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Relief from Income Tax on Expenditure on Energy Saving Materials

New clause 13 – in the House of Commons at 5:15 pm on 11th March 1997.

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'.—(1) The following section shall be inserted in the Taxes Act 1988 after section 265—"Relief from tax on expenditure on energy saving materials265A.—(1) Subject to the following provisions of this section, an individual who incurs expenditure of £25 or more in any year of assessment on energy saving materials shall be entitled to a deduction from his total income for that year of assessment equal in amount to one—half of that expenditure.(2) In this section 'energy saving materials' means any goods manufactured solely for any one or more of the following purposes—

  1. (a) cavity wall insulation;
  2. (b) loft insulation;
  3. (c) under-floor insulation;
  4. (d) insulating hot water tanks;
  5. (e) insulating pipes and other plumbing fittings;
  6. (f) draft proofing;
  7. (g) controlling domestic heating systems;
  8. (h) external and internal wall cladding;
  9. (i) providing low emissivity glazing.
(3) The Secretary of State may by order made by statutory instrument add to the purposes specified in subsection (2) above; and a statutory instrument under this subsection shall be subject to annulment by a resolution of the House of Commons.(4) A person shall not be entitled to relief under this section in any year of assessment if—
  1. (a) (disregarding this section) his total income for that year, after all deduction, exceeds the lower rate limit for that year; or
  2. (b) he does not carry out the work for which the energy saving materials in question were purchased within 12 months of the date on which they were purchased.
All such assessment and adjustments of assessments shall be made as may be necessary to give effect to this subsection.(2) This section shall apply in relation to expenditure incurred on or after 1st January 1998 providing that if before that date the Treasury has by Order made provision for giving relief of not less than nine and one half per cent. on the VAT that would otherwise be chargeable on energy saving materials as defined by section 265A of the Taxes Act 1988 then this section shall only apply if provided for by Order made at any time by the Treasury.'.—[Mr. Simpson.]

Brought up, and read the First time.

Photo of Alan Simpson Alan Simpson , Nottingham South

I beg to move, That the clause be read a Second time.

Photo of Mr Geoffrey Lofthouse Mr Geoffrey Lofthouse , Pontefract and Castleford

With this, it will be convenient to discuss new clause 15—Report on VAT on energy saving materials (No. 2)—'Within twelve months of this Act receiving Royal Assent the Treasury shall report to Parliament on the consequences to the Exchequer of reducing VAT on energy saving materials.'.

Photo of Alan Simpson Alan Simpson , Nottingham South

Earlier today, I had the good fortune to be able to introduce a ten-minute Bill entitled Warm Homes and Energy Conservation (Fifteen Year Programme). It tried to set in context the scale of the fuel poverty that this country has to face. It is against the background of that Bill that I want to speak to the new clause this evening.

I hope that you, Mr. Deputy Speaker, will allow me to give some background to this issue. Hon. Members will recall that, last year, I moved a similar amendment to the then Finance Bill in an attempt to secure exactly the same outcome—the reduction of VAT on energy-saving materials to 8 per cent. I had to do that in a convoluted way through a rebate system, because it was one of the few mechanisms allowed under the terms of the amendment of the law resolution.

I understood and anticipated that this year the Treasury would look again at the amendment of the law resolution, in order to try to close that loophole, and it did so. That meant that, this year, I had to find other ways to bring back to the House an issue that represents not only the will of the country but probably the will of the majority of Members of Parliament, were we able to get a clear and simple vote on the principle of reducing VAT to 8 per cent. on home insulation products. This year, I have done so by way of the provisions that allow amendments in the context of VAT relief.

6.30 pm

First, I want to take us back to the underlying tax principle. I am grateful to the former Chancellor of the Exchequer, the right hon. Member for Kingston upon Thames (Mr. Lamont), who said in his 1993 Budget statement: For the first time, the rate of VAT on domestic fuel and power will be the same as that charged on goods like loft insulation material, which improve energy efficiency. This will bring an end to the current anomaly, which makes nonsense of any attempt to use the tax system to improve the environment."—[Official Report, 16 March 1993; Vol. 221, c. 183.] At that time, the House in its wisdom decided to vote for the reduction of VAT on domestic fuel from 17.5 per cent. to the current 8 per cent. The motive behind my amendments has consistently been to pursue the logic set out by the former Chancellor, which is that it is absurd to have taxation policies that, in an environmental context, result in our taxing energy conservation more heavily than energy consumption. That is environmental nonsense.

I have had to go to considerable lengths, both this year and last year, to get amendments in order in the Finance Bill debate, so as to have the right to advance that principle. I want to put on record my gratitude to the Clerks for their considerable patience with my pursuit of a series of amendments that I had thought were in order but that all fell at one fence or another. The Clerks were unfailingly patient with my attempts and my determination to bring this matter before the House.

New clause 13 is an amendment to the Taxes Act 1988. The mechanism by which VAT would effectively be reduced would be through altering certain arrangements within the income tax system. It would allow relief to be claimed, by those who are only basic rate taxpayers, on the basis of 50 per cent. of the tax paid on energy conservation and home insulation products amounting to a sum of more than £25 in any tax year. The sums involved are the same as the relief that such claimants would receive were they to be given a direct reduction in the rate of VAT charged on energy-saving materials.

There is a proviso for those who would question whether going through the Inland Revenue collection, relief and rebate system is the most sensible way of pursuing the principle. That proviso is set out in subsection (2) of the new clause. It gives the Treasury the option of saying, if that was too cumbersome a collection mechanism and it preferred a direct reduction in VAT, that it could achieve the same result simply by coming back to the House and informing it of that preference.

The underlying principle is the one set out by the former Chancellor in respect of fairness in taxation. That principle has been picked up by the Labour party and by other Opposition parties in the policies we pursue. I do not think that my new clause is at odds with new clause 15, which was tabled by Labour Front Benchers, but it does move matters on.

My new clause allows for a period in which the calculations about how to implement the changes enshrined in the new clause could be worked out by the Treasury. The only difference between the new clauses is that that period of reflection and evaluation would be in pursuit not of a principle, but of the mechanism to implement a principle.

That is in no way inconsistent with many other points of principle that have been made by Labour Front Benchers when setting down our definition of fairness in taxation. In a speech on 20 January this year entitled "Responsibility in public finance", the shadow Chancellor, my right hon. Friend the Member for Dunfermline, East (Mr. Brown), made that principle clear when he said: work is something to be rewarded through the tax system, whereas environmental pollution is something that should be discouraged. In the same terms, the Labour party made its position clear in the Finance Bill debate last year, when my hon. Friend the Member for Bristol, South (Ms Primarolo) said: Instead of giving us bureaucratic and technical excuses, the Government should be agreeing to take the proposals forward in the 12-month period provided by the amendments, and should come back next year with clear proposals on how the will of the House can be enacted. She added: The Minister must explain whether he is against the principle that VAT on energy-saving materials should be the same as VAT on fuel, or whether he is telling us that Brussels prevents us from making them the same. If Brussels if preventing us, he should clearly explain why. We believe that he has no reasons to offer and we shall vote against the Government."—[Official Report, 27 March 1996; Vol. 274, c. 1131.] I was pleased to see in The Guardian today that the shadow Financial Secretary to the Treasury, my hon. Friend the Member for Edinburgh, Central (Mr. Darling) said: Although we support the principle of reducing VAT on this area, we cannot support any additional spending commitment unless it can be financed. I now turn to the question of financing. When we carried out the original calculations of the impact of reducing VAT on energy-saving materials, clear costs were built into that assessment. At worst, the impact on the Treasury coffers would be a cost of £10 million; at best, it was calculated that it could be revenue-neutral or revenue-positive, depending on the assessments made of potential increase in demand for materials supplied, produced and distributed as part of an energy-saving programme.

We also pointed out that the industry had made its own representations to the Secretary of State for the Environment, saying that it calculated that such a measure would result in a 10 per cent. increase in demand for energy-saving products, and that it could help to create and sustain some 10,000 job years in the installation, maintenance and delivery of home insulation products.

Last week, the energy policy committee of the Confederation of British Industry reinforced and repeated its message to the House, saying that it wished VAT to be equalised so that tax on energy conservation was no heavier than that on energy consumption. Eighty per cent. of the annual reports that have been presented to the House by local authorities under the Home Energy Conservation Act 1995 have asked the Secretary of State to reduce VAT to help them meet the targets that the 1995 Act set for them. To date, more than 300 local authorities have also passed motions in support of that tax principle.

Cost is an issue, and I can understand people wanting to know about cost before making a tax commitment, but I want to place this matter in context. Even the worst case scenario involves tax pittances—a minute fraction of the margin of error built into the annual accounts. That £10 million, even in terms of slippage in existing Government programmes, would effectively amount to no more than the time that the Chancellor takes out of delivering his Budget speech when he scratches his backside—a tiny sliver of total spending.

I say to my hon. Friends on both sides of the House that, instead of regarding this proposal as an uncosted spending commitment, if we were to pass the new clause tonight, it would constitute not a spending commitment of the Opposition parties but part of the Government's own commitments in this year's Finance Bill and this year's Budget. I suspect that we would then be arguing about who should take the credit for it, because there continues to be huge and growing support outside the House for that tax principle.

We are arguing tonight not about a delivery mechanism but about whether the principles of fairness in taxation are those that enshrine a belief that we must be fair to the environment and the planet as well as people. In that context, we must move in a direction in which we tax-penalise polluting processes and tax-reward acts of energy conservation.

I believe it was in 1852 that Victor Hugo said: An invasion of armies can be resisted, but not an idea whose time has come. I ask the House to take note of the fact that we may have before us an idea whose time has come, and a public who long for us to recognise that.

Photo of David Heathcoat-Amory David Heathcoat-Amory , Wells

We—at least I—debated this issue with the hon. Member for Nottingham, South (Mr. Simpson) last year, myself from a different position, but I still have considerable regard for the hon. Gentleman. I admire him for his consistency, and the fact that he has always believed that one achieves a social end and an environmental end by making better use of our energy. I say the same about some Conservative Members who have always tried to bring together those two concerns into a programme to improve energy efficiency.

I very much share the aims of the hon. Member for Nottingham, South, and have done so ever since I served in the Department of Energy, now abolished, in which I noted that we still waste a great deal of energy in this country, although very often the people who shout loudest about that do the least about it.

I attended many meetings in many halls throughout the country to promote energy efficiency, and was roundly castigated for lack of Government interest or cash, and I frequently noticed that there were no long-life bulbs in the light fittings, that the room was overheated and that little practical attention was being given to the need to control energy use. There is a fair amount of hypocrisy on this subject.

6.45 pm

I am afraid that it is a hard fact that there are two main incentives to energy efficiency, the first of which is the weather. A cold winter focuses attention on energy efficiency—but the Government do not control the weather.

The other main factor is the cost of energy. It is a sad fact that many people, in their domestic circumstances, ask themselves how they might save energy only when the price is increasing. We have lived for some years at a time of low world fossil fuel prices. Moreover, the success of our privatisation programme has delivered major benefits to the electricity and gas industries, which have flowed through to consumers. That has been a tremendous social benefit to a great many people, but it is bad for energy efficiency.

The Opposition policy to reduce VAT on fuel from 8 per cent. to 5 per cent. would deal another blow to energy efficiency. I am not sure about the status of that promise or pledge or aim or aspiration, but we think that we have it from the Opposition Front Bench that it is Labour's aim, at least, to reduce VAT in that way. It will encourage further waste of energy unless something is done in the opposite direction.

I must make one or two remarks about new clause 13 that will be familiar to the hon. Member for Nottingham, South. Apart from being technically defective in several respects, the new clause overturns a major consideration of the Government: to simplify the tax system, to make it easy to administer and comprehensible to the public, and to further our attempt to reduce burdens on businesses, especially small businesses, if we can.

The proposals in the new clause would entail extremely difficult judgments, to be made by a person or an agency, between various types of energy-efficient materials, as against other equipment or materials that may claim to be energy efficient but might not measure up to such a standard. Someone would have to judge what qualified for such treatment.

Photo of Alan Simpson Alan Simpson , Nottingham South

Will the right hon. Gentleman acknowledge that, if the option under subsection (2) of the new clause were exercised by the Treasury—that is, if a direct reduction of VAT on energy-saving materials were pursued—it would both simplify the tax system and reduce the burden on industry in the way that he has advocated?

Photo of David Heathcoat-Amory David Heathcoat-Amory , Wells

Yes, I concede that it would be rather simpler than the main proposal set out in the new clause. I say in parentheses that the hon. Gentleman showed considerable ingenuity in getting the whole thing in order on the Finance Bill. However, even with a straight reduction in VAT, someone would have to decide what equipment or materials qualified for such treatment.

Even a straight reduction in VAT would complicate the tax system. We have a single positive rate of VAT in this country, with the exception of the 8 per cent. rate on fuel and power, which is fairly simple to administer because it is easy to define the fuels that qualify, and they are sold by a comparatively narrow range of outlets. However, materials listed in the new clause are sold in every high street hardware store or ironmonger.

Presumably the system would work as follows. An invoice would have to be certified, and made out by the retailer to the effect that the material concerned would or might qualify. There would be no certainty that the material would be installed properly.

If that problem is overlooked, there is still the problem of making repayments to a separate category of people as defined by reference to their status in the Inland Revenue system. We would rapidly be faced by a monstrous paperchase. The proposed system would be highly regulatory and burdensome to business and industry. My criticisms of last year, which I voiced from the Dispatch Box, seem still to be valid, and I recommend their acceptance by the House.

I promised, again from the Dispatch Box, that other ways would be pursued of trying to achieve the ends of which the hon. Member for Nottingham, South has spoken. I know that my words were taken up by those who followed me at the Dispatch Box, and by Ministers in the Department of the Environment.

Something has changed, however, since last year, and I shall end by drawing attention to it. The Labour party has performed a spectacular somersault, and in so doing has revealed breathtaking cynicism. Last year, the hon. Member for Bristol, South (Ms Primarolo) criticised the directors of Friends of the Earth, who had suggested that the Labour party might abstain on the issue. She said that there was no question of abstention. She added that she would ask all hon. Members to vote for a rather similar clause in the name of justice, jobs, democracy and energy efficiency. The hon. Lady was patently insincere in saying that.

A similar scheme has been advanced this year, but suddenly it is not all about justice, jobs, democracy and energy efficiency. Instead, it is now all about the hon. Lady's election chances. She has had a fit of responsibility, like all the poodles who sit behind her, who are not all in the Chamber this evening. They were leaned on to take their names off the amendment. They have meekly fallen into line. That gives a rather disconcerting glimpse of what a future Labour Government might be like—shallow, opportunistic, contradictory, unprincipled and, at root, cowardly.

That contrasts with the approach of the hon. Member for Nottingham, South. I hope that I am not embarrassing him by praising him in this way. Although I disagree with many of his political principles, at least he has shown consistency on these issues, as has my hon. Friend the Member for South Suffolk (Mr. Yeo), who has pursued the issues that are now before us over many years. I cannot help but draw a distinction between the records of the hon. Gentleman and of my hon. Friend and the somersault that has been completed by the Labour party.

I reject the new clause with a certain reluctance, because I am aware of the motives that lie behind it. I can at least be glad that the whole episode has educated us further on what the new Labour party is really like.

Photo of Matthew Taylor Matthew Taylor Liberal Democrat Spokesperson (Environment)

The objective of reducing the cost to the consumer of energy-saving materials has received wide cross-party support. In various ways, well over half the Members of this place have signalled their support for the measures in the new clause. I congratulate the hon. Member for Nottingham, South (Mr. Simpson) on his extraordinary vigour and determination, and not a little ingenuity. It is not easy to get around the rather arcane procedures, if you will allow me to say that of them, Mr. Deputy Speaker, that govern the way in which the House deals with Finance Bills.

There is clear support from hon. Members on both sides of the House, because they know that the outcome would be good for industry and would help to create jobs. Perhaps more important, we have before us a simple and relatively inexpensive measure which, if implemented, would start to tackle the problems of global warming, which have been acknowledged by right hon. and hon. Members. Those problems are recognised by Governments throughout the world. Anyone who does not accept the argument that stems from those problems would not accept anything that I am saying and, equally, would not support the new clause. As I have said, however, the clause is broadly supported.

The new clause would help enormously those with low earnings who are living in damp, cold homes that they cannot afford properly to heat. We know that, every winter, people in this country—mainly, elderly people—die of hypothermia in their homes. In simple terms, that is virtually unknown in any other part of western Europe. For many years, other western European countries have built homes to standards of insulation that are way beyond our own. In many instances, they have colder climates. The people of those countries have no difficulty in affording to heat their homes, because costs are very low.

In that context, it is bizarre that the House should have created a position in which the use of fuel—that is a bad thing in itself, because no one benefits from the use of fuel—is subject to a lower rate of tax than that which applies to fuel conservation, which can help the environment and help people to stay warm. We are in a position to correct that anomaly this evening.

The right hon. Member for Wells (Mr. Heathcoat-Amory), speaking on behalf of the Government when he was Paymaster General, promised to look into ways of achieving a reduction in the cost of energy-saving materials. Here is a chance for the Government to act positively. That applies also to the Labour party, which, until Friday, I thought was in favour of reducing the cost of energy-saving materials. After all, 240 Labour Members had signed an early-day motion calling for the reduction in the cost of such materials. The entire Labour Front-Bench team voted in that way a year ago. Together, working across the House, we came within one vote of defeating the Government on that occasion. We could be almost certain of doing so now, given the Government's changed position, having lost their majority in the House.

Last week, however, I was told that Labour had withdrawn its support. I was told also that Labour Whips were asking Labour Back Benchers to withdraw their support. Yesterday morning, for just a moment, I thought that everything was all right and that I had heard ugly rumours bearing no relation to the truth. In an interview published yesterday by the national energy authorities, the Labour energy spokesman, the hon. Member for Leeds, West (Mr. Battle), said: as regards energy saving materials, we actually supported the amendment to the last Budget to equalise VAT rates for energy saving materials so I think our intention is plainly staked out there. That intention has certainly been staked out, but the road to the election is paved with good intentions. It now seems that the hon. Gentleman and the rest of his Front-Bench colleagues will let the Government off the hook. Staring victory in the face, Labour Front-Bench spokesmen opt for a U-turn.

Labour's Treasury team should not be afraid. Its members should have no problem voting for the new clause, because it sets out their policy. Only a couple of months ago, the right hon. Member for Dunfermline, East (Mr. Brown) said: Taxation is not neutral in the way it raises revenue. How and what government tax sends clear signals about the economic activities they believe should be encouraged, and indeed discouraged, and the values they want to entrench in society. For example, work is something to be rewarded through the tax system, whereas environmental pollution is something that should be discouraged. How right the right hon. Gentleman is, or rather was.

I feel sorry for the hon. Member for Nottingham, South. Last week, he was doing something on behalf of Labour Front Benchers, and no doubt expected a pat on the back and congratulations on defeating the Government. This week, he will be hauled before the Whips—at the end of the evening, no doubt—and told what a bad chap he is and how he has let the side down.

7 pm

The hon. Gentleman has not changed his policy position. The Labour Front-Bench argument has done a U-turn on itself in the past couple of days. Yesterday, Labour Front Benchers had not identified the money. Today, the problem is not the money, but the new clause, which is not drawn up in precisely the same terms as last year's, and, as it is not identical, they cannot support it. Last year, they did not support the new clause. They supported the caveat that allowed the Government to find a better solution. That caveat remains in the new clause today.

As for the money, it is extraordinary that Labour cannot find less than £10 million; yet, only a few months ago, the shadow Chancellor confirmed that the Labour party would further reduce VAT on energy to 5 per cent., at a cost of some £500 million. He has still not explained how he would fund that.

The Liberal Democrats still support the concept of environmental taxation—shifting tax away from jobs and on to pollution, and the use of scarce resources. Cutting VAT on energy-saving materials would send clear signals about the commitment of the House to combating global warming and helping people to cut their fuel bills and stay warm. It would also send clear signals about the strength of commitment of each hon. Member present in the Chamber to principles promoting the environment and social justice. A number of Conservative Back Benchers have shown their support, which I welcome. They are standing by their principles.

I congratulate the hon. Member for Nottingham, South and those on the Labour Benches who I know will support him. I note that there is cross-party support for this measure on the Opposition Benches. There is the potential for a Government defeat. In a few moments, that can be delivered. The only thing that will save the Government is the prospect that the Opposition dare not oppose any longer—that they will accept the Government Budget and line up to vote for it and defend the Government's position.

I always knew that we would get little support from Conservative Front Benchers. It did not occur to me for a moment that Labour Front Benchers would reverse their position, let down the environment, show that they cannot be trusted on tax issues and show, above all, that they cannot be trusted on an issue of social justice that would help the old and the cold to stay warm in their homes, and help the environment too. It is a disgrace, and I hope that they will still change their minds.

Photo of Tim Yeo Tim Yeo , South Suffolk

I warmly congratulate the hon. Member for Nottingham, South (Mr. Simpson) on tabling the new clause and on the ingenuity of its phraseology, which enables us to debate the issue of VAT on energy-saving materials. His persistence deserves admiration, although I fear that it will not receive that from his colleagues on the Opposition Front Bench. Despite his attempts to argue that his new clause was part and parcel of their new clause, there is a huge gulf between new clause 13 and new clause 15.

The case for cutting VAT on energy-saving materials is overwhelming. I will not rehearse the arguments—they have already been referred to in this short debate, and I entirely accept them. I had hoped that we might win the argument with the Treasury today. I thought that there was a chance that the example set by the landfill tax and by the differential rates of duty on petrol showed that the principle of using the tax system for environmental objectives has been completely embraced.

The true significance of the debate is the way in which the new clause has exposed the craven and backsliding attitude of members of the Opposition Front Bench. For months, as the hon. Member for Truro (Mr. Taylor) pointed out, the Labour party has given the impression that it favours cutting VAT on energy-saving materials to 8 per cent. It has abandoned that position more or less overnight—a real kick in the teeth for the green movement, and a warning that, if the Labour party ever came to power, environmental objectives would be at the bottom of its list of priorities.

We have become used to the image of the right hon. Member for Sedgefield (Mr. Blair) as a sort of John Kennedy in reverse. The word has gone forth from Labour party headquarters that there is no freedom, however dear to Labour in the past, that will be defended if such defence might cost the right hon. Gentleman votes in the future. There is no frontier, however bravely protected by Labour in the past, that will be protected in the future if such protection might cost him a vote or two.

The right hon. Member for Sedgefield has justified the overthrow of every principle on which he and his colleagues live their political lives and were elected to the House, by saying that those were the principles of old Labour. This week he has gone a step further: he has started to overthrow the principles of new Labour as well. Last year, members of his shadow Cabinet backed the proposal to cut the rate of VAT on energy-saving materials. They implied to every listener over the past 12 months that those were still their views, but now we know better. At the very first whiff of grapeshot from the shadow Chancellor, Labour's green aspirations have exploded.

That has happened when Labour is 20 per cent. ahead in the opinion polls. Would any of Labour's present policies survive if its lead slipped to 10 per cent.? The hon. Member for Sheffield, Brightside (Mr. Blunkett) has whispered to teachers that more resources are coming around the corner; let those teachers take heed. The hon. Member for Holborn and St. Pancras (Mr. Dobson) has whispered to public sector trade unions that higher pay settlements are just around the corner; let them take heed as well. One shadow Cabinet Minister after another has toured the country, lining up local councils and whispering that more money is just around the corner; let them all take heed from what has happened today.

Labour's promises are not worth a bucket of warm spit. When the hon. Member for Bristol, South (Ms Primarolo) speaks, she has only to say that she is abandoning new clause 15. Will she say whether Labour, if it ever gets the chance, will cut VAT on energy-saving materials to 8 per cent. or whether it will not?

Photo of Mr Cynog Dafis Mr Cynog Dafis , Ceredigion and Pembroke North

I shall not detain the House for more than a few minutes, but it would have been remiss of me if I had not supported the new clause, having been associated with legislation on energy conservation in the past.

The principle of rewarding energy conservation should be at the heart of the tax system. There is no question about that. There has been debate on whether the wasteful use of energy should be punished by raising VAT, as proposed, to 17 per cent. There is a strong argument against that, which was persuasively deployed last year. Our housing stock is extremely inefficient in energy terms and some people would have been severely disadvantaged by that increase in VAT. No one could quibble with the principle of equalisation.

The right hon. Member for Wells (Mr. Heathcoat-Amory) spoke about the complexities that might arise from implementation of the new clause. VAT on domestic fuel is 8 per cent., and a serious attempt should be made to deal with the anomaly between VAT on domestic fuel and VAT on energy-saving materials.

The measure would, at modest cost, improve comfort and warmth and reduce costs for the fuel-poor—an important target group—and create employment and provide environmental gain. It is astonishing that Labour Front Benchers are not prepared to support such a measure.

Last night, in a debate on social values, I suggested that a worrying accommodation was occurring between the Labour position and the Government position. In the present case, we have the mother of all accommodations. The argument in favour of the new clause is compelling, and the arguments that might be presented against it are among the lamest ever deployed.

Photo of Mr Tony Benn Mr Tony Benn , Chesterfield

As a former Secretary of State for Energy, I should like briefly to intervene to support the new clause moved by my hon. Friend the Member for Nottingham, South (Mr. Simpson).

Much is made of old Labour, but I remember the scheme that I introduced as Secretary of State to help the elderly in the winter. We did not depend on the temperature—we provided a 25 per cent. cut in the energy bills of anyone on benefit through the three winter months; that helped.

Any Member of Parliament, regardless of political allegiance, will know the fear of winter that exists among older people. This is not a sophisticated argument. Many people come to my surgeries and complain that their windows are draughty. Draught-proofing is not a sophisticated form of insulation, but those whose homes are losing heat in that manner—when it is avoidable and they can ill afford it—deserve the support of the House.

Another reason why I speak with some feeling is that, as a representative of a former mining constituency, it sticks in my gullet that unemployed miners and others in Chesterfield are dying of hypothermia. It is an outrage that an energy industry was shut down when people cannot keep warm in the winter.

Finally, I shall vote for the new clause because I believe in it—and there may be a case in politics for sticking to what we believe in before, during or after a general election.

Photo of Margaret Ewing Margaret Ewing , Moray

I have listened attentively to the hon. Members who have spoken during the debate. I noted with interest that the former Paymaster General, the right hon. Member for Wells (Mr. Heathcoat—Amory) returned, as Conservative Members usually do, to the complexities of accepting a technical amendment. Are Conservative Members rejecting the new clause for technical reasons or because they will not accept the morality of the argument?

Someone remarked that there was an element of ingenuity about the new clause. I assure my hon. Friend the Member for Nottingham, South (Mr. Simpson), with whom I work in the warm homes group, that the measure is not about ingenuity but about challenging all hon. Members to achieve a benefit for the many people who suffer from the cold and damp and who want a better life. The House has denied them that outcome for many years.

New clause 13 offers a variety of opportunities. Those of us who have studied the problem in detail know that insulation measures that are applicable in my constituency may not be applicable in Nottingham, South. We must examine all the options. We are trying to offer the people, councillors, local authorities and all the organisations involved the means of reducing heating costs. We must consider also the cost of misery, excessive winter deaths, conditions such as asthma and bronchitis and the chest diseases that many of our constituents suffer as a result of the House's failure to address the problem effectively.

It is important that we pass the amendment tonight. In the past 24 hours, there has been much uncertainty about the Government's intentions regarding value added tax on domestic fuel. The Chancellor of the Exchequer has flown back from China to see what is happening as a result of his interviews with The Grocer magazine. I am delighted to see him in the Chamber. When we proposed reducing VAT on domestic fuel to 5 per cent., we were told bluntly by the Labour party that it was a cynical ploy. We are now considering a new clause that would be a step toward resolving the problem of fuel poverty.

I suspect that all hon. Members will return to warm flats or warm homes tonight. However, hundreds upon hundreds of our constituents will return to homes that are damp and miserable. This measure is a small, but reasonable, step forward. It is more in sorrow than in anger that I ask Labour Front Benchers why they have sent their colleagues home to their warm and comfortable flats while they are sending our constituents to cold and miserable homes.

At Inverness in the north of Scotland, the Labour party gave a clear commitment that it regarded energy efficiency as a key issue, which it promised to put at the top of its housing priorities. Where on earth are the people who were at the Labour party conference at Eden Court in Inverness? They are not here tonight to vote for a step in the right direction.

Photo of Mr James Molyneaux Mr James Molyneaux , Lagan Valley

I support the remarks by hon. Members representing the parties below the Gangway. On this and many other related issues, we have acted co-operatively and, dare I say, with a degree of integrity. Our position on this issue has remained constant through many battles.

7.15 pm

Without any bitterness, I tender a word of advice to Her Majesty's Opposition: perhaps it would be in their interest to withdraw their rather meaningless new clause 15. It is rather like saying, "When in doubt, call for a report." We all know exactly what that means and where it ends. There is also a whiff of another phrase that used to be bandied about on both sides: "That the Bill be read in six months' time." There is still time for the Opposition to withdraw their new clause.

I am beginning to regret my decision to retire at the general election, as I shall envy the young folk around me who will return full of vigour to a truly entertaining House of Commons—if today's events are anything to go by.

Photo of Dawn Primarolo Dawn Primarolo Shadow Spokesperson (Treasury)

I shall speak directly to our new clause 15 and return to what is on the amendment paper rather than what might have been on the amendment paper but could not be because of an amendment to the law. At issue this evening is a serious debate about how we should deal with two issues: first, fuel poverty and how we can assist the fuel-poor; and, secondly, energy conservation. When dealing with the question of energy conservation and debates about that issue and about protecting the environment, it is important to recognise—as I am sure all hon. Members do—that environmental objectives may be achieved first, by fiscal measures; and, secondly, by direct regulation or investment in projects to assist the fuel-poor.

Despite the fact that there has been much comment about fuel poverty, new clause 13 does not deal with that issue. I shall return to that point later, as I have a feeling that hon. Members would like me to refer to that new clause. New clause 15 pursues the position that we supported last year: whether a variation of value added taxes on energy-saving materials will assist the objectives of energy conservation and of pursuing our environmental policies, and whether that is workable.

I remind the House that last year's amendment required the Treasury to define energy-saving materials and to consider a reduction of VAT on fuel. New clause 15 requires costings of the practical implications of varying the rate of VAT on fuel. If we could spend the same amount directly investing in people's homes and ensure that it was targeted at the fuel-poor, that would need to be considered.

Photo of Matthew Taylor Matthew Taylor Liberal Democrat Spokesperson (Environment)

As I understand it, the hon. Lady is saying that new clause 13 is technically imperfect. Given that the second part allows any Government to come up with an alternative scheme, could not the Labour party put pressure on the Government to do that? If Labour is in government in a couple of months' time, it will be able to come up with such a scheme in any case.

Photo of Dawn Primarolo Dawn Primarolo Shadow Spokesperson (Treasury)

The hon. Gentleman has just shot himself in the foot by admitting that new clause 13 is not workable. We are trying to come up with a workable proposal. At present, I am speaking to new clause 15, not new clause 13.

The policy goal must be to encourage households, particularly those on low incomes, to invest or to have that done for them, to reduce their fuel bills, and a move towards sustainable development, which would combat fuel poverty, save fossil fuels, cut emissions and generate jobs. An example of that is the environmental task force that Labour would fund, which would specifically address fuel poverty, and it would be targeted to assist the most vulnerable.

There is, of course, no entirely satisfactory way to promote that goal solely through the variation of VAT on insulation materials. The creation of jobs is highly suspect in regard to a major proportion of the materials used, and the work to fit them is often undertaken by households or their friends. Therefore it is important that close regard is paid to how the variation of VAT could be used.

Photo of Margaret Ewing Margaret Ewing , Moray

The hon. Lady referred to the housing task force. Given the statement made by the executive of the Labour party at Inverness last weekend, what exactly does Labour mean when it talks about setting aside funds? Can she give a figure?

Photo of Dawn Primarolo Dawn Primarolo Shadow Spokesperson (Treasury)

It means what it says: that the windfall levy will pay—[Laughter.] I am not surprised that Conservative Members laugh or that some hon. Members now speak in favour of an amendment for which they were not prepared to vote last year. Had they done so, some progress would have been made, so I shall take no lessons from hypocrites on the Conservative Benches who now claim that they are in favour of energy conservation.

Photo of Dawn Primarolo Dawn Primarolo Shadow Spokesperson (Treasury)

If I could make some progress, I would be very grateful. I will not leave the hon. Gentleman out, as I am sure that he has a point to make against the Labour party.

Another difficulty is how to determine what qualifies as energy-saving material. We tried to set the Government that task last year, and we asked them to come back with a report this year. It is not unreasonable that that clarification is still necessary, because some building materials have insulation qualities, and if VAT is to be extended to those areas as well, we should know what the full extent is to be. I cannot understand why it is considered so unreasonable to ask for the exact potential.

We also need to consider exactly how we would define energy-saving materials, for instance, referring to the quality of the materials themselves. A good environmental objective would be that not only must the materials be energy efficient but the production of those very materials should be carried out in an energy-efficient way. It may not be possible to deal with all of those items simply through the amendment.

Photo of Alex Salmond Alex Salmond Leader, Scottish National Party

The hon. Lady said that there are Conservative Members who are prepared to vote tonight for something for which they were not prepared to vote last year. That is true, but it is also true that Labour Front Benchers are not prepared to vote tonight for something for which they were prepared to vote last year. What political lessons does she draw from that change of position?

Photo of Dawn Primarolo Dawn Primarolo Shadow Spokesperson (Treasury)

I shall return to what is in new clause 13, because—

Photo of Nigel Evans Nigel Evans , Ribble Valley

She will write to you. [Interruption.]

Photo of Mr Geoffrey Lofthouse Mr Geoffrey Lofthouse , Pontefract and Castleford

Order. [Interruption.] Especially the second row on the Conservative Benches.

Every hon. Member who has taken part in the debate on the new clause has been given a reasonable hearing, and the hon. Lady has a right to the same.

Photo of Dawn Primarolo Dawn Primarolo Shadow Spokesperson (Treasury)

If only I could just write to everybody.

New clause 15 seeks to assess properly the costs of going down that route, so that we can then compare it with alternative strategies to ensure that we maximise our objectives.

On new clause 13, my hon. Friend the Member for Nottingham, South (Mr. Simpson) has been incredibly ingenious—I congratulate him on that—but he has lost sight of what he was seeking to achieve. Every hon. Member who spoke in the debate referred to the poor and the consequences of fuel poverty on the poor. The new clause provides for income tax relief, which would be provided against income tax the year after, and subsection (4)(a) provides for that to be paid at 23 per cent. Therefore, anybody who is not paying income tax cannot access the relief. Then, having put forward a proposition that does not reach the objectives that Members set in the important speeches in tonight's debate, the get-out clause, "If the Treasury does not like this, just reduce VAT on energy-saving materials," is no way to progress business in the House and to ensure—[Interruption.] Forgive me, but we are trying to create a system that is workable as opposed to scoring points against Labour's Front Bench.

Photo of Ian Pearson Ian Pearson , Dudley West

I support my hon. Friend in the sense that we should make good law, and I have strong suspicions that, as drafted, new clause 13 is not good law. She said a moment ago that this applies to the 23 per cent. rate of tax. My understanding is that the lower rate would be 20 per cent. rather than 23 per cent. Will she confirm that not only will many people not qualify, but that one of the fundamental problems is that people who have never had to complete income tax returns will now come under a self-assessment regime, and all the cost savings from the energy-saving materials will be blown in accountants' fees to help them to fill in the forms?

Photo of Dawn Primarolo Dawn Primarolo Shadow Spokesperson (Treasury)

My hon. Friend has made the point. Our new clause addresses the very issues that hon. Members have raised. It would enable an examination of the potential advantages of using a variation of VAT to deliver energy conservation measures. That has to be seen in parallel with the commitment to an environmental task force and the specific assistance given particularly to pensioners, who suffer because they cannot afford fuel.

Photo of Dawn Primarolo Dawn Primarolo Shadow Spokesperson (Treasury)

I have given way a number of times, so I shall not give way again.

Tonight's debate should he about the best way to deliver energy conservation and to tackle fuel poverty. Had the Government accepted last year's amendment, we would be discussing how to make progress towards that goal. I hope that the House will accept that, in the provisions in new clause 15, that objective is still in sight. In our discussions on energy conservation, we should decide how to tackle the problems of people who are experiencing fuel poverty through no fault of their own.

Photo of Michael Jack Michael Jack , Fylde 7:30 pm, 11th March 1997

I thought for a moment that I was dreaming. I was in a fantasy world in which hon. Members on the Opposition Front Bench were talking about saving on the cost of energy. A little cloud appeared in my dream: it was the windfall tax. I realised that that would increase the cost of energy. I ask my hon. Friends to bear that in mind when they consider the Opposition's arguments.

The debate is principally about new clause 13. I do not believe that I can better the arguments against new clause 13 made by my right hon. Friend the Member for Wells (Mr. Heathcoat-Amory), except to add that it is not only £10 million or £20 million that is at stake—that may be the initial figure, if the new clause were to have the force of law—but it could rise to £100 million. The new clause is exploitable, because there are loopholes all the way through it.

The Government have an excellent record of achievement on and commitment to energy saving, so we do not mind our policies being scrutinised. I, therefore, accept new clause 15. Let the report be written, and let our record shine forth.

Question put, That the clause be read a Second time:—

The House divided: Ayes 58, Noes 241.

Division No. 92][7.32 pm
AYES
Alton, DavidMcGrady, Eddie
Austin—Walker, JohnMackinlay, Andrew
Beggs, RoyMaclennan, Robert
Beith, Rt Hon A JMaddock, Mrs Diana
Bendall, VivianMallon, Seamus
Benn, Rt Hon TonyMolyneaux, Rt Hon Sir James
Bruce, Malcolm (Gordon)Nicholson, Miss Emma (W Devon)
Campbell, Menzies (Fife NE)Rendel, David
Carlile, Alex (Montgomery)Robinson, Peter (Belfast E)
Chidgey, DavidRoss, William (E Lond'y)
Clwyd, Mrs AnnRowlands, Ted
Corbyn, JeremySalmond, Alex
Cunningham, Ms RoseannaShepherd, Richard (Aldridge)
(Perth Kinross)Simpson, Alan
Davies, Chris (Littleborough)Skinner, Dennis
Davies, Rt Hon Denzil (Llanelli)Smith, Llew (Blaenau Gwent)
Evans, John (St Helens N)Smyth, Rev Martin (Belfast S)
Ewing, Mrs MargaretTaylor, Rt Hon John D (Strangf'd)
Forsythe, Clifford (S Antrim)Taylor, Matthew (Truro)
Foster, Don (Bath)Taylor, Sir Teddy
Harvey, NickThurnham, Peter
Hendron, Dr JoeTrimble, David
Tyler, Paul
Hughes, Simon (Southwark)Walker, A Cecil (Belfast N)
Johnston, Sir RussellWallace, James
Jones, leuan Wyn (Ynys MÔn)Welsh, Andrew
Jones, Nigel (Cheltenham)Wigley, Dafydd
Kennedy, Charles (Ross C & S)Wise, Mrs Audrey
Kirkwood, Archy
Livingstone, KenTellers for the Ayes:
Llwyd, ElfynMr. Cynog Dafis and Dr. Lynne Jones.
Lynne, Ms Liz
NOES
Ainsworth, Peter (E Surrey)Brooke, Rt Hon Peter
Alexander, RichardBrown, Michael (Brigg Cl'thorpes)
Allason, Rupert (Torbay)Browning, Mrs Angela
Amess, DavidBruce, Ian (S Dorset)
Arbuthnot, JamesBudgen, Nicholas
Arnold, Jacques (Gravesham)Burns, Simon
Ashby, DavidBurt, Alistair
Atkins, Rt Hon RobertButcher, John
Atkinson, David (Bour'mth E)Butler, Peter
Atkinson, Peter (Hexham)Carlisle, John (Luton N)
Baker, Rt Hon Kenneth (Mole V)Carlisle, Sir Kenneth (Linc'n)
Baldry, TonyCarttiss, Michael
Banks, Matthew (Southport)Cash, William
Banks, Robert (Harrogate)Channon, Rt Hon Paul
Bates, MichaelChapman, Sir Sydney
Batiste, SpencerChurchill, Mr
Bellingham, HenryClappison, James
Beresford, Sir PaulClark, Dr Michael (Rochf'd)
Biffen, Rt Hon JohnClarke, Rt Hon Kenneth
Body, Sir Richard(Rushdiffe)
Bonsor, Sir NicholasClifton—Brown, Geoffrey
Booth, HartleyCoe, Sebastian
Boswell, TimCongdon, David
Bowden, Sir AndrewConway, Derek
Bowis, JohnCoombs, Anthony (Wyre F)
Boyson, Rt Hon Sir RhodesCoombs, Simon (Swindon)
Brandreth, GylesCope, Rt Hon Sir John
Brazier, JulianCormack, Sir Patrick
Bright, Sir GrahamCouchman, James
Currie, Mrs EdwinaLennox—Boyd, Sir Mark
Curry, Rt Hon DavidLidington, David
Davies, Quentin (Stamf'd)Lilley, Rt Hon Peter
Davis, Rt Hon David (Boothferry)Lloyd, Rt Hon Sir Peter (Fareham)
Day, StephenLord, Michael
Devlin, TimLuff, Peter
Dorrell, Rt Hon StephenMacGregor, Rt Hon John
Douglas—Hamilton,MacKay, Andrew
Rt Hon Lord JamesMaclean, Rt Hon David
Dover, DenMcLoughlin, Patrick
Duncan, AlanMaitland, Lady Olga
Duncan Smith, IainMalone, Gerald
Dunn, BobMans, Keith
Dykes, HughMarland, Paul
Eggar, Rt Hon TimMarlow, Tony
Elletson, HaroldMarshall, John (Hendon S)
Evans, Jonathan (Brecon)Marshall, Sir Michael (Arundel)
Evans, Nigel (Ribble V)Martin, David (Portsmouth S)
Evans, Roger (Monmouth)Mawhinney, Rt Hon Dr Brian
Faber, DavidMerchant, Piers
Fabricant, MichaelMitchell, Andrew (Gedling)
Fenner, Dame PeggyMitchell, Sir David (NW Hants)
Fishburn, DudleyMoate, Sir Roger
Forman, NigelMonro, Rt Hon Sir Hector
Forsyth, Rt Hon Michael (Stirling)Montgomery, Sir Fergus
Forth, Rt Hon EricNeubert, Sir Michael
Fowler, Rt Hon Sir NormanNewton, Rt Hon Tony
Freeman, Rt Hon RogerNicholson, David (Taunton)
French, DouglasNorris, Steve
Fry, Sir PeterOnslow, Rt Hon Sir Cranley
Gallie, PhilOppenheim, Phillip
Garnier, EdwardOttaway, Richard
Gill, ChristopherPage, Richard
Gillan, Mrs CherylPaice, James
Goodlad, Rt Hon AlastairPatnick, Sir Irvine
Goodson—Wickes, Dr CharlesPatten, Rt Hon John
Greenway, John (Ryedale)Pattie, Rt Hon Sir Geoffrey
Griffiths, Peter (Portsmouth N)Pawsey, James
Grylls, Sir MichaelPeacock, Mrs Elizabeth
Hague, Rt Hon WilliamPickles, Eric
Hamilton, Rt Hon Sir ArchibaldPorter, David
Hamilton, Neil (Tatton)Portillo, Rt Hon Michael
Hanley, Rt Hon JeremyPowell, William (Corby)
Hargreaves, AndrewRichards, Rod
Harris, DavidRiddick, Graham
Hawkins, NickRifkind, Rt Hon Malcolm
Hawksley, WarrenRobathan, Andrew
Heald, OliverRoberts, Rt Hon Sir Wyn
Heathcoat—Amory, Rt Hon DavidRobertson, Raymond S (Ab'd'n S)
Hendry, CharlesRobinson, Mark (Somerton)
Horam, JohnRoe, Mrs Marion
Hordern, Rt Hon Sir PeterRowe, Andrew
Howard, Rt Hon MichaelRyder, Rt Hon Richard
Howell, Rt Hon David (Guildf'd)Sackville, Tom
Howell, Sir Ralph (N Norfolk)Scott, Rt Hon Sir Nicholas
Hughes, Robert G (Harrow W)Shaw, David (Dover)
Hunt, Rt Hon David (Wirral W)Shaw, Sir Giles (Pudsey)
Hunt, Sir John (Ravensb'ne)Shephard, Rt Hon Mrs Gillian
Hunter, AndrewShepherd, Sir Colin (Heref'd)
Hurd, Rt Hon DouglasShersby, Sir Michael
Jack, Rt Hon MichaelSkeet, Sir Trevor
Jackson, Robert (Wantage)Smith, Tim (Beaconsf'ld)
Jenkin, Bernard (Colchester N)Speed, Sir Keith
Johnson Smith,Spencer, Sir Derek
Rt Hon Sir GeoffreySpicer, Sir Jim (W Dorset)
Jones, Gwilym (Cardiff N)Spicer, Sir Michael (S Worcs)
Jones, Robert B (W Herts)Spink, Dr Robert
Key, RobertSpring, Richard
King, Rt Hon TomSproat, Iain
Knight, Mrs Angela (Erewash)Squire, Robin (Hornchurch)
Knight, Dame Jill (Edgbaston)Stanley, Rt Hon Sir John
Knox, Sir DavidStephen, Michael
Kynoch, GeorgeStern, Michael
Lait, Mrs JacquiStewart, Allan
Legg, BarryStreeter, Gary
Leigh, EdwardSweeney, Water
Sykes, JohnWardle, Charles (Bexhill)
Taylor, Ian (Esher)Waterson, Nigel
Taylor, John M (Solihull)Watts, John
Temple—Morris, PeterWells, Bowen
Thomason, RoyWhitney, Sir Raymond
Thompson, Sir Donald (Calder V)Whittingdale, John
Thompson, Patrick (Norwich N)Widdecombe, Rt Hon Miss Ann>
Thornton, Sir MalcolmWiggin, Sir Jerry
Townend, John (Bridlington)Wilkinson, John
Townsend, Sir Cyril (Bexl'yh'th)Wilshire, David
Tracey, RichardWinterton, Mrs Ann (Congleton)
Tredinnick, DavidWolfson, Mark
Trend, MichaelWood, Timothy
Trotter, NevilleYoung, Rt Hon Sir George
Twinn, Dr Ian
Vaughan, Sir GerardTellers for the Noes:
Viggers, PeterMr. Matthew Carrington and Mr. Roger Knapman.
Waldegrave, Rt Hon William
Walden, George

Question accordingly negatived.