seen simply as a way of raising revenue for the Exchequer. My argument is that the whole nature of green taxation should be set in a completely different context. There is no case for its being a revenue-raiser for central Government; that defeats the purpose. Allowing people
to pay more in order to go on behaving badly will do nothing to change the nature of an unsustainable economy. What is needed is behaviour change rather than revenue gain for the Exchequer.
There are also advantages in the use of green taxation as self-taxation and self-reward. If the fuel price escalator is reintroduced, we should say to the industry “Keep 50 per cent. of the revenue specifically for use in subsidising sustainable and alternative fuel systems.” That would induce the industry, and invite the motorist, to make more sustainable and ethical choices, because the industry itself would be paying; those who pollute would be paying a premium in order to support those who do not pollute. That is the way to engineer behaviour change.
The same principle applies to aviation, even though the idea of the right hon. Member for Witney (Mr. Cameron) about imposing a tax on individual passengers on flights was barking mad. We must do something about aviation’s contribution to climate change damage. The more I think about it, the more I am convinced that the only way to achieve that is to set carbon mileage allowances for every airport in the UK based on last year’s passenger miles multiplied by a factor that applies to the energy efficiency of the aircrafts that land. In doing that, we would be saying to each of the airports, “Your targets for reducing your own carbon emissions will be precisely the same as the targets set for the economy as a whole. How you do that—by the introduction of more efficient planes, for instance, or by changing the make-up of the flights you offer—is down to you, but we cannot pretend that the rest of the economy will be on a course that requires carbon emissions to be built in year on year but that somehow the aviation industry exists on a different planet.”
Mr. Evans: It has been said that the Chancellor is Stalinist, but I think that he has strong competition in that regard from the hon. Gentleman after he introduced that barking mad idea. In trying to reduce carbon emissions from aviation, we should look at what happens at Schiphol; two planes land almost side by side at the same airport. In our country, we have planes circling airports when they should be landing; they cannot do so because of congestion. We could save millions of tonnes of carbon emissions just by ensuring that we have capacity in all our airports.
Alan Simpson:
The problem will not be the number of planes circling airports. We should take a look at the Government White Paper on the future of the aviation industry. It is projected that by 2030 the number of UK passenger flights will have increased from 230 million a year to 460 million a year. Not all of those planes will be circling our airports; they will be in transit around the planet. The volume of carbon emissions associated with that will dwarf the emissions of almost all other sectors of the economy. That is why I say that we will have to set carbon miles thresholds for every airport and let the aviation industry and the airports drive their own agenda in respect of having increased fuel efficiency, different fuel systems and the other transformations that have yet to take place in the industry. Those transformations are precisely the same as those that applied to the car industry, and which it
said were impossible to introduce. Unless we set those targets and make the industry the driver of its own change, the aviation sector will continue to want an opt-out on the huge slice of the carbon damage contributions that they make in our economy.
Rob Marris: I caution my hon. Friend, who I always thought was on the left of the Labour party, that he seems to be falling into the same trap as the right hon. Member for Witney (Mr. Cameron)—albeit coming from a different direction—of advocating the use of a kind of price mechanism that is likely to lead simply to the poor being priced out of flying. I would not have thought that my hon. Friend approved of that.
Alan Simpson: No, I am not talking about using a price mechanism. I am talking about using a system that constrains the volume of movements and requires the industry to take responsibility for its own carbon reductions. The alternative is to hold to the idea that aviation will somehow be transformed by being included in the emissions trading system. I invite Members to look at the last page of the aviation White Paper. Its authors give an estimate of the impact that carbon pricing will have on their flight projections. For reference, today’s carbon price is €1.6 per tonne. In the aviation White Paper, the industry asks itself what the effect will be on flight projections if the price rises from 70p to £140 per tonne by 2030. Its own estimate is that that will reduce total passenger flights from 455 million to 445 million—a reduction of 10 million, which is next to nothing. That is why I urge the Government to look at a carbon miles quota system, rather than a carbon trading system. We should be brave enough to take steps that radically engage with the world in which our children are going to be asked to live. That means having the humility to address some of the things that we have tried to do that simply did not work, and to accept that it was worth trying to do them, even though they did not work.
I turn to my last bit of advice to the Government. There are two ideas that have been somewhat popular with the Government in the past couple of years, and we need to address them in considering what we will decide not to continue with. First, we need to say that there is no place for carbon offsetting in an agenda that seeks to deliver our own carbon reductions. Anyone who reads in order to understand this issue should not go into the detail of carbon offsetting schemes; instead, they should consult a website called cheatneutral.com, which invites people to offset their infidelity.
Rob Marris: How does the hon. Gentleman know?
Alan Simpson:
I have seen the website. [Interruption.] No, it does not work at all, but it is a wonderful spoof. A lad called Alex can be sponsored for 50p a week, and he will remain celibate so that the sponsor can carry on doing whatever they like. However, they can do it with a clear conscience only by sponsoring him for 50p. In other words, such people can offset their infidelity. Does it reduce the sum total of infidelity in society? No, not a jot, but it makes such people feel better. It has the ring of high moral tone that is so attractive at the moment, to judge by some of
our policy making, but it is a scam. We should not seek to offset against future generations and to undertake speculative projects that do not deliver a ha’p’orth of serious change in terms of carbon reduction. I should point out that the website is not serious—its intention is to ridicule an approach that deserves to be ridiculed.
If we stand back from the technicalities of such schemes and proposals, we see that the reality is that they do not deliver anything like the scale of change that we need today. Sadly, the same applies to emissions trading. It is a barking mad idea to seek to tackle the climate change challenge by inventing a mythical good called the carbon credit, and to invite the speculative trading of that credit on world markets against second-guesses of what the price of carbon might be in 10 or 15 years time. On asking anyone in the industrial sector about how they make their investment decisions, they will say that it is a question of assessing how those investments will play in real markets. It is hard enough for them to make even those assessments, but asking them also to gamble on assumptions about the cost of carbon in 10 years’ time makes the process a nightmare.
The emissions trading scheme has a number of intellectual and practical flaws from which it will never recover. The grandfathering rights that give credits to those who pollute, but not to those who do not, impose a monstrous burden. The scheme applies to the polluting half of the economy but not to the more virtuous half, which is a nonsense. Countries set their own loose limits—many give themselves more in credits in a given year than the amount of pollution that they emitted—so the situation is irretrievable. The scheme is an invitation to cheat, and the only people who make money out of it are the banks and the specialist niche market traders, who charge between 8 per cent. and 30 per cent. to handle the transactions. It is a great market for those who are in the land of wild-eyed speculators. But that is not the economy or the ecology in which we must play a profound part as the agents of change. The mechanisms that have really delivered in the short term are carbon tariff systems, not carbon credit trading systems. If we have the sense to adopt the former, our grandchildren will have much to thank us for.
3.40 pm
Peter Bottomley (Worthing, West) (Con): I congratulate the hon. Member for Nottingham, South (Alan Simpson) on his speech. He certainly made a contribution to the serious debate on reducing the amount of carbon that we produce. His comments on carbon offsetting will be welcomed by many, including one of my brothers-in-law, Robert Whitfield, who has been one of the key people trying to look seriously at what is going on, as opposed to some of the easy, glib ways out—for example, me saying that I will allow some of my trees to go on growing, and that will allow me to fly to China to see how its economic growth is coming along. If we ever get to the stage when the hon. Gentleman is not able to offer advice to his colleagues on the Front Bench, we will miss him.
I welcome the presence of the Economic Secretary. He has spoken in the House a lot in the past week, and this debate gives him the chance to listen to some good ideas. I can say with confidence to my colleagues and to the Liberal Democrats that the Government will
always take a good idea. We look forward to taking ideas from other parties as well, when we are in government.
The Chancellor certainly showed today that he has listened to several things that the Conservatives have said, even as he said that our proposals were a bad idea. I hope that those people who told the leader of my party that sharing the fruits of economic growth was an impossible idea will say the same thing to the Chancellor or his Treasury colleagues when interviewing them.
I look forward to a time when the next Labour Chancellor, if there are more Labour Budgets before the change of Government at the next election, will put all the news into the Budget statement, rather than leaving it in the press notices, or even out of the press notices and on page 278 of the Red Book.
Will the Economic Secretary try to ensure that the next Minister to speak from the Dispatch Box confirms that the tax reduction, which was cheered so loudly by Labour Back Benchers, will be more than outweighed by national insurance contribution increases? I am not sure that the people who were cheering the Chancellor at the end of his speech actually understood the impact of the abolition of the 10p in the pound tax rate. Some of those who will cheer almost any signal—any claptrap, in fact—from the Chancellor should try to listen to what he has said beforehand, and work out how he is managing to achieve the result that he has announced.
Paul Farrelly (Newcastle-under-Lyme) (Lab): Will the hon. Gentleman give way?
Peter Bottomley: I do not want to give way too often, because we have listened to some very lengthy speeches, but I will give way once.
Paul Farrelly: The hon. Gentleman has talked about certain proposals put forward by the Conservatives and by the Liberal Democrats. Will he also give the Chancellor credit where it is due? In the past few years the Opposition have rubbished his forecasts and talked about a black hole, but that has all proved to be unfounded. Will the hon. Gentleman give the Chancellor credit where credit is due?
Now let us look at taxes on business. The Chancellor has adopted the Conservative idea of reducing corporation tax, but I did not hear him say in his statement that taxes on businesses will rise by £1 billion next year and £1.8 billion the year after. If those figures are wrong, perhaps we could be told.
Borrowing will increase in the next five years. It has been suggested that the Chancellor will borrow more than twice what he will spend on law and order. The two figures cannot necessarily be compared, because the borrowing may be for investment, and spending on law and order may come out of current taxation, but it is a useful way of looking at the situation.
The Prime Minister says that what matters most is education, but education spending growth is set to fall to 2.5 per cent. a year—lower than the rate of growth of the economy. There may be reasons for that, and I
wish to put on record the fact that I welcome the increases in spending on the military, and I am glad that spending on security and intelligence will be increased. Clearly, Governments have to make decisions about how the cake is divided up, but if it is true that education spending will rise at a lower rate than the rate at which economy grows, I would expect the Chancellor to say that. If he is willing to defend it, why not say it in the open?
When a Treasury Minister next takes to the Dispatch Box, will he say how Britain’s economic growth last year compared with that of other EU members? Is it true that we came 22nd out of the total of 27 member states?
I turn now to the rate of inflation. Is it true that our inflation rate is the highest for 16 years? Is it double the level of 1997, when the Conservatives left office? Is it above the EU average? One would have expected to hear such details in a Budget statement, but I do not think that we did.
Stephen Hesford: Will the hon. Gentleman give way?
Peter Bottomley: Let me get through the rest of my list, as that may save a number of interventions.
Is it true that the UK’s structural budget deficit is, at 2.6 per cent., the largest of all the major EU countries? Is it higher than Italy’s structural deficit? Is real take-home pay falling? If we take the increase in the retail prices index to be 4.4 or 4.6 per cent. and say that average earnings, excluding bonuses, rose by 3.7 per cent., is that a fall in real pay?
The Government claim that the 3 per cent. rise in the prescription charge is less than the rate of inflation, but pay for nurses is going up by 1.9 per cent.—less than the rise in the prescription charge. Is that correct? How will that affect nurses’ take-home pay in the forthcoming year? What is the forecast for that?
When a Treasury Minister next stands at the Dispatch Box, will he say how business investment as a proportion of GDP last year compared with the figure for 10 years ago? Is the present level the lowest on record? Was last year’s 5 per cent. savings ratio half of what it was in 1997?
I am willing to praise the Chancellor for some of the good things that he may have done, and it is clear that the hon. Member for Newcastle-under-Lyme (Paul Farrelly) would like to join me in asking for the whole picture. There are some things for which the Chancellor does not take credit, or even mention. That sort of selection is normal and natural, but it reveals the right hon. Gentleman to be an ordinary Chancellor, and not an extraordinary one. If I were to try to come up with something for his economic gravestone, I might say that his RIP was the RPI.
Is it right that the trade deficit is set to rise to £60 billion, the highest on record? Is it right that there are a million more people in this country who are not in education, employment or training than there were in 1997? The Chancellor talks about the increase in employment, but how many of the people involved were not in this country 10 years ago? They may have come here to take advantage of economic opportunities. If
so, they contribute to our economy, but they do not offset the number of people out of work and not in training.
The Chancellor deserves praise for what he said about child benefit. I have long argued that the best way to help people when they have children is to make sure that they have money, resources or cash. It is important that those resources goes to families and households with children, regardless of whether there are two people earning, and of whether there are two adults present.
Child endowment is one of the most important functions of Government. We spend a lot of time arguing about appropriate levels of pension or state benefit income for people in retirement, and it is right that we do—but most retired people have at least had an opportunity during their lives to earn money or to put some by, through growing pension entitlements. Children cannot do that; the law does not allow them to, and their age prevents them. We must make sure that people who have children can give them a decent standard of living.
That matters a great deal, but we will never be able to ensure that every working person can earn enough at work to support children. Conventionally, child benefit comes in when a family goes from having two incomes and two mouths to feed, to one income and three mouths to feed. Arguments will continue about the appropriate levels of working families tax credits, or other benefits, but I have always believed that child benefit should be the centrepiece of the system. I learned that from the writing and campaigning of Eleanor Rathbone, and from the work of Sir Brandon Rhys-Williams, a former colleague in this House.
The Chancellor did not mention local government finance. When we consider the burden of taxation on people we have to include the amount of council tax they pay. Whether the Lyons review has not produced the result the Government wanted, or whether there are awkward decisions to be taken and difficult approaches to identify, is not for me to say. However, until we can look at the overall taxation burden we cannot look at equity and fair distribution over the life cycle between different income groups and owners of different asset classes.
I hope that my party will find a way to make sure that local government has a buoyant source of income—perhaps even a set of buoyant sources. Central Government benefit from rises in revenue from value added tax, excise duties, income tax and national insurance, including fiscal drag as the economy and incomes grow. Local government does not. Until local government can expect a share of economic growth, with more money and more spending decisions, and a variety of income sources, there will continue to be tensions between central Government and local government, and between local government and taxpayers. We need to move forward from that situation.
Stephen Hesford: On local government finance, does the hon. Gentleman advocate relocating some or all of the ability to raise business rates to local government? That would provide the flexibility to which he referred.
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