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. Anne
Snelgrove (South Swindon) (Lab): I have been listening
with interest to what the hon. Gentleman has been saying. However, I
wonder whether he agrees with
the hon. Member for Rutland and Melton (Alan Duncan), the shadow Cabinet
spokesman on business, enterprise and regulatory reform, who described
corporate reporting of greenhouse gas emissions as “heavy-handed
bureaucracy” in The Independent on Sunday on 6 April.
Does he agree with that
description?
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.
So, very
briefly, I see clause 80 as a very welcome addition to a Bill that is
designed to be a framework Bill, sending the most powerful signals to
the market, and it is a nudge at exactly the right time, if one wants,
as we do, the British economy to be in the vanguard of the transition to
the low-carbon economy. If one wants that to happen, one wants British
companies to be among the most energy-efficient and the most
carbon-productive in the world, and we must get on with it, because
this is a very real risk that people will have to
manage. 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— |
