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Alan Simpson: My decision was based on both factors that the hon. Gentleman mentioned. I felt that there was no point in Members of Parliament trying to preach to the public about the scale of the changes that need to happen in our society if we were not prepared to act ourselves. There was therefore an element of walking the walk as well as talking the talk to the decision. At the time, it was also an economic decision because I was one of the last beneficiaries of the Government’s programme whereby one received a 50 per cent. rebate on the costs of installing solar panels. I was therefore somewhat disappointed when we changed the programme and moved to the low-carbon buildings programme, thus effectively removing such support for PV. The change has effectively doubled the cost of installing PV panels.
The panels are so expensive in the UK because, by and large, we have to import them and we do that on a minute scale. Fiscal measures that were introduced in Germany show that, if the domestic market can provide for a programme of 300,000 houses with solar roofs, the unit costs of production and installation drop like a stone. Our problem in the UK is our piecemeal set of measures, which continue to treat microgeneration as an infant industry. The fiscal measures that other parts of Europe have adopted mean that microgeneration has become a dynamic and cost-cutting part of their economy.
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Hermann Scheer, the architect of the German feed-in tariff law, came over a couple of weeks ago and met the Minister for Science and Innovation. He pointed out that it was calculated that each adult German citizen spends approximately €2,500 a year on energy bills—that is a combination of bills at home and energy costs in the work place. In a Land or region of approximately 1 million people, that meant annual energy expenditure of €2.5 billion. In conventional terms, that region would buy gas, oil and uranium from an external source and coal from internal and external sources. Expenditure would go outside the region for energy sources that are beginning to run out. By actively promoting microgeneration, regions have instead put the bulk of that €2.5 billion a year into their economies. The multiplier effect of that spending creates jobs and skills and generates taxes in the regions. Mr. Scheer argued to our Minister that microgeneration is not a cost but becomes a dynamic cost-saving measure that results in huge economic security.
As was said earlier, such measures have given Germany 50 per cent. of the world market in onshore wind turbines and 15 per cent. of the world market in PV. We need to measure against that the effectiveness of our fiscal strategies for promoting a similar sort of dynamic in the UK economy, and our place in the global economy in promoting microgeneration.
Mr. Philip Dunne (Ludlow) (Con): The hon. Gentleman commendably puts his money where his mouth is in his domestic power generation. Would the latest measure in the low-carbon buildings programme, to which he referred, to limit the amount of grant per household to £2,500 have deterred him from proceeding with his installation? If not, does he anticipate that it will have a significant impact on reducing take-up throughout the population?
Alan Simpson: It would not have deterred me because I had a different starting point. However, if asked to determine whether that made economic sense in the short term, I have to say that the answer would be no. All those with whom I work in the microgeneration industry and all those households that are desperately keen to be part of the process wring their hands in despair at the muddle into which we appear to have got ourselves in the low-carbon buildings programme. I understand that the programme was underfunded to begin with, and that there was a danger we would run out of funding for it within the first couple of months of the financial year. Trying to ration it out on a monthly basis has meant that, unless someone is on the phone in the first hour of the first day of each month, their prospects of getting into the programme are next to none.
There is clearly a level of public interest in the programme, but that does not make the programme adequate. It ought, however, to give the House an indication of how hungry society is to be part of such a change, and it ought to give the Treasury an indication of why it is so important that it should give a lead on the reporting of the fiscal effectiveness of the measures that it puts in place in the Budget to support that kind of shift. If what we are doing is right in principle, but the scale of intervention is simply inadequate, Parliament needs to be big enough to acknowledge and understand that, and to do something about it.
We also need to acknowledge that, in every Budget that has been presented since 2002, there have been measures to address energy efficiency in the home and to address microgeneration and the shift to sustainable and renewable energies. Having said that, it would be hard to say that those measures had been anything other than piecemeal, so far as the Treasury is concerned. So far, they have been restricted to changes in the rate of VAT and exemptions from VAT. They have also been supplemented by fiscal measures relating to capital exemptions. Those provisions are to be welcomed, but they do not, in themselves, make for a coherent programme.
There needs to be a new range of fiscal measures if we are to make our programmes coherent. I am happy for the House to have an argument about what those measures should be. At other stages, we have debated the case for attaching a reduction in the rate of stamp duty to the introduction of microgeneration systems in the home. The coherence of that argument is that it would be at the point of transfer of a property that people would look most closely at the financial savings that could be made if they had introduced microgeneration systems, or if they did so within six months, in which case they could get a rebate. That is a perfectly coherent case for fiscal intervention at a point where families and households make those decisions about change.
An alternative would be to consider fiscal intervention measures that could be applied in an ongoing way to address annual savings in household expenditure. That could take us into the arena of entitlements to council tax rebates or of the introduction of feed-in tariff systems. Such systems have now been introduced in 19 other countries across the expanded European Union; Britain is one of the few exceptions. It would be perfectly possible for the Treasury to put in place fiscal measures
that would promote such a shift to feed-in tariffs. That would afford households the long-term security to work out what savings could be made by taking on a substantial capital investment in the short term that could be set against substantial cash savings that could be planned over a number of years. I am somewhat agnostic as to which of the measures makes the most sense. I would be happy for us to adopt any of them, or any combination of them. They will not happen, however, unless the Treasury puts itself at the centre of the reporting process.
There is a further option in which the Treasury might be interested. Only a few months ago, the Government announced that they wanted a lead from a number of core cities to promote energy services companies. They asked for ideas on how cities could lead that initiative—
Madam Deputy Speaker: Order. The hon. Gentleman is straying a little wide of the amendments before us. Perhaps he could address his remarks to them.
Alan Simpson: The point that I was making, Madam Deputy Speaker, was that microgeneration is at the core of energy services companies, because they relate to how we use microgeneration at a collective level to support community energy needs.
In the Netherlands, fiscal measures have been used to support the introduction of microgeneration systems involving “hot road” technologies in school car parks and playgrounds, and in the car parks at health centres. Those measures are driven by fiscal incentives that get built into the costs and allowances that apply at the design stage in the framework of the approach to the built environment in the 21st century. That is a result of a Treasury lead that changed the rules of the game.
As I said earlier, it frustrates me that, during this Parliament, in every Bill that has been enacted in which targets have been set on climate change, fuel poverty eradication and carbon reduction, the Treasury has exempted itself from the duty to report. All the evidence from elsewhere in Europe and across the globe shows that real change comes when it is driven from the financial heart of the Government. Such change cannot happen if it does not start with a duty to report. What follows from a duty to report is that, when we know what will work and what will not, we can move on to a proper debate about the scale and direction of the programmes that will work. Until we get the Treasury to take ownership of that central co-ordinating role, however, we shall be left planning in fragments.
If this is the biggest challenge of our time, it will be sad to record that, at the heart of the Government, when Members on both sides of the House and members of the public in every part of the land were knocking on the door, there was no one in at the Treasury. I hope that the Minister will accept the amendments and give the lead that Parliament and the public have a right to expect.
Mr. Redwood:
I rise to support the amendments, because I share the impatience of the Conservatives and the Liberal Democrats, and of the hon. Member for Nottingham, South (Alan Simpson), at how small
the incentives are in the Bill as drafted. The amendments would make some contribution towards making them a little more generous.
There is a growing view in the House and outside that much more power could be generated in environmentally friendly ways by individuals and families through their own domestic property. Of course we are not talking about people having a large power station in their back garden and abusing the thing; the Government have made it quite clear that the measures are limited to microgeneration schemes, and they have a rather low threshold for their definition of such schemes. It is therefore even more strange that they should double up the restrictions by putting in clauses that prevent people from producing a little more power than they need for their own requirements on average over the days, the weeks and the months as they look at the balance in and out of their system. I hope that the Minister will succumb to the pressures from inside and outside the House and at least accept the amendments that get rid of that unnecessary restriction.
The tax reliefs on offer in the Bill as drafted are not very generous. The allowance on chargeable gains is unlikely to produce any money for most of the people who might take up the scheme. We are concentrating only on the income tax relief, which relates only to surplus generated power, so if we are told that there can be no installation that might produce surplus power on average, it means that no tax relief is on offer. The way the definitions will be phrased under the legislation means that they will give with one hand and take away with the other.
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The House, apart from Members on the Treasury Bench, is trying to persuade the Government to be more generous, ambitious and bold in future by including the requirement for annual review. We hope that will bring the Government two realisations: first, that the tax relief they are offering at present is almost zero and that from zero will come little; and, secondly, that as the schemes will not catch on quickly because the tax relief on offer is far from generous, perhaps in a future year, in a future Bill, it will be seen that something bolder and bigger is needed.
John Bercow: My right hon. Friend is forging a progressive consensus with the hon. Member for Nottingham, South (Alan Simpson) to which I am a happy subscriber, but I am puzzled and my brow is furrowed. Can my right hon. Friend explain to the House why there is an instinctive disinclination on the part of the Treasury annually to report? Is it because the Treasury thinks that others report to it and that it is not in the business of lowering itself to report, or is there a better reason that has hitherto escaped me?
Mr. Redwood:
Tomorrow the progressive consensus takes over at No. 10 Downing street. We hope that the obstacle has been the current Prime Minister and that when we have a new Prime Minister who wishes to forge a progressive consensus he will want to join the hon. Member for Nottingham, South, my hon. Friends the Members for Buckingham (John Bercow) and for Wycombe (Mr. Goodman), me, and even the Liberal Democrats on this occasion, to show that he is truly
persuaded that the progressive consensus is now in favour of much more microgeneration and that he understands furthermore that fiscal incentives are an extremely good way of changing behaviour.
The House knows that I do not normally favour tax increases and regulations to change behaviour. However, if a tax reduction is on offer it is more my kind of behaviour-changing inducement, so I recommend it strongly to the Government if and when they want to join the emerging progressive consensus. I have often found that the ideas I propose in the House are a little ahead of their time, but this may be one that is not so far ahead of its time that we shall have to forgo all value from it for the foreseeable future.
Mr. Newmark: In achieving the consensus, does my right hon. Friend see a day when the new Prime Minister might install a wind turbine on the top of No. 10 Downing street?
Mr. Redwood: We shall probably not see that any time soon, even with the change of tenant at No. 10 Downing street, but as the hon. Member for Nottingham, South said, perhaps the House can do rather more under the provisions of the clause to provide examples of how we could generate more of our own energy. Members have already said that we generate a lot of hot air that could be used. I suspect we should need a spin turbine rather than a wind turbine, and the new tenant at No. 10 may be particularly good at offering a model that would offer facilities from which he and we might benefit.
I urge Members on the Treasury Bench to understand the strong feeling that much more could be done. My hon. Friends and others clearly understand that at present the technology is not cheap enough to take off across the board, which is why so few people are adopting it, apart from those such as the hon. Member for Nottingham, South and my right hon. Friend the Leader of the Opposition, who are showing the way. However, to get our constituents enthusiastic about microgeneration we need to introduce real tax relief. The provisions do not do that; the amendments would help a little, but the amendment that requires an annual report might in due course persuade even the Government that they should join this exciting progressive consensus.
Jeremy Corbyn: The Leader of the Opposition and his individualistic wind turbine sum up Tory policies—they are completely individualistic. If, as my hon. Friend the Member for Nottingham, South (Alan Simpson) has just pointed out to me, the Leader of the Opposition had gone for a community wind turbine, he might have had greater success and his chimneys would probably be safer.
Mr. David Drew (Stroud) (Lab/Co-op): Collectivism.
Jeremy Corbyn: Absolutely. Some collectivism is still alive and well on the Labour Benches, too.
I support the proposals for annual reporting on microgeneration. If we are agreed on a policy of support for the idea of microgeneration, especially photovoltaic cells on the roofs of houses, it is obvious that we should consider it every year to see how
successful or otherwise it has been and if need be change policy to encourage it further. A large number of people want to put photovoltaic cells on the roofs of their houses so that they can generate some or all of their electricity, with any surplus going into the grid. However, the costs are impossible, partly because, as my hon. Friend the Member for Nottingham, South pointed out, the grant system has ended and been subsumed into the carbon-neutral homes scheme.
Secondly, because there are so few places in the country where such schemes operate, the cost of the cells is enormous. That need not be so. We simply need to provide a reasonable grant system to encourage people to produce such energy, and reasonable tax incentives. In addition, where grants are awarded for improvements to any public or private buildings a condition should be imposed, such as the standards that apply to insulation and windows, that there should be a degree of microgeneration through photovoltaic and water-heating cells. That seems eminently sensible.
As my hon. Friend pointed out, if we imposed such rules on new properties it would be helpful. We hope that there will be a big increase in the development of council and social housing, which would be a good opportunity to experiment and to encourage the use of more photovoltaic cells. However, the real issue relates to improvements to existing properties; for example, when people replace roofs or undertake major regeneration there would be a good opportunity to install microgeneration systems.
The Treasury probably agrees with almost everything that has been said on both sides of the debate, so why cannot the Government accept the amendments? They have been proposed previously and the arguments have been well rehearsed. The argument for considering the success of the provisions is blindingly obvious. If we do not want to go down the road of developing more power stations, the answer lies in our existing buildings, where we can do something towards conserving energy—we have already gone a long way in that direction—as well as generating electricity. Towns in Germany, Austria and elsewhere have taken huge steps in that direction and have thus become centres of excellence for the development of microgeneration technology. Why cannot we do the same? Why are we holding ourselves back when we so readily understand and welcome the arguments?
Mr. Newmark: I turn first to amendments Nos. 3, 4 and 5. I have no need to rehearse the careful arguments advanced earlier in the debate today and in Committee on the issue. However, in the Committee of the whole House, the Chief Secretary implied that the question was one of intention, not of the volume of production—of which we have heard much today. The right hon. Gentleman said that the Government’s proposals on microgeneration were
“targeted at people whose primary intention is to consume in their home the electricity that they generate”.—[ Official Report, 1 May 2007; Vol. 459, c. 1479.]
That may be so, but clauses 20 and 21 are drafted in terms of the amount generated, not the intention behind the generation. Will the right hon. Gentleman attempt to put a figure on what he believes constitutes significant excess?
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