Clause
18
Rate
of aggregates
levy
Question
proposed, That the clause stand part of the
Bill.
Mr.
Gauke:
I would like to raise a number of points on
aggregates tax, which are part of clause 18. The first is on the issue
of neutrality and what the funds raised by the aggregates tax will be
used for, which continues from where we left off on the climate change
levy and the landfill tax. The clause results in a small increase in
the aggregates tax per tonne from £1.95 to £2, which we
could say was broadly inflationary. Last year’s increase was
more significant; I think that it was 30p per
tonne.
Again,
the issue when that was introduced was that there was an aggregates
levy sustainability fund that was going to use the proceeds of the
aggregates tax. My understanding is that in the fund’s first
four years of operation, only 70 per cent. of the nominal £117
million allocation went into the aggregates levy sustainability fund.
Can the Minister confirm whether that is right? Can she also provide
details as to what the fund is there to achieve, and details of the
funding
formula?
We
had this debate in the Public Bill Committee last year. The Minister
for Local Government was Financial Secretary then. I asked him whether
last year’s increase could be said to have been revenue neutral.
Although it could be said that it was introduced alongside a 0.1 per
cent. reduction in the rate of employers national insurance
contribution, there did not appear to be an equivalent tax cut last
year. He pointed out that business taxes were being cut last year, but
he confirmed in a letter to me on 5 June 2007 that the increase in the
aggregates levy last year, which we saw come into effect last month,
was not part of that business tax package. What is the Government
policy on recycling the aggregates
levy?
Secondly,
my hon. Friend the Member for Putney has met industry representatives
and experts in this sector and it is a great pity for all concerned
that she is not able to fully express all their concerns this
afternoon. There are concerns about the precise workings of the
aggregates tax. I put that to probe the Government. There are
exemptions; for example, slate is not subject to the levy. A number of
new slate quarries have opened up since the levy was introduced. They
have a competitive advantage over granite quarries, which are closing
down. Why is slate not subject to the levy? That is a genuine
inquiry.
In addition, I
understand that china clay aggregate is not subject to the levy either
and nor is shale or aggregate that is exported. Are there any EU law
implications, as there so often are, for the fact that exported
aggregate is not subject to the levy and would that cause difficulties
under the treaty of Rome? I understand that limestone for agricultural
use is not subject to the levy but the same limestone if used in
construction is. Equally, a limestone quarry that produces aggregates
to make cement is not subject to the levy, but a limestone quarry that
produces aggregate for concrete is. There may well be very good reasons
for those distinctions and I look forward to hearing
them.
Mr.
Browne:
I will be extremely brief. The
hon. Gentleman raised many interesting questions. I am looking forward
to hearing the Minister’s response, not least because it will
help me to decide whether to refit some of my house with slate rather
than granite surfaces,
if I can afford either. My understanding is that the levy raises
something in the region of £300 million a year, but only
£35 million goes into the aggregates levy sustainability fund. I
do not know whether those were the numbers that the hon. Gentleman used
as I did not quite catch them. He used quite a few numbers in a short
space of time. If that is the case, why does only 10 per cent.
of the revenue raised go into the environmental fund and what is the
Government’s thinking on the appropriate proportion of the
revenue raised that should go into that
fund?
Kitty
Ussher:
The clause increases the rate of aggregates levy
from £1.95 per tonne to £2 per tonne. The new rate will
apply to any aggregate commercially exploited on or after 1 April 2009.
We have always said that we would make sure that the levy kept pace
with inflation over time. That is broadly what we are doing today.
There is strong evidence that the levy is achieving its environmental
objectives. Between 2001 and 2005 sales of virgin aggregate in the UK
fell by 8 per cent., while there was an increase of nearly 6 million
tonnes of recycled
aggregate.
I
shall now deal with the types of material as it follows on from that
point. Exemptions are granted to certain materials such as slate waste
and china clay waste to promote their use as alternatives to so-called
virgin aggregate. That policy stems from our broad minerals planning
policy, which seeks to encourage the use of these materials as
alternatives to virgin aggregate. I do not know whether either are
available from John Lewis, and whether that will help the hon. Member
for Taunton to decide how to redo his house. In terms of the fund, he
is entirely right. The levy raises around £300 million a year.
The budget for the sustainability fund is £35 million a year.
The difference is used to fund roughly a 0.1 per cent. employers
national insurance contributions cut, which was made when the levy was
introduced. Even if one includes what we discussed on the previous
clause, it still does not fund all the mixed concessions. Therefore,
there were no stealth taxes involved in this.
The hon.
Member for South-West Hertfordshire wanted to know a bit more about the
sustainability fund. It is administered by the Department for
Environment, Food and Rural Affairs and it aims to minimise demand for
primary aggregates, to promote environmentally friendly extraction and
to reduce the effect of local aggregate extraction. Outside England it
is up to the devolved Administrations to decide how to spend their
allocation. However, in the spirit of co-operation, the Government have
helpfully suggested that it should be used in six areas: overcoming
market barriers; promoting increased use of alternative materials as
aggregates; funding and research into more sustainable construction and
demolition; promoting conservation and increased biodiversity;
restoring the natural landscape and promoting environmentally friendly
quarrying practices; and supporting local community
projects.
The value of
the sustainability fund was set at its introduction and continues to
offer value for money. Our internal estimates suggest that 10 per cent.
of the total amount raised is the maximum scope for such spending. I
hope that that is sufficient to encourage the Committee to agree to the
clause.
Question put
and agreed
to.
Clause 18
ordered to stand part of the Bill.
Clause
19
Carbon reduction trading
scheme: charges for
allocations
Mr.
Gauke:
I beg to move amendment No. 69, in
clause 19, page 9, line 10, leave
out ‘in particular’ and insert
‘specifically’.
The
amendment, which is probing, relates to the regulations that clause 19
authorises the Government to produce on the carbon reduction trading
scheme. It would ensure that the list of matters on which regulations
may make provision contained within clause 19(3) is exhaustive rather
than illustrative. The clause contains a number of provisions
concerning what the regulations may
address.
The
Exchequer Secretary sent me a letter yesterday—it arrived
today—to clarify that the list of regulations that may be made
under clause 19 is not yet complete and that we will therefore
unfortunately not have the opportunity to debate them in the course of
these proceedings. There is a limit to how much can be said about the
clause in the absence of those regulations. I do not know whether you
intend, Sir Nicholas, to allow a stand part debate on the clause,
because I want to make only one point on that. Equally, I should be
happy if you guided me to make that comment
now.
The
Chairman:
I am certainly happy, and I hope that the
Committee will be, to allow the hon. Gentleman to make his point under
this amendment, which would avoid a stand part
debate.
Mr.
Siôn Simon (Birmingham, Erdington) (Lab): The
wisdom of
Job.
Mr.
Gauke:
I am grateful for your guidance and wisdom, Sir
Nicholas.
Kitty
Ussher:
You read the mood of the Committee, Sir
Nicholas.
Mr.
Gauke:
Exactly. You assessed the mood of the Committee as
well as the appropriate requirements of the circumstances, Sir
Nicholas.
My point is
that the European Union’s emissions trading scheme has received
a great deal of criticism. Some say that it has been ineffective in
reducing carbon emissions, that it set carbon at the wrong price and
that it has been used too easily. This is an important point for the
development of the Government’s own carbon reduction trading
scheme. How does the Government see the EU ETS? Does the Minister
believe that the criticisms that it is deeply flawed are fair and
accurate? If so, what will she do about it? I appreciate that this is
not the time for a detailed debate on the matter, but in formulating
the regulations under clause 19, how will the Government avoid some of
the difficulties? How will the Minister distinguish between what the UK
will do and what has happened under the EU to ensure that we are not
left with an ineffective scheme that imposes a bureaucratic burden but
does nothing to reduce carbon emissions?
The
Chairman:
Before I call the hon. Member for Taunton, may I
say that Solomon was known for his wisdom and Job for his
patience?
2.30
pm
Mr.
Browne:
Thank you for your wisdom and
patience in calling me, Sir Nicholas. I hope to reward both of them in
the next few seconds. It is worth putting on record the fact that I am
extremely supportive of the principle of carbon trading. We need to
explore the potential of market mechanisms for reducing carbon
emissions. Simply banning more and more activities—or, in some
cases, pricing people out of activities that they may need to
undertake—is a blunt instrument. It is a necessary instrument
for dealing with the problem of climate change, but it is quite
limited. The theory of carbon trading is worth developing
further.
I have a few
brief questions for the Minister to answer. The first follows on from
previous clauses but is directly relevant to this one. The
Government’s overall approach lacks coherence. There is a little
bit here and a little bit there, but it is difficult for somebody
trying to understand the Government’s aim in their entire policy
to work out why they have chosen to adopt such a confusing array of
policies. Does she believe that they could be consolidated into
something more
coherent?
My
second point was raised with me in representations from the Carbon
Trust. As I understand it, the Government will produce a league table
of the best and worst companies for CO2 emissions. Depending
on where companies come in the table, they will receive payments from
the Government. Assuming that I have understood that correctly, will
the Minister expand on how much revenue will come in, how much will go
out and what companies have to do to become financial beneficiaries of
the scheme? To take an alternative approach, it may be possible that
the incentive is to lose less, rather than gain financially, under the
proposals. Obviously, that could have revenue
implications.
Finally,
why is primary legislation not being used to set the charge levels? I
think that everybody in the House is a bit uncomfortable when we are
asked to buy into a policy in broad-brush terms. We are reassured that
the details will all be filled in later, when we will not necessarily
be scrutinising matters in such detail, and told that we do not need to
worry ourselves too much about them. As the Government have learned to
their cost in many other matters, the details can be the most
controversial aspect of any proposal. I should be grateful if the
Minister explained why the Government cannot bring forward a full
package of proposals so that Committee members can satisfy themselves
that they have agreed to them in their
entirety.
Mr.
Simon:
I want only 30 seconds to assure you, Sir
Nicholas, that lauding you from a sedentary position for having the
wisdom of Job was not biblical ignorance in my case—I pride
myself on my biblical knowledge—but a Freudian
slip.
The
Chairman:
Before I call the Minister to reply, although
not to that intervention, I thank the hon. Gentleman for his courtesy
and explanation.
Kitty
Ussher:
I shall try to be Job-like and
full of wisdom at the same time. I shall answer a specific point and
then move to the more general ones. The Opposition’s amendment
seeks to remove the flexibility that we have deliberately put into the
clause, because we want to ensure that we have all the tools at our
disposal to adapt to the market as it evolves in years to come without
having to return to primary legislation. We will not necessarily use
all our powers but, if we accepted the Opposition amendment, we might
take away a power that we may need subsequently. That is why I
encourage members of the Committee to resist
it.
As
for the general points about the EU emissions trading scheme, I do not
accept that it is deeply flawed and is a disaster. In fact, as an
economist by training—Lord, forgive me—there is a
beautiful simplicity to carbon auctions and trading. I share the view
of the hon. Member for Taunton about that. However, there is a
consensus that, as a global leader of its kind, the EU emissions
trading scheme perhaps started a little too lightly and will have more
of an effect as it is ratcheted up—the position that we are now
in. The hon. Gentleman asked what my colleagues at DEFRA are doing
about matters. They are negotiating hard to achieve that precise result
and simply to reach an agreement, because those innovative traders in
the City who want to make a liquid market in carbon permits need
certainty beyond the current time frame for that to happen and,
obviously, the policy will be more successful if there are liquid
secondary
markets.
There
is a fundamental difference between our proposal and the EU emissions
trading scheme. First, it has been designed deliberately to apply to
different organisations and, secondly, it will start charging for
permits and thus will have a faster effect than the EU emissions
trading scheme, even though that scheme is now proving extremely
useful. I reject the suggestion that we are incoherent. We have a wide
range of measures to combat climate change, and they reinforce each
other in a positive way. As for the question of precisely how firms can
apply for grants to offset the cost, the hon. Member for Taunton was
right that they will be charged for the permits and will then receive
grants to support the innovative changes that they will have to make to
reduce their emissions. I do not have the precise details. I am not
sure that it would be a good idea to set them out in the Bill, but I
shall make sure that they are made publicly available to members of the
Committee. Furthermore, setting out in the Bill the level of charges is
neither necessary nor desirable. Since the power is a regulating one, I
presume that there will be an opportunity for hon. Members to make
their feelings known in the usual way.
Mr.
Gauke:
I am grateful to the Economic
Secretary for her comments. I appreciate her argument for flexibility
although, touching on the remarks made by the hon. Member for Taunton,
certain important matters should be dealt with by primary legislation.
I put to her the concerns expressed by third parties on the EU
emissions trading scheme. I did not use the word,
“disaster”. For example, Open Europe, of which I suspect
the Minister is not overly fond, has expressed serious concerns about
the scheme, and I noted her comments about regard to it, as I did her
comments about distinguishing the scheme from what the Government
intend to do. I beg to ask leave to withdraw the
amendment.
Amendment,
by leave, withdrawn.
Clause 19 ordered to stand
part of the
Bill.
The
Chairman:
Does the hon. Member for Waveney wish to say
something?
Mr.
Bob Blizzard (Waveney) (Lab)
indicated
dissent.
The
Chairman:
I was perhaps ill informed of the hon.
Gentleman’s
intention.
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