Industrial Energy Tax

Oral Answers to Questions — Treasury – in the House of Commons at 12:00 am on 15th April 1999.

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Photo of David Chaytor David Chaytor Labour, Bury North 12:00 am, 15th April 1999

If he will make a statement about the implementation of the industrial energy tax. [79453]

Photo of Dawn Primarolo Dawn Primarolo Paymaster General (HM Treasury)

Following the recommendations made by Lord Marshall, the Government will introduce a climate change levy on the business use of energy from April 2001. The new levy will make a significant contribution to meeting our targets for reducing greenhouse emissions.

The climate change levy will entail no increase in the overall burden of tax on business, since it will be recycled in full through a cut of 0.5 per cent. in the main rate of employers' national insurance contributions. Businesses will also benefit from an additional £50 million for schemes aimed at promoting energy efficiency directly, and from extra support for renewable sources of energy.

The Government recognise the need for more special consideration for the position of energy-intensive industries, given their high energy usage and exposure to international competition. We intend to set a significantly lower rate of tax for energy-intensive sectors. My right hon. Friend the Deputy Prime Minister initiated discussions with the sector concerned at a meeting on 29 March.

Photo of David Chaytor David Chaytor Labour, Bury North

I thank my hon. Friend for that reply, and congratulate the Government on the way in which a consensus has been developed in recent months on the need for the climate change levy. However, does she agree that, although large companies are now well aware of the arguments surrounding the levy and the need for it, many thousands of small companies have not been party to the debate surrounding Lord Marshall's report, climate change and the Kyoto protocol? Can my hon. Friend assure the House that, in implementing the levy, and also in explaining its purpose, special attention will be given to the needs of small companies?

Photo of Dawn Primarolo Dawn Primarolo Paymaster General (HM Treasury)

I can give my hon. Friend that assurance, because the consultation now taking place on the details of the scheme and the percentage of the levy, and the discussions on how it will operate, are not only targeted at assisting the energy-intensive industries. As my hon. Friend rightly pointed out, they will also ensure that small and medium companies are aware of their obligations and of the process that will take place.

Photo of Eric Forth Eric Forth Conservative, Bromley and Chislehurst

The Minister has just emphasised the Government's environmental concerns, as the Economic Secretary did a moment ago. Ministers have argued for some time that they can justify huge and stringent increases in fuel tax for vehicles because they will be environmentally helpful. Given that the pollution of the environment by domestic energy is at least as great as that by vehicles, how can she explain the reduction that the Government made in domestic fuel energy tax?

Photo of Dawn Primarolo Dawn Primarolo Paymaster General (HM Treasury)

The answer is fairness, and to assist pensioners so that people could afford to keep warm. The Government's targets for meeting their Kyoto obligations are clearly laid out, in connection with both the industrial energy tax and the measures taken in the transport sector, in the consultation documents that are to be published by the Department of the Environment, Transport and the Regions.

Photo of Dr Alan Williams Dr Alan Williams Labour, Carmarthen East and Dinefwr

Are not the energy-intensive industries the very ones that benefited most from the collapse in energy prices in the past 10 years? Oil prices have fallen from $30 a barrel to $10 a barrel, the price of gas has fallen by half, and coal is down to £30 a tonne. I am disappointed to hear that the Government have decided to introduce a lower rate when those industries have benefited the most from low energy price and have the most to contribute to carbon dioxide savings.

Photo of Dawn Primarolo Dawn Primarolo Paymaster General (HM Treasury)

I am sorry that my hon. Friend is disappointed, but we need to pay especial attention to the question of competitiveness. The consultation document, which suggests an illustrative rate reduction for intensive energy industries, is designed to ensure that they make a contribution and fulfil their obligations. At the same time, we are mindful of the environment in which their businesses operate.