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The noble Lord said: In proposing a body known as the Carbon Tax Industrial and Consumer Impact Forum, I first need to explain how I see the jigsaw puzzle overall and then demonstrate why such a forum will have such an indispensable part to play in moving this process forward in a way that can be sustained. Sustainability, of course, is the name of the game. I hope not to speak at excessive length—I will certainly break no records—but by the end I hope that my noble friends will think that I have covered a reasonable number of points on the proposal.
I begin from a point where many would begin—including people in the trade unions, a constituency with which I still have some contact. We are talking about an almost unbelievable reversal of the energy coefficient of growth, on the carbon side at least. I have been involved for many years in this whole business of how to have emissions trading and how to get China and India involved. I remember saying at Rio de Janeiro in 1992, as chairman of the world trade union group on the environment, that we needed to bring in India and China and, at some point, to have a degree of support from the developing countries on the basis that we are each entitled to so much carbon. I remember the American being astonished at what he called those communist ideas. However we do it, the central point is to recognise that there must be pain as well as gain.
I am reminded of the story of the American President who called in a top US admiral in wartime and said, “Admiral, I have figured out the solution to the U-boat problem”. “What would that be, Sir?”, asked the admiral. “Drain the North Atlantic”, said the President. “How do I do that, Sir?”, asked the admiral. The President riposted, “Admiral, am I not the President of these United States and your Commander-in-Chief”. “Yes, Sir”, said the admiral. “Then go out there and obey my orders”, said the President. At the present time, to the order “Drain the North Atlantic”, we would add, “Install windmills to keep out the water”. The extent to which we think we can run an economy without carbon will quite surprise some people. We are a long way from getting that into the bloodstream of—that is, owned by—people. We need to talk to people in their representative capacity to be sure of that.
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I am sorry that my noble friend the Minister is not present. I hope he does not think this an unimportant matter for debate. The Bill is overwhelmingly predicated on choking off demand through price, either directly through taxation, indirectly through energy supply-side increases or through emissions trading and carbon taxation. I use the generic term “carbon tax” in my amendment. That predication is palpably clear from the Oxford Economics reports commissioned by the Treasury, but has it been openly stated by Ministers? I think not; at least, I have not heard my noble friend Lord Rooker say so. He may correct me if I am wrong.
A research paper produced by Oxford Economics, again commissioned by the Treasury, gives this equation: an increase in carbon prices to about €60 per tonne to all sectors of the economy is sufficient, at 2006 prices, to reduce emissions by 30 per cent relative to their 1990 levels by 2020. That finding assumes that all reductions in carbon emissions are achieved by UK firms and households rather than by a purchase of carbon reductions from other countries. That quite explicitly demonstrates that we are predicating our whole approach on choking off demand though prices—and, we could add, through taxes. That process will be inherently regressive; certainly so, if we take no steps to reverse the regressive effect. It is no poll tax, but if we think about the proportion of income that the bottom 25 per cent of the population, or the bottom 10 per cent, have to spend on heating their homes then is not far off that. If they have a car, we should be saying—as one Oxford study does—that the proposal is equivalent to removing one-third of cars from the road. Well, guess whose cars those would be?
If we think that we have approval for all of this, we are kidding ourselves. We are far from that. I strongly support this Bill’s principles, having been involved in this business for a very long time. However, I am afraid that the principle of choking off demand through price increases—whether through taxation, energy supply increases or emissions trading carbon taxation and so on—will not be without huge social conflict unless we make provision in advance to avoid that. It will not be sufficient, in a few years’ time—when we have doubled the price of carbon through tax, or whatever—to say “Well, nobody opposed the Climate Change Bill. You all supported it”. I would not care to have to make that argument in a pub by that stage.
There is nothing wrong in having a lobby; goodness gracious, I have been involved in enough of those. Yet it seems that the environmental lobby has never said these things; again, I stand to be corrected. I am glad to see the noble Baroness, Lady Young of Old Scone, in her place, as she can say whether this quote is wrong. She was quoted in the Daily Telegraph of November 20 as saying that,
There is no hyperbole there, then. Is she getting ready to help dish out the ration books? As we found in World War II, ration coupons are the fairest way—fairer by far than rationing by price. Another way of looking at it, if my analysis is correct, is that
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The standard line in the Treasury cannot be a million miles away from the analysis of the Stern report as the noble Lord, Lord Stern, was in the Treasury all of his life. It argues that the macroeconomic numbers for meeting our carbon targets would not produce a shock out of line with the sort of numbers that vast structural changes to our economy in the past 100 years or so have entailed. I think people have in mind a Ted Heath-type period—the oil shock and so on—but the numbers are totally different. We have to achieve the results advocated in the Bill. The jury may still be out on whether an ice age will come back in the next 5,000 years. As an old trade union official, I know that trade union officials are very long-sighted in negotiations, but no one normally looks ahead for 5,000 years. We all have to agree that this is a programme that will be relevant for 50 years, and we cannot go on without the price tag being associated with the Bill. It is like having an orchestra in which the only instruments are the trumpet and the harp. We need all the instruments in the orchestra.
Some sections of society—the wealthiest—will be able to take this in their stride. Poorer people will not. There will also be an effect on employment. The noble Lord, Lord Stern, acknowledged that. To make a purely arithmetical point, all other things being equal, lower economic growth would mean that we would have to take a hit on employment or productivity. We are committing ourselves to reducing carbon in an economy that will be three times bigger at the end of the planning period than now. All the studies have shown that the price elasticity of demand for carbon is rather low; in other words, people need a lot of it. It has also been remarked that if we are going to push up the price of carbon in this way, which may be necessary, it is tantamount to saying that as soon as ordinary people can afford to go to Malaga on their holidays, they cannot go. It is all right for everyone else to go, but we will push the price up so they cannot go. That is what we are saying in the programme that the Bill is inaugurating.
Those are blunt statements that lead to discussion, but I hope they demonstrate that there is a huge problem in the lack of ownership in Birmingham, Manchester, Scotland or Wales of what we are talking about. No one has bought into this so far. They may have done so at a casual level; everyone says, “What a good idea”, but it is not true. The noble Baroness, Lady Young of Old Scone, has described the changes in our socioeconomic set-up as being as profound as World War III. If that is true, it means that we cannot simply write a blank, post-dated cheque without giving anybody any guess about the amount of money the cheque is for, which we will all have to pay. When I say, “no ownership”, I mean among consumers. My noble friend Lord Whitty wears a hat on the National Consumer Council, but everybody is involved wearing two or three different hats: as taxpayers, workers, consumers, industrialists and so on.
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In the two or three days in Committee that I have attended, noble Lords have talked about the need for a new politics. I am afraid that there is no point saying that we need a new politics without responding to some of the points I am making. This is my only contribution to this debate. There have been 30 hours of debate so far, and this is my only speech, but I have to say that there will be a collapse of trust in government when Ministers of whatever Government tell people in due course why this pain is being imposed on them and, to add insult to injury, that they agreed to it because Parliament agreed the Climate Change Bill. The paradox is “no pain, no gain”. We are being very precise about numbers when it comes to the targets for 30, 40 or 50 years’ time, but there are no numbers on the fiscal side. We cannot guess at that.
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I have given some of the reasons for establishing a Carbon Tax Industrial and Consumer Impact Forum. I am sure that someone can think of a simpler title or acronym for it. I acknowledge the formal point that the Minister always makes, which is that this is not a Defra Bill, but sitting round the table in such a forum we will need people from the Treasury, BERR and Defra as well as interested parties such as workers’ representatives, consumer representatives, industry and others to show their ownership of mitigating the negative side of the cost-benefit outcome for the less privileged people in society. The climate change committee has a separate, very important function but it is not the function to which I am referring, and it cannot do the trick of delivering ownership. It is essential that there is something in the Bill along the lines of my amendment, and I will be happy to discuss it any level. I thank the Committee for being accommodating about the time that I have taken.
Finally, on the European front, which is mentioned in the amendment, today’s announcements in Brussels remind us that the fiscal numbers are easier to get at when we look at the European picture. We need a European agreement on the carbon tax, which was the basis of my maiden speech in 1999. However, we do not want a contradictory mess of competing subsidies that would destroy the internal market. That was also a theme of the statement agreed in Brussels today. Bringing people in to get some ownership of this agenda and to take the responsibility of explaining it to their affiliates is the way to win hearts and minds. I hope the Minister is able to say that proper consideration will be given to it. I beg to move.
The Duke of Montrose: I shall respond to the presentation made by the noble Lord, Lord Lea of Crondall, in general rather than on specifics because we have spent time discussing the pain and problems that will occur on the international scene and he has highlighted the pain and problems that may occur on the domestic scene. That is very realistic. We do have to think of it and I know the Minister will have been thinking about it.
It reminds me of some sentences that characterise a great deal of what we are doing in the Bill. They were written by Matthew Arnold:
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Earl Ferrers: May I make an observation? Earlier, the Minister said that this Bill would not make an impact on extra civil servants or the Treasury. I have thought about that quite a lot since he made that remark. As far as I can see it is going to have a huge impact. It can only increase bureaucracy like mad. The noble Lord, Lord Lea, wanted to set up a forum to include,
- “representatives from Her Majesty’s Government, employer groups, trade unions and consumer organisations”.
The forum then has to produce a report—all forums produce reports—
and it must “give due regard” to increases in taxation, and so forth.
That can only be an enormous increase in bureaucracy and it will not reduce an extra car, reduce a hole in the atmosphere or anything.
Lord Lea of Crondall: I am grateful to the noble Earl for giving way, but I do not know that he can have been listening to what I was saying. The cost of a forum—goodness gracious—will be infinitesimal compared with delivering this £50 billion or £100 billion result that we want. Does he, if I might put it in the form of a question, not accept that this is going to have an enormous impact on people—that they have got to start to understand and be persuaded to accept when they are at the delivering end?
Earl Ferrers: I am not persuaded by that. There is no doubt that the way this is being done can only result in a huge bureaucracy, which can only add more cost and produce nothing beneficial in the end, unless, of course, there is a marginal decrease in carbon, but I rather doubt it.
Lord Puttnam: Perhaps I may act as something of a tiebreaker and speak in general terms in support of my noble friend Lord Lea. If my memory serves me right, in his diaries, Sir John Colville makes the point that the standard of living for the average British family fell by 50 per cent between September 1939 and December 1940. I remember asking my mother when I was a child how she dealt with that. The truth was that she dealt with at least half of that through adaptation—changing the way in which we lived. Our family standard of living did not fall by 50 per cent, it probably fell by, let us say, 20 per cent. I suspect that this might well be the general experience of a great number of people over the next 20 or 30 years.
In that diary, Sir John Colville also says that he did not at the time think it would be possible to persuade the British people to accept this level of deprivation. He puts it entirely down to the power of Prime
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As I have said several times during the Committee stage, the pain of adaptation will be very real. To pretend otherwise, is not to do ourselves—and certainly not the younger people who are going to feel the full effects of this—any favours at all. However, it can be managed. The other thing I remember my mother saying over and over was, “Don’t forget, we were all in it together, and there was a common enemy”. Climate change is a common enemy. Once again, we will be in it together and in that sense I suspect that new adaptation methods will be devised.
Lord Whitty: In a general sense, I want to underline the argument made by my noble friend Lord Lea. A few amendments ago, the Minister chose the Oxford English Dictionary definition of adaptation by referring to “modifying in the light of new circumstances”. That is a nice, gentle, Oxfordy way of describing it. These will be drastic changes. They might take some time and be differential in their impact, but the changes will be drastic over the period that this Bill envisages. They are changes in our lifestyle, the pattern of the economy, the nature of work, the balance of work and life and the pattern of consumption. All of those require us to face up to them in a similar way to the concentrated period to which my noble friend Lord Puttnam has just referred.
They are not minor modifications; they are huge. In wartime—and in this sense, the equivalence referred to by the noble Baroness, Lady Young, is quite correct—all the elements of civil society pulled together and the pain was at least assumed to be more or less equivalent across all levels of society. One of the phrases that we remember from wartime is the late Queen Mother’s remark that at last we can look the East End in the face.
We will be in similar times over these kinds of adjustments. That will require the engagement of leaders of industry, business, commerce, trade unions and other parts of society—and indeed of consumer organisations, such as my own—to make their communications available in putting across the same message. I suspect the Government are not going to be too keen about the prescription put forward by my noble friend Lord Lea. It is a bit corporatist and not with the Zeitgeist. However, it is inevitable that we will have to find some new way to bring all the leaders of society into this battle.
Going back to the previous amendment, it is not just the Secretary of State who will have to implement this, but all of us in any leadership capacity in any part of this nation. There ought to be some reflection of that in the Bill.
The other aspect is that many measures that the Secretary of State—the Government—will introduce through trading schemes, taxation and so on, will have regressive impacts. I have made speeches in this House on that. We are paying too little attention to
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A forum and its bureaucracy are, perhaps, not the most obvious ways of doing it, but the spirit behind my noble friend’s amendment is important and deserves some reflection in this Bill and its proceedings.
Lord Davies of Oldham: This has been an interesting and wide-ranging debate. With his usual perception, my noble friend Lord Rooker recognised that this amendment would be expansive and cover the wide range of the economy. Therefore it was felt that it might not be unhelpful for a Treasury spokesman to reply to this amendment. I am sorry that my noble friend Lord Lea finds that a totally inadequate response on the Government’s part—even before I have managed to utter a few words.
Lord Lea of Crondall: I withdraw what I said. I did not realise the distinction with which my noble friend would be able to respond, with his Treasury connections. I also apologise to my noble friend Lord Rooker. I have clearly insulted two of my noble friends on the Front Bench and, before I make a hat trick by insulting someone else, I had better go home. However, I am looking forward to it.
Lord Davies of Oldham: I hope my noble friend will stay to hear the response, because I want him to stay to withdraw his amendment as well. I hope he will tarry a little longer. We recognised that his amendment raised very broad issues. That is why I am expected to make a short contribution to this important amendment.
He will appreciate that Clause 10 already requires a number of factors to be taken into account both by the Government in coming to any decision about carbon budgets and by the Committee on Climate Change in formulating its advice. The list of factors includes economic circumstances, in particular, the likely impact of the decision on the economy and the competitiveness of particular sectors of it. That is a recognition of the substance of the point made by my noble friend.
This Bill has to be set in the context of a substantial impact on the economy. I am grateful to my noble friends Lord Puttnam and Lord Whitty who seized the opportunity to emphasise that these will, in due course, be epoch-making changes. They will be as great as those that have affected our society at any time in the past. However, we should not underestimate the ability of our nation or others to adapt to change.
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When great challenges are thrown down to societies, the adaptability of people to transform their lives quickly and adopt strategies that they would not have thought of a decade earlier is remarkable. It is forced on them by circumstance, but it is also a realisation that a larger objective needs to be attained. People respond to leadership in those terms and recognise
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However, I do not underestimate the level of change that is required by the challenge that faces us on global warming. But that is the whole raison d’etre of the Bill. I hear what the noble Earl, Lord Ferrers, said and was glad that he returned us to prose. There was no way that I could keep up with the noble Duke, the Duke of Montrose, with his poetic flights, although they were much appreciated. I am therefore very glad that the noble Earl, Lord Ferrers, brought us back to the prosaic. He was right: these challenges will make demands on society in terms of the necessary resources.
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