Finance Bill

[back to previous text]

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.
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.
Previous Contents Continue
House of Commons 
home page Parliament home page House of 
Lords home page search page enquiries ordering index

©Parliamentary copyright 2008
Prepared 16 May 2008