Climate Change Bill [Lords]

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Mr. Gummer: Is it not true that, as the cost of carbon becomes an increasingly real cost, companies are going to have to measure their carbon footprint much more effectively? Is it not much more expensive not to do so according to a standard mechanism? They will find, at some stage or other, that the broad-gauge people will have to come into line with the narrow-gauge people. The cost is considerable. Is it not much more sensible to do it now, to the value of everyone, not to give them extra expense, but to reduce it?
Gregory Barker: That would be eminently sensible. That would enhance economic value, because we would be creating a common market in carbon disclosure, a currency in carbon that would aid understanding, increasing the value and the economies of scale, rather than that haphazard approach. If we are going to have economic growth in those low-carbon industries, it is clear that we must have agreed common parameters. Existing clause 80, if implemented, would achieve that task with the speed and urgency required. Business could then get on with the real job of making important investment and strategic decisions based on clear, uniform information. The first responsibility of a modern Government is to provide a stable framework within which business can operate. I do not think that anyone, certainly on the Committee, would contest that carbon and the price of carbon are here to stay and will be an increasingly important part of our national and international economy.
Importantly, clause 80 does not apply to smaller businesses, only to any company that is required to produce a business review under the Companies Act 2006. That means that any company that qualifies for any two of the following conditions would be exempt: companies with turnover of less than £5.6 million, a balance sheet of not more than £2.8 million or fewer than 50 employees. That existing clause is enabling only, and is suitably flexible, permitting the Secretary of State to distinguish between different categories of company, such as by sector or size, and by emissions type. It is important to know that clause 80 is supported by a wide range of businesses under an umbrella organisation called the Aldersgate Group, as has been said—companies as diverse as British Telecom, United Utilities and the Co-op. City funds, such as Morley, London Bridge Capital and Quadris, are also supportive. The Government’s alternative, as proposed in new clauses 6 and 7, might not act as an industry driver to the same extent as clause 80 would.
Why does the proposed voluntary statutory guidance not include the requirement on businesses to publish their emissions data in their annual report and accounts? How does the Minister expect regulations to result in greater transparency in carbon reporting when the requirement to report no longer appears in legislation? Does the Minister feel that a review date deadline of 1 December 2011 for assessing the contribution of carbon reporting to meet the Government’s climate change objectives is a date—over three years away—that reflects the urgency with which we need to get to grips with the issue and to get British business emissions under control? In the final analysis, what UK plc needs is a common protocol that is consistent with international reporting standards, that will act as a significant driver for change—real, dynamic industrial change in the corporate sector—and will further enhance the City of London’s ambitions to become a world leader in carbon accounting, reporting, trading and so on. Finally, any solution must create a level playing field, which would allow consumers and investors to make meaningful comparisons between competitors.
At the end of the day, this all smacks of textbook economics on the part of the Labour Government, who seek to do right by business and the private sector but who fundamentally do not understand the dynamics of the private sector and of the wealth creators. It is backward-looking, and failing to understand that progressive, modern, entrepreneurial businesses in Britain today would welcome such forward-looking legislation. The clause is not anti-business; it is creating the necessary conditions for new businesses to grow and flourish in the low-carbon economy and for creating the dynamic change that we must see if we are going to continue to grow. The change is a backward-looking, regressive move. I greatly regret the Minister’s opposition.
Gregory Barker: Without seeing the full quotation, I do not think that I could pass comment on a very narrow excerpt. However, I think the hon. Lady will find that there is always concern about any new regulation. Of course we are the party of business and enterprise, and we would rightly exclude from these regulations small business. If the Government were to impose such requirements on small and medium-sized enterprises and small entrepreneurs, they would be unduly excessive at this stage of the development of the low-carbon economy.
However, let us be absolutely clear: we are committed to an ambitious fast-forwarding of the low-carbon economy and that will not happen with a timid, unambitious, step-by-step, incremental approach to business regulation. The fact that the proposed date is 2011, when this Government will have long been swept from power, is simply another sign that this Government talk the talk but are not prepared to walk the walk.
Mr. Nick Hurd (Ruislip-Northwood) (Con): I refer the Committee to my declaration in the Register of Members’ Interests. I will speak very briefly, because I would like to keep my powder dry for new clause 8, but I support the principle of mandatory disclosure of greenhouse emissions for companies of a certain size, which is how clause 80 is framed.
We recommended that mandatory disclosure in the quality of life policy commission, because we see it as a piece of constructive regulation that will perform a key task in meeting the key challenge of helping us to put a value on carbon. Putting a value on carbon is not necessarily the same as putting a price on carbon. It is a process of elevating the importance of this new currency, this new business risk, which is carbon, to the level of the boardrooms of major British companies, because it is a major business risk that they will have to manage.
In seeking to do that, we are not promoting a piece of excessive bureaucracy that goes against the grain of the market; we are seeking to accelerate an existing market trend. As my hon. Friend the Member for Bexhill and Battle stated, one only has to look at the trend of take-up for the carbon disclosure project and the initiatives run by Trucost to see that there is a trend of growing participation.
Again, when one talks to businesses and asks, “How big a burden is it on business to do this?” the answer is, “This is not insuperable bureaucracy at all”. Having said that, as my right hon. Friend the Member for Suffolk, Coastal pointed out there is an urgent need to develop a common standard, because that would be easier for the businesses involved and it would also make it much easier for increasingly interested private investors—owners of capital—to make comparisons between the companies that they invest in.
It is extremely disappointing in this context, when there is a need for the Government to send strong signals to the market, that we see a Government in retreat from what is, as has been pointed out by the hon. Member for Northavon, really quite a timid proposal. I would actually go further. I would encourage the Minister to look further up the chain of capital, which is extremely apathetic now, and look at the way that pension funds and insurance companies, which own 50 per cent. of the FTSE 350, are engaged with the issue of climate change. The answer is that they are insufficiently engaged with it.
I urge the Government to look at the statutory requirement on pension fund trustees and their fiduciary duty, because companies such as Freshfields are beginning to point out that pension funds’ fiduciary duty must take into account climate change. However, we hear nothing from the Government in this respect and pension fund trustees are not engaged with this issue. Equally, insurance companies have no obligation on them at all in relation to climate change. If we saw activity upstream in the chain of capital, it would drive down through the choices made by fund managers, and we would start to see a process of engagement between capital and business. We have the most powerful capital markets in the world, and they are not being deployed in the interests of the agenda. We talk a lot about how we want the City of London to be the centre of carbon finance, yet when push comes to shove, and when we see a test whereby the Government are asked to take a relatively small initiative that goes with the grain of the market, they retreat rather than advance. The disclosure is insufficient. We need to do more. That would be extremely welcome, and we shall listen carefully to the Minister’s argument.
5.30 pm
Mr. Gummer: This is the part of the Bill where the Government’s actions seem extraordinary. I find them difficult to follow, and I shall explain why. All the indications are that progressive business is happy with the change in the Bill made in the House of Lords. If the Government, perfectly reasonably, lay a business review requirement under the Companies Act 2006, it looks peculiar, given the Bill, if that business review requirement does not contain the element of carbon reporting that is suggested. In any case, not to do so looks very odd against the rest of the Government’s policy.
There needs to be a significant reason for such action. So far that has not been divulged to us, although perhaps the Minister can produce it. He knows that, if he produces a good reason, people are prepared to support it or, at least, not to oppose it, but it will have to be a very good reason. It will have to explain matters to the co-operative movement, which has after all supported the Labour party for many years and clearly sees the measure as a proper way forward. It is also crucial for business. I hope the Committee will not mind my relating a story about why getting the carbon figures right makes a huge difference.
It is clear that retailers will demand that the carbon cost of every product is shown on the product. That is one of the exciting steps that will be taken. It will be a big step forward. Members of the Committee know my interests in such matters. They are set out in the Register of Members’ Interests. One of the companies that tried to find out its carbon footprint was PepsiCo, with which I am not connected, but I am interested that it did that. It measured the carbon footprint of a packet of crisps and discovered that, for 30 g of crisps, 75 g of carbon were used.
That seemed a large amount, and because measurements had been taken, the company thought that it had better find out the reason for thatamount. It discovered that, because it had quite reasonably denominated a particular size of potato that fitted its machines for chopping, farmers used more water than they would have done otherwise to make sure that the potato was big enough. The potato, being a great user of water in any case, became, so to speak, a bag of water.
Once the potatoes were chopped up, a lot more oil had to be used to fry out the potato water. As a result of measurement, PepsiCo decided that that was a silly waste of money and that it would be better off to change the machines so that they took a smaller potato, and to insist on mass as the measurement of the potato that it wanted. It would use less frying oil, reduce the cost of manufacturing the crisps, and the company could genuinely say that it had used less carbon to produce them. The point of the story is simple. Measurement is a crucial part of what we need to achieve our ends under the Bill. Not to recognise that in the Bill is to repeat the abiding failure of the present Administration.
I do not want to return to the subject of smart metering, but the Government have been in power for 11 years and still have only two pathetic pilot schemes. They cannot manage to roll out smart metering, when the Liberal Democrats have enabled them to do so by statute. If the Government had acted when they had cross-party agreement, that would have made more difference to our energy use than any other single act.
The Government will understand why we are suspicious of their inability to take on board the fact that measurement is crucial for action. We must measure. If we do not measure, we do not act. It is a central part of any sensible policy. To measure, there must be a sensible comparator, and the Carbon Trust has been sensible about that when dealing with carbon footprint marks on packets of crisps. It does not want different marks that do not have the same meaning, so that one cannot be measured against the other. It knows that most people have no idea what 75 g of carbon means, but they know that 75 g is lower than 100 g and that 65 g is lower that 75 g. People know that there is some kind of magnitude and as long as the measurement is done on the same basis, there will be some mechanism for making a judgment.
That is true about the world as a whole. Big businesses are concerned that we are gradually developing a range of different mechanisms for measurement, such as those from the old days when we tried to measure different series of interests. That is why we had the annual percentage rate. It was the only way to ensure that we compared like with like. In the end, people had to bring together a whole series of different mechanisms, which was complicated. Light-heartedly, I used the example of the broad and narrow gauge. It would have been more sensible if people had decided at the beginning what gauge they wanted. If they had made the correct decision, we would have had broad gauge, which would have been more sensible and comfortable.
We must have certain standards. Governments are usually sensible about that, so why not in this case? It is because there are people in the business world who always want to say no. I hope the Minister will not take this personally, but I must say something in a very direct way. As I am a religious convert, I can say that converts are dangerous because they tend to get rather excited about whatever it is that they have been converted to. I try to be careful about that in matters of religion, but the trouble with the Labour party is that to some extent, it is a convert to capitalism. Its difficulty is that it does not distinguish bad capitalists from good capitalists, as it has never understood the system. It gets led astray by the worst voices in the whole set-up.
The least good businesses do not want any regulation and do not see why they cannot continue doing what they have always done. When they are brought forward, the Labour party believes them. Those of us who have always been capitalist—cradle capitalists, if I may make that comparison—know perfectly well that people cannot be allowed to get away with that. We should look at the best and ask how we can enable the best to do better and the least good to catch up, and how we can do that in a way that is not too heavy handed.
We should take those who are big enough to bear the burdens and set the standards, and give them higher standards and expect more of them. That is what we should do. Oddly, the Government accept that idea in the context of health and safety. They expect businesses of all kinds to report the number of accidents, and nobody says that adding up accidents is too difficult. It is the first thing that must be done before action can be taken. If we do not know how many accidents there have been, we cannot put them right. If we do not know what the carbon footprint is, we cannot do anything to reduce it.
Big companies have enough vision to know that they must take such measures anyway, that it is good for them and enables them to reduce costs, and that it is not an incubus but something that might be valuable. They would like to get some competitive advantage, so they want a standard through which to compare one with another so that the system is not misused. All that seems sensible, so why on earth do the Government not want to do it? There might be some remarkable explanation that we have not yet discovered, but which we shall hear. Let us assume that there is.
Why will the Government’s alternative take so long? What on earth are we proposing? The problem is supposed to be urgent. We are faced with real difficulties. It is the biggest threat facing mankind, and the biggest danger to the continuation of civilisation. The Committee agrees on all that, yet the Government say, “It will take us 18 months to produce the guidelines, which will be entirely voluntary, and then we will have a review in 2011.” My goodness! That is absolutely the wrong example to set to the nation. Even if there is a frightfully good reason that no one has heretofore heard for not reporting such basic facts, there is no possible reason for not doing something quickly. Even if the Government began to convince us of the first of those circumstances, they could not convince us of the second. A leisurely march along the promenade at Worthing—that is the attitude that the Minister suggested—
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