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Barry Gardiner: No, it is not a delicate matter; it would be a foolish thing for anyone to do. It is not a matter of standing up for the rich against the poor. That is the point that I am making, and it is why I particularly stressed the maximin principle that John Rawls established. That is why I said that for a poxy
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£500 million to £800 million we should not risk our economy losing a potential £3.5 billion, £4.5 billion or £7.5 billion. I want to ensure that we get this right, so that that money is spent protecting the poor and so that we have the resources to increase the fuel duty allowance and to take 250,000 children out of poverty.

My fear is that the uncertainty will put people off. It was a bad measure, and it was a bad measure when the Conservatives suggested it. The criticism from the Conservative Benches was quite rich, given that the Conservatives launched the policy. It is a terrible thing when we cannot trust the official Opposition to get their sums right in the first place so that we can steal their policy.

I have welcomed taxation as an instrument of social justice. However, it can be used not only to redistribute wealth but to change behaviour. I am pleased to welcome the measures announced today to increase revenues from plane duty by 10 per cent. in the second year and to exclude from road tax in the first year cars with emissions lower than 130 g per kilometre. Those measures seem genuinely designed to change behaviour and to encourage people to pollute less.

That is important, because such fiscal measures, if not designed to change behaviour, tend to operate against the first objective of taxation, which I believe is social justice, because they allow the rich to go on polluting, but they stop the poor from engaging in the same behaviour. Because of that, the fiscal neutrality such as that urged by the hon. Member for Ribble Valley (Mr. Evans) is not always a salient point and is not necessarily just. If additional revenues are raised from rich polluters, they can be redistributed to poorer citizens who have been forced to change their behaviour. That undermines the point that he made earlier.

Mr. Brady: Tax on motor cars is banded according to how badly they pollute the atmosphere, so why cannot aviation tax similarly reward airlines that use cleaner aircraft? Why are all aircraft to be taxed at the same level, without reference to how clean or dirty they are?

Barry Gardiner: The hon. Gentleman makes a fair point. It is his own point, not one that I have considered, so I cannot enlighten him.

The delayed fuel duty rise of 0.5 per cent. over inflation is not necessarily a green measure and is not seriously designed to change behaviour. It is more a compromise between inflationary pressures and the need to raise additional revenue. We should consider more innovative environmental fiscal policies. The UK Government should take a lead in stimulating markets for environmental services that are not the subject of mandatory regulation. We should use the tax system to create financial incentives for businesses to invest in projects and purchase environmental service credits and offsets for environmental services, such as maintaining biodiversity, which are currently wholly voluntary. Subject to an annual limit, businesses subject to UK corporation tax could be granted a credit against tax for such investments or offsets, and the tax credits would be freely transferable between such taxpayers. Such an approach can provide a bridge between wholly voluntary CSR—corporate social responsibility—investments and the developed market for environmental services.


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At the Rio summit in 1992, three treaties were launched, one of which we always talk about—the Kyoto treaty or protocol. The other two were the biodiversity convention and the wetlands convention. The key difference among them is that only the Kyoto protocol provided for mandatory limits on environmental damage. That aspect of the protocol laid the foundation for the trading of emissions credits and offsets which is now attracting considerable investment; the market is set for continued growth. However, the global carbon market is now centred in London and is becoming a significant addition to the financial services sector.

Global warming is, however, only one of several critical environmental problems that must be addressed in the near term if the world’s growing population—particularly the rural poor of the developing world—is not to suffer significant degradation of the ecosystems on which it depends. The other two Rio conventions recognised that, and the loss of biodiversity and freshwater resources has accelerated steeply since those conventions were promulgated. Their key weakness is the lack of mandatory provisions that create, in economic terms, scarcity of those vital resources. They therefore lack the means of price discovery that now characterises limits on greenhouse gas emissions.

There have been experiments in creating markets for such ecosystem services in the US, such as wetlands banking; in Australia, where there have been desalination credits; and in Costa Rica in respect of biodiversity. However, all are essentially domestic in focus and impact. No international system of ecosystem payments currently exists. It is common ground that biodiversity and fresh water are increasingly scarce, but that no price mechanism exists for fully valuing them, with the result that they are wasted.

I urge the Government to pioneer a system that encourages business in developed countries to invest where investment is most needed in the developing world. Such a system could be established relatively simply through the UK tax system. Tax credits are a well established mechanism for encouraging socially responsible investment. One key difference would be that the impact would be felt primarily outside the UK, in jurisdictions that met appropriate standards of governance and accountability for ecosystem investment. That would be consistent with many of the Government’s environment and development policies, which are now primarily structured as aid programmes.

Stimulating such investment from the private sector could not only leverage Government aid programmes but, if properly structured, stimulate a marketplace for environmental services investment—for credits and offsets—that would significantly increase the resources brought to bear on those problems. It would also bring in private sector and market disciplines.

Given that ecosystem projects are long term and typically require significant up-front costs, it will be important that businesses be entitled to transfer excess credits that cannot be applied under annual limits to the use of the credits and to bank them against future tax liabilities. Those characteristics will provide confidence that the full value of the investment could
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be realised by the funding business and allow each business to use the credits as an integral part of its financial and tax planning.

A market in such credits could then emerge to a limited extent. The goal, however, would be the stimulation of a market, comparable to the carbon market, in ecosystem service payments themselves. That would be done by requiring that to qualify for the tax credit, the investment would have to be structured to create fungible securities denominated in standardised terms and international currencies. Those new securities such as carbon credits could be registered and issued by participating countries that met standards specified in secondary legislation—standards for verification, monitoring and so on have been developing for some years both in national systems, such as that in Costa Rica, and across the voluntary sector. Augmented by standards of administration and transparency, the securities could provide sufficient integrity to underpin a new marketplace of considerable size and effect.

John Thurso (Caithness, Sutherland and Easter Ross) (LD): I have been following the hon. Gentleman’s argument with great care and I agree with much of it. Is he aware that the blanket bog of Caithness and Sutherland represents one of the most important carbon sinks in the world? Will he assure me that any scheme of which he is thinking would not be prejudicial to our domestic banks of carbon and would not merely be for overseas?

Barry Gardiner: I welcome the hon. Gentleman’s ingenuity in weaving his constituency so seamlessly into the debate. Of course, he is absolutely right: the carbon sequestered in peat bogs in this country alone is worth more than all that the forests of France and Germany have sequestered in wood. It is an absolutely essential resource, and the hon. Gentleman is right to make the point, even though he does so extremely shamelessly for the benefit of his own constituents.

There is now a natural opportunity to extend the UK’s leadership in carbon trading to trading in other environmental services while attracting new and larger-scale investments than voluntary efforts can afford and providing significant additional resources from the private sector to help to achieve goals that are being pursued almost exclusively through the public and not-for-profit sectors. The growth of the carbon market after mandatory requirements were imposed after years of very limited voluntary effort by business demonstrates the necessity and effectiveness of genuine financial incentives in underpinning market mechanisms. In the absence of international treaties with mandatory limits on the use of other ecosystem services, our tax system could provide an alternative basis for the development of market mechanisms comparable to those of the carbon market.

I want briefly to touch on the raising of the duties on alcohol, which relates to a problem that has been widely trailed in the press in recent weeks. No raising of the duty will meet the taxation objectives that I have set out. It will mean that rich people can go on drinking as much alcohol as they like and poorer people may think a little bit more about whether to buy it. That in itself is not the issue. It would be much more powerful were we to introduce the sort of controls that were introduced in the pharmaceutical sector a few years ago when, because of the deaths of people consuming bottles of
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paracetamol, we said that there could be no two-for-one or BOGOF—buy one, get one free—offers. That now needs to be imposed in the alcohol sector. We cannot expect big supermarket chains not to try to package alcohol at reduced prices. However, insisting that it can be sold only at a recommended retail price, as we have in the pharmaceutical sector, would be a far surer way of achieving the desired change in people’s behaviour than simply increasing duty as a revenue-raising measure.

David Taylor (North-West Leicestershire) (Lab/Co-op): Research indicates that most people who suffer from the problem of alcohol abuse and binge drinking will have acquired their alcohol from the very low-cost supermarkets. The average urban or village pub cannot buy alcohol from its wholesalers for the prices that Tesco and others are selling it at. It will hit them hard, but Tesco will just carry on serenely, will it not?

Barry Gardiner: My hon. Friend repeats in another form exactly the point that I am making. The special offers and the undercutting of prices from the recommended retail price are enabling young people in particular to go out and get themselves drunk at little cost instead of simply buying alcohol to have a drink. We cannot effect the necessary change in behaviour merely by raising the duty on alcohol—we must tackle the source, which is the undercutting of prices.

The 58 per cent. rise in schools spending that the Chancellor alluded to is well illustrated in my constituency, where as a result of that investment extraordinary improvements have gone on over the past decade, particularly in the secondary schools. I would single out Wembley high technology college, where the percentage of students achieving five A* to C grade GCSEs has improved from 42 per cent. to, in this last year, 83 per cent. That is precisely a result of the investment that has gone in, and it must continue to do so.

I am conscious that other hon. Members wish to speak, and that I have spoken for a long time. I conclude by saying simply that the Chancellor’s Budget was accused of being boring, but at least it was stable, sensible and prudent. By contrast, the Leader of the Opposition managed to speak for nine minutes and 28 seconds, by my reckoning, without putting forward a single Conservative policy. The Chancellor’s fare today may have been no more exciting than a bowl of soup, but the Leader of the Opposition’s soup was made of chicken, the chicken was starving and it was only the shadow of a chicken.

4.30 pm

Stewart Hosie (Dundee, East) (SNP): I have no idea what the final remark of the hon. Member for Brent, North (Barry Gardiner) meant. I promise to speak for less time than he did, or at least it will appear to be less.

This was a sub-prime Budget from a Chancellor who had no room to manoeuvre. Like his predecessor, he managed to boast about growth in the UK economy—the usual boasts—but he did not seem to understand that OECD average growth outshone the UK for at least half of the 10 years up to 2007. He failed to mention, just as his predecessor normally did, that the small dynamic economies—Ireland in particular—have had larger growth every single year since Labour came to power. He ignored, as his predecessor did—I thought
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that his predecessor had written his speech—the quarterly downturns in the Scottish economy, and the many low and flat growth quarters on this Government’s watch. As a result of the historical policies outlined today, economic growth in Scotland has been lower than the UK average every year since 2001. Scotland has had, on average, a growth rate 30 per cent. lower than the UK’s for the past 25 years.

The growth gap is not just measured in lost GDP opportunity, but in jobs, particularly manufacturing jobs. Since 1997, 1 million manufacturing jobs have been lost in the UK, with 100,000 in Scotland, 34,000 of which have been lost since 2002. As an example, 1,100 manufacturing jobs were lost in Dundee in the past year alone. Were the Government to do what is necessary to make Scotland more competitive, we could increase Scotland’s GDP by an extra £19 billion over the next 10 years, and match the recent growth rate of the 15 small EU states.

I said that the consequence of the Government’s handling of the economy was not simply measured in lost GDP opportunity but in the loss of manufacturing jobs. The loss of those jobs is partly the cause of, and partly the result of, an £87 billion deficit in trade and goods, which the right hon. Member for Edinburgh, East (Dr. Strang) mentioned earlier. That deficit was £77 billion in 2006. There was a total balance of trade deficit of £70 billion, which was £55.2 billion in 2006. Those are extraordinary figures, but those deficits have a further impact: a direct, quantifiable suppression of GDP growth. The impact on GDP growth was valued at £4 billion, and there has been an impact on such growth every year since. UK GDP has grown by £30 billion less than it would have had trade been in balance—about £1,000 per household.

We saw in the Red Book today that receipts are down £1.2 billion from the pre-Budget report, but there was an increased tax yield from the North sea, which was based on an average price of $83.60 a barrel of oil—an increase on the $68 a barrel estimate in the pre-Budget report. The average for the last quarter was $94 a barrel, and in four of the last five working days, we have seen record closing prices for North sea oil. I am pleased to see that the Red Book is forecasting £56 billion in revenues for the next six years, as opposed to the £38 billion in the last six-year forecast. I hope that the Government will not try to deny that this year.

Nowhere in the Budget are there plans to invest the windfall in a trust or fund for future generations, such as that in Norway. Its oil fund—its national pension fund—is worth approximately 2,000 billion kroner. It is forecast to increase to about 2,800 billion kroner in a couple of years—that is equivalent to £250 billion, which is around 20 per cent. of UK GDP. Investing in such a fund is such a sensible idea that the Minister for Energy said

It is a pity that the proposal is not in the Budget. Even using some of the windfall from the high oil revenues to moderate the high price of fuel at the pump would help.

Instead, we have fuel duty proposals that can be summarised as a deferral of the 2p rate just now, an increase of 1.84p a litre next year, followed by a 1/2p per
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litre increase above the index from 2010. That will ratchet up the percentage of the price at the pump in duty and VAT, of which the Government already receive more than 60 per cent. I hope that I can come back to that with amendments in Committee or on the Floor of the House as the Finance Bill progresses through the Commons.

The key element lacking in the Budget is any incentive for growth. It contains next to nothing to give comfort to business. The economy is so tight, with the Government’s borrowing rules destroyed if the off-balance-sheet PFI liabilities are included, let alone the way in which the Northern Rock unsecured liabilities might be calculated and reported, that the Government, far from taking the necessary steps to stimulate economic activity, competitiveness and growth, are scrabbling around for every penny from the taxpayer and from business to plug the holes in the books.

The Red Book illustrates my point. Last year’s pre-Budget report included an estimated net debt of £37.6 billion. Next year, the figure will be £43 billion. The pre-Budget report anticipated a cumulative deficit of £541 billion, and next year we face a deficit of £581 billion. Last June, the total of outstanding PFI liability was £179 billion on £53 billion-worth of capital projects; that figure has now reached £189 billion. Approximately two thirds of that is off balance sheet. Such debts are extraordinary.

The Scottish National party Government in Scotland have removed or reduced business rates for 150,000 small companies. The UK Government should have followed suit for larger businesses and cut corporation tax significantly, allowing Scottish business to keep more of the £6 billion in corporation tax that the top 250 companies alone paid in the past financial year. The Government should, at the very least, have listened to the Scottish Chambers of Commerce and scrapped plans to raise the small companies rate, but of course they did not. Instead, they have taken their lead from the policy decisions of the previous Budget and the pre-Budget report, which the CBI estimates will take £5 billion out of business and straight into the black hole that is the UK economy.

I have not added up all the numbers yet, but it looks as though the Budget will take more than £2 billion more from business in the next three years. That is cash. Given that borrowing is tight because of the credit crunch about which we have all heard, that cash could have delivered shareholder value or encouraged new investment. It might have allowed businesses to invest, acquire, recruit and grow. Businesses could have used the cash to market, upskill or retool, to absorb the swingeing increases in energy, transport and raw material costs or, indeed, to pay better wages. The workers are rightly saying, “Look at real inflation—we need a bit of help here.”


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