I turn to the nuclear subsidy. As I have said, the carbon price support rate will hurt families and industry in the immediate future, yet it seems likely to fail to reduce carbon emissions. We have to wonder why the Government decided to implement it. The obvious explanation is that they got it wrong, again. It would not be the only tax that they have bungled in this Finance Bill. I have already mentioned the difficulties over the fuel duty stabiliser and the North sea oil tax, which was—[Interruption.] Sorry, I have been thrown
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off slightly by a sedentary heckle from the Economic Secretary. As I was saying, the Government introduced a last-minute supplementary charge on North sea oil in response to growing public protest about prices at the petrol pump. We have subsequently seen how ill thought out that was, and it has led to the Government having to perform U-turns at a fairly rapid pace.
One explanation of why the Government want to introduce the carbon price support rate is the money that it will raise. Is it perhaps a revenue-raising measure in disguise? The 2011 Budget report reveals that it will raise £740 million in 2013-14, more than £1 billion in 2014-15 and £1.4 billion in 2015-16. If it fails to encourage faster green investment, as some predict, the tax could go on to raise much more as the carbon price approaches £70 a tonne. In fact, the Budget report states explicitly:
“The decisions the Government is taking to strengthen the tax system—including…the introduction of the carbon price floor announced at this Budget—will also help to support the long-term sustainability of the public finances.”
Geraint Davies (Swansea West) (Lab/Co-op): Does my hon. Friend agree that the problem with having a unilateral carbon price in the UK is not just that it will make international investors such as Tata Steel near Swansea think of moving their investment to Europe, and therefore helping Europe rather than Britain? She may be interested to know that in Port Talbot, near Swansea, a specialist steel is being developed. When wrapped around buildings, it produces its own heat and reduces the carbon footprint. Does she agree that the Government’s measures are undermining global market-changing technology to reduce carbon footprints, as well as destroying jobs in Britain?
Kerry McCarthy: That is an important point. Although there is concern about the carbon emissions of energy-intensive industries, in cases such as my hon. Friend has outlined they are actively working on measures to reduce carbon emissions. It is important that we do not throw the baby out with the bathwater and prevent that type of green investment.
The carbon price support rate will actually provide an effective subsidy to the nuclear industry, as the Economic Secretary has confirmed in a written answer. In fact, it will benefit nuclear power twice as much as the renewables sector, with an average value of £50 million a year for nuclear between 2013 and 2030, compared with just £25 million a year for renewables.
We support building new nuclear power stations as part of the UK’s energy mix, but the problem is that the Government explicitly promised voters that they would not grant nuclear power stations a public subsidy. In fact, there is meant to be cross-party agreement that we are against nuclear subsidies. The Conservative party said in its manifesto that it intended
“clearing the way for new nuclear power stations—provided they receive no public subsidy”.
The coalition agreement stated that the Conservative party was
“committed to allowing the replacement of existing nuclear power stations…provided that they receive no public subsidy.”
The Prime Minister himself said in the House in March:
“What we should not be doing is having unfair subsidies.”—[Official Report, 23 March 2011; Vol. 525, c. 950.]
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Then there are Liberal Democrat Members, who were elected on a manifesto that opposed nuclear power entirely. At their party conference last year, a resolution was passed stating that
“any changes in the carbon price”
“result in windfall benefits to the operators of existing nuclear power stations”.
When we delve deeper, it turns out that this is not the only nuclear subsidy by stealth that the Government are trying to sneak past the House. When I say “subsidy by stealth”, I am of course borrowing a phrase from the hon. Member for South Suffolk (Mr Yeo), the Chair of the Select Committee on Energy and Climate Change. Writing about the Government’s wider package of electricity market reforms, he has warned that they
“must not impose a one-size-fits-all reform on all low-carbon generation in order to avoid singling out nuclear for support.”
He said that the Government’s proposed design for feed-in tariffs
“seems to be more about concealing the fact that it is providing financial support for nuclear power than it is about coming up with the best approach.”
Even if the Government do support public subsidy for new nuclear build, they need to explain why they want to subsidise existing nuclear stations—and, for that matter, existing renewable power stations. Calling the carbon price support rate a green tax surely implies that it is intended to provide an incentive for future green behaviour. However, the Economic Secretary said to the Public Bill Committee:
“We are clear that ensuring that a tax is structured to drive positive environmental behaviour is one thing; ensuring that that can happen on the ground, and that people can change their decisions of the future is another.”––[Official Report, Finance (No. 3) Public Bill Committee, 19 May 2011; c. 242.]
A public subsidy for existing power stations, whether renewable or nuclear, is not behaviour-changing.
We should remind ourselves exactly where the subsidy comes from. The Economic Secretary may argue that it is not a public subsidy per se, because it does not involve taxing and spending. In fact it has a much more direct impact on every electricity bill payer, whether they are working families or manufacturing firms, and it is still a public subsidy in every sense. The hon. Member for South Suffolk says that the Government
“needs to be upfront about its financial support for nuclear energy”,
and I agree with him. That is why we have tabled the amendment.
The Government are using money taken from people and from energy-intensive industries to subsidise nuclear power stations, which they explicitly promised voters they would not do. They are also using that money to subsidise existing power stations, which makes no sense. We have tabled the amendment to give them an opportunity to explain why they have done that. If they are still sticking to their policy that there should not be a subsidy, I want to know how they will put that right.
David Mowat: Will the hon. Lady give way?
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Kerry McCarthy: No, because I am just reaching the end of my speech. The hon. Gentleman will have an opportunity to intervene when other Members are speaking.
The hon. Members for Redcar (Ian Swales) and for Westmorland and Lonsdale (Tim Farron) have tabled amendment 21, which calls for mitigation measures for energy-intensive industries. I hope that they and other Liberal Democrat Members will feel able to support amendment 12. It has 11 signatories, not all from the Labour party, and like them we call for support for energy-intensive industries. In addition, we have called for help for consumers and support for green investment. Our amendment also calls for the nuclear subsidy to be recouped, as did the hon. Member for Cheltenham (Martin Horwood) this weekend, according to the Daily Mail.
The Government have confirmed that there will in fact be a windfall for the existing nuclear industry, despite the Liberal Democrats’ party conference decision last year. Fortunately, the coalition agreement allows Liberal Democrat Members to vote against that without its being seen as an issue of confidence in the Government. I hope that they will make use of that ability today.
The Government’s carbon floor price will not do what they said it would do. It is a missed opportunity for the country. We could have seen a new generation of green investment and jobs, but instead we see ordinary people being hit at the time when they can least afford it. We see UK manufacturing being hit when the Government say they want to promote growth, yet we will not see carbon emissions into the atmosphere reduced by a single tonne, and we might not see green investment. The Government have got the policy wrong, and our amendment asks them to go back and think again.
Ian Swales (Redcar) (LD): I wish to speak to amendment 21, in my name and that of my hon. Friend the Member for Westmorland and Lonsdale (Tim Farron).
I, too, support the carbon price support mechanism and its objectives, but without mitigation measures its introduction will have the surely unintended consequence of seriously damaging energy-intensive industries through higher electricity prices. Cumulative electricity prices in the region of 20% will make production costs higher in the UK than in European and international competitors. Analysis shows that the profitability of UK-based energy-intensive businesses could fall by up to 150%, or disappear altogether. They are mostly international businesses, and the competition cannot believe their luck that the UK seems determined to make itself much less competitive.
Geraint Davies: I agree with that point. Is the hon. Gentleman aware that Airbus, whose wing production is based in north Wales and which commands 55% of the total global plane market, is producing its latest generation of planes with a carbon composite that requires 30% less fuel consumption? It is therefore contributing to lower carbon footprints. By discouraging it through this ridiculous pricing technique, we are inadvertently harming the planet rather than helping it, and harming jobs as well.
7.30 pm
Ian Swales: I am not aware of Airbus’s activity in detail, but I will support the hon. Gentleman’s point later by saying that such industries have a role to play in our future, and that they are not just of the past.
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The hon. Member for Bristol East (Kerry McCarthy) has mentioned the comments of the head of Tata Steel. He also said:
“European steelmakers already face the prospect of deteriorating international competitiveness because of”
EU emissions costs. On the provision in the Bill, he added:
“This is an exceptionally unhelpful and potentially damaging measure.”
As well as steel, other large sectors are at risk—including chemicals; oil and gas; cement; aluminium; glass, bricks and ceramics; tyres; and paper. There could be more. Those are broadly the sectors that are most affected, but the EU has gone further and drawn up a list of 164 industrial sectors and sub-sectors that are deemed to be exposed to what it calls carbon leakage. That means that the EU recognises that the EU emissions trading scheme and other measures could disadvantage European companies that compete internationally. The sectors and sub-sectors that are judged to be at risk of carbon leakage are estimated to account for around a quarter of the total emissions covered by the EU emissions trading scheme, but for around 77% of the total emissions from EU manufacturing industry.
The UK Government's proposing to add a further tax to those already in place is bound to have an effect. We have just witnessed fresh closures and 1,500 job losses from Tata in Scunthorpe and Teesside. I see a number of hon. Members in their places who are directly affected by that. Tata again mentioned UK energy prices as a factor in its recent decision, but in the fourth carbon budget statement, the Secretary of State for Energy and Climate Change said that
“we need to ensure that energy-intensive industries remain competitive and that we send a clear message that the UK is open for business.”—[Official Report, 17 May 2011; Vol. 528, c. 177.]
The announcement has been welcomed, but there is concern that, to date, there has been insufficient detailed consultation on, and impact assessment of, the proposals with respect to energy-intensive industries. Consequently, the fear is that the Government might underestimate the risk to those sectors.
David T. C. Davies (Monmouth) (Con): I am grateful to my hon. Friend—I suppose I should call him that—for giving way on that point. Does he find it slightly ironic that Members of all parties in this House have for years called for all sorts of extra costs on any industry that generates carbon in any form, but that now, all of a sudden, when the consequences of that become clear, they begin to express their reservations?
Ian Swales: I thank my—yes—hon. Friend for his intervention. It seems that the issue is becoming more prominent. That is due partly to industry lobbying. Earlier this year we set up an all-party parliamentary group on energy-intensive industries. I have major concerns for my constituency and the Tees valley, and I am an officer of that group—at least one other officer is in the Chamber. The very high level of interest shown in the group by companies from all sectors indicates the potential gravity of the problem.
Those industries are looking not for special favours, but simply for a level playing field on which to compete internationally. Despite what some commentators claim, there is already a price issue. Even before the Bill, the
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increase in bulk electricity prices in the UK over the past 10 years was 22% more than in Germany, 29% more than in France and 64% more than in Spain.
The inconvenient truth about UK carbon reduction performance is that it is partly due to the rapid decline in manufacturing. As we have heard in this Chamber many times, under the previous Government manufacturing reduced from 22% to 11% of the economy. Our goal should not simply be to reduce our energy usage at the expense of those industries which, by their nature, are energy intensive. A tonne of steel cannot be melted, and chlorine cannot be made from brine, without using a huge amount of energy—it is simply not possible. Our goal should be to improve our energy efficiency for the same level of activity, not to reduce activity. Otherwise, the trend of the UK exporting jobs and importing carbon will continue.
To ensure that the UK makes a real contribution to climate change, we cannot look just at carbon production; we must also measure carbon consumption. I say that mainly to ensure that the effect of imports is recognised, but we must also acknowledge the contribution of export businesses to our economy. There is no better example than the restarted Redcar steelworks, which will contribute almost 1% to the UK’s carbon emissions, but whose output will go almost wholly to Thailand. Whose carbon is that?
The Government’s policy has far wider economic consequences. Energy-intensive industries play a vital economic role. For example, as the hon. Member for Bristol East said, the chemical industry is a vital exporter—in fact, I believe that it is our biggest exporter. That illustrates how important such industries are to our national economy as well as our local economies. Those sectors feed many other industries, such as automotive, aerospace and green technology, which needs materials for wind, wave and solar power.
We should also remember that the service economy does not exist in isolation—it partly depends on manufacturing, all the way from office cleaners to corporate lawyers and merchant bankers. Pricing those industries out of the UK would mean that tax revenues fell because of closures, and a lack of further investment. That will have the knock-on effect of higher unemployment and an increased burden in welfare costs. I therefore hope that the Minister considers the wider economic consequences of the effects of the Government’s policy on energy-intensive industry.
Energy-intensive industries are often capital intensive, which means that companies cannot just pick up their kit and move. The key thing for the UK is whether executives in boardrooms across the world are writing off the UK as a place to invest and reinvest. International businesses have options on where to put their money. I know from experience in the chemical industry that a business can take up to 20 years to die after an exit decision is effectively made by ceasing to reinvest.
Energy-intensive industry does and will continue to play its part in improving energy efficiently. It also produces a range of environmentally beneficial products, such as catalysts, insulation, lightweight plastics, and, as we have heard, energy-saving aerospace products. The all-party group recently heard how developments in tyre technology reduce fuel use in vehicles, how new types of glass reduce heat loss from buildings, and which industries are needed to make photovoltaic cells.
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To give another example, I am aware of a research project in my constituency between Tata, the steel producer, and the Centre for Process Innovation, to make construction-grade photovoltaic panels. Such developments are vital in moving the UK towards a low-carbon economy. We do not want that expertise to be lost to the UK. Energy-intensive industries are not sunset industries that stand in the way of our low-carbon goals, but crucial allies in delivering the necessary technology to make them a reality.
There is therefore an urgent need for simplicity in carbon taxes and for long-term certainty for the industry. Energy-intensive industries need such clarity before the carbon price support mechanism is introduced. Will the Minister assure me that she supports the Energy and Climate Change Secretary, who said—and I repeat—that
“we need to ensure that energy-intensive industries remain competitive and that we send a clear message that the UK is open for business”?—[Official Report, 17 May 2011; Vol. 528, c. 177.]
Will she ensure that the Government engage in comprehensive consultation, and take steps to ensure that a full package of mitigation measures is agreed and legislated for, ahead of the introduction of carbon price support?
Mr Iain Wright (Hartlepool) (Lab): It is a pleasure to follow my north-east neighbour, the hon. Member for Redcar (Ian Swales), and if I may, I shall reiterate some of what he said.
I agree with both amendments, particularly amendment 12 tabled by my right hon. and hon. Friends. If this country was portrayed as a heat map, with particular emphasis on different components of industry, such as nuclear energy, energy-intensive industries and renewable energies, my constituency would burn the brightest. We on Teesside provide a large part of this country’s energy needs. I have a nuclear power station in my constituency, and just outside there is a gas turbine station and a combined heat and power facility. Petroplus, Europe’s biggest independent refiner and wholesaler of petroleum products, has significant oil and gas refining capabilities in my constituency.
Although we generate a lot of the country’s energy requirements, we use a lot of it too. As the hon. Member for Redcar said, we have significant energy-intensive industries—not just refining but petrochemicals, speciality and fine chemicals, plastics, biotechnology and pharmaceuticals. I also have a world-class steel pipe mill in Hartlepool supplying essential components in the supply chain for the oil, gas and chemical industries, although unfortunately the pipe mill has just laid off 90 people. Some 60% of the UK petrochemical industry is based on Teesside, as well as more than one third of our country’s pharmaceutical and chemical industry. The Tees valley has the largest concentration of petrochemical industry anywhere in western Europe, and we have the largest hydrogen network on the continent.
A single venture in Teesside, GrowHow UK, which makes nitrogen fertilizer in my area, uses 1% of the UK’s entire natural gas capacity. About 40,000 people are employed directly in the process industries on Teesside, with a further 250,000 employed indirectly through the supply chain. Energy-intensive industries generate one quarter of my region’s gross domestic product, with
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about £10 billion of sales. As the hon. Member for Redcar said, the importance of Teesside and these industries to the national economy, let alone the regional economy, cannot be overstated.
Like my hon. Friend the Member for Bristol East (Kerry McCarthy), who sits on the Front Bench, I agree with the principle of a carbon floor price. However, given the importance of energy-intensive industries to my area, I remain very concerned that the proposals in the Bill for carbon floor pricing represent a serious threat to UK competitiveness.
Geraint Davies: Does my hon. Friend agree that this carbon floor pricing will, first, run contrary to the strategy of shifting from reliance on banking to manufacturing and a broader base and, secondly, move the production of things such as steel, which is environmentally controlled and relatively clean, from Britain to somewhere such as south America, where the same amount of steel will be produced much less cleanly? The impact will be to harm the environment and the economy, which is ridiculous.
Mr Wright: I absolutely agree with my hon. Friend on both points. We are exporting not just jobs but carbon emissions to elsewhere in the world where there might not be the same high level of regulation on carbon emissions.
The point that I want to emphasise as much as possible is that my area is doing exactly what the Government want it to do—we are rebalancing the economy and have an emphasis on manufacturing and, in particular, export-based industries that can provide wealth and job creation. It seems that we are doing everything right according to the Government, but we are being penalised and not provided with a level playing field.
My hon. Friend the Member for Bristol East and the hon. Member for Redcar quoted the managing director and chief executive officer of Tata Steel’s European operations. I want to be as balanced as I can. He praised the Government’s enterprise zones and stated:
“It is good news that the Tees Valley is to be among the first of the government’s newly created Enterprise Zones, as Tata Steel will remain a major employer in that region”.
To expand on the quotes already given, however, I should add that he went on to state:
“The extension of the Climate Change Agreements and the return of the discount on the Climate Change Levy to 80% will come as modest but welcome relief to Britain’s hard-pressed energy-intensive industries. However, these benefits are likely to be dwarfed by the introduction of the Carbon Floor Price (CFP), which represents a potentially severe blow to the sustainability of UK steelmaking. European steelmakers already face the prospect of deteriorating international competitiveness because of the proposed unilateral imposition by the European Commission of very significantly higher emission costs under Phase 3 of the EU Emissions Trading System. The CFP proposal will impose additional unilateral emission costs specifically on the UK steel industry by seeking to artificially ensure that these costs cannot fall below government-set targets which no other European country will enforce. This is an exceptionally unhelpful and potentially damaging measure.”
7.45 pm
The Government need to ensure that there is a level playing field for energy-intensive industries in the UK, especially in the north-east. We must not be hindered by the unilateral imposition of added costs, and Europe
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must not be rendered uncompetitive by additional regulation on energy-intensive industries that means that less-regulated economies such as Russia and China benefit. That will not do anything to alleviate environmental pressures.
I think amendment 12 would help the financial and economic environment for energy policy, provide the certainty needed for boards to make substantial investment in the UK and be the catalyst for wealth creation in my area. It would also help to safeguard the manufacturing capacity of vital industries. I hope the Government and Government Members will support it.
Andrew Percy: I will try to avoid further outbursts over the EU, Madam Deputy Speaker—I can never resist the opportunity to get my views on the EU written into Hansard.
I agree with much that has been said. I am not going to get into an argument with the hon. Member for Hartlepool (Mr Wright) over whose constituency glows redder, but in my constituency a significant amount of power is generated locally—by the Drax power station, which is just outside, by Eggborough power station and by Keadby gas power station. Furthermore, I share the Scunthorpe steel works in my constituency with the hon. Member for Scunthorpe (Nic Dakin)—unsurprisingly —and I will say something about that in a moment.
I echo some of the concerns expressed by colleagues on both sides of the House. In the Humber, the petrochemical industry is a huge employer, and we are hoping for further growth. Indeed, the whole renewables sector in the Humber is incredibly important, and it would be perverse were we to bring Siemens and other tower and turbine producers to the Humber only for them to be unable to use steel from Scunthorpe because it has been rendered uncompetitive.
I am not going to rehearse all the arguments on climate change. I am not a scientist—I do not understand a lot of these things—but I understand that it is probably a good thing to do something about the amount of carbon we are putting into the atmosphere. Of course, however, jobs must always come first. We need no greater reminder of that than what is happening in Scunthorpe at the moment with Tata Steel—1,200 jobs are going already because of losses going back a few years. In fairness to Tata, it has not blamed this policy, but it has said that it has considerable concerns about its impact on future growth at Scunthorpe. I would like to hear from the Minister—she and I have had conversations about this on several occasions, as she will remember—what the Government plan to do to support the high-energy users. The Humber economy is very much based around high-energy use, so this policy could impact on us disproportionately. I know that the Government are considering that point, but the sooner we can get some certainty the better.
As I mentioned, much has already been said, and in the interests of brevity I do not propose to go over it all. [Interruption] But I have not quite finished. Something needs to be said about general support for manufacturing. What has happened to manufacturing in this country not only over the past decade but over the past couple of decades is a scandal. I welcome the fact—I believe in being as positive as possible—that the Government are committed to a resurgence in manufacturing, which, as I said, is very important in the region represented by me and neighbouring colleagues. That is why we welcome
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the enterprise zones, which the hon. Member for Hartlepool mentioned, and we are hopeful of getting another one approved for the Humber shortly. I welcome the emphasis on skills and sending young people the clear message that working in manufacturing is just as valuable as trotting off to university to get a degree and become a doctor.
We are hearing all the right things from the Government, and I support that entirely. However, I have concerns about where we are heading with this policy, which is why I think that both the amendments have some merit. Before deciding how to vote, I will listen to the response from the Minister, who I know is very much alive to the issue. Clearly the Government will not want to do anything that puts manufacturing jobs at risk, so I look forward to her response. On that note, I will end this brief, four-minute speech, and look forward to hearing from other hon. Members.
Nic Dakin (Scunthorpe) (Lab): I am pleased to follow my neighbour, the hon. Member for Brigg and Goole (Andrew Percy), and I support many of his comments.
For the Government to unite the representatives of manufacturing industries with Greenpeace, Friends of the Earth and the World Wildlife Fund in opposition to their proposals is a masterstroke. I do not accept the ingenious argument that the Economic Secretary to the Treasury gave in Committee, which was that such a range of opposition to the tax was proof positive that the right balance had been achieved. That is patently not the case: as we have already heard, the arguments of the high-energy manufacturers and the environmentalists are complementary, not contradictory. The key challenge that we face as a nation is how to balance greening the economy with growing the economy. The Government’s proposals fail to meet that challenge. The UK is competing internationally for investment. The Humber is competing with Bremerhaven and Esbjerg for green investment. As we have already heard, those making investment decisions too often sit outside these shores. In the real world, the carbon floor price represents a serious threat to our competitiveness. We are in danger of seeing multinational companies choose to invest not in the UK but elsewhere.
Martin Vickers (Cleethorpes) (Con): The hon. Gentleman is making a persuasive case. He and I know the seriousness of the situation from our regular visits to Tata Steel in Scunthorpe, and he will be familiar with the Able UK site in my constituency. One of the arguments for the company coming to our area was the proximity of the steel works, which, ironically, Able UK wants to use for production in the renewables sector. I am sure the hon. Gentleman agrees that it would be tragic if that steel were produced elsewhere, thereby creating greater emissions.
Nic Dakin: The hon. Gentleman makes a cogent and sensible point. [ Interruption. ] Indeed, I note that the Economic Secretary is writing it down, so I hope that she will respond to it later.
We are in danger of exporting UK jobs to places such Ukraine and Russia, thereby boosting global warming rather than reducing it. As we have heard, my community in Scunthorpe faces serious challenges after Tata announced that 1,200 jobs were at risk. We have also heard the chief executive of Tata Steel, Karl-Ulrich Köhler, quoting the carbon floor price as part of the context of the decision.
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However, other, local companies are equally concerned. Richard Morley of Caparo Merchant Bar in Scunthorpe said to me:
“As well as supporting growth and jobs, companies like mine are well-placed to provide many of the technical and material solutions necessary to address climate change”—
the point that the hon. Member for Cleethorpes (Martin Vickers) made a moment ago—
“but we can only do so if we are able to remain competitive. The unilateral introduction of the”
“at too high a level could threaten this.”
Richard Stansfield of Singleton-Birch has examined in more detail what the carbon floor price means:
“The CFP does not actually set a…price of £16 in 2013 as has been implied. The figure of £16 has been arrived at by using a 2009…carbon price of £11.06 and adding a £4.94 tax, called the carbon price support, to reach the £16. The current forward price of carbon in 2013 is already around £16, so adding this £4.94 will make the price of carbon £20.94. This will be £4.94 more than our European competition will be paying and £20.94 more than the rest of the world.”
Only last month we heard the new director general of the CBI, John Cridland, expressing concerns about the impact of the carbon floor price on high-energy manufacturing.
In a written answer to a parliamentary question, the Economic Secretary confirmed that the carbon price support provisions would put up consumer energy bills and deliver windfall profits of £50 million a year from 2013 to existing nuclear reactor operators. Greenpeace has calculated that the figure exceeds £1.3 billion up to 2020. The Government’s proposal is therefore a bad deal for bill payers. Almost £1 billion will be given to the nuclear industry for doing absolutely nothing new. The proposal will add nothing to energy output or Britain’s energy security, and there will be no requirement for the companies to invest the windfall in national priorities such as energy efficiency programmes or meeting our renewable energy targets.
I am afraid, therefore, that in its present form the carbon floor price is a badly designed tax. It will not drive the significant investment needed to develop clean, safe alternatives to fossil fuels or the technological improvements needed in energy-intensive industries. As research by Waters Wye Associates concluded:
“The outcome of implementing policies as they are currently conceived will…be poor both economically and environmentally. Global greenhouse gas emissions may well increase as well as hitting both investment and jobs.”
The current approach risks penalising British industry and endangering British jobs. It will hurt the consumer and fail to deliver our green ambitions. I urge the Government to think again.
Angela Smith (Penistone and Stocksbridge) (Lab):
I want to speak in support of amendment 12 for three reasons. First, the Government’s statements on subsidies for nuclear power have been absolutely clear. The amendment calls for a report, so that the Government can at least be transparent about how they will use the subsidies raised through the carbon floor price. Secondly, the impact on fuel poverty has to be measured and so, again, has to be transparent. Finally, like the hon. Member for Redcar (Ian Swales) and my hon. Friends
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the Members for Hartlepool (Mr Wright) and for Scunthorpe (Nic Dakin), I particularly support proposed new subsections (4)(c) and (f) of clause 78, which relate to the impact on energy-intensive industries.
The report should detail the impact on energy-intensive industries and make clear how the revenues will be used. The Government should commit this evening to using some of the revenues raised from the carbon floor price to mitigate its impact on the competitiveness of our industries. If we look at the numbers employed in energy-intensive industries across the UK, we see that at least 225,000 people are directly dependent on such industries, with around three times as many indirectly dependent on them through the supply chain.
The impact of the proposed measures would absolutely be felt in my constituency of Penistone and Stocksbridge. Tata Steel in Stocksbridge is a major employer, currently providing more than 800 jobs, and has recovered from its hiatus in 2008, when it was on the brink of going bankrupt and out of business. Tata Steel is now back in profit, employing as many people as it did in 2008, if not more. That is a success story for UK manufacturing and a vote of confidence by Tata Steel in the capacity of UK manufacturing and its ability to compete globally. In my constituency we also have Fox Wire, which makes world-class cabling for drilling and welling operations globally, and Naylor Industries and Hepworth, which manufacture clay pipes for all sorts of applications across the world. We also have Pilkington glass and Georgia-Pacific, which produces paper. That makes well over 1,500 jobs that are directly dependent on energy-intensive industries.
As my hon. Friend the Member for Scunthorpe set out in detail earlier, the impact of the carbon floor price is clear: the cost of carbon will increase from £16 a tonne, rising from 2013 to £30 a tonne by 2020. As he pointed out, that will create a significant risk that the industries that we are talking about this evening will be placed in an uncompetitive position globally, not just in relation to Europe, but in relation to the US, China, Ukraine and Russia. We share the view of the head of Tata Steel’s European operations that this will threaten the future of those industries in the UK.
What is it about those industries that makes them so special, and why should a special case be made for them? The argument is crystal clear: it would be very short-sighted to damage those industries in relation to the rest of UK manufacturing because their products are increasingly being geared towards improving fuel efficiency, and they are reducing their carbon emissions in their manufacturing processes.
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It has been said that when one tonne of carbon is emitted in the production of a wind turbine blade, it is balanced by the fact that 123 tonnes of carbon will be saved through the energy produced by that blade. My Tata Steel plant in Stocksbridge is engaged in making components for wind turbines. It is involved in making the lighter but tougher steels required for components for Rolls-Royce engines in aircraft, and it also makes landing gear. The advanced manufacturing research centre at Sheffield university is increasingly engaged in research and development relating to reducing carbon emissions in manufacturing, particularly in the aerospace industry. There is a real partnership between Boeing
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and Rolls-Royce in Sheffield, working to ensure that that industry is absolutely focused on reducing carbon emissions.
The clay pipe manufacturing industry in my constituency has a crystal clear argument for its right to survive and to compete internationally on a level playing field. Clay pipes are biodegradable, and they last a lot longer than the plastic piping that is increasingly being used in applications across the UK and globally. The carbon floor pricing mechanism that we are discussing could put industries such as Naylor’s and Hepworth’s out of business. Around 90% of the clay pipe manufacturing in the UK is in my constituency. I do not think anyone would say that using biodegradable clay pipes was not better for the environment than using the plastic piping that is increasingly undermining that industry. Energy efficient glass is being custom made and fitted by Pilkington in my constituency. As I have already said, the steel industry is absolutely focused on an energy efficient carbon-reduced future.
The Minister represents Putney, but I know that she hails from Rotherham. She will therefore understand the historic importance of steel to south Yorkshire, and its ongoing importance to the area. She knows that steel is crucial even now to the survival of manufacturing there, and I am asking her to agree to producing the report and to commit the Government, through the Treasury, to come up with effective mitigation measures for the energy-intensive industries.
The Government say that they are committed to rebalancing the economy, to creating growth in the private sector and to rebuilding our manufacturing base. They now have an opportunity, through the most powerful Department in Government, the Treasury, to show that they mean business for manufacturing, that they mean what they say, and that they are committed not only to call centres and private sector growth in other areas of the economy but specifically and especially to the growth of jobs in high-wage, high-value manufacturing in the private sector. That is the kind of manufacturing that will help us to deliver the low-carbon future that we are looking for. I want to hear positive comments from the Minister on these points tonight.
Other Ministers from the Department for Business, Innovation and Skills and from the Department of Energy and Climate Change have said on the record in the Chamber, as well as off the record in talking to us all informally and in ministerial meetings, that they want the Government to produce a mitigation package as soon as possible. They understand the problem. We want to hear from the Treasury tonight that it understands it as well, because those Departments will not be able to put that package before the House until the Treasury agrees to it. I appeal once again to the Minister’s heritage: what she says tonight will mean a great deal not only to Members representing constituencies affected by the proposals but to the representatives of those industries who are probably listening now and waiting to hear her give some reassurance about their future.
Tom Blenkinsop (Middlesbrough South and East Cleveland) (Lab): I should like to speak to amendment 12. It is a great pleasure to talk about places that I know well, such as the Teesside Cast Products plant in Redcar, Stocksbridge, Hartlepool and Scunthorpe, as well as Skinningrove in my own constituency.
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The chemical industry is no longer the dirty industry depicted in Ron Angel’s “Chemical Worker’s Song”. On Teesside, between 35,000 and 45,000 workers are directly or indirectly employed in the industry, and over the past 18 years, it has reduced its emissions by some 75%. That has been matched by the steel sector’s reduction in energy per tonne of steel produced from 31.7 GJ in 1973 to 19.4 GJ in 2010.
Ian Swales: Does the hon. Gentleman agree that those industries need no further encouragement to reduce their energy use, because, by definition, they already spend a large proportion of their money on energy? They all have a good record in reducing their energy use.
Tom Blenkinsop: I thank the hon. Gentleman for his comment, and I entirely agree with him. The industries are in it to make money, and it is obvious to anyone who knows them that they need to reduce the amount of energy that they expend to make their products.
British manufacturing output as a whole has been growing for decades, according to figures from the Office for National Statistics. Why is that? Output in the chemicals industry has increased, unlike in other sectors. During the 2008-09 downturn, the industry suffered the second smallest decline in production. The development of the chemical industry over the last decade under Labour has been largely unreported. Only now is it being seen as a sexy subject. However, in places such as Middlesbrough, Redcar and Billingham, we have always referred to ourselves as proud smoggies, in the knowledge that our manufacturing endeavours have far more worth than the machinations of the City.
According to DECC statistics on greenhouse gas reduction, the disappearance of the chemicals sector would directly save an average 10.79 million metric tonnes of CO2 equivalent, out of the total UK generation of 627.85 million metric tonnes of CO2 equivalent. Across industry, the chemicals sector is responsible for only 3.9% of energy-related emissions. The growth reviews in November and December last year gave good signals to manufacturing. However, the rhetoric contained in those reviews assumed that a low-carbon economy could emerge only by pricing energy-intensive users out of the market. The flaw in that logic is the assumption that the full substitution of fossil fuels will miraculously come about if intensive energy users are strangled. A further flaw is that the technology that will develop green industries actually flows from the existing energy-intensive industries, their research and development, and their skilled work forces, but they will obviously no longer exist in the UK if we force them abroad.
The December growth review stated that high energy prices were a barrier to advanced manufacturing growth, yet the Secretary of State for Environment and Climate Change said at the same time that recovery does not come from old industries “bouncing back”, and that the low-carbon industries would be an important part of our growth story over the next 10 years. That was in his speech to the Institute for Public Policy Research on 1 December last year.
For every tonne of CO2 emitted in producing insulation, 233 tonnes of CO2 are saved, and, as my hon. Friend the Member for Penistone and Stocksbridge (Angela Smith) said, for every tonne of CO2 emitted in producing a wind turbine blade, 123 tonnes of CO2 are saved. For
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every tonne of CO2 emitted in the production of energy-saving tyres, 51 tonnes of CO2 are saved—and so on, and so on. In the case of insulation, one year’s CO2 emissions created producing insulation saves 2.4 billion tonnes of CO2.
At the heart of the issue is the lack of understanding in the Treasury and DECC that these chemical companies cluster, as they always have done, and as they previously did within the large-scale set-ups of ICI. As NEPIC—the North East of England Process Industry Cluster—has proven in my region, locally produced products often feed on-site sister businesses or other company-owned plants. That integration produces better economies of scale, efficiency, profitability and technological development. It is regional clustering, as exemplified by NEPIC in north-east England, which was set up by One North East, that exemplifies industrially-led industrial activism. The Government’s carbon floor pricing policy, on the other hand, fragments industrial integrative clustering.
Unfortunately, the Government assume that secondary industries will not leave the UK, even if the primary chemical industries do. Indeed, the Secretary of State for Energy and Climate Change has said that
“quite a few of the high energy users have forms of natural protection like high transport costs so the impact is rather less than you might expect.”
Unfortunately, empirical evidence wholly contradicts the Government’s stance. As Jeremy Nicholson, director of the energy intensive users group has said:
“The idea that downstream industries are likely to remain here indefinitely if primary production goes might have a theoretical case but I’d say just look at the empirical evidence: downstream manufacturing thrives on co-location with primary industry and why would you expect that to cease in the future?”
Real life examples clearly show just how fragile downstream companies are. Let us consider Wilton, the former ICI site in the constituency of the hon. Member for Redcar (Ian Swales). The plants were balanced with the ICI ethylene cracker at the top of the production pyramid; as foreign ethylene became cheaper and producers produced offshore, the requirement for the cracker was reduced, leading to other plants downstream such as the Dow plant also being affected.
When Dow closed, 55 direct jobs were lost. That is not as big a media story as the events that unfolded at the mothballing of the Redcar blast furnace at the then Teesside Cast Products Corus plant, but the repercussions of Dow were just as profound. An estimated 2,500 jobs were lost downstream as a result of the closure of Dow’s ethylene oxide production plant—the only ethylene oxide plant in the UK. NEPIC has bounced back, bringing in other investments to Teesside, but it is acutely aware of the loss of primary chemical production and of lost opportunities for technological developments that could be made on Teesside, securing new green markets in turn.
More than this, however, the Secretary of State’s comments condone the loss of primary chemical production as a result of the carbon floor pricing while actually actively pursuing it. The question I must ask is: if industry flees within two years, as feared, how on earth will this carbon floor pricing levy taxation apply when the energy-intensive industry is no longer here? An industry cannot be taxed if it will not hang around to be taxed, which leaves Britain with neither the tax nor the industry.
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As many primary raw chemicals are very expensive to transport and in some cases are banned from transportation, the Secretary of State’s relaxed approach appears uninformed. Many secondary production companies are small and medium-sized enterprises, often with fewer than 10 employees, and economies of scale for the transportation of such vast quantities of chemicals are just not viable, making the whole operation futile and highly costly for such small operations.
Amendment 12 would ensure that the Government look at the immediate impact of the provisions in the schedule on energy-using manufacturing industries and on employment in those industries; and at how the moneys raised by those measures will be used to mitigate the immediate impact of the schedule on consumers and on manufacturing industries and to encourage green investment. At the very least the Government must monitor and review their own policy and its consequences, which I fear will be devastating for energy-intensive industry and for my area of Teesside. A review will allow the Government to take stock.
Ian Lavery (Wansbeck) (Lab): Is my hon. Friend aware of the double whammy of the European trading scheme and the carbon floor price, which will have a devastating effect not just on Scunthorpe and Teesside but on Lynemouth in my constituency? Rio Tinto Alcan is the company there and it makes a current profit of £50 million a year, which will be totally wiped out as a consequence of this double whammy, putting 600 quality jobs at risk. Does my hon. Friend agree that special measures must be put in place to overcome these unjust taxes?
Tom Blenkinsop: I thank my hon. Friend for his intervention. Yes, I certainly do. To finish, let me say that a review will allow the Government to take stock of the policy and to make quick changes to it, as I fear they might have to before it is too late.
Nia Griffith (Llanelli) (Lab): There have been many excellent contributions, so I shall keep my comments short.
As secretary of the all-party steel group, I want to speak to amendment 12, in particular to subsection 4(c) and (f). We are asking for the Finance Bill to be amended because of the very significant negative impact that the carbon floor price, at the level set, is likely to have on heavy industry, such as the Trostre steelworks in my constituency and similar steelworks and energy-intensive industries throughout the UK.
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To provide just one example, we are talking about tens of millions of pounds of incremental costs to Tata Steel UK—costs that are not faced by its European competitors, let alone by its global competitors. We have already seen manufacturers move factories to countries where costs are much lower and environmental conditions less stringent, but up until now the European emissions trading scheme has helped to create a level playing field within Europe. The real worry is that the proposed carbon floor tax will make us uncompetitive, even compared with our European competitors, and will drive Tata to invest elsewhere rather than in the UK. We all understand the need to reduce emissions and companies such as
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Tata have made significant improvements in fuel efficiency, but emissions affect global warming wherever they are produced, which is why we work together in the European Union on emissions and try to negotiate globally on climate change issues.
There is real concern that this carbon floor price will cause carbon leakage. Because the Government are imposing these conditions, manufacturers will choose to go to parts of the world where they can get away with less environmentally stringent conditions. They can therefore continue to produce the same amount of emissions, while we have lost that industry and lost valuable jobs. Our worry is that we are putting ourselves not only in an uncompetitive position vis-à-vis the cheaper countries in the world, but at a disadvantage in respect of our European competitors.
Tata has made these points very clearly, stating:
“Other European operators are likely to remain operating under an ‘abatement at least cost’ regime, therefore exposing Tata Steel UK to a different cost pressure and impacting on our ability to compete even inside the single market.”
We are deeply concerned that the carbon floor price will not deliver the desired investment growth. In other words, companies such as Tata Steel UK and other similar manufacturers could make long-term investment decisions based on what they see in the carbon floor price. They could turn away from the UK and decide that instead of investing here in the UK, they will take their plans elsewhere.
Tata Steel UK states that the carbon floor price will be
“increasing the longer-term risk to the sustainability of our UK operations.”
That is a very stark message indeed, which is why the amendment asks for proper account to be taken of the effect of this carbon floor price on energy-intensive industries and for details to be worked out on the mitigation measures that could be put in place for manufacturing industry and on measures to encourage the green technologies that we all so fervently hope to be part of and that will be part of the growth strategy for the future of manufacturing in the UK. For those reasons, I support the amendment.
Caroline Lucas (Brighton, Pavilion) (Green): I am pleased to speak in support of amendment 12, because the House needs much more detail from the Government on the impact of a carbon floor price, including possible unintended consequences.
First, however, let me say a few words about amendment 21. Although I have a great deal of sympathy with some of the comments made about the amendment, we need to be reasonable when looking at the impacts of the sort of floor price we are talking about on energy-intensive industries. I am quite sure that some parts within those industries will face real problems, and it is right to look at measures such as border tax adjustment so that they are not put at a competitive disadvantage.
Let us not forget, however, that the EU has already exempted large numbers of energy-intensive industries from paying for the EU permits under the emissions trading scheme. Let us not forget that not all energy-intensive industries are subject to carbon leakage. Some undoubtedly are, and we certainly need elements of
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mitigation for them, but some can quite easily raise their prices and pass them on. Let us not forget that what we are trying to do is to put a price on carbon. That is the purpose of the whole exercise. Yes, we need to look at mitigating measures, where necessary, but let us not throw the baby out with the bathwater and lose the purpose of the exercise, which is to shift to a greener economy. Let us not forget that research by the university of Cambridge and others has found no empirical evidence to show that more ambitious climate policies will result in mass relocation of industries out of the EU.
Ian Swales: I respect the hon. Lady’s expertise on these issues. Can she give examples of energy-intensive industries that she feels are at no risk of carbon leakage?
Caroline Lucas: What I can say is that I have been in the European Parliament, that representatives of industries have told us time and again that the latest EU environmental law will lead to mass relocation from Europe, and that plenty of studies have shown that that has not happened. I accept that many energy-intensive companies will face problems that will need to be mitigated, but, according to those studies, the risk of relocation is far lower than has been suggested.
Caroline Lucas: I will not give way again, because I want to talk about amendment 12, which I have tabled.
I agree that an effective carbon price mechanism has the potential to reduce greenhouse gas emissions from electricity power, mainly by increasing the carbon liability attached to energy use and thereby making energy efficiency measures and renewables more attractive. It also embodies the “polluter pays” principle, which, of course, I also support. I fear, however, that the proposed carbon floor price will not ensure that investment in energy generation is directed towards low-carbon technologies.
I hold that view for a number of reasons, including the fact that market-based solutions to direct investment in low-carbon generation have proved pretty weak in the past. For example, the EU emissions trading regime has so far failed to maintain the cost of pollution allowances at high enough levels to make any significant difference in reducing emissions. It is also true that, because the floor price will be subject to annual votes in Finance Bill debates such as this, it will fail to provide the price stability that is needed to boost certainty and security for investors in low-carbon energy sources. Furthermore, it can be difficult to judge the level at which a carbon floor price should be set to give appropriate incentives to the various technologies that the Government wish to support.
It is clear from those inherent weaknesses that a carbon floor price will maximise its potential to support a low-carbon economy only if any additional revenues that it raises are ring-fenced for use in support of that transition. That must include, in particular, energy efficiency measures for the fuel-poor. Many Members have raised that subject this evening. The Institute for Public Policy Research estimates that an additional 30,000 to 60,000 households could be pushed into fuel poverty in 2013 as a result of the carbon floor price because it will push up the cost of electricity.
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It is therefore crucial for flanking measures to be introduced alongside a carbon floor price, including measures that will properly support and protect those in fuel poverty. They should include proper capitalisation of the green investment bank, support for the implementation of the green deal—for instance, ensuring that the “eco” element is increased considerably, given that it is the part directed at the fuel-poor—and, indeed, assisting in the development of innovative renewable energy technologies. Failure to ring-fence the revenue of the carbon floor price would mean missing a real opportunity to focus efforts on the technologies that will most quickly cut emissions from power generation.
Many other Members have reinforced the idea that the carbon floor price must not deliver windfall profits to the well-established nuclear industry, which has already been heavily publicly supported for many years. The Government’s own figures show that existing nuclear generators stand to gain £50 million a year from it until 2030. It is vital for the Government to clarify whether such a windfall constitutes the kind of subsidy for nuclear power that they have repeatedly said they will not provide. It looks very much like a subsidy to me, and it looks very much like a subsidy to the Chair of the Energy and Climate Change Committee, the hon. Member for South Suffolk (Mr Yeo), who has said that the Government should be upfront about the fact that it is a subsidy. He has also said that
“it would be deeply irresponsible to skew the whole process of electricity market reform simply to save face.”
I hope that Ministers will benefit from his expertise, and will recognise that rigging the electricity markets simply to try to provide more support for nuclear generation is entirely wrong.
David Mowat: The hon. Lady is making a powerful case against the nuclear industry, but a few moments ago she made a case against high electricity prices and their impact on the poorest in our society. Electricity costs in France are between a third and a quarter less than those in this country owing to decades of cheap nuclear power, which has a beneficial impact on both heavy industry and consumers.
Caroline Lucas: The hon. Gentleman will not be surprised to learn that I do not agree with the tenor of his intervention. The truth is that the price people pay for nuclear power does not represent its true cost in terms of liabilities, decommissioning and clearing up after an accident. People in Japan are not paying the true cost of clearing up after Fukushima. That £250 billion was not included in people’s energy costs. Nuclear subsidies are incredibly untransparent, but, essentially, people are paying a great deal more for nuclear power. I agree with the hon. Gentleman that we need electricity prices that people can afford, but the answer is to invest in renewable energy and energy efficiency, which will become far more competitive and far cheaper than nuclear power very soon if we give them the support they require.
If the Government recognise that this is a subsidy, they should claw it back through a windfall tax. I tabled a new clause that would have allowed them to do exactly that, but, sadly, it was not selected for debate.
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David Mowat: It may be true that renewables will become more cost-effective over time, but there is an long way to go: a factor of about four in the case of solar power.
Caroline Lucas: I entirely disagree. I wish that the hon. Gentleman had been at a meeting with representatives of the solar industry that took place a few days ago in Portcullis House. We were shown presentations by Ernst and Young and others which demonstrated that if a small amount is invested now, solar energy will be able to compete with all fossil fuels and with nuclear power in four or five years.
Although an improved carbon floor price mechanism could help to deliver a less carbon-intensive energy sector, it is important for the Government not to see it as a “silver bullet” solution. Other stronger levers, such as a well managed—I underline “well managed”—feed-in tariff regime and a strong emissions performance standard must also be part of the overall picture. Sadly, however, the Government are falling short in those respects as well. I should like them to devote at least as much effort to stepping up their work at EU level to ensure that the next phase of the EU emissions trading scheme is much more effective than the current phase. The recent collapse in the cost of EU carbon allowances under the scheme is clear evidence of their over-allocation, and the shortcomings of the scheme are becoming increasingly obvious.
I should also like the Government to work with European partners to ensure that, as a minimum, allowances are in line with the policy of cutting EU emissions by between 80% and 95% by 2050, as agreed by member states; that allowances cannot be banked from the second phase of the EU ETS into the third phase; and that a reserve price is set on the auction of permits into the market. Any permits that the market does not want to buy at the reserve price or more should be retired from the scheme.
I urge the Government to undertake to produce the report for which the amendment calls, and to take the opportunity to show how the benefits of a carbon floor price can be maximised and any unintended consequences eliminated. If the carbon floor price is to be effective, we need a tax on the windfall profits of the nuclear industry, along with flanking measures to ensure that those in fuel poverty do not suffer as a result of this policy.
Dr Alan Whitehead (Southampton, Test) (Lab): The Economic Secretary to the Treasury has already suggested that those in favour of a carbon floor price should explain how it could be introduced in a different way from that proposed by the Government. I imagine that she will return to that subject at the end of the debate, but I suggest that she need only look at her own consultation document, which led to the amount that has been established and the mechanism by which the floor price works.
The consultation document posited a £1 difference between a Europe emissions trading scheme and a carbon floor price, certainly in respect of the starting period. It also warned about how far away from that £1 difference a floor price might go and what might happen to energy prices in the rest of Europe. As people who contributed to that consultation document suggested,
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because our energy supply is highly interconnected with that of Europe, a substantial difference could lead to investment going to where the sale price is cheaper, with, perhaps, new gas-fired power stations being developed on the other end of an interconnector rather than lower-carbon power stations being developed at our end of an interconnector.
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Essentially, the Government ignored their own consultation document and came up with a carbon floor price that clunks, rather than floats, against the ETS. Indeed, it is a carbon floor price that has a £4.94 difference; as my hon. Friend the Member for Scunthorpe (Nic Dakin) said, when it is introduced there will be almost a £5 difference from the ETS, and rising, by decision, on an annual basis. It will also in essence be a straightforward tax—and not a very green one at that—on removing the exemption for producers upstream from the climate change levy.
The objective could have been achieved in many other ways, such as retiring permits, matching the ETS and undertaking downstream arrangements, all of which could have led to a different outcome in respect of the carbon floor price, and I say that as someone who supports the idea of having a carbon floor price. We therefore need to ask why this has happened in this way.
It has happened for two very tempting reasons. First, this clunking arrangement happens to net the Treasury about £800 million a year, so it is quite a large tax earner, and also—if one were so minded—potentially quite a large earner to redistribute through underpinning either mitigation for certain industries or other measures to develop a low-carbon economy. The second reason is that because this measure relates to upstream exemptions in respect of the climate change levy, it provides a clear and straightforward subsidy to the nuclear industry. That is not subsidy for new nuclear, however. One could argue that a subsidy for new nuclear ought to be honestly discussed, as the Chairman of the Energy and Climate Change Committee has suggested. The current policy of no subsidy for new nuclear might then be recast as an upfront debate on what subsidies new nuclear would need to come on stream in the time scale the Government suggest it should. It is not a subsidy for new nuclear, however; instead, it is a subsidy for existing nuclear.
The subsidy is essentially a subsidy for nuclear that will go out of commission. All but one of the current fleet of nuclear power stations will go out of commission by 2023. This is therefore a gold-plated pension fund for existing nuclear power station operation. That is because, as the Government have said, it in effect produces a £50 million subsidy for old nuclear. Another estimate is that up to 2030 it will produce £1 billion or more of subsidy. To the extent that it is defended as a subsidy—the Government’s Office for National Statistic indicates that a number of its measures are indeed subsidies—it is defended because it is a subsidy that is not exclusively for nuclear. However, old nuclear power stations generated some 69 billion kWh in 2009, compared with 9.3 billion kWh of generation by wind over the same period, and more than 70% of all that money—which will be free money for existing lower-carbon operators—will go straight to nuclear.
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The money will not go just straight to nuclear either. It will go straight to one company, because after the closure of two nuclear power stations in 2012, all the existing nuclear power stations will be owned by one company: EDF. It has plans to develop four new nuclear power stations and it owns four sites about which there has been agreement on developing new nuclear in the recent national policy statement on nuclear power. We are talking about a direct subsidy going to one company to provide money for its existing power stations and this company has in prospect the plan to build four new nuclear power stations on sites it currently has. So a rather straightforward case is being put forward here.
When the new arrangement comes into being there should, at the very least, be a review of what its effects are, whether other ways of doing things might have been better and how such a subsidy might be clawed back to undertake the sort of things that hon. Members have mentioned in terms of protection for high-emitting industries. Such a review should also consider the question of developing renewable energy and other forms of low-carbon investment at the same time. Currently, £800 million per year sits in the Treasury and £1 billion sits in the coffers of EDF. That is a far cry from what I thought a carbon floor price was about and we ought to make speed to ensure that a carbon floor price undertakes what it is supposed to do, which is to reward good green activity and not reward bad green activity.
Tristram Hunt (Stoke-on-Trent Central) (Lab): I wish to speak to amendment 12, and I shall do so both as chair of the all-party group on energy-intensive industries, which the hon. Member for Redcar (Ian Swales) so kindly mentioned, and as the Member of Parliament for Stoke-on-Trent Central—the potteries. I wish to draw the Minister’s attention to the impact of the carbon price on the ceramics industry, because that poses a real danger to the future of the industry which really began the industrial revolution, at Etruria, under the great influence of Josiah Wedgwood.
You will know, Mr Deputy Speaker, that the potteries came to north Staffordshire not because of the north Staffordshire clay, although that helped, but because of the coal—because of the energy—as Edwin Clayhanger told young George in the great “Clayhanger” novel by Arnold Bennett. The firing of the kilns and the making of the pottery demand intensive energy use, as temperatures of up to 1,200° C are involved, although we are hoping to bring that down with new technology. The cumulative impact of some of the carbon price legislation is therefore dangerously undermining the ability of these industries to survive.
The point about the effect of this legislation is that these industries will provide a classic example of carbon leakage. Over the past 20 years we have seen jobs disappear to Indonesia, Vietnam and China, and we face the threat of jobs leaving for Poland and Bulgaria. We do not cut global carbon emissions through this process. Instead, we export jobs and reimport the carbon. Britain loses economic competitiveness and the world gains nothing in terms of cutting carbon emissions. Ministers need to understand that many of the companies involved are international conglomerates, as many of my hon. Friends have pointed out. Such companies have the ability to move their businesses offshore, and they will do so if we become more and more uncompetitive.
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Many in the ceramics industry are in favour of energy-saving measures, and I am not averse to those. We have seen, in different industries across the sector, the ability of energy-saving measures to improve performance. Let us consider what happened to the German car industry in the 1980s. When the Greens began to turn their attention towards the inefficiencies of that industry and its overuse of energy, that industry began to be transformed. Today the German car industry is among the most successful and competitive in the world.
The problem that we face in Stoke-on-Trent is that many of our industries and many of our pottery firms have already cut their energy usage by 80% or 90%, yet they still face new hikes and new measures. It will be very difficult for them to make further cuts. We need a more sophisticated way of measuring carbon, which is what our amendment suggests. We need a more sophisticated way of understanding carbon usage, and we need to understand its use over a lifetime.
We have already heard references to the chemical industry. In my constituency I am blessed with the Michelin tyre production company, and when the energy used in production is set against the lifetime use of those tyres, energy is actually saved. My hon. Friend the Member for Penistone and Stocksbridge (Angela Smith) mentioned using clay pipes rather than plastic pipes, and again, over the lifetime of the products, energy is saved. In Newcastle-under-Lyme, next door to my constituency, one can also see some very good clay pipe production.
The point is that high-quality products made with high energy intensity often, in the long run, save carbon. The Government need to get their thinking straight. When considering the competitiveness of such industries, Ministers often point to cuts in corporation tax as saving businesses. If no profits can be made—if they are wiped out by the carbon costs—the cuts to corporation tax will make no difference. There is a failure to appreciate the cumulative impact and the international market.
I hope that we have begun to see the beginnings of a shift in thinking. We look forward to the outcome of the DECC-BIS-Treasury working party, which will reach its conclusions towards the end of the year. Ministers should regard our amendment as an attempt to help them and to encourage a degree of clarity in the dealings between their civil servants over the coming months. What is frustrating about this process is the fact that the ceramics sector in Stoke-on-Trent is enjoying a resurgence. Jobs are coming back from China because of rising energy and labour costs in both porcelain and bone china. We are seeing a resurgence in the kingdom of Spode, Wedgwood, Churchill and Dudson, and of new companies, such as Emma Bridgewater. It would be typical of British legalistic short-sightedness and the myopia of the Treasury world view if, faced with a rising and successful industry, we were to undermine it. If we are interested in rebalancing the British economy we should support the ceramics, chemical, steel, glass, aluminium and other energy-intensive sectors on their journey towards a green economy. The amendment seeks to do just that.
Justine Greening:
Clause 78 and schedule 20 amend the climate change levy to introduce a carbon price floor for electricity generation. We have had a helpful
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and interesting debate on the two amendments and I shall do my best in the time available to try to address as many of the points that were raised as possible. Before I do that, it is probably worth returning to the question of why this measure is necessary in the first place. Indeed, the hon. Member for Brighton, Pavilion (Caroline Lucas) spent some time setting that out in her speech.
We all recognise that the UK needs significant new investment in low-carbon electricity generation over the coming decades. As the debate has shown, we do not want that to be the only thing that we encourage over the coming years. We also want to encourage a broader transition to a low-carbon economy. As the hon. Member for Penistone and Stocksbridge (Angela Smith) pointed out, many industries that have been mentioned today in the context of the challenges they face have the chance to benefit from their role in the low-carbon economy of the future.
We need significant new investment in low-carbon electricity generation. As well as preparing for an increase in demand for electricity over the following decades, the UK must meet its legally binding CO2 emissions reduction targets, which require an 80% reduction from 1990 levels by 2050. That is why in the Budget, following consultation, we announced that the UK would introduce a minimum carbon price. As the hon. Member for Southampton, Test (Dr Whitehead) pointed out, we included a number of different scenarios in that consultation so that we could understand and get feedback from stakeholders on the impact of the different scenarios. In fact the carbon price floor will provide a strong incentive for billions of pounds of new low-carbon investment.
Dr Whitehead: Does the hon. Lady agree that none of the scenarios in the consultation document included the idea that there should be a £5 premium on the emissions trading scheme as a result of the introduction of a carbon floor price?
8.45 pm
Justine Greening: The scenarios we looked at as part of the consultation asked stakeholders what carbon price they felt we should start at, and where they felt it should finish—the trajectory from the first to the last point. As suggested by respondents, we used the market price of carbon, which is low, although we used DECC’s central carbon price as an illustration in the consultation. The hon. Gentleman referred both in his intervention and in his contribution to the balance we have to strike in setting a carbon price floor that will actually make a difference while putting in place one that does not in the meantime make the energy-intensive industries in our country uncompetitive, as we heard in powerful contributions from my hon. Friends the Members for Redcar (Ian Swales) and for Brigg and Goole (Andrew Percy) and, in an intervention, from the hon. Member for Scunthorpe (Nic Dakin). I want to provide the House with some reassurance about the steps we are taking to ensure that we manage to strike that balance. Despite the various contributions we have heard today, when we take the time to read Hansard tomorrow we shall probably see that there was more agreement in the approaches than may have come across from the tone of the debate. The challenge for us on both sides of the House is to strike the right balance, and I want to talk a little more about how we intend to try to do that.
5 July 2011 : Column 1457
We know that ultimately we have to make the transition to low-carbon electricity generation cost-effectively, and that will happen only if investors have greater long-term certainty about the cost of carbon emissions. The shadow Minister, the hon. Member for Bristol East (Kerry McCarthy) talked about uncertainty, but the measure is about introducing more certainty so that the extra investment we need can take place. The impact assessment that was part of the consultation showed that although the carbon price floor will increase electricity bills in the short to medium term, bills will be lower in the longer term than would have otherwise been the case, as more low-carbon capacity leads to cheaper electricity. I shall talk about how we want to see fuel poverty tackled over coming years, because that is obviously important.
Andrew Percy: I particularly welcome my hon. Friend’s comments about supporting industry as we move forward. I had to pop out of the Chamber after my speech to meet people from Drax. One of the things they told me was that at the moment the system is so structured that it discourages them from buying UK coal in favour of foreign coal. Will she take that into account when looking at the extra support that can be provided? If not, could she meet us to discuss this important issue in a bit more detail?
Justine Greening: My hon. Friend makes a helpful contribution. I am always happy to meet hon. Members. In fact, only last week I wrote back to the hon. Member for Stoke-on-Trent Central (Tristram Hunt) to say that I would be happy to meet representatives of his local industry. One of the reasons we are working across Government—not just the Treasury, but BIS and DECC—is to make sure that we consider all the different aspects of the support we want for the energy-intensive industries, and get it right.
I am conscious of the time, and the fact that Members want to debate the remaining amendments, so I now want to make progress. In Committee we discussed at length the issues raised in the amendments. Not all Members present in the Chamber today will have heard those debates, so I shall go through my response to both amendments, taking amendment 21 first, as it raises some important points. It would require the Government to lay, and Parliament to approve, an agreed package of mitigation measures for energy-intensive industries.
A number of Members from across the House made powerful cases on behalf of their local industry about why the issues are so important. The Government recognise the issues and want to take steps to address them. There is, as I said, clearly a balance to be struck: we need to meet our carbon reduction requirements, but to do so in a way that still enables the UK to continue to have competitive energy-intensive industries. That is why the Budget helped to offset the impacts of the price floor on energy-intensive industry and to show, as we have heard, that the UK is open for business, as it must be.
In March we announced an extension of climate change agreements to 2023, with an increase in the discount on electricity from 65% to 80% for participants in the scheme from April 2013. We plan to consult on how to simplify climate change agreements for the companies participating in them. Overall we intend to reduce tax levels to among the lowest in the EU.
5 July 2011 : Column 1458
We announced that we would not introduce the previous Government’s planned complex and costly carbon capture and storage levy, which would have increased electricity bills by 2% from 2015. In addition, we set out plans that will see a cap on the cost of policies funded through energy bills. To support industry more broadly, we introduced policies that will reduce corporation tax by a further 1%, which is part of an overall year-on-year set of reductions in corporation tax.
As I said, BIS, DECC and the Treasury are already in discussion with energy-intensive industries to identify those most affected by the carbon price floor and to pull together the best set of options to address some of those concerns. The package that we plan to announce by the end of the year will build on the measures, some of which I have set out, that we announced in the Budget. The Bill could also be a means of implementing part of the package. I should be clear that the options that we are considering do not relate only to tax. They look across the board at what we can do to support energy-intensive industries.
On Opposition amendment 12, the carbon price floor is designed to give UK electricity generators certainty about the carbon price. That will encourage more investment in low carbon. Although some Members expressed concerns about how the policy will work, it has been supported by a number of members of the investment community. A range of policy assessments have been carried out not just as part of the consultation document, but as part of the extensive impact assessment that was done alongside that, including the tax impact and information note that was published at the time of the Budget.
Caroline Lucas: Does the Minister agree that the carbon price floor effectively constitutes a subsidy for nuclear power? Does she therefore agree that unless it is clawed back through a windfall tax, it would contravene the terms of the coalition agreement on no subsidies for new nuclear?
Justine Greening: I am pleased that the hon. Lady has raised that point, because it gives me the opportunity to be crystal clear again—alongside the statements that I made in Committee, and those that she knows I have made to the Select Committee of which she is a member—that this policy is not a subsidy for the nuclear industry. As was pointed out in the previous debate by my hon. Friend the Member for Bristol West (Stephen Williams), who I am pleased to see in his place following his contribution to the Committee stage, this is a tax on carbon, not on nuclear fuel rods, as happened in Germany.
The reason nuclear is outside the scope of the tax is that uranium and wind, for example, are not in the carbon price floor because, of course, they do not contain carbon. I understand the arguments that have been made, but they are a little like saying that because we have a tax on alcohol, that is a subsidy for the soft drinks industry. There is also a contradiction between what Opposition Members have been saying. They complain that this is a tax-raising measure, yet they also say that it is a subsidy. Those arguments are contradictory.
Amendments 21 and 12 are unnecessary, and I hope that they will both be withdrawn.
Question put, That the amendment be made.
5 July 2011 : Column 1459
The House divided:
Ayes 217, Noes 276.
[8.54 pm
AYES
Abbott, Ms Diane
Abrahams, Debbie
Ainsworth, rh Mr Bob
Alexander, Heidi
Ali, Rushanara
Ashworth, Jon
Austin, Ian
Bailey, Mr Adrian
Bain, Mr William
Banks, Gordon
Barron, rh Mr Kevin
Beckett, rh Margaret
Begg, Dame Anne
Benn, rh Hilary
Benton, Mr Joe
Berger, Luciana
Blackman-Woods, Roberta
Blears, rh Hazel
Blenkinsop, Tom
Blunkett, rh Mr David
Bradshaw, rh Mr Ben
Brennan, Kevin
Brown, rh Mr Gordon
Brown, Lyn
Brown, rh Mr Nicholas
Brown, Mr Russell
Buck, Ms Karen
Byrne, rh Mr Liam
Campbell, Mr Alan
Campbell, Mr Gregory
Campbell, Mr Ronnie
Caton, Martin
Chapman, Mrs Jenny
Clark, Katy
Clarke, rh Mr Tom
Clwyd, rh Ann
Coaker, Vernon
Coffey, Ann
Connarty, Michael
Cooper, Rosie
Cooper, rh Yvette
Corbyn, Jeremy
Crausby, Mr David
Creagh, Mary
Creasy, Stella
Cruddas, Jon
Cryer, John
Cunningham, Alex
Cunningham, Mr Jim
Cunningham, Tony
Curran, Margaret
Dakin, Nic
Danczuk, Simon
Davidson, Mr Ian
Davies, Geraint
De Piero, Gloria
Denham, rh Mr John
Dobson, rh Frank
Docherty, Thomas
Donohoe, Mr Brian H.
Doran, Mr Frank
Dowd, Jim
Doyle, Gemma
Dromey, Jack
Dugher, Michael
Eagle, Ms Angela
Eagle, Maria
Edwards, Jonathan
Efford, Clive
Elliott, Julie
Esterson, Bill
Farrelly, Paul
Field, rh Mr Frank
Fitzpatrick, Jim
Flello, Robert
Flint, rh Caroline
Flynn, Paul
Fovargue, Yvonne
Francis, Dr Hywel
Gapes, Mike
Gilmore, Sheila
Glass, Pat
Glindon, Mrs Mary
Godsiff, Mr Roger
Goggins, rh Paul
Goldsmith, Zac
Goodman, Helen
Greatrex, Tom
Green, Kate
Greenwood, Lilian
Griffith, Nia
Gwynne, Andrew
Hain, rh Mr Peter
Hamilton, Mr David
Hamilton, Fabian
Hanson, rh Mr David
Harman, rh Ms Harriet
Healey, rh John
Hepburn, Mr Stephen
Heyes, David
Hilling, Julie
Hodgson, Mrs Sharon
Hoey, Kate
Hopkins, Kelvin
Hosie, Stewart
Howarth, rh Mr George
Hunt, Tristram
Irranca-Davies, Huw
James, Mrs Siân C.
Jamieson, Cathy
Jarvis, Dan
Johnson, rh Alan
Johnson, Diana
Jones, Helen
Jones, Susan Elan
Joyce, Eric
Kendall, Liz
Khan, rh Sadiq
Lammy, rh Mr David
Lavery, Ian
Leslie, Chris
Lewis, Mr Ivan
Love, Mr Andrew
Lucas, Caroline
Lucas, Ian
MacNeil, Mr Angus Brendan
Mactaggart, Fiona
Mahmood, Shabana
Mann, John
Marsden, Mr Gordon
McCabe, Steve
McCann, Mr Michael
McCarthy, Kerry
McClymont, Gregg
McCrea, Dr William
McDonagh, Siobhain
McDonnell, John
McFadden, rh Mr Pat
McGovern, Alison
McGovern, Jim
McKechin, Ann
McKinnell, Catherine
Meacher, rh Mr Michael
Meale, Sir Alan
Mearns, Ian
Michael, rh Alun
Miliband, rh David
Miller, Andrew
Mitchell, Austin
Morden, Jessica
Morrice, Graeme
(Livingston)
Morris, Grahame M.
(Easington)
Mudie, Mr George
Munn, Meg
Murphy, rh Paul
Murray, Ian
Nash, Pamela
O'Donnell, Fiona
Onwurah, Chi
Owen, Albert
Pearce, Teresa
Percy, Andrew
Perkins, Toby
Raynsford, rh Mr Nick
Reed, Mr Jamie
Reeves, Rachel
Reynolds, Emma
Reynolds, Jonathan
Ritchie, Ms Margaret
Robertson, Angus
Robinson, Mr Geoffrey
Rotheram, Steve
Roy, Mr Frank
Roy, Lindsay
Ruane, Chris
Ruddock, rh Joan
Sarwar, Anas
Seabeck, Alison
Shannon, Jim
Sharma, Mr Virendra
Sheridan, Jim
Shuker, Gavin
Simpson, David
Skinner, Mr Dennis
Slaughter, Mr Andy
Smith, rh Mr Andrew
Smith, Angela
Smith, Owen
Spellar, rh Mr John
Stringer, Graham
Stuart, Ms Gisela
Sutcliffe, Mr Gerry
Thomas, Mr Gareth
Thornberry, Emily
Trickett, Jon
Turner, Karl
Umunna, Mr Chuka
Vaz, Valerie
Vickers, Martin
Walley, Joan
Watson, Mr Tom
Watts, Mr Dave
Weir, Mr Mike
Whiteford, Dr Eilidh
Whitehead, Dr Alan
Wicks, rh Malcolm
Williamson, Chris
Wilson, Phil
Wilson, Sammy
Winnick, Mr David
Winterton, rh Ms Rosie
Wishart, Pete
Wood, Mike
Woodcock, John
Woodward, rh Mr Shaun
Wright, David
Wright, Mr Iain
Tellers for the Ayes:
Mark Tami and
Graham Jones
NOES
Adams, Nigel
Afriyie, Adam
Aldous, Peter
Amess, Mr David
Andrew, Stuart
Bacon, Mr Richard
Baker, Norman
Baker, Steve
Baldry, Tony
Baldwin, Harriett
Barclay, Stephen
Barker, Gregory
Baron, Mr John
Barwell, Gavin
Bellingham, Mr Henry
Benyon, Richard
Beresford, Sir Paul
Berry, Jake
Bingham, Andrew
Binley, Mr Brian
Birtwistle, Gordon
Blackman, Bob
Blackwood, Nicola
Blunt, Mr Crispin
Boles, Nick
Bone, Mr Peter
Bradley, Karen
Brake, Tom
Bray, Angie
Brazier, Mr Julian
Brine, Mr Steve
Brokenshire, James
Brooke, Annette
Bruce, Fiona
Bruce, rh Malcolm
Buckland, Mr Robert
Burley, Mr Aidan
Burns, rh Mr Simon
Burrowes, Mr David
Burstow, Paul
Burt, Alistair
Burt, Lorely
Byles, Dan
Cable, rh Vince
Cairns, Alun
Campbell, rh Sir Menzies
Carmichael, Neil
Carswell, Mr Douglas
Cash, Mr William
Chishti, Rehman
Chope, Mr Christopher
Clappison, Mr James
Clark, rh Greg
Clarke, rh Mr Kenneth
Clifton-Brown, Geoffrey
Coffey, Dr Thérèse
Collins, Damian
Colvile, Oliver
Cox, Mr Geoffrey
Crockart, Mike
Davey, Mr Edward
Davies, David T. C.
(Monmouth)
Davies, Glyn
Davies, Philip
de Bois, Nick
Dinenage, Caroline
Djanogly, Mr Jonathan
Dorries, Nadine
Doyle-Price, Jackie
Duddridge, James
Duncan Smith, rh Mr Iain
Dunne, Mr Philip
Ellis, Michael
Ellison, Jane
Ellwood, Mr Tobias
Elphicke, Charlie
Eustice, George
Evans, Graham
Evans, Jonathan
Evennett, Mr David
Fabricant, Michael
Foster, rh Mr Don
Francois, rh Mr Mark
Freeman, George
Freer, Mike
Fullbrook, Lorraine
Fuller, Richard
Gauke, Mr David
George, Andrew
Gibb, Mr Nick
Gilbert, Stephen
Goodwill, Mr Robert
Graham, Richard
Grant, Mrs Helen
Gray, Mr James
Green, Damian
Greening, Justine
Grieve, rh Mr Dominic
Griffiths, Andrew
Gyimah, Mr Sam
Halfon, Robert
Hammond, Stephen
Hancock, Mr Mike
Hands, Greg
Harper, Mr Mark
Harrington, Richard
Harris, Rebecca
Hart, Simon
Harvey, Nick
Haselhurst, rh Sir Alan
Hayes, Mr John
Heath, Mr David
Heaton-Harris, Chris
Hemming, John
Henderson, Gordon
Hendry, Charles
Hinds, Damian
Hoban, Mr Mark
Hollobone, Mr Philip
Holloway, Mr Adam
Hopkins, Kris
Howarth, Mr Gerald
Howell, John
Huhne, rh Chris
Huppert, Dr Julian
Hurd, Mr Nick
James, Margot
Javid, Sajid
Jenkin, Mr Bernard
Johnson, Gareth
Jones, Andrew
Jones, Mr Marcus
Kawczynski, Daniel
Kelly, Chris
Kennedy, rh Mr Charles
Kirby, Simon
Knight, rh Mr Greg
Laing, Mrs Eleanor
Lamb, Norman
Lancaster, Mark
Lansley, rh Mr Andrew
Latham, Pauline
Leadsom, Andrea
Lee, Dr Phillip
Lefroy, Jeremy
Lewis, Brandon
Liddell-Grainger, Mr Ian
Lilley, rh Mr Peter
Lloyd, Stephen
Lopresti, Jack
Lord, Jonathan
Loughton, Tim
Luff, Peter
Lumley, Karen
Macleod, Mary
Main, Mrs Anne
May, rh Mrs Theresa
McCartney, Karl
McIntosh, Miss Anne
McLoughlin, rh Mr Patrick
McPartland, Stephen
McVey, Esther
Mensch, Louise
Menzies, Mark
Mercer, Patrick
Metcalfe, Stephen
Mills, Nigel
Mitchell, rh Mr Andrew
Mordaunt, Penny
Morgan, Nicky
Morris, Anne Marie
Morris, David
Morris, James
Mosley, Stephen
Mowat, David
Mulholland, Greg
Mundell, rh David
Murray, Sheryll
Murrison, Dr Andrew
Neill, Robert
Newmark, Mr Brooks
Newton, Sarah
Nokes, Caroline
Norman, Jesse
Nuttall, Mr David
O'Brien, Mr Stephen
Offord, Mr Matthew
Ollerenshaw, Eric
Ottaway, Richard
Paice, rh Mr James
Parish, Neil
Patel, Priti
Pawsey, Mark
Penning, Mike
Penrose, John
Phillips, Stephen
Pickles, rh Mr Eric
Pincher, Christopher
Poulter, Dr Daniel
Prisk, Mr Mark
Pugh, John
Raab, Mr Dominic
Reckless, Mark
Redwood, rh Mr John
Rees-Mogg, Jacob
Reevell, Simon
Reid, Mr Alan
Rifkind, rh Sir Malcolm
Robathan, rh Mr Andrew
Robertson, Mr Laurence
Rogerson, Dan
Rosindell, Andrew
Rudd, Amber
Russell, Bob
Rutley, David
Sanders, Mr Adrian
Sandys, Laura
Scott, Mr Lee
Selous, Andrew
Sharma, Alok
Shelbrooke, Alec
Shepherd, Mr Richard
Simmonds, Mark
Simpson, Mr Keith
Skidmore, Chris
Smith, Miss Chloe
Smith, Henry
Smith, Julian
Smith, Sir Robert
Soames, Nicholas
Soubry, Anna
Spelman, rh Mrs Caroline
Spencer, Mr Mark
Stephenson, Andrew
Stevenson, John
Stewart, Bob
Stewart, Rory
Streeter, Mr Gary
Stride, Mel
Stuart, Mr Graham
Stunell, Andrew
Sturdy, Julian
Swales, Ian
Swayne, Mr Desmond
Swinson, Jo
Syms, Mr Robert
Teather, Sarah
Timpson, Mr Edward
Tomlinson, Justin
Truss, Elizabeth
Turner, Mr Andrew
Uppal, Paul
Vaizey, Mr Edward
Vara, Mr Shailesh
Walker, Mr Charles
Walker, Mr Robin
Wallace, Mr Ben
Ward, Mr David
Watkinson, Angela
Weatherley, Mike
Webb, Steve
Wharton, James
Wheeler, Heather
White, Chris
Whittaker, Craig
Whittingdale, Mr John
Wiggin, Bill
Williams, Mr Mark
Williams, Stephen
Williamson, Gavin
Willott, Jenny
Wilson, Mr Rob
Wollaston, Dr Sarah
Wright, Simon
Young, rh Sir George
Zahawi, Nadhim
Tellers for the Noes:
Stephen Crabb and
Mark Hunter
Question accordingly negatived.
5 July 2011 : Column 1460
5 July 2011 : Column 1461
5 July 2011 : Column 1462
The Exchequer Secretary to the Treasury (Mr David Gauke): I beg to move amendment 1, page 48, line 16, leave out subsection (4).
Mr Deputy Speaker (Mr Nigel Evans): With this it will be convenient to discuss Government amendments 2 to 8.
Mr Gauke:
Clause 87 and schedule 25 give effect to the new mutual assistance recovery directive, which comes into effect on 1 January 2012. The directive will improve the current mutual assistance provisions, which permit member states to recover and enforce tax debts and to exchange information across the European Union. This will improve tax compliance and make the tax system fairer. The directive extends mutual assistance to all national and local taxes. Local taxes are devolved, so consent is required from the Scottish Parliament and
5 July 2011 : Column 1463
the Northern Ireland Assembly to legislate on their behalf. These consents could not be secured before those Administrations dissolved ahead of the May elections, so a number of exclusions were included in the Bill published on 31 March 2011. Agreement has now been received from Scotland and Northern Ireland that Westminster can legislate for these matters.
The amendments remove the exclusions included in the Bill in relation to Scotland and Northern Ireland. They also make an addition to the explanation of “relevant UK authority” in order to include a claim from another member state to recover an agricultural levy in Scotland.
Gavin Williamson (South Staffordshire) (Con): I understand that my hon. Friend recently received the very prestigious award of tax personality of the year. I am somewhat concerned that this glorious award may be influencing his conduct as a Minister in carrying on his business in relation to tax policy. Is that a fact?
Mr Gauke: I am grateful to my hon. Friend for that intervention. I am trying hard not to let the award go to my head. I will endeavour to do my best, but it is of course a great honour. I take it as praise for what the Government are doing more generally on tax policy. Before I break into tears—I find it quite emotional to talk about the award—I shall return to the issue of mutual assistance.
HMRC’s data-gathering powers are modernised by clause 86 and schedules 23 and 24. It is important that the powers satisfy the international standards determined by the OECD and the global forum on transparency and exchange of information for tax purposes. The provisions in the Bill, which have been discussed in Committee, will ensure that HMRC can use its full range of existing powers to meet requests from overseas.
The global forum is currently conducting a peer review of the UK and a specific issue has been identified that we have to address. Schedule 36 to the Finance Act 2008 does not allow HMRC to require information from a third party when it does not know the full identity of the taxpayer but has some information from which their full identity can be ascertained, such as a branch code and a bank account number or a credit card number. At present, unless a serious loss of tax is suspected, HMRC is unable to issue a notice to a third party that can be reasonably expected to know the name and address of the person concerned. In the examples I have given, that would be a bank or credit card issuer. To meet our international commitments, we need to amend schedule 36 to allow a formal notice to be issued in those circumstances. However, we have made a clear commitment to consult on tax changes, so I have asked HMRC to consult over the summer on how best to achieve the changes, with a view to publishing draft provisions in the autumn and legislating next year. I envisage the changes taking effect from Royal Assent in 2012.
In conclusion, the amendments to clause 87 and schedule 25 will help to ensure that the new mutual assistance recovery directive is fully transposed into UK law by 31 December 2011. We fully support the aims of the directive and this implementing legislation. I therefore commend the amendments to the House.
5 July 2011 : Column 1464
Chris Leslie: The amendments look reasonably uncontentious. It is sensible to find ways to support mutual assistance between nation states in the recovery of tax debts and duties. I am glad that the consents have come from the devolved Administrations. Those justify the amendments, so we do not wish to oppose them.
May I, too, take this opportunity to congratulate the hon. Gentleman on the prestigious award of tax personality of the year. I am sure that there is more to his personality than tax. Perhaps in his speech, as well as thanking his parents and his agent, he could also thank his accountant.
Mr Gauke: I beg to move amendment 22, page 166, leave out line 18 and insert
‘day specified in the election as the day on which it takes effect (which must be later than the day on which the election is made).’.
Mr Deputy Speaker (Mr Nigel Evans): With this it will be convenient to discuss Government amendments 23 to 29.
Mr Gauke: The amendments will ensure that clauses 34 and 48 operate as intended when companies make retrospective changes to the dates to which their accounts are drawn up.
Schedule 7 allows companies to elect prospectively to change the currency in which they prepare their accounts for tax purposes. That is often referred to as their functional currency. That change must be prospective to prevent companies from changing their functional currency with the benefit of hindsight to realise a foreign exchange loss for tax purposes. Following the Public Bill Committee debate on clause 34, a major accountancy firm disclosed an avoidance scheme that retrospectively creates a short accounting period to circumvent the new rules. The amendments will ensure that clause 34 operates as intended when a company retrospectively changes the date to which its accounts are drawn up.
Clause 48 and schedule 13 implement an optional branch exemption regime. Companies must elect into branch exemption in advance of an accounting period to prevent them from leaving known losses outside of exemption in order to retain loss relief. Retrospective accounting period changes create problems similar to those that arise in connection with clause 34, whereby decisions on election into branch exemption may be made with the benefit of hindsight. The amendments will ensure that clause 48 operates as intended when a company changes its accounting periods. In each case, the date on which an election comes into force will be fixed in advance at the time when the election is made.
The amendments that relate to clause 34 will protect the £60 million yield in the original measure, and together the amendments will protect an estimated £200 million that would otherwise be likely to be lost due to avoidance schemes. They will ensure that clauses 34 and 48 operate as intended when a company uses hindsight to alter its accounting periods. I therefore urge the House to accept them.
5 July 2011 : Column 1465
9.15 pm
Chris Leslie: Again, these Government amendments are sensible. It is important that we tighten loopholes for investment companies that might chop and change the election of their functional currencies to generate tax deductible foreign exchange losses and avoid a tax obligation. They seem important minor amendments to improve election arrangements, so we are happy to support them.
Amendments made: 23, page 166, line 21, leave out subsection (3) and insert—
‘(2A) An election under section 9A(2)(a) may be revoked by notice of the revocation being given to an officer of Revenue and Customs before the election takes effect.
(3) Subject to that, an election has effect until immediately before—
(a) the day on which another election by X takes effect, or
(b) the day on which a revocation event occurs,
Amendment 24, page 166, line 41, at end insert—
‘(5A) Subsections (5B) and (5C) apply if a period of account of X (“the straddling period of account”) begins before, and ends on or after, the day on which—
(a) an election under section 9A(2)(a) takes effect, or
(b) a revocation event occurs.
(5B) It is to be assumed, for the purposes of this Chapter, that the straddling period of account consists of two separate periods of account—
(a) the first beginning with the straddling period of account and ending immediately before that day, and
(b) the second beginning with that day and ending with the straddling period of account,
and X’s profits and losses are to be computed accordingly for the purposes of corporation tax.
(5C) For those purposes, it is to be assumed—
(a) that X prepares its accounts for each of the two periods in the same currency, and otherwise on the same basis, as it prepares its accounts for the straddling period of account, and
(b) that if the accounts for the straddling period of account, in accordance with generally accepted accounting practice, identify a currency as X’s functional currency, the accounts for each of the two periods do likewise.’.
Amendment 25, page 167, line 28, leave out from ‘but’ to end of line 37 and insert ‘for a change in the company’s functional currency (within the meaning of section 17(4) of that Act) as between—
(a) the period of account of the company in which the gain or loss arises, and
(b) a period of account of the company ending in the 12 months immediately preceding that period.”’.
Amendment 26, page 167, line 44, leave out from ‘but’ to end of line 9 on page 168 and insert ‘for a change in the company’s functional currency (within the meaning of section 17(4) of that Act) as between—
(a) the period of account of the company in which the gain or loss arises, and
(b) a period of account of the company ending in the 12 months immediately preceding that period.”’.
Amendment 27, page 168, line 14, at end insert—
‘( ) Where an election made by a company before 27 June 2011 does not specify the day on which it takes effect, the election is to be treated as if it specified the first day of the first period of account of the company beginning after the election was made.’.—(Mr Gauke.)
5 July 2011 : Column 1466
Amendments made: 28, page 209, line 39, leave out from ‘company’ to end of line 40 and insert ‘beginning on or after the relevant day.
(1A) “The relevant day” is the day on which, at the time of the election, the accounting period following that in which the election is made is expected to begin.
(1B) Subsection (1C) applies if an accounting period of the company (“the straddling period”) begins before, and ends on or after, the relevant day.
(1C) It is to be assumed, for the purposes of the Corporation Tax Acts, that the straddling period consists of two separate accounting periods—
(a) the first beginning with the straddling period and ending immediately before the relevant day, and
(b) the second beginning with that day and ending with the straddling period.
(1D) Where for those purposes it is necessary to apportion the profits and losses for the straddling period to different parts of the period, that apportionment is to be made on a just and reasonable basis.’.
Amendment 29, page 209, line 41, leave out from ‘before’ to end of line 42 and insert ‘the relevant day.’.—(Mr Gauke.)
Amendments made: 32, page 315, line 34, leave out paragraph (b) and insert—
(b) M, or another member of the relevant group, has assets which correspond to liabilities which N, or another entity which is not a member of the group, has to M or (as the case may be) that other member (“N’s liabilities”),’.
Amendment 33, page 315, line 36, leave out ‘between M and N’.
Amendment 34, page 315, line 37, at end insert ‘, and liabilities of other members of the group to N or another entity which is not a member of the group,’.
Amendment 35, page 316, line 1, leave out paragraph (d) and insert—
(d) “the netting event occurs” if the insolvency or bankruptcy of—
(i) M, or another member of the relevant group which has assets which correspond to a liability covered by the provision mentioned in sub-paragraph (1)(c), or
(ii) N, or another entity which is not a member of the group and which has such a liability,
gives rise to the termination of any arrangements under which such a liability arises.’.
Amendment 36, page 316, line 23, leave out ‘M’s assets’ and insert ‘the assets of M, or of another member of the relevant group,’.
Amendment 37, page 316, line 24, at end insert—
‘( ) But if this paragraph applies in relation to more than one member of the relevant group, no part of an asset may be included in the net settlement assets of more than one such member.’.
Amendment 38, page 320, line 11, leave out paragraph (b) and insert—
(b) M, or another entity within sub-paragraph (9), has assets which correspond to liabilities which N, or another entity not within that sub-paragraph, has to M or (as the case may be) to that other entity within that sub-paragraph (“N’s liabilities”),’.
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Amendment 39, page 320, line 13, leave out ‘between M and N’.
Amendment 40, page 320, line 14, at end insert ‘, and liabilities of other entities within sub-paragraph (9) to N or another entity which is not within that sub-paragraph,’.
Amendment 41, page 320, line 35, leave out paragraph (e) and insert—
(e) “the netting event occurs” if the insolvency or bankruptcy of—
(i) M, or another entity within sub-paragraph (9) which has assets which correspond to a liability covered by the provision mentioned in sub-paragraph (8)(c), or
(ii) N, or another entity not within sub-paragraph (9) which has such a liability,
gives rise to the termination of any arrangements under which such a liability arises.’.
Amendment 42, page 321, line 6, leave out ‘M’s assets’ and insert ‘the assets of M, or of another entity within sub-paragraph (9),’.
Amendment 43, page 321, line 7, at end insert—
(a) if N’s net settlement liabilities include liabilities of a relevant foreign bank covered by paragraph 17(17), X% (as determined at Step 2 in paragraph 24(1)) of the assets corresponding to the liabilities of the relevant foreign bank are to be disregarded for the purposes of sub-paragraph (14), and
(b) if sub-paragraph (12) applies in relation to more than one entity within sub-paragraph (9), no part of an asset may be included in the net settlement assets of more than one such entity.’.
Amendment 44, page 324, line 38, leave out paragraph (b) and insert—
(b) M, or another entity within sub-paragraph (9), has assets which correspond to liabilities which N, or another entity not within that sub-paragraph, has to M or, as the case may be, to that other entity within that sub-paragraph (“N’s liabilities”),’.
Amendment 45, page 324, line 40, leave out ‘between M and N’.
Amendment 46, page 324, line 41, at end insert ‘, and liabilities of other entities within sub-paragraph (9) to N or another entity which is not within that sub-paragraph,’.
Amendment 47, page 325, line 15, leave out paragraph (e) and insert—
(e) “the netting event occurs” if the insolvency or bankruptcy of—
(i) M, or another entity within sub-paragraph (9) which has assets which correspond to a liability covered by the provision mentioned in sub-paragraph (8)(c), or
(ii) N, or another entity not within sub-paragraph (9) which has such a liability,
gives rise to the termination of any arrangements under which such a liability arises.’.
Amendment 48, page 325, line 36, leave out ‘M’s assets’ and insert ‘the assets of M, or of another entity within sub-paragraph (9),’.
Amendment 49, page 325, line 37, at end insert—
(a) if N’s net settlement liabilities include liabilities of a relevant foreign bank covered by paragraph 19(17), X% (as determined at Step 2 in paragraph 24(1)) of the assets corresponding to the liabilities of the relevant foreign bank are to be disregarded for the purposes of sub-paragraph (14), and
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(b) if sub-paragraph (12) applies in relation to more than one entity within sub-paragraph (9), no part of an asset may be included in the net settlement assets of more than one such entity.’.
Amendment 50, page 336, line 33, at end insert—
‘Netting agreements
(1) The Treasury may by order add to, repeal or otherwise amend any of paragraphs 16, 18(8) to (16), 20(8) to (16), 22 and 25.
(2) An order under this paragraph may make consequential amendments of this Schedule.
(3) An order under this paragraph may have retrospective effect in relation to—
(a) any chargeable period in which the order is made, or
(b) in the case of an order made on or before 31 December 2011, any chargeable period ending on or after 1 January 2011.
(4) Orders under this paragraph are to be made by statutory instrument.
(5) A statutory instrument containing an order under this paragraph may not be made unless a draft has been laid before, and approved by a resolution of, the House of Commons.’.—(Mr Gauke.)
Amendments made: 2, page 390, line 29, leave out ‘other than excluded matters’.
Amendment 3, page 390, line 31, leave out ‘other than excluded matters’.
Amendment 4, page 390, line 32, leave out sub-paragraphs (3) and (4).
Amendment 5, page 391, line 18, leave out sub-paragraph (4).
Amendment 6, page 393, line 15, at end insert—
(ca) if the foreign claim relates to an agricultural levy and the steps are ones to be taken in or in relation to Scotland, the Commissioners concurrently with the Scottish Ministers;’.
Amendment 7, page 393, line 42, leave out sub-paragraph (2).
Amendment 8, page 395, line 26, leave out sub-paragraph (3).—(Mr Gauke .)
9.16 pm
Mr Gauke: I beg to move, That the Bill be now read the Third time.
During the course of the debates on this Finance Bill we have spent some time combing through the details of our plans to put the economy back on course. It is a Bill that will help ensure the stability of our financial sector, protect the most vulnerable in society from the worst effects of the downturn, make Britain a better place to do business and stimulate private sector growth. We are clearly the Government who are setting the agenda on the need for a tax system that encourages growth, by cutting corporation tax, improving research and development tax credits, extending enterprise investment schemes and increasing the entrepreneurs’ relief.
To be fair, after three months of debate we have not seen much policy from the Opposition. Of course, the right hon. Member for Morley and Outwood (Ed Balls)
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proposed a temporary cut in VAT in the middle of our proceedings, although I cannot but draw the House’s attention to the fact that he then failed to table an amendment to that effect until it was too late. It fell to the hon. Member for Carmarthen East and Dinefwr (Jonathan Edwards), who I am delighted to see here this evening, to table such an amendment. However, at that point the official Opposition abstained and failed to support the very policy for which they had been campaigning the week before. I would like to think that they were persuaded by the arguments made from the Dispatch Box that it was the wrong policy. Perhaps there is some cachet in being tax personality of the year after all, although on that evening not all Government Back Benchers were so easily persuaded by arguments from the Treasury Bench.
Hon. Members will be aware that this is the first full Bill in which we have demonstrated our commitment to the principles of tax policy making that were set out in last year’s Budget. To paraphrase Bananarama, it ain’t just what you do, it’s the way that you do it. I am sure hon. Members are aware that the Treasury Committee published its report on our new approach to tax policy making on 15 March, and that they will have noted the principles of good taxation set out by my right hon. Friend the Chancellor in his Budget speech. Like the Committee, he gave his views on what the key elements of our tax system should be. It should support growth and encourage competition; be certain and predictable; be simple to understand and easy to comply with; and be fair, reward work, support aspiration and ask the most from those who can most afford it. Those principles are central to the policy making process that is reflected in the measures that we see in the Bill.
The Bill supports growth in our economy, and will help to provide businesses with the most competitive tax system in the G20. We set out our plans for achieving that in “The Corporate Tax Road Map”, which was published last November. We are providing business with a clear understanding of our overall direction of travel; setting out the timetable for major areas of reform; and enabling businesses to have the confidence they need to invest, create new jobs and drive the recovery. John Cridland, director-general of CBI said, quite simply:
“This Budget will help businesses grow and create jobs. The Chancellor has made clear the UK is open for business.”
The Bill delivers some of the major changes: a cut in corporation tax to 26% this year and 25% next year, towards a rate of 23% in 2014, which will be the lowest corporation tax rate in the G7; cuts in the small-profits rates of tax; interim reforms of the controlled foreign corporation rules, before a full reform next year; and simplification of the rules relating to corporate capital gains. Those will help to deliver on making Britain competitive internationally, although that is not the only driver of growth: we are supporting British businesses through changes to the enterprise investment R and D tax credit schemes, making them more generous; we have doubled the rate of entrepreneurs relief; and we are increasing the disposal time for short-life assets to eight years.
We set out most of the measures in the Bill last year, just as we set out most of the measures for next year in Budget 2011. We will consult on draft legislation in the autumn to allow time to hear from interested parties
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and, as I have said, we have set out future changes in a number of areas, including for corporate taxes. Certainty is what British businesses need most, and that is what this Government are giving them.
On simplification, we recognised the spaghetti bowl of complexity in the tax system, so last summer we set up the Office of Tax Simplification to advise us on how to untangle matters. It has made substantial progress and has already examined the reliefs within the tax system. Following its recommendations, we have identified more than 40 reliefs for abolition, of which seven are repealed by the Bill. We recently launched a consultation on the remainder to ensure that taxpayers have sufficient notice of the changes, with a view to legislating next year. Furthermore, the OTS has made recommendations on the operational integration of income tax and national insurance contributions, and we announced in the Budget that we will take forward work on that. A simpler tax system is an easier tax system, and it reduces costs for business and the Government, although it may leave me with less to read on my quiet evenings in.
The final principle outlined by the Chancellor and echoed by the Treasury Committee is that of fairness. We have increased the personal allowance by £1,000, and will increase it to £10,000. We are making real steps in every year in this Parliament. We have cut fuel duty by only 1p, as opposed to the 6p increase that the previous Government would have imposed. We are freezing vehicle excise duty for hauliers, and there will be an inflation-only increase in vehicle excise duty for all other motorists.
We are supporting pensioners through the triple guarantee on state pensions and by removing the requirement to annuitise, and we are helping charities through changes to the substantial donors rules. We are taking action on tax avoidance to address issues that have spiralled out of control. In particular, we have introduced legislation to tackle disguised remuneration—the practice whereby well paid individuals disguise their remuneration as loans that are never repaid, which results in a loss to the Exchequer. That measure will raise more than £700 million a year, and I am genuinely surprised and disappointed that it did not receive Opposition support in Committee. We have also introduced the bank levy to encourage banks to behave in a less risky manner, while ensuring that they pay their fair share. The tax system must be fair, and this Government are ensuring that that is so.
When I thought that I would be making this speech on 4 July, I found it easy to weave in references to American independence, in which taxation played such a large part. The date of 5 July is a little less well known for historical events, although of course it was the date in 1948 on which the NHS was launched. My research on this day uncovered a further event of note, although I shall refrain from calling it historical—were the right hon. Member for Delyn (Mr Hanson) here, I would wish him a very happy birthday. I thank him for his constructive engagement during the passage of the Bill in Committee and on Report, as I do the hon. Members for Bristol East (Kerry McCarthy) and for Nottingham East (Chris Leslie). I hope that the right hon. Gentleman has found the time to celebrate. I would like to thank him for his good humour during the Bill. I would also like to take this opportunity to pass on my congratulations to an official who has been supporting me throughout
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the Bill and who is celebrating her 30th birthday today and showing her dedication to the cause. It may be her 30th birthday but she is still with us in the Chamber today.
We have a plan for deficit reduction that has been internationally endorsed, and we are sticking to it. We have a plan for growth—growth that will be driven by investment and exports, growth that is sustainable and growth that supports entrepreneurs throughout the country. The Bill puts in place the right conditions to allow British business to flourish, and I commend it to the House.
9.25 pm
Chris Leslie: May I join the Minister in congratulating the Bill team on their hard work and unstinting efforts, especially in Committee, where unfortunately I was unable to join them? However, it has been a delight to revisit these issues on Report over the past couple of days. I would like to pay tribute to my right hon. Friend the Member for Delyn (Mr Hanson), whose birthday it is today—I do not know where he is at the moment, but I am sure that he is watching proceedings avidly.
I should also say happy birthday to the NHS and to the official who has been helping the Minister. I am told that 30 is the new 20. I thank my hon. Friend the Member for Bristol East (Kerry McCarthy), and also my hon. Friend the Member for West Ham (Lyn Brown). The Whips are often unsung in these matters, but we would not be here without their support and assistance—and tugging of jackets at various moments! I am not familiar with Bananarama’s greatest hits but the Minister, given his new personality award, might like to tell me a little more about them. I gather that “True Confessions” in 1986 was one of their greatest hits, but “Please Yourself” came in 1993—I think that somewhere between the two defines his approach to the Finance Bill.
Coming in at just under 400 pages, the third Finance Bill of the year, with a huge number of amendments, is a complex measure, but for all its detail and complexity, I am afraid that it represents a missed opportunity to tax the banks fairly and to support job creation across the UK. Those omissions make this a sub-standard and ill-judged Bill. Of course, like every country we need to get the deficit down, but the Government are creating a vicious cycle in our economy because they are cutting too far and too fast—hitting families and costing jobs. More people out of work and on benefits will make it harder to get the deficit down. In fact, the Government are now set to borrow £46 billion more than they had planned.
The Government said they would cut the deficit by cutting spending, but putting people on the dole and suppressing growth is a waste of money and a waste of their potential. Instead, the Government need a plan B. They ought to follow our balanced deficit plan, which puts jobs first. Of course, although we need tough decisions, getting people off the dole and back into work is the best way to reduce the deficit. As we have made clear today, rather than giving the banks a tax cut, the Government should adopt Labour’s plan for a tax on bankers’ bonuses and use the money to fund apprenticeships, getting young people into work and supporting small business.
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I am afraid that the Bill jeopardises job creation and fails to support existing jobs. The rushed decision to make a tax raid on North sea oil means that companies are reconsidering their future in Britain, and puts investment and jobs in jeopardy. Of course the Government should seek windfall profits at a time of high fuel prices, but they have rushed that decision without consultation or proper consideration of the longer-term economic consequences. By slashing the investment allowances by £2.6 billion, the Government are penalising those companies that invest, particularly small businesses and businesses in the manufacturing sector. Again, that is putting jobs at risk and holding back growth.
The Bill leaves a number of unresolved and unanswered questions. In Committee, the Government said the child trust fund replacement for looked-after children was still being considered by the Department for Education, but that there was no fixed time frame for implementation. The Minister has been unable to put on record whether any progress has been made on that issue, which is a pity.
Clause 26, which deals with disguised remuneration employment income provided through third parties, has stood out as being particularly badly drafted. It is long and complex, and has been subject to no fewer than 88 last-minute amendments. Businesses are still raising concerns about its scope and interpretation. However, although the drafting of clause 26 was unclear, we did not oppose the principle, and it would be wrong if our position on it were further misrepresented. All we wanted to know was whether the provisions would catch some genuine transactions and whether Ministers were working properly with businesses and professionals to clarify those issues.
The amendments made on Report to clauses 34 and 48 were about closing avoidance loopholes that HMRC have detected. We support those amendments of course, but we have raised concerns about avoidance in respect of the foreign profits clauses. We also had concerns about the loss of tax revenue to developing countries—something on which the Government claim to have conducted only an “initial analysis”. It is a shame that the Government have passed legislation when they cannot give a figure for the impact on developing countries’ tax bases—an assessment that we called for before implementation. We can therefore only hope that the poorest countries in the world are not unintentionally harmed by that measure.
To conclude, as well as leaving a number of questions unanswered and creating uncertainty, the Bill represents a missed opportunity to get banks to pay a fairer share of tax to society, through a stronger bank levy and a repeat of the bank bonus tax. Tragically, it is also a missed opportunity to tackle unemployment and get people into work—further evidence that this Government fail to understand that the best way to secure growth and get the deficit down is to get people off the dole.
9.31 pm
Stephen Williams:
I shall make some brief remarks in this Third Reading debate on yet another Finance Bill. Unlike the hon. Member for Nottingham East (Chris Leslie), who is lucky not to have sat through every stage of the Bill, I have endured all of it, from the Budget and Second Reading right the way through to the upstairs
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and downstairs stages. I too congratulate my hon. Friend the Minister on being named tax personality of the year, which is indeed an exalted position. The tax personality of the year should, of course, know that 5 July is the end of a tax month; in fact, it is also the end of the first quarter of the traditional tax year, so he could have mentioned that too. I can only assume that the judges made their decision before they heard his Bananarama joke. Unfortunately you were absent at that point, Mr Speaker, so you will have to look in
Hansard
to see what I am talking about.
In the spirit of cross-Chamber harmony, I too briefly congratulate the right hon. Member for Delyn (Mr Hanson) on his birthday. He has also been with us for all stages of the Finance Bill, apart from this one. I can only assume that he has thought of somewhere better than the Chamber of the House of Commons from which to watch the final stage of the Bill.
This is a good opportunity to weigh up the credibility of both the official Opposition and the coalition Government, after all the various stages of the Bill. We have heard many times that the Labour Opposition believe that fiscal tightening and a reduction in the budget deficit are needed. However, although we have heard from many Opposition Members about the cuts that they oppose, we have not heard from any of them about the cuts that they favour. We have also heard about their difficulties with the various tax changes that the coalition Government are making. As my hon. Friend the Minister pointed out, the Opposition pulled a rabbit out of the hat in the middle of our proceedings when the shadow Chancellor announced a great new policy with a flourish. His policy was that the Opposition would, after all, oppose the VAT increase to 20%. However, first the Scottish National party gave the Opposition an opportunity to vote against the increase and they abstained, and then Plaid Cymru gave them another opportunity and they abstained again. Indeed, the Opposition could have given themselves an opportunity to vote against the increase, but they failed to get their amendment in on time. That is two official abstentions and one botched attempt to oppose the Government’s policy, so the next time any Labour MP says that they oppose the rise in VAT, they will not have much credibility.
The Opposition also even opposed tightening a tax avoidance measure in Committee, and this morning the last vestige of Labour credibility—if Labour had any—in dealing with the economy was stripped away by the hon. Member for Nottingham East, when Labour refused to support the extension of special drawing rights arising from Britain’s contribution to the IMF. Of course, that was part of the initiative launched by the former Prime Minister, the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown), when he supposedly saved the world—I think that was the phrase—at the London G20 summit in 2009. And today, his successor spokespersons for the Labour party refuse to support the spirit of internationalism in dealing with bail-outs around the world.