Clause
13
Rates
of climate change
levy
3.30
pm
Question
proposed, That the clause stand part of the
Bill.
Mr.
Goodman:
We now move on to the climate change levy. Any
discussion of it is bound to bear a resemblance to our discussion
during the Committee of the whole House on air passenger duty in one
important respect, although the first is explicitly linked to carbon
reduction and the second is not: both have been described as blunt
instruments. In the case of the APD, the phrase was the Financial
Secretary’s, and in the case of the CCL, it was used by the
Royal Commission on Environmental
Pollution.
As
far as I know, a man called Tony Grayling is still an adviser to the
Secretary of State for Environment, Food and Rural Affairs—he
certainly was at one point fairly recently. He said of the CCL that it
does not provide an incentive to switch to lower carbon fossil fuels.
For example—it is quite an important example in relation to the
discussion on the CCL—the single rate for electricity under the
CCL provides no incentives for electricity generators to switch to
renewables. That is not surprising. The CCL undoubtedly has a blunt
effect; it is essentially an energy tax, levied on the supply of energy
to business, paid downstream by energy consumers. It has been
frequently argued, by us and others, that a structure that first
establishes an energy tax, then pays out a series of rebates to
businesses and then introduces a set of climate change agreements that
enables firms to escape from the structure of the taxation of rebates
that the Treasury has established in the first place is not especially
transparent. We want to see the CCL reformed into, or replaced by, a
carbon levy that is more closely linked to carbon emissions. To borrow
a phrase that I think was once used by Rab Butler, the climate change
levy is the best climate change levy that we have at the moment
and therefore we do not intend to oppose the clause. However, I would like to press
the Financial Secretary about the views expressed by Mr.
Grayling and by the Institute for Public Policy Research—I think
that Mr. Grayling has done some work for the
IPPR—with which the hon. Gentleman will be familiar. In a study
for the IPPR, Mr. Grayling suggested that the rates should
be increased towards £70 per tonne of carbon, which is the
official figure used by the Department for Environment, Food and Rural
Affairs for the social cost of carbon. I realise that it has proved
difficult to establish a precise figure for the social cost of carbon,
but what is the Treasury’s view on that
cost?
Returning to the
point about the rate for electricity, the IPPR study also recommended
that the tax rate should vary according to the fuel mix of the
supplier, based on carbon emissions because that would encourage
investment in clean coal technologies. Again, what is the
Treasury’s view on that
issue?
A recent study
by the Institute for Fiscal Studies said that the climate change
agreement targets were too lenient. I quote the
study:
“Firms
would have achieved their targets in any case and as such were enjoying
a reduced-rate CCL for effectively doing what they would have
done.”
Another study, by
Cambridge Econometrics and the Policy Studies Institute,
concluded:
“Only for one
sector...did we find that the CCA target would have been missed
had no CCL ever
existed.”
Were the IFS
and the PSI wrong? Again, I look forward to the Financial
Secretary’s response.
John
Healey:
First, the hon. Gentleman is wrongin many
respects about the climate change levy andthe commentators are
wrong about climate change agreements. Together, these measures have
delivered for this country more than a quarter of the target for
emissions reduction that we are working towards under our Kyoto
obligations; that is a very significant contribution to our efforts to
help the world to tackle the climate change problems that we
face.
I suppose that
I should welcome the fact that the hon. Gentleman will not oppose this
legislation and this increase. I suppose that, in some ways, we are
making progress, because he and his party opposed the climate change
levy when we introduced it in 2001. The Chief Secretary, who I think
was responsible for that legislation at the time, remembers how
fiercely it was opposed by the Conservatives, who would not accept the
case for trying to introduce an Act to tackle climate change and would
not accept the case for the climate change
levy.
In fact, by 2010
the climate change levy will deliver carbon savings of more than 3.5
million tonnes a year; the climate change agreements will deliver
climate change savings of more than 2.8 million tonnes a year, and
together they are a central plank in our efforts to make such
savings.
The levy
itself was designed less to have an impact on generators and more to
encourage greater energy efficiency among energy users, particularly
business users. To that extent, it is succeeding in the specific aims
that we set
for it. We monitor constantly the way in which the levy and climate
change agreement operate. Clearly, we must consider some longer-term
questions, particularly given the interaction with a strengthened
European Union emissions trading scheme. That is for the future,
however. The clause will increase the rates for the climate change levy
in line with inflation from April next year. We have always said that
the rates at which the climate change levy are charged should rise with
inflation over time. We legislated for this year’s increase in
last year’s Finance Bill. We are doing the same this year to
provide advance notice for the industry and others affected by the
changes to the climate change
levy.
Question put
and agreed
to.
Clause 13
ordered to stand part of the
Bill.
Clause
14
Rates
of aggregates
levy
Question
proposed, That the clause stand part of the
Bill.
Mr.
Dunne:
I wish to address the clause because I am concerned
that the Government are applying double standards in their attempt to
justify a very significant increase in the aggregates levy of more than
20 per cent. after the levy has been stable for a number of years. The
justification in the Red Book is that it will encourage the sustainable
use of resources as some kind of green measure. Yet the Government then
provide themselves with an exemption—they are saying that that
is suitable for the private sector, but not the public sector. Highways
have always been exempt from the aggregates levy and highways
authorities are probably the largest users of aggregates in the
country. Now the Government are seeking to exempt the
railways—another Government user of aggregates. How do the
Government square that? Should they not be subject to the same
sustainability
argument?
The
main reason that I think that the clause applies a double standard is
that increasing the cost of construction for UK-sourced materials will
simply encourage the importing of materials. That was brought home to
me when I read the comments of Mr. John Webster, who I
believe is from a trade association. He
said:
“There
will be singing and dancing in the streets of Dublin and Brussels
tonight as the Chancellor tilts even further the operational cost
balance towards our overseas
competitors”.
Many
building products that can use pre-cast concrete for which aggregates
are the main feedstock can alternatively use building materials made of
timber imported from over seas. The environmental impact of encouraging
imports of heavy and substantial building materials is far more
significant than the alleged negative environmental impact of
extracting aggregate resources. This country has plenty of the
latter—they are not in scarce supply and can be sustainably
extracted. It is a mockery to claim that the measure before us is
anything other than a revenue-raising measure by the Government.
Admittedly, it would not raise enormously significant
revenues—according to the Red Book, the impact would be
£40 million in the first year. None the less, it is significant
for the construction industry because it will put up its costs. Those
costs are not just for major infrastructure
projects—it will put up the cost of the
Olympics, over which the Government have been embarrassed already. It
will also put up the cost of affordable housing, about which all
Committee members will be concerned. The measure has not been thought
through. It is a penny-pinching and inappropriate tax-raising measure
cloaked in greenery.
Rob
Marris:
I fully understand the hon. Gentleman’s
comments. Is he aware that the aggregates levy was introduced on 1
April 2002? If the clause goes through, it will put up the levy by the
amount to which he referred from 1 April 2008. That will be the first
rise in six
years.
Mr.
Dunne:
I am aware of that. That is not in dispute, and we
are not complaining about that. I am complaining that it will go up by
22 per cent. in one go for no apparent reason other than to raise
revenue for the Chancellor. Of course, that is part of his job, but he
is singling out that industry. That will have much wider ramifications,
which have not been thought through, or clearly explained to the
nation. I look forward to hearing how the Financial Secretary can
justify them.
John
Healey:
I do not know, Mr. Gale. Whatever the
hon. Gentleman’s leader says, if you vote blue in Ludlow, you do
not get green. This is not a revenue-raising levy. When we introduced
the aggregates levy in 2002, we cut the national insurance rate for
employers across the board. So, if anything, the Treasury is down on
receipts from the levy rather than up. In addition, it is an
environmental tax; it is an environmental tax for environmental
purposes. Its purpose is, first, to incorporate some of the external
costs that come from quarrying and, secondly, to try to encourage the
greater use of recycled stone and gravel.
The
assessment, including the independent assessment of the impact of the
levy since its introduction in 2002, shows that between then and 2005
the amount of newly quarried rock, stone and gravel in this country was
reduced by 18 million tonnes, and the amount of recycled aggregate used
in this country over that time increased by 5.5 million tonnes, so it
is having the sort of impact that it was designed to
achieve.
Mr.
Gauke:
I note the Financial Secretary’s point that
when the aggregate levy was introduced there was a tax cut in another
area to offset it, so it is, at best, neutral. However, according to
the Red Book the increase in the aggregate levy will yield an
additional £40 million in 2008-09 and £45 million in
2009-10. What taxes were cut to ensure that those increases will be
fiscally
neutral?
John
Healey:
I know that the hon. Gentleman did not miss it;
there were some significant corporate tax cuts in the Budget this year,
and we discussed them in Committee this week, under the main
corporation tax rate cut in clause 2.
John
Healey:
I am going to make this point and then I will sit
down. The aggregates levy has not changed, despite the principle on
which we introduced it and our expectation that it would rise in line
with inflation to maintain not just its real value but its real effect.
As it
was bedding down, we chose to freeze it each year until this year. This
is the first rise that we have proposed; in many ways, this is a
catch-up year. We are making this increase in the rate in order to
maintain the environmental impact that the levy, in its earliest years,
appears to be have been having.
Question put and agreed
to.
Clause 14
ordered to stand part of the Bill.
Clause
15
Rates
of landfill
tax
Question
proposed, That the clause stand part of the
Bill.
Julia
Goldsworthy:
We feel that everything possible needs to be
done to encourage the diversion of waste from landfill. However, some
problems are occurring as a result of the way in which the landfill tax
works. In the Red Book, the increase in landfill tax is described as
“supporting recycling”. I should like to dwell for a
couple of minutes on how my local authorities are able to deal with the
issue and the types of pressure that landfill tax puts on
them.
Cornwall, like
many other areas, has a two-tier authority. We have one authority
responsible for collecting waste and another responsible for disposal.
It is therefore difficult to transfer the pressures on—to divert
waste completely from the principal authority. That creates great
difficulties, as there are no direct incentives for recycling. The
pressure seems to be towards anything that is a diversion from
landfill. That can lock people into more environmentally unfriendly
ways of dealing with their waste.
John
Healey:
The hon. Lady is right; in certain areas,
responsibility for the planning and management of waste disposal,
particularly of household waste, is split between collection and
disposal authorities, which can cause difficulties. Does she conclude
from that thatit would be best to move to unitary and
single-tier authorities in her area, or should collection and disposal
responsibilities be lodged with one or other level of the authorities
in her
patch?
3.45
pm
Julia
Goldsworthy:
I agree that it is perverse that the county
council has an agreement with the district authority that is based on
the weight of rubbish that it collects, so there is no incentive to
reduce it. In addition, we end up with several different means of
collecting waste and rubbish for recycling in different district
authorities.
Mr.
Dunne:
To help the hon. Lady, and with regard to the
intervention from the Financial Secretary, in those areas where people
think through the issues carefully, it is quite possible for councils
of different tiers to co-operate in a waste partnership, such as the
Shropshire waste partnership, to form a single entity to collect and
dispose of waste, without the need for a unitary
authority.
Julia
Goldsworthy:
I can see advantages in having greater
strategic control, not only of waste issues, but on other levels. One
reason why we support Cornwall’s bid for unitary status is that
it would give the authority greater strategic control over the whole of
Cornwall. Unfortunately, Cornwall county council has been locked into
having an incinerator, which means that it is difficult to encourage
more recycling. Having a strong voice throughout the county may allow
the authority the time to explore other alternatives and to press the
case for them. Energy from waste is the only option that Cornwall has
been given so far, which means that the county will still suffer,
although the decision has been taken and the council is doing all that
it can to divert from landfill, as the incinerator will not be built
for a few
years.
Mr.
Breed:
As my hon. Friend rightly said, Cornwall county
council has grasped the rather unfortunate nettle of waste-to-energy,
commonly known as incineration. I bring to her attention the
neighbouring authority in Plymouth, which last Thursday passed from
Labour to Conservative control. I hope that the new administration will
reverse the current contractual arrangements, whereby Plymouth city
council dumps all its household waste in a landfill site in my
constituency.
Julia
Goldsworthy:
I need say no more. The concern is that the
council ends up locked into the decision, which has already been taken,
yet the impact of the landfill tax will continue to have an effect and
place pressure on council tax. There are difficulties, and I wonder
whether the Financial Secretary has considered an alternative, such as
a waste tax, which would encourage local authorities not only to divert
from landfill, but proactively to encourage recycling. He might also
consider measures to deal with packaging at the point of production,
rather than work out how to deal with it at the other end. The
provisions are useful for dealing with landfill, but there are
limitations to what they can achieve. They can be improved, and I hope
that the Minister’s mind is open to pursuing those
improvements.
Rob
Marris:
The basic rate of landfill tax is £2 a
tonne; the clause will put that up to £2.50 a tonne. Will my
hon. Friend the Financial Secretary reconsider that rate and work on
classification issues with the Department of the Environment, Food and
Rural Affairs and the Environment Agency? If certain things are
classified as inactive or inert waste, they will attract the much lower
rate of duty and probably be put into landfill, as the cost to the
concern of doing so will be less. That would result in loss of revenue
as well as environmental consequences. I am sure that DEFRA and the
Treasury are already working on
that.
I am
particularly concerned with fly-ash, notto be confused with
fly-tipping, which is produced principally by coal-fired power
stations. I am indebted to Thomas Duve, who wrote an article for the
“Science in Parliament” magazine in spring this year for
the following information. Fly-ash is a glass, silica-rich mineral that
is left over when coal is burnt, and a lot of coal contains it to a
greater or lesser extent. It is currently classified as inactive waste
and is landfilled at £2, which will increase to £2.50 a
tonne.
In many other European Union
countries fly-ash is recycled for other uses, so because of the
classification and tax issue, which at £2 and what will be
£2.50 a tonne is rather low, we are not recycling what our
European neighbours are. That creates a double negative: we do not use
the useful material that will be in heaps outside every coal-fired
power station and we are clogging up landfill sites. Will my hon.
Friend assure me that he will look at those two issues? First, will he
reconsider the rate, even though it is increasing from £2 to
£2.50 and it has been announced that it will go up to
£3.00 a tonne for inactive waste? Secondly, will he discuss with
his colleagues in DEFRA and the Environment Agency whether the
classifications for materials such as fly-ash and others are right? If
they are not right, we have a double-whammy because there is a loss of
revenue and an environmental negative as material is going to landfill
that need not do
so.
John
Healey:
I can give my hon. Friend the assurance he is
seeking. I will look at the classification system for inactive
waste—particularly the position of fly-ash. We have considered
that before, but I am happy to take a fresh look at it.
I am not sure
that I can be quite so positive in response to the hon. Member for
Falmouth and Camborne. I am unconvinced about the need for a new waste
tax, and, in the end, tax is not the only type of policy that needs to
play a part in dealing with how we manage and dispose of waste and
increase waste recycling. The Government have a number of measures in
place and perhaps need to consider other future measures. She may be
interested to know that the Secretary of State for Environment, Food
and Rural Affairs will shortly publish a renewed waste strategy that
pulls together much of the work that we have done across Government on
how to raise our game for the
future.
Question
put and agreed
to.
Clause 15
ordered to stand part of the
Bill.
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