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We are worried that the policy constitutes spin over substance. Organisations such as Friends of the Earth would have liked a package of measures to encourage microgeneration, not to limit it in the way in which the Bill does. I am worried that, in the case of climate change, a token gesture is worse than doing nothing because it fools people into believing that action is being taken, when it is actually limited. We do not know whether the income tax exemption will cost the Treasury anything. That shows its small scale given the few people who will benefit from it.
New clause 1 would provide for a package and extend the scheme to small-scale local energy generation. It would also create a sense of accountability by providing for the preparation of a report to show that the Government are consulting local authorities and other relevant bodies. We will support the new clause, which would provide for a wider approach.
Amendment (a) to new clause 1 would allow for consultation to include other Departments. One would believe that that was a given in any Treasury consultation, but the experience of the low-carbon buildings programme and this year’s fiasco suggests that it needs to be clearly set out to ensure that it happens.
The amendments and the new clause propose comprehensive changes and signal a more strategic approach, which would significantly improve the scheme. I hope that they will help provide greater stability to schemes such as the low-carbon buildings programme and other cross-departmental work. They are reasonable proposals and I hope that the Chief Secretary will accept them.
Alan Simpson (Nottingham, South) (Lab): I wanted to speak briefly to support new clause 1, which addresses Treasury reporting on energy efficiency matters and microgeneration. I tabled the same amendment last year and I want to make it clear that it has cross-party support, which was reflected in the Climate Change and Sustainable Energy Act 2006. That had the support of the whole House.
The key weakness in our current approach to reporting is that there is a range of departmental responsibilities, involving the Department of Trade and Industry, the Department for Communities and Local Government
and the Department for Environment, Food and Rural Affairs, but in each case, the policies hit a brick wall in the absence of a commitment from the Treasury to be part of the reporting mechanism about fiscal measures, which promote microgeneration and energy efficiency. That is a glaring gap in the coherence of our approach to climate change policies.
In other parts of Europe, Finance Ministries have been at the heart of driving climate change programmes and commitment to the shift to microgeneration and renewable energy. They have done that by placing themselves at the centre of parliamentary and democratic accountability. Yet whenever the matter has been raised in the House, the Treasury has refused to accept the reporting responsibilities that it quite happily places on other Departments.
There is a central point for the Committee to grasp: unless our climate change policies and the accountability for them are driven by the centre, we will not get the take-off points that will shift our economy into seriously promoting microgeneration, renewable energy and energy efficiency. That will not happen if there is a gap at the centre. I put it to Treasury Ministers that it is not enough to give the lead in policy pronouncements, or to be first off the blocks with the press releases. They need to be first out of the frame when it comes to holding themselves to account in such a way that we could then expect other Departments to follow suit. I make a plea to them that this should not be done in a way that will divide the House along party lines. It can be achieved with cross-party consensus, and if we were to do that, the whole House and the whole country would welcome it.
Mr. Paul Goodman: I am looking for a sentence that will sum up the what the official Opposition feel about clauses 20 and 21, about new clause 1, about the Liberal amendments to the clauses and to new clause 1, and about what the hon. Member for Nottingham, South (Alan Simpson) has just said. That sentence is: “The Red Book only takes us so far.” It takes us only so far in relation to the two clauses before us because, although they are microgeneration measures—they are welcome, and we do not intend to oppose them—page 177 of the Red Book does not tell us how effective the Treasury expects them to be. In other words, it does not say what it expects the incentive effects of them to be over what period of time, or how many extra microgeneration systems the Treasury expects to be installed by how many people over what period of time. The House would like to have that information.
The theme of the limitations of the Red Book brings me to new clause 1. Last year, this measure was proposed as new clause 9, and I pay tribute to the hon. Member for Nottingham, South for drafting it. It was voted on last year, and supported by the hon. Gentleman and other Labour Members, as well as by us and the Liberals. It was a good new clause, and it is worth returning to it this year, which is why we have re-tabled it.
I have all the quotes from the speech that the hon. Gentleman made last year, but I am not going to quote him; he is perfectly capable of speaking for himself. His argument, in essence, is that the Treasury is the
powerhouse. It has been powerhousing domestic politics since the war, and it does not grow any less powerful as the years go by. Indeed, under this Chancellor, it is growing more powerful. If the microgeneration drive is to be taken seriously, we do not simply need the description of what the Government are seeking to do, as outlined on page 177 of the Red Book. We need an annual assessment of how effective their strategy is, of its framework, of the take-up of the measures and of whether that take-up is successful. When the Financial Secretary responded to the debate on the proposal last year, he did a very workmanlike job, as he always does. He referred us back to the Red Book, but there is a prevailing feeling in the House now that that simply will not do if the Treasury is to drive this strategy forward.
I agreed substantially with what the hon. Member for Falmouth and Camborne (Julia Goldsworthy) said about these proposals. She made a good case for her amendment to our new clause, and we certainly have no difficulty with it. She also asked the Minister some pertinent questions about the necessity of the subsections of the two clauses that would apparently limit the amount of energy produced by microgeneration. I shall not repeat her questions; I shall simply ask the Chief Secretary to respond to them in due course, and to give us some reason to believe that the Treasury really is going to put itself in the driving seat in relation to microgeneration, rather than leaving it to other Departments that do not have the Treasury’s muscle.
The Chief Secretary to the Treasury (Mr. Stephen Timms): We have had some interesting comments on the clauses.
Clause 20 builds on incentives already introduced to encourage development and growth in the take-up of microgeneration by householders, such as the DTI low-carbon buildings programme, to which the hon. Member for Falmouth and Camborne (Julia Goldsworthy) referred, and a reduced rate of VAT on the installation of microgeneration systems. As she said, my right hon. Friend the Chancellor announced in the Budget a further £6 million for the low-carbon buildings programme for households, bringing the total to more than £18 million for the coming year. We see that as a contribution towards a transition to a more mature market—one that is not dependent on grants—for microgeneration in the future. I reassure her, however, that the programme of household grants will resume allocation in May.
Clause 20 removes a genuine barrier to the take-up of microgeneration by householders, and helps them to contribute to the reduction of carbon emissions. Let me explain how the barrier arises and how the clause addresses it. I hope that I will then be able to explain why the amendment is inappropriate.
Households that have invested in microgeneration will often produce more electricity than they require for their own use. Therefore, they have the opportunity to sell or export surplus electricity back to their energy supplier, and so earn additional income. In our discussions with the industry and environmental groups, it became clear that uncertainty about the tax treatment of that income has discouraged some householders from investing in microgeneration. I can
clarify today that the Government’s view is that a tax charge will indeed arise, hence the need to rectify the position and ensure that there will be no income tax charge.
Therefore, clause 20 introduces a tax exemption for the income that individuals receive from exporting electricity back to their supplier. It ensures that where an individual installs microgeneration in their home to generate electricity for their own use, any payment or credit that they receive from the sale of surplus electricity is not subject to income tax. Therefore, it achieves clarity and certainty for householders and achieves investment in microgeneration in line with the Government’s microgeneration strategy.
The clause is targeted at people whose primary intention is to consume in their home the electricity that they generate. I have suggested to the Committee that it would not be right to extend, as the amendment would, the exemption to everybody. If accepted, the amendment would provide an exemption for businesses selling electricity if they happen to be run by an individual on domestic premises. In the case of businesses, there is no uncertainty, as there is with householders, about the tax position. For businesses, therefore, there is not a barrier to the take-up of microgeneration, so I suggest that the clause does not need to be extended as the hon. Member for Falmouth and Camborne proposes.
It would be rather peculiar to give incentives to electricity companies to set up power stations, albeit small ones, in people’s homes. A business based on commercial microgeneration should pay tax on its profit, just like any other commercial activity. To do as the amendment proposes would be unfair, and addresses a problem—uncertainty about the tax position—that does not exist where the primary purpose is commercial.
A similar argument applies in the case of clause 21, which deals with renewables obligation certificates, the purpose of which is to certify the generation of electricity from a renewable source. The auction price of renewables obligation certificates has been remarkably stable, at around £40 to £50 per megawatt-hour, since the renewables obligation was introduced in 2002. As intended, it has proved to be an effective market-based mechanism for increasing renewable electricity generation.
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Those using microgeneration at home can receive ROCs in the same way as any other electricity generator. They can sell their certificates to energy companies seeking to fulfil their renewables obligations. In those circumstances, the tax consequences could be complex. Householders could find themselves liable to income tax when they received their ROCs, and to capital gains tax when they sold them. The clause avoids that complexity, and ensures that individuals will not be liable for either tax in respect of ROCs that they acquire for electricity generated through microgeneration in their homes. Together with the income tax exemption in the previous clause, it provides clarity and certainty, along with very a favourable tax treatment of the income that householders receive from microgeneration of electricity.
Businesses do not face the same barriers to take-up as individuals. I do not consider it appropriate to give a tax exemption to some people pursuing a commercial activity when others competing with them do not have the same advantages. That applies equally to income from ROCs and income from sales of surplus electricity. I hope the Committee will reject that amendment as well.
I listened with interest to what was said by the hon. Member for Wycombe (Mr. Goodman) and my hon. Friend the Member for Nottingham, South (Alan Simpson) about new clause 1, which would provide a legal obligation for the Treasury to publish an annual report on fiscal measures appropriate to assist with energy efficiency, microgeneration and small-scale generation. The clause is not necessary, because there is already a requirement to produce information on those subjects. The Sustainable Energy Act 2003 requires annual reports on progress towards sustainable energy aims. Last year it was amended by the Climate Change and Sustainable Energy Act 2006 to require the annual reports to include
“things done during that period for the purpose of implementing the strategy for the promotion of microgeneration in Great Britain”,
a strategy that was published last year. The
“things done during that period”
will of course include fiscal changes.
Details of the environmental impact of Budget measures are published by the Chancellor every year, not once but twice, in both the Budget and the pre-Budget report. They are in chapter 7 of the Red and Green Books, which is dedicated to measures to meet the Government’s environmental objectives. The environmental chapter was first included in the 1999 pre-Budget report, and has been a standard feature of Budget and pre-Budget report documentation ever since. That reflects the high priority assigned by the Treasury to environmental matters throughout the past decade.
The Government are committed to tackling the global challenge of climate change. We have introduced a range of measures to support energy efficiency across all sectors, from heavy industry to individual householders. Energy efficiency is key not only to reducing greenhouse gas emissions, but to helping to reduce fuel poverty.
I was delighted to hear the hon. Member for Twickenham (Dr. Cable) pay tribute to the climate change levy. Along with the climate change agreements, it has encouraged energy efficiency in industry. It is estimated in this year’s Red Book that the levy and agreements will deliver emissions savings of 6.3 million tonnes of carbon a year by 2010. In the domestic sector, we have reduced VAT rates to help households take the most cost-effective steps to improve energy efficiency. Fiscal measures certainly have a role to play in improving energy efficiency, and that underpins a range of steps that we have taken.
A great deal of work is already being done across Government to encourage energy efficiency, microgeneration and local energy generation. Information on progress is reported regularly. The new clause is not
necessary, and while I hope it will not be pressed to a vote, I invite the Committee to reject it if it is.
Julia Goldsworthy: I think that it was the hon. Member for Wycombe (Mr. Goodman) who described the Chancellor as being in the driving seat when it comes to such measures, but unfortunately it seems that the Treasury is trying to look like it is putting the foot on the accelerator, while at the same time it is slamming its foot on the brakes. Unlike the present Chancellor, perhaps his successor will choose to grasp the issue more firmly.
I am pleased to hear the Chief Secretary confirm that the low-carbon buildings programme allocation will begin in May, but today is 1 May and, as far as I know, the programme is still suspended. It is a matter of concern that it has been suspended for months and that we still do not have a firm date for its proper reinstatement. In the meantime, people whose job it is to increase the capacity of that programme face losing those jobs because the funding stream is not there.
The clauses provide some clarity about liability for income tax and the fact that there will be an exemption, but I remain concerned about the sub-paragraphs to which the amendments that my hon. Friend the Member for Somerton and Frome (Mr. Heath) and I tabled refer. The matter remains obscure. I am still not clear what the Chief Secretary meant when he talked about the potential for commercial gain. Surely either we want to increase take-up of microgeneration or we do not. If there is an exemption from personal income tax, surely that deals with the commercial issue. If he is concerned about the issue of exceeding the amount of electricity that the household requires, surely that should be a reason to look again at the definition of microgeneration, rather than trying to deal with it as the Bill proposes, which does not seem clear. People who take up the scheme will not know when they have significantly exceeded the amount that they were intended to generate. To what extent is the measure supposed to apply?
Mr. Paul Goodman: I just wanted to say that we do not intend to press new clause 1 to a vote tonight. None the less, does the hon. Lady agree that we did not get a full answer from the Chief Secretary and that it will be worth returning to the matter in due course?
Julia Goldsworthy: I agree. I hope that we will be able to return to the issue. I hope that, despite the particular sub-paragraphs to which we have drawn attention, it will be possible to frame the measure in a way that does not constrain the production of energy and heat through microgeneration. Surely that is the whole point of the programmes that are to be introduced. For those reasons, I will not seek to press the amendments to a vote, but I remain unconvinced. I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause s 20 and 21 ordered to stand part of the Bill.
Bill reported [ C lauses 1, 3, 7, 8, 12, 20, 21, 25, 67 and 81 to 84, and S chedules 1, 18, 22 and 23] , as amend ed ; to lie upon the Table.
Petitions
Japanese Knotweed
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Clive Efford (Eltham) (Lab): This petition of residents living in Chelsworth drive and Tuam road in my constituency highlights the growing problem of Japanese knotweed. Responsibility for clearing an infestation where it appears is clearly set out in statute, but that is not the case when the land is bona vacantia. No one has a legal duty to deal with the problem, despite the threat to neighbouring properties, creating a problem for people living in those properties. That problem has existed for those residents for many years. The petition declares:
The Petitioners therefore request that the House of Commons enacts legislation or statutory instruments that will identify which authority or body is responsible for the clearance of Japanese Knotweed, and provide powers for the House of Commons to enforce such clearance when necessary.
Kent Science Park
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Derek Wyatt (Sittingbourne and Sheppey) (Lab): I wish to present a petition brought by the Five Parishes Opposition Group and others in my constituency against the Kent science park proposals. I wholeheartedly support the group and its allies, and I have secured three Adjournment debates on this subject. The total number of signatures is 3,200.
The Petition of the members of the 5 Parishes Opposition Group and others,
Declares that the petitioners object to any planning proposal by the Kent Science Park that seeks permission for either one or all of the following: to expand the site beyond the existing security boundary; to build any number of houses on green fields; to construct an A2-M2 road link; and to undertake any other affiliated building works.
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