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House of Lords

Monday, 10 November 2008.

The House met at half-past two: the LORD SPEAKER on the Woolsack.

Prayers—Read by the Lord Bishop of Newcastle.

EU Emissions Trading Scheme: Aviation

Lord Berkeley asked Her Majesty’s Government:

The Minister of State, Department for Transport (Lord Adonis): My Lords, on 24 October, the Council of the European Union adopted a directive including aviation in the European Emissions Trading Scheme. All flights arriving at and departing from European airports are to be included in the scheme from 2012 onwards. The Government led the debate within Europe on including aviation, and we are very pleased with this outcome.

Lord Berkeley: My Lords, I am very grateful to my noble friend for that Answer and I congratulate the Government on that achievement. It is a great reflection on the Government. Does my noble friend agree that, when the proper values are attributed to air to reflect the damage that emissions cause, air traffic volumes will probably reduce, or at least the growth will be reduced, which is something that the airlines are already forecasting? In the light of that situation, my noble friend was at Paddington station last week to receive a cheque for, I think, £350 million from the British Airports Authority. Do we assume that that was something to do with inducing him to go for the third runway, or was it for Crossrail?

Lord Adonis: My Lords, I was receiving a cheque for only £230 million, but if my noble friend would like to make good the other £120 million, he is very welcome to do so. I stress that the contribution that BAA is making towards Crossrail is in respect of the current two-runway airport and the benefits that will accrue to that airport. It does not imply any decision in respect of further changes to runway alignments at Heathrow.

Lord Bradshaw: My Lords, I wonder whether the Minister has thought of the certificates of origin that have to be presented when a claim is made stating that the carbon emissions have genuinely been saved somewhere else. Can he reassure me that this is not some sort of plaything for the financial services industry to make a profit?

Lord Adonis: My Lords, this will be a robust scheme, but we have only just agreed the basis on which it will proceed. There will need to be considerable preparation before the scheme comes in to see that there are no ways of evading it unduly.

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Lord Taylor of Holbeach: My Lords, do the Government see the ETS as currently configured as a vehicle for the calculation of aviation carbon emissions under the Government’s Climate Change Bill proposals? Is the problem not the challenge of Europe-wide agreement, which is welcome, but of relating a European system to a global market?

Lord Adonis: My Lords, the noble Lord is right that there is an international dimension to this well beyond Europe. We are leading discussions in the United Nations Framework Convention on Climate Change and in the International Civil Aviation Organisation. Negotiations will conclude in 2009. We still believe that we can get a global deal, including international aviation. The steps that we are taking in the European Union are an enormously important building block to achieving that global deal.

Lord Clinton-Davis: My Lords, does my noble friend agree that the aviation industry, apart from this issue, has made considerable progress? Does he further agree that quieter aircraft will be coming into service, perhaps in three or four years, and that we should certainly see an improvement? Does he also agree that there are different techniques for landing and take-off? All in all, the aviation industry has made a lot of progress.

Lord Adonis: My Lords, I agree with my noble friend that the aviation industry is making progress. Including aviation in the new EU emissions trading scheme will contribute to a reduction in CO2 emissions of up to 129 million tonnes by 2015 and 194 million tonnes by 2020. So the steps that we have agreed within the European Union are hugely important in terms of the climate change agenda.

Lord Pearson of Rannoch: My Lords, have the Government studied the latest analysis by the Open Europe think tank, which shows how the whole climate action and renewable energy package, of which the ETS forms a part, may be severely misguided? For example, it will increase our fuel bills by around 13 per cent and push at least a million more people into fuel poverty. Given that the planet now appears to be cooling down, would it not be better to abandon the ETS and all the rest of it? Have the Government even thought of this as a way forward?

Lord Adonis: My Lords, it is hard to know which of the noble Lord’s questions was more tendentious, but since I assume that they started from a deep prejudice on principle against any action at European level, almost irrespective of the issue at stake, I suspect that that might deal with the substance of his questions.

Lord Pearson of Rannoch: Shame.

Lord Adonis: My Lords, the evidence set out in the Stern report was clear, and we regard action at the European and national levels as urgent if we are not to see very serious impacts on the planet over the next 50 years.

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Lord Faulkner of Worcester: My Lords, as someone who has opposed airport expansion in the south-east, particularly the third runway at Heathrow and expansion at Stansted, for rather longer than the Conservative Party, I at least welcome its conversion to this cause. In view of the fact that 100,000 of the annual number of flights at Heathrow are to destinations that can be served easily by rail, and given my noble friend’s enthusiasm for high-speed rail and rail expansion, would it not make sense for them to take the place of those flights and for the third runway to be abandoned?

Lord Adonis: My Lords, my noble friend is absolutely right to say that I am keenly interested in the potential for expanding the rail network, including the introduction of high-speed lines, but, as my noble friend will be aware, fewer than 3 per cent of flights to and from Heathrow are to Manchester or Leeds, the areas suggested in the party opposite’s plan for a high-speed line. Therefore, we are discussing apples and pears; to my mind, there is a compelling case for examining the possibility of developing a high-speed line, but that does not relate at all clearly to the case for or against expansion at Heathrow.

Lord Avebury: My Lords, the Minister said that the ETS scheme had to be elaborated so that the aviation industry could not evade it unduly. Did he mean that it is okay for it to do so just a little bit?

Lord Adonis: My Lords, I think that we are working through the implications. I did not fully catch the noble Lord’s question, so I will write to him.

Lord Brooke of Alverthorpe: My Lords, I congratulate the Government on the progress they have made on aviation. What work is being done regarding an even bigger polluter—shipping? When are we likely to see that included?

Lord Adonis: My Lords, actually, on Thursday there will be a Question in the name of the noble Lord, Lord Higgins, on shipping and climate change, but I can tell my noble friend that the UK is proposing that the IMO negotiates a new convention to deal with greenhouse gas emissions from ships, using economic instruments such as an emissions trading scheme. We would welcome the inclusion of shipping in the EU Emissions Trading Scheme.

Housing: VAT

2.44 pm

Lord Cope of Berkeley asked Her Majesty’s Government:

Lord Davies of Oldham: My Lords, the Government generally support member states having the flexibility that would be allowed by the legislative proposal regarding reduced VAT rates adopted by the European Commission in July, including the elements to which the noble Lord refers.

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Lord Cope of Berkeley: My Lords, I am grateful to the noble Lord for that reply, particularly as the noble Lord, Lord Mandelson, dodged the question the other day. Does he agree that the only reason why the anomaly of a zero rate on new buildings and 17.5 per cent on repairs has gone on for so long is the European directive governing VAT? Will the Government press very hard the few nations that object to a change, particularly Germany, to try to ensure that the Chancellor of the Exchequer has the opportunity to make such a change now that targeted tax cuts are back on the agenda?

Lord Davies of Oldham: My Lords, I am sorry that the noble Lord made that slighting remark about my noble friend Lord Mandelson, who was merely reflecting that the issue is not yet decided in Europe. Before making a judgment, Britain must await the normal budgetary process, which is the responsibility of the Treasury and not of the Department for Business, Enterprise and Regulatory Reform. On the noble Lord’s more general point, I have indicated that the Government are in favour of the changes proposed by the Commission. He is right that a number of countries are still to be persuaded, but we have considerable hopes of making progress on that and of the directive being passed shortly.

Lord Howarth of Newport: My Lords, given the case in current economic circumstances for a stimulus to construction activity, and given the importance in any case of acting to remove the present perverse disincentive to conserve houses and listed buildings, will the Government not just support the introduction of the directive but seize the opportunity next year to use the discretion that the directive allows? Indeed, will they urge the Commission and ECOFIN to introduce the directive as rapidly as possible?

Lord Davies of Oldham: My Lords, I appreciate my noble friend’s interest in listed buildings. On VAT, he will already know that Britain has additional powers with regard to certain activities relating to listed buildings. However, he is right to press for additional benefits and we will be looking at that once the European decision is taken.

Baroness Knight of Collingtree: My Lords, the Minister’s Answer seemed to indicate that this matter would not be dealt with with any urgency. Will he consider the fact that, perhaps because of roofing or other difficulties, many historic buildings are in danger and in urgent need of something being done? Will he look at the possibility of speeding that up?

Lord Davies of Oldham: My Lords, I did not want to convey any lack of urgency on the issue. The European directive is expected shortly and the noble Baroness will know that the Pre-Budget Report, when taxation changes may be effected, is also imminent, so we are not talking about undue delay. I was reflecting that, with regard to listed buildings, the UK is in a slightly better position than the rest of Europe because we recognise particular features of Britain’s historic past, and we intend to improve on that.

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Lord Newby: My Lords, the Minister talked in general terms about a timetable. In his view, on the current timetable facing the Commission, would it be possible for the Government to introduce a reduced rate of VAT in next year’s Budget? If not, will they put additional pressure on the EU to bring the timetable forward?

Lord Davies of Oldham: My Lords, I have no specific doubts on the timing. The noble Lord will recognise that, as I said, the European decision is imminent and, although the date of the Budget has not yet been set for next year, we will have time before it is set. I do not want to convey the idea that we automatically follow what the European Commission offers as a possibility. We are in favour of the measure because it will give flexibility to states, but the House will appreciate that we currently give significant advantages on VAT to small businesses and the construction industry. For instance, the threshold does not start until a turnover of £67,000, which is vastly higher than the norm in Europe.

Lord Harrison: My Lords, further to his helpful replies, will my noble friend acknowledge that by agreeing to the ECOFIN motion on 7 December he will be helping small businesses in the construction industry and will be helping to renew the national infrastructure, as well as having the benefit of working in cohesion and in concert with our partners?

Lord Davies of Oldham: My Lords, the Government have made it clear that they want to assist the construction industry and housing in particular. There is a dimension with regard to listed buildings, which has been identified accurately today. I am not in a position to pre-empt or preordain the Government’s decision on VAT, but we have announced our strategy on and intentions towards small businesses. The construction industry will benefit and a decision will be taken on VAT at the appropriate time. The House will recognise that that appropriate time will be in the Pre-Budget Report and the Budget.

Lord Higgins: My Lords, will the noble Lord confirm that there is no need to wait for a Budget to make a change because there are already provisions on the statute book in relation to the regulator to do so without waiting for the Budget?

Lord Davies of Oldham: My Lords, of course that is the case, but the noble Lord will appreciate, with his vast experience of Treasury matters, that we have to look at the VAT issue in the round. He will know just how significant VAT is—

Noble Lords: No.

Lord Davies of Oldham: My Lords, in this instance we are talking about more than £1 billion of revenue. I know that the Conservative Party might be entirely reckless about income to the state at a time when it has no control over the coffers, but I noticed that, when asked for its taxation proposals today, it proved to be a little coy.

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Baroness Oppenheim-Barnes: My Lords—

The Minister of State, Department of Energy and Climate Change & Department for Environment, Food and Rural Affairs (Lord Hunt of Kings Heath): My Lords, we are now well into the 16th minute.

Railways: Channel Tunnel

2.52 pm

Lord Dykes asked Her Majesty’s Government:

The Minister of State, Departmentfor Transport (Lord Adonis): My Lords, through the Channel Tunnel Intergovernmental Commission, which brings together the relevant representatives of both Governments, there are regular discussions both between the two Governments and with Eurotunnel. The most recent plenary meeting of the IGC was on 25 September in London, when the Channel Tunnel fire was discussed, as were the measures being taken towards restoration of full services.

Lord Dykes: My Lords, I declare an interest as a frequent user of the tunnel and thank the Minister for that Answer. When will the Channel Tunnel Safety Authority deliver its report on changes in risk and safety assessments? I think that it is due in September of next year, which seems a long time away. Will he accelerate that in view of the great interest in the matter at the moment? Does he agree that the Channel Tunnel services have recovered enormously since the accident, and that even if its cause were other than what I am about to describe, both Governments should address their priority interest to excluding dangerous materials in heavy vehicles going through the tunnel?

Lord Adonis: My Lords, I am glad to say that services are getting back to normal. Eurostar services are close to normal and there has been an increase in shuttle paths through the tunnel. On 10 October, Eurotunnel announced that work would now proceed to renovate interval 6 of the north tunnel, which was the affected part of the tunnel, with a view to regaining full operations in the north tunnel by mid-February.

On the Channel Tunnel Safety Authority’s investigation, I can add nothing to the Answer that I gave in your Lordships’ House a short time ago. There needs to be a thorough investigation and we do not believe that it would be appropriate for either Her Majesty’s Government or the French Government to intervene in established processes. We have made it clear that any issues on safety brought to the attention of the two Governments will be acted on immediately.

Lord De Mauley: My Lords, the Rail Accident Investigation Branch reported that Eurotunnel had not installed fire suppression systems, which are available

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and are specifically designed to protect the tunnel from fires on wagons carrying lorries. It gave as its reason that,

Why did the Government fail to insist upon this measure?

Lord Adonis: My Lords, I am not familiar with the issue that the noble Lord raises. I need to look into it and come back to him, but I should tell him and the House that following the fire in 1996, the Heath and Safety Executive commissioned an independent review of the design of the trains using the tunnel, including the shuttles, which concluded that any risks attached to the design were as low as reasonably practicable. I think that incorporates the point the noble Lord raised, but I shall look into it and come back to him.

Lord Bradshaw: My Lords, does the Minister agree that after the first fire in the tunnel, the Health and Safety Commission, which investigated it, made some propositions about how unlikely another fire was? I believe the figure ran into some millions. The fire happened very quickly and was very dangerous. Will the Minister press the safety authorities—I am not asking him to interfere with their independence—to produce an interim report as soon as they can stating the cause and what is most likely to prevent it happening? Railway investigating bodies are notoriously slow in their progression.

Lord Adonis: My Lords, we will act on any issues as soon as they are brought to our attention. As the noble Lord will know, two pieces of work are being undertaken: first, the safety inquiry looking specifically at the causes of the accident and lessons to be learnt, which is being conducted by the French independent accident investigation body together with the UK Rail Accident Investigation Branch; and, secondly, the work of the Channel Tunnel Intergovernmental Commission and its agents on the assessments. Proper processes are in place for taking stock of the issues raised by the fire. We will seek to act immediately on anything brought to our attention.

Lord Forsyth of Drumlean: My Lords, will the Minister give an undertaking in his new post to look at the arrangements for searching passengers and vehicles prior to them embarking on trains for the Channel Tunnel and satisfy himself that they are adequate, given the requirements that are insisted upon for airports and air travel in the United Kingdom?

Lord Adonis: My Lords, we believe that they are adequate, but if the noble Lord has any particular issues he would like to draw to my attention, I would be happy to take them up.

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