Energy Tax

– in the House of Commons at 6:50 pm on 20th July 1999.

Alert me about debates like this

[Relevant documents: The Ninth Report of Session 1998–99 from the Trade and Industry Committee on the Impact on Industry of the Climate Change Levy, HC 678.]

Photo of David Heathcoat-Amory David Heathcoat-Amory Conservative, Wells 7:14 pm, 20th July 1999

I beg to move, That this House notes that the proposed energy tax represents a huge transfer of cash from manufacturing and energy intensive industries to the public and service sectors; threatens to drive large energy users out of the United Kingdom altogether and is a badly targeted and inefficient way of reducing CO2 emissions; believes this is another stealth tax on industry and notes the Government has increased the Landfill Tax without applying the revenue to offsetting cuts in National Insurance Contributions as was done by the last Conservative Government; and calls on the Government to consult on alternative ways of meeting Britain's international commitments to counter global warming and to withdraw this damaging threat to industry. The subject of the debate is familiar; it is Labour's addiction to new taxes. The House knows that before the election the Prime Minister promised not to raise taxes, but that he and his Government have broken that promise repeatedly in every Budget since then.

The Government talk of supporting the family, but they tax the family. They talk about encouraging savings, but they tax savings. They talk of encouraging competitiveness in industry, while regulating industry and taxing it. Halfway through this Parliament, British industry already faces £30 billion in extra taxation over the lifetime of the Parliament. That is not my figure but that of the British Chambers of Commerce.

Now the Government plan another new tax—an energy tax, which was announced this year, will be enacted in next year's Finance Bill, and will come into effect in 2001. It is designed to raise an extra £1,750 million a year—a figure recorded in the Red Book.

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

I am grateful to the shadow Minister for giving way at this early stage. Does he accept that the proposal is revenue neutral, because all the money raised will be given back in cuts in national insurance contributions?

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

Later I shall deal specifically with the untested assertion that the tax is in some sense revenue neutral. It is anything but revenue neutral for the companies and sectors that pay it.

The Government are building on what they have already done to the British haulage industry, which faces annual escalating rises in diesel duty. The rise amounts to 12 per cent. for this year alone. The haulage industry has been made uncompetitive in the single market, and to the extent that it can pass on its costs to British industry as a whole, it has made the rest of British industry uncompetitive too.

All those increases in diesel taxes and other taxes are being made behind an environmental smoke screen, but the real reason is to raise revenue. Not content with what they have already done, the Government plan to raise another extra £1.75 billion. They claim that that is revenue neutral, because they will cut employers' national insurance contributions by an equivalent amount.

Photo of Joan Walley Joan Walley Labour, Stoke-on-Trent North

The right hon. Gentleman talks about a smoke screen, but does he agree that we desperately need an international agreement to deal with carbon dioxide emissions and global warming? Does he not realise how important it is to ensure that the United Kingdom plays a leading part in that?

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

It may be news to the hon. Lady, but there already is an international agreement; it was signed at Kyoto. What she wants has already been done. Those are binding legal commitments, and the Conservatives agree that we must meet our international commitments. Later in my speech I shall explain how we will do that.

First, however, I shall deal with the point raised by the hon. Member for East Carmarthen and Dinefwr (Mr. Williams) about the so-called revenue neutrality. No one believes in that. Let us consider what the Government have already done in terms of other environmental taxes. An instance would be the landfill tax introduced by the previous Conservative Government. We applied all the revenue—a smaller sum but substantial nevertheless—to an offsetting cut in national insurance contributions. The then Labour Opposition supported us.

What happened when Labour took office? The Labour Government put up the tax on landfill from £7 to £10 a tonne. Not a penny is going back to industry in offsetting cuts. Moreover, they have announced a new tax escalator. The landfill tax will now go up every year for the next five years, but none of that extra revenue will be returned to industry. The Government will have more than doubled that tax, and none of the revenue will be recycled.

Photo of David Chaytor David Chaytor Labour, Bury North

Will the right hon. Gentleman give way?

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

No; I want to ask the Economic Secretary a question, as she will answer the debate. Will she confirm now that all the revenue, now and in the future, will be used to cut employers' national insurance contributions? Such a simple question demands a simple answer.

The Economic Secretary's silence is very eloquent, and we are entitled to draw one conclusion from it—that the Government will do to the energy tax what they did to the landfill tax. They will introduce it at a lower rate, and then they will put it up, forgetting all their promises and waffle about tax neutrality. That is the Government's game, and we are now forewarned.

However, even if we accept that the revenue will be applied to an offsetting cut, the proposed tax represents a massive transfer of cash from the manufacturing and energy-using sectors of the economy to the service sector, and to the public sector in particular. The public sector alone will benefit to the tune of about £150 million a year, even if it takes no action to cut energy bills.

Photo of Mrs Anne Campbell Mrs Anne Campbell Labour, Cambridge

Is the right hon. Gentleman aware of the report from Cambridge Econometrics, published on 6 July? It states that the climate change levy will create more jobs and save more CO2 than the Government predict, and that new energy-saving devices will help manufacturing industry in the long term, by creating jobs and making them more efficient.

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

That prediction takes no account of job losses in industries hit by the levy, nor of the jobs that will be exported as firms migrate away from the United Kingdom to avoid the levy.

Photo of Desmond Swayne Desmond Swayne Conservative, New Forest West

Is my right hon. Friend aware that agriculture—and especially the protected horticultural sector, which recycles all its carbon dioxide—will be disproportionately hard hit by this perfidious tax?

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

My hon. Friend is right. Many sectors and industries will be badly hit, and I shall give some more detail about one in particular. Sir Brian Moffatt, the chairman of British Steel, estimates that that company will pay a net £220 million a year under this tax. He says that British Steel will be forced to close plants here which will be replaced by inefficient plants in other parts of the world. That answers the point raised by the hon. Member for Cambridge (Mrs. Campbell). If efficient British plants are replaced by inefficient plants in other parts of the world without environmental control, the global atmosphere will suffer and British industry will be grievously hurt.

Photo of Mr Llew Smith Mr Llew Smith Labour, Blaenau Gwent

I represent a steel community. Can the right hon. Gentleman explain why British Steel is bleating about the financial costs of the energy tax when recently it was able to return about £700 million to shareholders? It has also been making people redundant and throwing them on the scrap heap, in an area of Wales with one of the highest levels of unemployment.

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

I should have thought that the hon. Gentleman would have welcomed the renaissance in steel making plants since privatisation and the other industrial reforms introduced by the previous Government. It is a British success story. However, the British Steel chairman should know something about the industry. His point was that that renaissance is being put at risk because of a badly targeted and ill considered tax that will drive plants overseas.

Photo of Denis MacShane Denis MacShane Labour, Rotherham

I hope to be able to make some points about steel if I catch your eye later, Mr. Deputy Speaker, but the right hon. Gentleman will be aware that he is describing the worst case. Last week, one of British Steel's most senior executives came to the House and talked about a tax of £55 million. The eventual level that is set may be higher or lower, but the right hon. Gentleman must use accurate and honest figures, not the worst-case projection.

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

I am glad that the hon. Gentleman admits that the industry will be damaged. We are now talking merely about the extent of that damage. The chairman of British Gas might have got it slightly wrong, but the impact on investment and employment in an important British industry will be devastating.

Photo of Mr Ian Bruce Mr Ian Bruce Conservative, South Dorset

My right hon. Friend has been generous in giving way, and too generous with the Government. The Government say that the tax will be revenue neutral, but as jobs in the chemical and steel industries go overseas, so will their tax-raising potential. To pay for the offset, the tax on energy-using industries will therefore have to be increased. Will not the result be that we will lose the jobs, but that the carbon dioxide will be created in other countries rather than here?

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

That is an interesting point. The Government are committed to raising a certain sum. If the tax is rendered impossible to collect due to migration overseas by businesses—if they in effect evade the tax—there will be an extra burden on the firms that remain. When the Select Committee on Trade and Industry quizzed the Economic Secretary, she was unable to "offer any clear guidance" on the point. Perhaps this debate will get some hard answers to hard questions, such as that posed by my hon. Friend.

I have spoken about steel, but I shall now move to aluminium. There is an Alcan plant in the constituency of the Chancellor of the Exchequer. Alcan is a very responsible company that recycles most of its product and already derives more than a quarter of its energy needs from hydro sources. However, the price of its product is set internationally on the London Metal Exchange. It can do nothing about that. Therefore, the extra costs being loaded on Alcan by the Government have to be met by the company, through lower production, employment and investment. There is a real threat that such an internationally owned company will seek to invest and expand abroad, rather than in the United Kingdom.

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

No, I must make progress.

Other sectors will be in trouble too. The whole chemical industry is threatened, and firms involved with paper, cement, horticulture, sugar and farming will all pay far more in tax than they will ever receive back in national insurance contribution cuts. All those firms will be rendered uncompetitive. I am grateful that those and other points were drawn out in the Select Committee report published earlier this week.

It is a most useful report. The Select Committee has a Labour majority but the report is unanimous, and could not be more clear about the threat. It states that the tax could prove a blunt instrument which does considerable damage to sectors of the British economy already struggling to maintain their competitiveness. In the same chapter, the report states that the north-west of the country could lose £500 million in tax paid by those industries and that all that money will go from north to south.

That is a bizarre form of industrial support. The Labour Government long since gave up representing the interests of manufacturing industry, but surely even they can see that it is bizarre that the north-west of England, one of the United Kingdom's poorer regions, should pay £500 million that will go to support service industries, and the public sector, in places such as the south-east.

Photo of John Bercow John Bercow Shadow Minister (Education)

With regard to my right hon. Friend's references to the north-west, is he aware that the debate is graced by the presence of a distinguished member of the Select Committee on Trade and Industry who also represents a constituency in the north-west? I refer to the hon. Member for Chorley (Mr. Hoyle), who, I feel sure, will wish to catch the Speaker's eye in order to reinforce my right hon. Friend's powerful arguments.

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

I shall stay specially to hear the hon. Member for Chorley (Mr. Hoyle) speak. I hope that he will not resile from a report published only yesterday with his signature on it. We all look forward to hearing from him.

It is not only heavy industry that will suffer. Rural England will be hit—again. Calor Gas—an essential supplier of energy to remote rural areas, small businesses, caravan parks, horticulture and agriculture—observes that gas is to be taxed for the first time, but its competitor fuel, oil, will not. That will induce a switch from gas towards oil, which is both bad for the environment and contrary to the Government's transport policy, for which duty on gas is being cut to persuade people to switch away from oil.

Northern Ireland's economy is sensitive and vulnerable, but the Financial Times has reported: Energy tax threatens N Ireland plans for gas link". Taxing gas—making it relatively less competitive—puts at risk the proposed pipeline between Belfast and Dublin. That is an odd way in which to support the peace process. The Northern Irish economy is being made less competitive as people are encouraged to switch from gas to less environmentally benign oil.

Photo of Chris Leslie Chris Leslie Labour, Shipley

Will the right hon. Gentleman give way?

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

I hope that the hon. Gentleman will forgive me if I do not. I have given way generously and should like to make an important point.

An additional muddle is that the proposals do not even try to tax carbon. The Government want to reduce carbon dioxide emissions, but electricity from sources that produce no carbon dioxide, such as nuclear plants, will be taxed at the same rate as electricity derived from coal or oil. There is no incentive to switch from a source of energy that produces CO2 to one that does not. That runs contrary to Lord Marshall's report, and to the recommendations of the Select Committee. I risk embarrassing the hon. Member for Chorley, but the report states, on page xxiv: There would appear to be some confusion within Government about the extent to which the Climate Change Levy could and should reflect the carbon content of fuels … We recommend that the Government seek ways to link the Levy, at least broadly, to the carbon content of fuels. Will the Minister clear up the confusion? If the Government aim to reduce production of carbon dioxide, why do they not tax carbon instead of energy in general?

The whole botch of proposals is illustrated by the case of Britannia Zinc, a smelter in Avonmouth. Many of my constituents work at the competitive plant, which operates on thin margins in an international business. Unavoidably, it uses a great deal of energy. It is a matter of physics, not politics, that certain chemical reactions cannot occur unless a lot of energy is used. The firm calculates that it will pay 20 times more in tax than it will receive back in national insurance contribution reductions. The plant is foreign-owned, and it has a sister plant in Germany. The parent company says that tax in Germany is capped at a much lower level, intended to protect industries vulnerable to international competition.

The Government will rebate the levy by only 50 per cent., and only selected, privileged industries deemed fully energy efficient will receive it. That is wholly inadequate. No matter how efficient Britannia Zinc and many other plants become, they will have to pay large sums, and that will make them uncompetitive in world markets. Will the Minister promise that such companies will be exempted—or substantially exempted—from the tax? There is great uncertainty in the market about the Government's proposals, which are already jeopardising the inward investment on which the UK depends. Will the Minister put it beyond doubt that the Government will take no action to prejudice the position of highly vulnerable international industries?

Photo of Joan Walley Joan Walley Labour, Stoke-on-Trent North

The right hon. Gentleman is spreading needless alarm. Under the Government's proposals, opportunities exist for negotiated agreements with energy-intensive users. We seek consensus with industry. How can the right hon. Gentleman ignore that?

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

The hon. Lady is quite wrong. The 50 per cent. levy means that no matter how efficient companies are, they will pay 50 per cent. of the tax. They cannot reduce energy consumption below a given technical level. Anyone making chlorine must pass an electric current through a solution: there is no other way to do it. No matter how efficient anyone is, an irreducible minimum of energy must be used. The Government are telling firms that they must pay the levy, no matter how efficient they are. That will drive chlorine production out of the UK.

Photo of Paul Keetch Paul Keetch Liberal Democrat, Hereford

The right hon. Gentleman is right. The third largest employer in my constituency, Special Metals Wiggins, employs 1,000 people to produce specialist nickel alloys. The firm shares many of the concerns that the right hon. Gentleman has raised. The hon. Member for Stoke-on-Trent, North (Ms Walley) may wish to know that a small specialist company that talks to another may end up disclosing to its competitors large amounts of its business. In specialist areas, such as high-intensity metal production, the tax will cost jobs. For Special Metals Wiggins—

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

I agree with the hon. Gentleman. Although the main impact of the tax will be more direct, the associated disclosure of information to competitors and use of management time will undermine British industry.

A further lunacy requires our attention. Britannia Zinc wants to cut carbon dioxide emissions by installing a gas-fired electricity generating station. The company has applied to do so, but the Government have placed a moratorium on such stations. The Government threaten the company with a tax but, at the same time, they stop the company making required cuts in carbon dioxide emissions. There can be no better example of how Government policies pull in opposite directions. The Government must sort out some of the mad paradoxes and contradictions at the heart of their policy. We have a tax-driven policy that is clumsy and counterproductive. We need a policy to deal with the specifics of global warming in a way that does no damage, or as little damage as possible to our competitive position.

The Conservative party fully understands the dangers of global warming. We will meet our international commitments. We have always done so. When Lady Thatcher was Prime Minister she was the first to recognise the importance of the issue. When my right hon. Friend the Member for Huntingdon (Mr. Major) was Prime Minister, he went to Rio to negotiate and sign the international agreement to stabilise CO2 emissions. We met that commitment. Most other countries did not, but the United Kingdom did. We knew that one could do that only if one worked with industry and listened to the alternatives to taxation.

Many industries are willing and anxious to play their part. The Chemical Industries Association has already obtained an agreement with the Department of the Environment, Transport and the Regions which commits the industry to improving its energy efficiency by 20 per cent. up to 2005. If such agreements fail, that will be the time when penalties may be appropriate, but it is not right to impose a tax even if companies meet targets and become as efficient as is technically possible.

Emissions trading was one of the options proposed by the Marshall committee. A cut in CO2 would be required from an industry or sector and firms able to make larger cuts would be able to sell them to firms unable or unwilling to make the same reductions. The result would be that the specified, targeted, definite overall reduction in CO2 would take place in the most cost-efficient way. It is a market solution and it does least damage to industry. It works in the United States, where there is emissions trading for sulphur. BP Amoco in Britain already uses it within its own plants. It is anxious to talk to the Government about it. The Conservative party supports it, but again the Government are dithering.

The Select Committee from which I have already quoted said: The Government has sent out mixed messages". How can the Government expect industry to get its act together when the Government cannot decide whether they will introduce a tax, emissions trading or a mixture of both? The only clear message coming out of the Government at the minute is that if they face any problem, they reach for the tax lever.

Photo of Damian Green Damian Green Shadow Spokesperson (Environment, Food and Rural Affairs)

My right hon. Friend has pointed out the perverse effects of the Government's actions, which are more to do with raising tax than controlling emissions, which we all want to do. Does he agree that the game is given away by the fact that, of the money that the Government intend to raise from the climate change levy, a derisory amount will be reinvested in renewable and sustainable energy sources, showing that they are not serious about reducing emissions, but are very serious about raising money from British industry?

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

Absolutely. It is a token amount. About 4 per cent. of the yield is to be allocated to renewable energy and other types of environmentally benign energy production. That is an inadequate response.

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

Forgive me, I wish to conclude on this point.

What we know after we have been through all the fog of uncertainty around the Government's policy is that they have come up with a tax-driven solution. That tax is badly thought out, badly targeted, damaging, anti-competitive, wrong and we will oppose it.

Photo of Patricia Hewitt Patricia Hewitt Economic Secretary, HM Treasury 7:44 pm, 20th July 1999

I beg to move, To leave out from "House" to the end of the Question, and to add instead thereof: 'notes that there is now compelling evidence that climate change needs to be tackled, that there is therefore a need for action to reduce greenhouse gas emissions, and that the United Kingdom has a legally-binding target for reducing greenhouse gas emissions set under the Kyoto Protocol; welcomes the recommendations of Lord Marshall on the case for a climate change levy; further welcomes the measures taken by the Government to help British business, including cutting corporation tax rates to their lowest ever level; welcomes the Government's decision to pre-announce the introduction of the climate change levy by two years to give time for further consultation on its design; and supports the Government's determination to work with industry and other parties to ensure that it meets its environmental objectives whilst safeguarding Britain's international competitiveness.' Before I turn to the substance of the matter, I should like to apologise to you, Mr. Deputy Speaker, and through you to the House. The debate has come, as all right hon. and hon. Members will be aware, in the middle of a particularly busy week, and I am afraid that I have prior engagements that I have not been able to abandon completely so I will not be able to fulfil the normal courtesies of the House and be present for the winding-up speeches. My hon. Friend the Financial Secretary to the Treasury will respond fully to the debate and I look forward to reading the record of what I am sure will be an extremely interesting occasion.

The debate is about climate change and what we do about it. There is increasing evidence that it is happening. As the Department of the Environment, Transport and the Regions report on indicators of climate change notes, in England, four of the five warmest years in the 340-year record have occurred in the last decade. We have certainly all noticed that in recent days.

We cannot doubt that climate change is the result of human activity. What industrial development since the 18th century has created, sustainable development on the dawn of the 21st century must start to put right. In the words of the report of the Select Committee on Trade and Industry published yesterday: The question is how, not whether, greenhouse gas emissions can be reduced. I am sure that I shall not be alone tonight in referring to the Select Committee's useful report. Indeed, the right hon. Member for Wells (Mr. Heathcoat-Amory) has already referred to it. I take this opportunity to thank my hon. Friend the Member for Ochil (Mr. O'Neill) and other members of the Committee for their contribution to the debate.

The United Kingdom has a legally binding target for reducing greenhouse gas emissions, set under the Kyoto protocol, of a 12.5 per cent. reduction on 1990 levels on a basket of six greenhouse gases by the period 2008–12.

Photo of Quentin Davies Quentin Davies Conservative, Grantham and Stamford

Does the hon. Lady have any plans to deal with the other five greenhouse gases? The matter for debate this evening, of course, merely affects CO2.

Photo of Patricia Hewitt Patricia Hewitt Economic Secretary, HM Treasury

Of course we have plans, but I shall focus on CO2 emissions, which is the main greenhouse gas. We have discussed them, especially in relation to road transport, to deal, for instance, with emissions of sulphur.

Photo of Patricia Hewitt Patricia Hewitt Economic Secretary, HM Treasury

No. I wish to make this point.

Meeting the Kyoto target is the beginning, not the end of the process. As Lord Marshall put it in his report: The commitments made at Kyoto are only the beginning if we are really going to tackle the problem of climate change.…Whatever programme the Government designs will need to look beyond the current round of targets and provide long-term, continuing, incentives to reduce emissions. That is why we committed ourselves in the manifesto on which we were elected to a 20 per cent. reduction in CO2 emissions by 2010.

Photo of Mr Barry Jones Mr Barry Jones Labour, Alyn and Deeside

I thank my hon. Friend for the urgency with which she saw my steel workers. May I tell her of the concerns also held by my cement and paper-mill workers? Having heard the fulmination of the right hon. Member for Wells (Mr. Heathcoat-Amory), does she intend to include in her speech the remarkable way in which she plans to consult across industry and is already receiving deputations? Surely, with two years to go, we can see a done-deal for the industry.

Photo of Patricia Hewitt Patricia Hewitt Economic Secretary, HM Treasury

I am grateful to my right hon. Friend, who has made an extremely important point and, more broadly, a constructive contribution to the debate.

Photo of Patricia Hewitt Patricia Hewitt Economic Secretary, HM Treasury

No. I will make a little more progress.

The United Kingdom is not alone in having to meet the targets set under the Kyoto protocol. On current projections, most overseas countries will have to introduce new measures in one form or another if they are to meet those targets. In many cases, the targets set for those countries are even more stringent than ours. That is why since 1990, seven European countries have introduced carbon or energy taxes. The Italian Government recently announced plans for a new CO2 tax.

Photo of Desmond Swayne Desmond Swayne Conservative, New Forest West

Why is the Minister introducing a tax that will penalise protected horticulture, which recycles its CO2? Why does she not introduce a tax that provides an incentive to reduce CO2 emissions?

Photo of Patricia Hewitt Patricia Hewitt Economic Secretary, HM Treasury

I thought that the hon. Gentleman would ask about protected horticulture; we shall consider that matter in the course of our consultations. If he will be a little more patient, I shall come to the detailed way in which we are considering the design of the levy.

I want to stress that all sectors of the economy must play their part in meeting those targets. In respect of transport, of course, the previous Government introduced the road fuel duty escalator, which we have maintained. In the domestic sector, we have made it clear—unlike the previous Government—that we will not introduce new taxes on the domestic use of fuel power.

Photo of Patricia Hewitt Patricia Hewitt Economic Secretary, HM Treasury

Let me finish my point before I give way. To introduce new taxes would only add to the appalling problem of fuel poverty that we inherited from the previous Government—some 5 million families and elderly people who cannot afford to heat their homes properly. I shall now give way to the hon. Gentleman, who presumably supported VAT on fuel.

Photo of Dominic Grieve Dominic Grieve Shadow Minister (Scotland)

The hon. Lady might recall from her appearance before the Environmental Audit Committee that I may well be broadly supportive of her on some of the issues that she has raised. On domestic carbon dioxide emissions, does she agree that simply to say that nothing more can be done because of fuel poverty ignores the fact that growth is greatest in the domestic sector, whereas the reductions have been greatest in the manufacturing sector? Are we not in danger of missing the targets that we should be addressing?

Photo of Patricia Hewitt Patricia Hewitt Economic Secretary, HM Treasury

The hon. Gentleman is quite wrong. Of course, we must tackle fuel poverty; we shall do that by expanding the home energy efficiency scheme, by revising building regulations and by working with our European partners to ensure that we have high-efficiency products in the domestic sector—backed up by mandatory labelling and minimum legal standards. As I said, every sector must play its part, but, because of fuel poverty, taxation is not an appropriate policy weapon for the domestic sector.

Photo of Patricia Hewitt Patricia Hewitt Economic Secretary, HM Treasury

I should like to make a little more progress before I give way again.

Business needs to play its part. My hon. Friends and I welcome the lead already taken by many British companies in helping to cut greenhouse gas emissions. There has been a 65 per cent. improvement in energy efficiency in the aluminium sector since 1990.

Photo of Alan Beith Alan Beith Liberal Democrat, Berwick-upon-Tweed

The hon. Lady mentioned the contribution of the aluminium industry. Will she take account of the overall environmental record of that industry—especially its recycling capacity and the energy saving that it has already undertaken? Will she take seriously the suggestions made by the industry so that the design of the tax can take account of the industry's special problems?

Photo of Patricia Hewitt Patricia Hewitt Economic Secretary, HM Treasury

That is precisely what we are doing. I have recently held valuable discussions with representatives of Alcan and of the aluminium sector. That is one reason why I specifically mentioned the industry.

In the public sector, we have set a target for energy efficiency throughout the Government estate of a 20 per cent. improvement on 1990 levels by March 2000. All of that—and much more—is welcome.

Photo of Stephen Dorrell Stephen Dorrell Conservative, Charnwood

The Minister has placed considerable stress on the importance of every sector making a contribution to reducing carbon dioxide emissions. Is it not extraordinary that the Government should continue their moratorium on gas-fired power stations—the single effect of which is to create an incentive for the electricity-generating sector to shift back towards higher carbon dioxide emissions?

Photo of Patricia Hewitt Patricia Hewitt Economic Secretary, HM Treasury

The right hon. Gentleman is quite wrong. There is no moratorium on gas-fired power stations; every application is considered on its merits—[Interruption.] I am delighted to say that a large number of applications have been accepted for the use of gas in combined heat and power plants. That is the most efficient way of using gas for the production of energy.

Photo of Andrew Robathan Andrew Robathan Conservative, Blaby

Is the hon. Lady aware that the combined heat and power industry is extremely concerned that there has not yet been any reassurance that it will be exempt from the energy tax? Indeed, it would fly in the face of everything if CHP and renewable energy were not exempt from the energy tax.

Photo of Patricia Hewitt Patricia Hewitt Economic Secretary, HM Treasury

In the consultation document, we specifically stated that we wanted to consider the right way to treat combined heat and power within the climate change levy. That is what we are doing.

The welcome improvements that have been made by many—not all—British companies are not the end of the issue. Much more can and must be done. As Lord Marshall stated, there remains scope even in energy intensive industries for energy savings and emissions reductions which are relatively cost-effective. He continued: many business representatives acknowledged that their industries were by no means at the technological frontier on energy efficiency.

Photo of Mr Ian Bruce Mr Ian Bruce Conservative, South Dorset

Will the hon. Lady cut through some of the subterfuge that will, no doubt, continue throughout the debate? Will she admit that the only logical, sensible way forward would be to cut carbon emissions, and that the reason the Government will not do so is because that would cut the amount of coal burnt in this country compared with other fuels? That is why she has been sent to the Dispatch Box with such a weak case.

Photo of Patricia Hewitt Patricia Hewitt Economic Secretary, HM Treasury

I am sorry that Conservative Members regard as frivolous or as a subterfuge a serious response to this serious issue. I suspect that that reflects the way that they behaved when they were in government.

The climate change levy—as spelled out in the consultation document—needs to be primarily based on energy because, for the reasons that I have given, this is a downstream, not an upstream, tax. Given the electricity pool arrangements, it is not possible for any business user to tell how much of his electricity comes from a particular source—whether it be coal, gas or a renewable source. The hon. Member for South Dorset (Mr. Bruce) simply reveals the fact that he does not understand the electricity pool arrangements.

The prices paid by industry for gas and electricity have tumbled in recent years. Between 1990 and 1998, average industrial—[Interruption.] Conservative Members might not want to hear the facts, but it is important to understand them. Average industrial gas and electricity prices—[Interruption.]

Photo of Michael Martin Michael Martin Deputy Speaker (First Deputy Chairman of Ways and Means)

Order. We cannot have hon. Members shouting at the Minister. The Minister must be heard.

Photo of Patricia Hewitt Patricia Hewitt Economic Secretary, HM Treasury

I am grateful, Mr. Deputy Speaker. Average industrial gas and electricity prices fell by 44 per cent. and 24 per cent. respectively in real terms.

Photo of Quentin Davies Quentin Davies Conservative, Grantham and Stamford

Does the hon. Lady accept that her argument about the pool does not stand up to examination? Why not exempt companies that either sign contracts for, or themselves install, dedicated capacity based on lower carbon emission generation, or non-carbon emission generation—such as renewables?

Photo of Patricia Hewitt Patricia Hewitt Economic Secretary, HM Treasury

That is not how the electricity pool works at present. I am not sure whether the hon. Gentleman seriously suggests that the rate of the climate change levy should vary every half hour according to the marginal supplier into the pool. However, of course we are considering the whole issue—

Photo of Patricia Hewitt Patricia Hewitt Economic Secretary, HM Treasury

Let me finish with the hon. Gentleman's previous intervention.

We are considering how the review of electricity trading arrangements and the possibility, after that review, of the establishment of contracts for green trading arrangements should be treated in the climate change levy. I shall give way once more to the hon. Member for Grantham and Stamford (Mr. Davies), but then I must make some progress.

Photo of Quentin Davies Quentin Davies Conservative, Grantham and Stamford

I think that the hon. Lady does not understand how the pool system works. It is perfectly possible for industry to sign contracts for supply outside the pool—to sign contracts with a dedicated supplier or to install its own capacity. Why does she not exempt from her levy the type of capacity that is delivered outside the pool, based on low carbon or non-carbon emission generation?

Photo of Patricia Hewitt Patricia Hewitt Economic Secretary, HM Treasury

The previous Administration left us a mess in respect of the electricity pool. We are sorting it out.

The right hon. Member for Wells referred to the DTI Select Committee. I refer him to another part of its report, which stresses: Because of lower international oil prices, the price reductions stemming in part from liberalisation and competition, and the fall in the Fossil Fuel Levy on electricity, taxes upon energy might need to rise rather than fall. As the report rightly stressed, no single measure can solve the problem: regulation alone is not enough; and economic instruments alone are not enough. Voluntary measures, regulation, emissions trading and taxation all have a role to play. That is why, following Lord Marshall's report, my right hon. Friend the Chancellor announced, in March, our intention to introduce the climate change levy on the business use of energy.

My right hon. Friend stressed, as I do this evening, that the climate change levy is not a revenue-raising device: it will be revenue neutral for business as a whole. He also stressed that it is not an across-the-board tax, because energy-intensive sectors must have and will have different treatment. As we said at the time of the Budget, the levy will be designed in a way that protects the competitiveness of United Kingdom firms. The scale and rates of the climate change levy will, of course, be a matter for my right hon. Friend's Budget next year, but, as my right hon. Friend the Member for Alyn and Deeside (Mr. Jones) indicated, we continue to consult with business and industry on the design of the levy—for example, on the treatment of renewables and combined heat and power, the appropriate treatment of electricity used in electrolysis, the best way of recycling the revenues and how to deliver extra help to small firms to become more energy efficient.

Following Lord Marshall's recommendation, we are negotiating with energy-intensive industries on the extent to which they can achieve further energy efficiency through binding agreements, in return for significant reductions in the levy. My right hon. Friend the Secretary of State for the Environment, Transport and the Regions and his colleagues at his Department are leading those negotiations, and I am glad to say that they are proving to be positive and constructive. Next week, together with my right hon. Friend the Minister for the Environment and my hon. Friend the Minister for Energy and Industry, I shall meet representatives of those sectors to hear directly from them. We have asked those industries to make proposals on agreements.

As I have repeatedly stressed, the figures quoted in the consultation document are purely illustrative: no decisions have yet been made on the detailed design of the levy. On all those matters we have an open mind. We are listening to industry, we are working with industry, and we shall make our decisions on the basis of what is good for the environment and what is good for competitiveness. It has been suggested by, among others, the right hon. Member for Wells that the climate change levy will destroy competitiveness. That is nonsense. When we published our statement of intent on environmental taxation, we specifically stated that care must be taken to consider the implications for international competitiveness.

We will not sacrifice the competitiveness of our industry to our environmental goals—it would be madness to do so. Climate change knows no boundaries, so if industry were to move elsewhere and the greenhouse gases simply came from a different country, we would have damaged our jobs without protecting our children and grandchildren. However, nor will we sacrifice the environment to our competitiveness goals—it would be madness to do that, and industry is not asking us to do so. Industry is as committed as we are to cutting greenhouse gas emissions and to working with us to make the climate change levy work effectively.

Photo of Dr Peter Brand Dr Peter Brand Liberal Democrat, Isle of Wight

The Economic Secretary refers to greenhouse gases, but does she recognise that the glasshouse industry makes an enormous contribution to reducing carbon dioxide? Will any thought be given to granting carbon dioxide reduction tax credits to those industries that need to use carbon dioxide to produce oxygen, as well as useful by-products such as tomatoes on the Isle of Wight?

Photo of Patricia Hewitt Patricia Hewitt Economic Secretary, HM Treasury

That is precisely the sort of issue that we are considering in the negotiations and consultation with industry.

Photo of Geraint Davies Geraint Davies Labour, Croydon Central

Does my hon. Friend agree that the big question tonight is how the Opposition would fulfil their Kyoto obligations, given that, on the one hand, they are doing a U-turn on the fuel duty escalator on consumer consumption and, on the other hand, they will not support any sort of industrial levy, even one produced in consultation with industry? Would they not simply raise VAT on fuel? Is that not really what the debate is about?

Photo of Patricia Hewitt Patricia Hewitt Economic Secretary, HM Treasury

My hon. Friend is absolutely right—he makes the very point that I was about to come to. The Opposition's motion calls for alternative ways of meeting Britain's international commitments". It has been made clear that their true intention is to raise VAT on fuel to 17.5 per cent., which policy was voted for by the Leader of the Opposition, the shadow Chief Secretary to the Treasury and every right hon. and hon. Member whose name appears above the motion. That is the Conservatives' real purpose and policy. Every pensioner in this country knows that, under a Conservative Government, VAT on fuel would rise to 17.5 per cent.

Photo of Patricia Hewitt Patricia Hewitt Economic Secretary, HM Treasury

No—I have been extremely generous in giving way.

In the modern economy, a cleaner environment and a more competitive industry go hand in hand. Getting the design of the climate change levy right is not only about minimising a possible competitive disadvantage, but about maximising the competitive advantage that comes from giving all our businesses effective incentives to develop and market the cleanest products and processes.

Photo of Mr Peter Brooke Mr Peter Brooke Chair, Northern Ireland Affairs Committee, Chair, Northern Ireland Affairs Committee

In the context of the argument that the Economic Secretary is currently developing, why is our public sector research into energy-saving issues so comparatively low by international standards?

Photo of Patricia Hewitt Patricia Hewitt Economic Secretary, HM Treasury

I have great respect for the right hon. Gentleman, but I draw his attention to the fact that the energy technology support unit, which advises the Government on energy efficiency, includes world-class scientists whose expertise is renowned. They are playing an important part in the negotiations and they have stressed, both to Lord Marshall and to the Government, the scope for significant further savings, even within the energy-intensive sectors.

The development of trading schemes for emissions permits offers us a new competitive opportunity. We see emissions trading as part of the long-term solution to reducing emissions in the United Kingdom. That is why we are working closely with representatives from the Confederation of British Industry and from many companies on the design of a domestic emissions trading scheme. By developing such a scheme now, we can learn valuable lessons ahead of the international trading scheme envisaged under the Kyoto protocol, which we expect to be in place by 2008.

As I have said repeatedly, emissions trading is one of the ways in which energy-intensive sectors can choose to meet their targets. However, as Lord Marshall pointed out, emissions trading is unlikely ever to cover the majority of small and medium-sized enterprises in the UK or firms in the commercial sector, which together account for about 60 per cent. of the total greenhouse gas emissions from business. Therefore, emissions trading and the climate change levy are complementary measures, and the Select Committee on Trade and Industry specifically endorsed that conclusion.

Photo of Patricia Hewitt Patricia Hewitt Economic Secretary, HM Treasury

No—I have been generous in taking interventions. It is vital to protect the air we breathe. We are determined to rid our air of the pollution which endangers human health and the environment. From climate change to waste collection, from the ozone layer to the protection of birds, the search for sustainable development is unremitting. It will require a change in life style for all of us, as we learn to live fuller lives without jeopardising our children's future or their opportunities to use the world's resources. That is the Conservative party's green manifesto, on which the right hon. Member for Wells and his right hon. and hon. Friends stood for election only two years ago. They stood on those principles two years ago, but mock them as motherhood and apple pie tonight. They have abandoned every principle in favour of the extremism and cynical opportunism to which we have become accustomed from the modern Conservative party. They were right two years ago and they are wrong now. It is my hope that, even now, they will admit their errors, abandon that extremism, and join with my right hon. and hon. Friends in voting for the Government's amendment.

Photo of Andrew Stunell Andrew Stunell Shadow Spokesperson (Environment, Food and Rural Affairs), Liberal Democrat Spokesperson (Environment, Food and Rural Affairs) 8:08 pm, 20th July 1999

I draw the House's attention to the amendment standing in my name and the names of my right hon. and hon. Friends, which sets out clearly the Liberal Democrats' views.

We broadly welcome the climate change levy that the Government have proposed—at least, we welcome the principle, but we have some reservations about the details. We welcome it because, as the Economic Secretary said, and as I believe the right hon. Member for Wells (Mr. Heathcoat-Amory) acknowledged, the problem of climate change and climate degeneration is a real one and one that has to be tackled both nationally and internationally with appropriate policies. The Liberal Democrats believe that the Government must set targets and implement policies that will tackle it. Listening to the right hon. Member for Wells, it was easy to conclude that the Conservatives have missed the point. It is clear that they oppose several aspects of the levy, but it is extremely unclear how they expect the United Kingdom to meet its treaty obligations if nothing is done with the climate levy.

Photo of Dominic Grieve Dominic Grieve Shadow Minister (Scotland)

Let us put aside the motherhood and apple pie aspect of this issue. We can try to achieve the Kyoto targets principally because the transfer from coal to gas for electricity generation makes the targets feasible, even if we do nothing else. I am perfectly prepared to acknowledge that we must do much more, but that is the true situation.

Photo of Andrew Stunell Andrew Stunell Shadow Spokesperson (Environment, Food and Rural Affairs), Liberal Democrat Spokesperson (Environment, Food and Rural Affairs)

I am not sure whether the hon. Gentleman is saying that we should do nothing else to achieve the Kyoto targets or whether he is making another point.

Lord Marshall and the integrated pollution prevention and control directive have said that we must work towards achieving much tougher carbon reduction targets beyond 2010 both nationally and internationally. If we approach the current exercise as a way of just about reaching the target and we then plateau and make no further changes, we will be making a mistake that will ultimately damage the competitiveness of United Kingdom industry far more than any of the proposed changes that are currently on the table.

I draw the attention of the House to the comments of the Energy Saving Trust, which was established by the previous Conservative Government. It has pointed out that the assessed cost of climate change—or climate degeneration—is about 170 ecu per tonne of carbon emitted. It points out that the cost of the levy is lower than the cost of allowing climate change to continue unhindered. We welcome the measure because we believe that the target must be met and because we believe that there are opportunities, as well as problems, in responding to the change.

The report of the Trade and Industry Committee is somewhat disappointing in that it does not appear to recognise some of the opportunities that international competitors are already exploiting in developing new technologies and renewable energy sources. That is what is happening in the real world.

Photo of Dominic Grieve Dominic Grieve Shadow Minister (Scotland)

The hon. Gentleman referred to "new technologies". Is he suggesting that British Steel is not at the technological forefront of steel production? It has minimised the amounts of energy required to produce every tonne of steel.

Photo of Andrew Stunell Andrew Stunell Shadow Spokesperson (Environment, Food and Rural Affairs), Liberal Democrat Spokesperson (Environment, Food and Rural Affairs)

I welcome that intervention because it gives me the opportunity to draw the hon. Gentleman's attention to our amendment. It is absolutely vital that, when a sector is engaged in international trade, the measures put in place are appropriate and do not render United Kingdom industry uncompetitive. I was encouraged by the Minister's comments on that subject, but I draw her attention to the remarks of the Select Committee, which said that the Government appear to be including in that category almost every complainant and lobby group they can find. By including other sectors, one is in danger of diluting the necessary protection for those sectors genuinely engaged in international trade which might be at risk

As regards the use of energy by industry and commerce, although the major users consume a significant amount of energy, they constitute only 30 to 40 per cent. of total energy consumption. The majority of energy used in the industrial and commercial sectors is consumed not by major energy producers but by those running small workshops, by small businesses and the service sector—some 1.4 million businesses in this country, which are not major energy users by any stretch of the imagination.

Conservative Front-Bench Members have indulged in a certain amount of exaggeration and hype—I hesitate to suggest that such a thing would happen in this place. However, the price of gas for industrial and commercial firms has fallen by 46 per cent. in the past 10 years and the price of electricity has fallen by 22 per cent. Even if the levy were introduced at what I understand—if the Minister is to be taken seriously—are described as "illustrative rates", it would increase those prices by less than a third. There is a certain level of hysteria which we must keep under close control.

Photo of Denis MacShane Denis MacShane Labour, Rotherham

If the index is 100 for United Kingdom electricity and energy prices for steel, what is the price of energy electricity in Germany, France or in any other major European competitor country?

Photo of Andrew Stunell Andrew Stunell Shadow Spokesperson (Environment, Food and Rural Affairs), Liberal Democrat Spokesperson (Environment, Food and Rural Affairs)

That is an interesting point. I draw the attention of the House to a logical conclusion of the Conservatives' argument: there should be a level playing field for energy taxation across the world. Six—perhaps seven—European Union countries are moving to introduce, or have introduced, either a carbon tax or an energy tax. I was prompted to intervene on the right hon. Member for Wells to ask whether he was, rather unusually, arguing in support of an EU-wide tax system in order to ensure that the United Kingdom does not lose its competitive advantage. However, the right hon. Gentleman drew back from that logical consequence.

Photo of Tim Loughton Tim Loughton Conservative, East Worthing and Shoreham

Will the hon. Gentleman acknowledge that all but one of the EU countries that is contemplating introducing, or has introduced, energy taxes have taxed carbon content? All but one of those countries have introduced large rebates for high-intensity users, including 100 per cent. rebates for steel producers in Belgium and Luxembourg. That is a very different kettle of fish from what is on offer here.

Photo of Andrew Stunell Andrew Stunell Shadow Spokesperson (Environment, Food and Rural Affairs), Liberal Democrat Spokesperson (Environment, Food and Rural Affairs)

The hon. Gentleman points to the extremely important difference between an energy tax and a carbon tax. The Liberal Democrats believe that we should base our levy regime on the carbon content of fuel. The hon. Gentleman also points out that we should ensure that exemptions take account of the competitive environment—and I have made that point myself.

We welcome the levy in principle because it will reduce carbon emissions to some extent. It will help to slow down the rate of climate degradation and will perhaps direct investment into green technologies. However, we have some major reservations. Perhaps the most important of those is the one to which the hon. Gentleman referred: the levy does not discriminate between carbon-based and non-carbon-based fuels. That means that the environment for renewables will become increasingly difficult.

I was impressed to see a press notice from the Office of Gas and Electricity Markets—I suppose we should call it Ofgem—which stated that it will reduce the rate of the fossil fuel levy in England and Wales from 1 October and that The reduction follows a slow-down in the expected rate of commissioning schemes approved at the last rate setting exercise. In other words, renewables are already finding the going tough. For example, an aluminium smelter that would otherwise be able to draw on renewable fuel to bypass the levy will be unable to do so. The incentive to invest in renewables will be cut as much as the incentive to invest in carbon-based energy sources.

A second criticism is the levy's lack of transparency. The Inland Revenue has published a consultation document. We are surely not short of consultation documents. We could have a refuelling and recycling exercise with that paperwork alone. The Inland Revenue's document recommended against showing the energy levy on the bills that consumers receive, so they will not know that they are paying it. There are built into the proposals serious disincentives for the business sector to make changes that would improve efficiency.

Businesses face a situation in which their prices are down; in which the marginal, invisible cost of the levy will not appear on their bill; and in which the grant that will be recycled from that to provide an incentive to them to improve their efficiency is trivial. The tax will raise £1.75 billion, and only £50 million will be recycled to improve the efficiency of businesses. That is less than £40 per firm per year, which will never provide an incentive for small firms to reinvest to get rid of inefficient plant or to reduce heat loss from their buildings.

We have reservations also about the shotgun approach for major energy users. The debate has already covered that point. We strongly believe that adapting to the Kyoto targets, and beyond to the further reductions in carbon use, can and should be a job-promoting transition, not a job-destroying one.

Photo of Tim Loughton Tim Loughton Conservative, East Worthing and Shoreham

Why, in the Liberal Democrats' amendment to the motion, is there no mention of the hon. Gentleman's article in The Parliamentary Monitor, in which he says that the levy should be introduced at a modest level, but with a very clear signal that it will be raised progressively year-on-year."? Will he now confirm that the Liberal Democrats' policy is to have an energy tax escalator, as he stated in black and white a few days ago?

Photo of Andrew Stunell Andrew Stunell Shadow Spokesperson (Environment, Food and Rural Affairs), Liberal Democrat Spokesperson (Environment, Food and Rural Affairs)

My article does not appear in the amendment, first, because I am too modest, and secondly, because the amendment would have been too long. I am very happy to talk about the future direction in which the tax should go, although I am not sure that that is the point that the Conservatives are making. If you will permit me, Mr. Deputy Speaker, I will take the argument a little further. If we have to tackle climate change not only by a one-step change by 2010, but by further steps in 2020, 2030 and 2040, it is absolutely clear that we will have to use market forces and fiscal measures to effect change more quickly.

I repeat that the amount of money being recycled to business to promote that efficiency is far too small. The Government should clarify how they will support investment by industry in increased efficiency and the promotion of renewable sources of energy. What moves are they prepared to fund to ensure that the switch to renewables takes place?

Finally, the House needs to remember that the debate is not about getting through to the next general election, or even reaching 2010 with our treaty obligations intact. It is about putting in place industrial, fiscal and market-friendly policies that will ensure that we cut pollution, reverse climate degradation, create jobs and wealth and improve the nation's quality of life. Sadly, the debate so far has produced, on the one side, a very timid response, and on the other, a complete and ostrich-like avoidance of the fundamental issues facing the House and the planet.

Photo of Mr Peter Snape Mr Peter Snape Labour, West Bromwich East 8:24 pm, 20th July 1999

It is always a pleasure to be lectured by the Liberal Democrats about what we should do. Motherhood and apple pie are second nature to them, and dispensing them is what they are here for. A good dollop of both does the House no harm. Personally I find the apple pie a bit sickening, although I have listened to such talk for many years.

At least the Government are consulting on their proposals for the climate change levy. It would be remiss of me not to point out that there are, to say the least, misgivings about the likely proposals among industrialists in the west midlands, part of which I represent. I shall come to the detail of those misgivings in a moment, but first I must say to my hon. Friend the Financial Secretary that she will have to tell us exactly what a revenue-neutral tax is. I have been in the House for a long time—too long, perhaps, in the opinion of some—but that is a creature that I have never yet come across in my 25 years here. It is a one-legged fish, a Loch Ness monster or a mythical figure.

Photo of Mr Peter Snape Mr Peter Snape Labour, West Bromwich East

I cannot be interrupted while I am talking about mythical figures. The revenue-neutral tax is a very odd creature. The best brains in the Treasury have been putting together a tax that is revenue neutral, but the very words are contradictory. This is the first such tax that will have emerged from the Treasury if it proves to be truly revenue neutral

Photo of Dominic Grieve Dominic Grieve Shadow Minister (Scotland)

On the assumption that taxation that is raised is not used to line Ministers' own pockets—one rather hopes, and I am prepared to accept, in the context of this House, that that does not happen—there is in fact no such thing as revenue-neutral taxation. As with any other tax, the money will be taken from some people for the benefit of others. Some businesses will suffer and other businesses will get the benefit.

Photo of Mr Peter Snape Mr Peter Snape Labour, West Bromwich East

I suspect that this is the last time that the hon. Gentleman and I will agree this evening, but I am similarly inclined to think that revenue neutral is an unnatural description for any tax levied by the Treasury. If it turns out to be revenue neutral in the truest sense, it will be a first. I cannot speak for Ministers in the previous Government, but I am sure that Ministers in this Government will not seek to line their pockets in the manner that the hon. Gentleman mentioned.

I want to ask my hon. Friend the Financial Secretary a couple of questions about the impact on companies such as British Steel of possible proposals in next year's Budget. I find the Conservative party's expressions of concern hypocritical—I speak collectively, Mr. Deputy Speaker—if only because those of us who were around in the 1980s saw the damage that the Conservatives' policies did to companies such as British Steel. We witnessed the decimation of the steel industry, particularly in the west midlands, south Wales and Scotland, which was regarded as being part of the Thatcherite pattern that was prevalent at the time. Conservative Members' present expressions of great concern strike me as a deathbed repentance.

Is it true, as British Steel says, that it is likely to come off worse than its rivals in the system of rebates under the climate change levy? The company's view is that the most that it can hope for is a 50 per cent. rebate, whereas elsewhere in Europe the rebates will be between 60 and 100 per cent. If British Steel is right, it is, as the company says, unfair that it has, by voluntary means, cut its greenhouse gas emissions by 6 per cent. since 1990, but those reductions will not be taken into account for the purposes of any rebate under the climate change levy. That would obviously render British Steel pretty uncompetitive compared with, for example, the Dutch and the Germans.

British Steel makes a genuine point. As my hon. Friend the Member for Rotherham (Mr. MacShane) implied in his intervention on the hon. Member for Hazel Grove (Mr. Stunell), energy costs for British industry are already higher than for other European countries such as Holland and Germany. To load additional costs—if that is what is likely to happen—on British Steel is, to say the least, likely to be retty damaging to its competitiveness.

Of course, it is not only the bigger companies that are fearful of the likely impact of the climate change levy on their profitability. I have in my constituency a company called Sandwell Castings Ltd., which employs 200 people. It was part of a large group and would undoubtedly, like many similar companies, have gone to the wall had it remained so. It was bought out by its management some years ago, led by the then managing director, who is now sadly deceased, Mr. Alan Wilson, who worked very hard to turn around the company's prospects. Although he has died, the company still regards itself—understandably—as successful and is anxious to continue in business for years to come.

The sales and marketing director wrote to me last month about what he calls "an energy tax". It is all very well calling this measure a climate change levy, but it is a little like the poll tax being called the community charge. A climate change levy will be seen and described as an energy tax and there will be no point in Ministers sending out directives instructing people to call it by its proper name. The sales and marketing director said: We are now faced with an ENERGY TAX which I understand will add 12 per cent. on our melting costs. At this company we are using the very latest technology to melt aluminium but the imposition of this tax compromises the existence of companies such as ours and the 200 people we employ.My request is simple, please make sure your colleagues, many of whom I believe have never been in a foundry, understand the implications of this tax because at this rate Mr. Blair will not have the credentials to sit at the G7"— the G8table as an industrial nation. Those are some of the fears expressed locally.

I wrote back to try to allay the fears of Mr. Green, the sales and marketing director. He sent me a further letter, breaking down the likely impact, in his opinion, of the climate change levy on his company. He envisages a total increase—obviously, melting aluminium is a particularly energy-intensive business—in costs of more than £72,000, and a 14.4 per cent. increase in fuel costs.

Against that we must set the proposed 0.5 per cent. reduction in the company's national insurance charges under the—I have to keep checking the phraseology—revenue-neutral tax, which amounts to a fraction over £17,000. The company believes that that will leave it worse off to the tune of £55,723. That is a precise figure for the imposition of a tax, the details of which have not yet been published, although I think that my hon. Friend the Financial Secretary will get my drift. These are the genuine concerns of a company that has been successful. It was saved from the brink of closure but now very much fears that its future will be imperiled unless the climate change levy is handled differently from the way it is rumoured.

I have one suggestion on the levy, however it is introduced. The House will know—as a former railwayman, I have bored hon. Members for many years with such sagas—how I think that the railway can better compete in various areas. Since rail generates less than 25 per cent. of the CO2 emissions produced by road transport, what about a rebate on the climate change levy proportional to the amount of additional freight that companies move by rail instead of by road? I hope that that constitutes at least one constructive suggestion in my speech which the Minister will be able to take on board.

As I said, I welcome the opportunity to express some of the fears of industry, both large and small, about the impact of the climate change levy on profitability. I know that it is the Government's avowed intention to ensure that no legislation has an adverse effect on the profitability of companies such as British Steel, or smaller ones, like Sandwell Castings Ltd. During the consultative period, I hope that my hon. Friend the Financial Secretary will take on board the very genuine fears that exist. If she wants, I will send her a copy of the letters to which I have referred so that she can see for herself just how concerned such companies are about the future.

I have been in this House too long to make threats. I spent too long sitting on the Opposition Benches waiting for a Labour Government—nearly 20 years—to make threats, but if legislation appears in the way in which companies such as Sandwell Castings very much fear, I shall be unable to support my right hon. Friend the Chancellor in its introduction. That is how serious it is.

I appreciate the necessity to do something. I have said that Liberal Members—who, as usual, want to be all things to all people—are in favour of the climate change levy but not, please God, in their constituencies, affecting companies that they represent. I hope that I do not fall into the same category when I say that there is a problem throughout the west midlands, which was decimated by the policies of the previous Government. Any proposals that my right hon. Friend the Chancellor makes in his Budget should take account of the needs of British industry in general and west midlands industry in particular.

Photo of Tony Baldry Tony Baldry Conservative, Banbury 8:35 pm, 20th July 1999

I am a member of the Select Committee on Trade and Industry, which yesterday published a unanimous report on the impact on industry of the climate change levy. The Register of Members' Interests shows that I have a declared interest in the cement and construction industries.

Given the scope of the levy, there is hardly anyone involved in United Kingdom industry who will not be affected by it. The Amalgamated Engineering and Electrical Union convenor at British Aluminium Extrusions in Banbury has written to me, reminding me that British Aluminium employs just over 400 people in Banbury. He says—remember that this is a union convenor: The net extra cost of energy to this company will be £507,000"—" just over half a million pounds— (net of a £40,000 NIC Contribution reduction) per year at the full rate of the Levy … companies like ours in manufacturing will be net payers while service industries will benefit.Even at the reduced rate allowed for companies under IPPC"— integrated pollution prevention and control— in exchange for a negotiated agreement to reduce energy consumption, the Levy will be a crippling extra burden. If the Government takes this money in extra taxation, our company will not be able to invest in the new equipment required to enable us to fulfil the requirements of a negotiated agreement.The Levy will hinder our competitiveness against companies in Europe and beyond … Unless the workings of this Levy are changed fundamentally from those put forward in the Consultation Paper, the UK will lose jobs, the Treasury will lose the tax revenues from employment, the country's balance of payments will suffer and global warming will get worse and not better. That is in an industry that the Economic Secretary only a short while ago said had produced a 65 per cent. increase in energy efficiency in recent years. Therefore, it is not surprising that the hon. Member for West Bromwich, East (Mr. Snape) has found widespread concerns about the levy throughout the west midlands. Those concerns are obviously mirrored in industry throughout the United Kingdom, as became apparent in the evidence that the Select Committee received.

In June 1998, the UK accepted a legally binding 12.5 per cent. reduction target of greenhouse gas emissions as part of the European Union effort in reaching the Kyoto target. I do not believe that there is any dispute in any part of the House that the UK must meet its Kyoto target for reductions in greenhouse gas emissions. The question is how, not whether, greenhouse gas emissions can be reduced.

Shortly after the Government were elected, the Treasury issued a statement of intent on "environmental taxation", which said that the Treasury would seek to ensure, among other things, that environmental taxes would have acceptable distributional impacts and take account of the implications of those taxes for the international competitiveness of UK business.

The climate change levy, as proposed, fails both those tests resoundingly. It fails to have an acceptable distributional impact—its distributional impact is obviously very unfair—and it clearly has a substantial adverse implication for the competitiveness of UK business.

Lord Marshall's task force concluded: there probably is a role for a tax if businesses of all sizes and sectors are to contribute to improved energy efficiency and to help meet the UK emission targets". There is no quarrel with his conclusion, but in terms of design, the task force concluded, among other things, that any levy should give special treatment to energy-intensive industries and recycle revenues in full to business, including by means of a fund geared to promote energy efficiency. Again, the proposed levy fails both those tests. It does not give special treatment to energy-intensive industries, and the revenues will not be recycled—indeed, the Treasury will take almost all the benefit of them for other purposes.

This is a levy on manufacturing industry that can only damage UK industrial competitiveness. A crude method of recycling revenues has been chosen that has nothing to do with energy efficiency. It simply transfers resources from manufacturing industry to the service and public sectors.

That is not surprising. The more the present proposals are examined, the clearer it becomes that the Treasury's principal policy objective is not to meet the Kyoto target, but to use the target as a means of raising money to cut national insurance contributions by 0.5 per cent. The Treasury clearly sees the levy as an opportunity for a significant reduction in employers' national insurance contributions in the next Budget. However, that will be at the expense of UK jobs, UK businesses and UK investment, particularly in manufacturing, where we cannot afford to lose industrial competitiveness.

In evidence to the Select Committee on Trade and Industry, the Electricity Association argued that the levy will, crazily, have the effect of limiting the resource to pay for capital investment in energy efficiency. Moreover, most of the industries that stand to be hardest hit because they are substantial users of electricity have over recent years, for sound commercial reasons, tried to ensure that they are as energy efficient as possible. An energy levy will not make them more energy efficient; it will simply be a tax on manufacturing industry.

I have in my constituency Kraft Jacobs Suchard, manufacturer of Maxwell House, which employs 1,200 people in Banbury. The firm writes: In 1990 and 1993 substantial investment was made to install Combined Heat and Power (CHP) units, achieving a 27 per cent. saving in fossil fuel and a corresponding reduction of approximately 16,000 tonnes per year of CO2 emission. Clobbering a company like Maxwell House will not make it more energy efficient; it will simply cause it to lose international competitiveness with other companies elsewhere in Europe.

It is therefore little surprise that the Select Committee on Trade and Industry in a report published yesterday—the House should be reminded that that was a unanimous report of a Committee that has a substantial Labour majority—states: We have been disturbed by the unprecedented scale of the reaction to the Government's proposal. We share the view expressed by several witnesses that, without appropriate modifications and exemptions, the Levy could prove a blunt instrument which does considerable damage to sectors of the British economy already struggling to maintain their profitability". The report continues: It is imperative that the Levy makes special provisions for energy intensive industries, such as to minimise any damage to their international competitiveness". In opening the debate, the Economic Secretary sought to give the impression, as most Ministers do at this time, that concerns could be allayed because the Government were consulting. I am glad that the Government are consulting. One of the concerns of witnesses who appeared before the Select Committee was that in their view the Government had not consulted sufficiently. The test for the Government is not how the levy is perceived by industry now, but how it will be perceived at the time of the Chancellor's next Budget.

I hope that those on the Treasury Benches will take note of the Select Committee's findings, having heard all the evidence not just from manufacturing industry and others but from proponents of the levy, of the concern that it may do considerable damage to sectors of British industry. We said: we are concerned about the investment implications of the uncertainty about the rates of Levy which will apply to many major UK manufacturing industries". Although we found that the Levy would be a powerful symbol, both domestically and internationally, of the UK's commitment to its Kyoto obligations, this should not detract from the need to ensure that the details of the Levy are fair to UK industry. I very much hope that the Government in general and the Treasury in particular will give careful consideration to the Select Committee's report. It is a proportionate report based on evidence taken directly from representatives of those most concerned. It does not seek to make party political points and its conclusions are fairly based on the evidence.

The Government, of course, have sought to spin the levy on the basis that it will in some way be revenue neutral, that somehow it will be all swings and roundabouts. But even in this regard the Select Committee found that it received the distinct impression that there was considerable confusion over the meaning of the phrase 'revenue neutral', and that some witnesses had wrongly assumed that it was intended to convey the impression that no firm or sector would lose out as a result of the introduction of the Levy. I suspect that that is exactly what the Government did hope would be conveyed, and that was confirmed by the way in which the Economic Secretary opened the debate this evening. She sought to give the impression that the levy would in some way be revenue neutral, but as the Select Committee found, the phrase is not even an accurate description of the levy's effect on public finances since there will be a net saving in public expenditure due to the public sector's reduced liability for national insurance contributions. None of that should be surprising because, in truth, the Treasury sees the levy not as a contribution to combating climate change but as a contribution to the Consolidated Fund.

However, the greatest irony of the Government's proposal is that it fails to discriminate between energy sources according to their carbon content. Under the proposal, electricity generated from renewables, nuclear fuel, coal and gas will all attract the same rate of levy, and that is somewhat bizarre. Clearly, a carbon tax that hits carbon-rich fuels will give energy users an incentive to switch to using fuel with a lower carbon content. But, again, there is inconsistency in the Government's proposals, as the Select Committee found. It said: There is a tension between the Government's desire to protect the coal industry and the need to cut back carbon dioxide emissions which, at least partly, explains the reluctance to link the taxation of energy use to carbon content of fuels. The simple fact is that the present proposal on the levy meets neither the public criteria set out by the Treasury for environmental taxes, nor those set out for an energy levy by Lord Marshall's task force. It comprehensively fails on all those criteria. The energy tax is just another stealth tax. It does little to help the environment but will inflict injury on UK manufacturing industry and will undermine the United Kingdom's international competitiveness.

The Government need to rethink the climate change levy comprehensively, and they must do so.

Photo of Bob Laxton Bob Laxton Labour, Derby North 8:49 pm, 20th July 1999

The climate change levy is noble in intent. If we do not take action now to reduce greenhouse gas emissions, not only will future generations pay the price in the form of the consequent environmental damage but actions postponed will be necessarily more painful and burdensome than if we were to take them today.

Lord Marshall's report fashioned an economic instrument which sought to batten down the use of energy and its resultant carbon dioxide output. We must consider whether that instrument as currently fashioned is carefully calibrated or a bludgeon.

I suggest that a climate change levy that made British industry uncompetitive—and perhaps destroyed jobs and the capacity to create wealth—would not be very sensible; nor would it make any sense if it seriously distorted the British economy. Labour Members have traditionally championed the cause of manufacturing industry as the foundation of wealth creation, but I am concerned that this economic instrument may result in the large-scale transfer of resources from manufacturing to the public sector and, of course, the service sector.

Devising a system of incentives and, for that matter, disincentives that encouraged people to switch between fuels so that less polluting fuels are given a boost over more polluting fuels should not be beyond our capabilities. Lord Marshall has acknowledged that the economic instrument that he devised does not achieve that, and the Trade and Industry Committee, of which I am a member, was even confronted with evidence of some glaring anomalies in respect of the proposed levy. They could have had the perverse effect of encouraging the use of mineral oils over the less polluting liquid petroleum gas in rural areas and encouraging the switching of electricity generation from the relatively benign alternative of gas-fired plant to the less friendly alternative of oil-fired plant. They are not marks of the well designed tax without undesirable side effects that Lord Marshall was commissioned to outline.

We need a careful rethink, not a simple, knee-jerk reaction, which is what we have seen from the Opposition. After all, if they had taken timely action when they were in government, we would not be facing such difficult choices. Other countries seem to have struck a better balance, and perhaps our Government should look more closely at some of the mechanisms that have been planned or put in place by them.

Photo of Mr Peter Snape Mr Peter Snape Labour, West Bromwich East

I have to tell my hon. Friend that he is being less than fair to Conservative Members. They not only signed up to Kyoto but applied the fuel tax escalator year on year. The fact that they are seeking to rat on that now is entirely predictable. At least they made an effort at that time, but in their present guise of a pretty ineffective Opposition, they deny their past

Photo of Bob Laxton Bob Laxton Labour, Derby North

I agree with my hon. Friend; Conservative Members give the appearance of being 40-faced on this issue.

I have received correspondence from a company that operates close to my constituency of Derby, North. Accordis is a Dutch-owned international company, and I well know that it is facing some difficult market conditions. Although it may not be too well known—certainly not in the Derby area—it took over from Courtaulds. I have no reason or ability to check its figures, but I shall repeat what it has said for the benefit of the House. It calculates that, at the highest rate, the levy would cost it nearly £7.4 million in the United Kingdom and nearly £3.2 million at the Spondon site. Clearly and understandably, there is concern that the Dutch owners may consider switching production outside the United Kingdom. I certainly hope that that is not the case, and the Government are consulting on that issue.

Hon. Members will see from the Select Committee report that we have called for the Government to work closely with industry to achieve energy efficiency gains, but changing behaviour does not necessarily have to be all stick and no carrot. Most of the negotiations between the Government and energy-intensive industries, as I understand them, have revolved around credits for anticipating future lower use of energy, but we have the opportunity to be more creative here.

The Government are consulting on this tax. I believe that we should consider three points. First, we should recognise moves towards the use of less polluting fuels as well as the use of less energy. We should remove entirely any perverse incentives implicit in this levy as currently designed that encourage the opposite.

Secondly, there should be recognition, by some means or other, of industries that have recently invested to improve their record, so that they are not disadvantaged compared with industries that have cynically delayed such investment. There was some suggestion of that in the evidence given to the Select Committee on Trade and Industry.

Thirdly, there should be credits available for those who reduce their output of greenhouse gases, which are far more damaging than carbon dioxide in their environmental effects. The Iceland supermarket chain is re-equipping its refrigeration with environmentally benign hydrocarbons and is moving away from hydrofluorocarbons which, when they leak, are more than 2,000 times more environmentally burdensome than carbon dioxide. Why not let Iceland and other supermarkets chains that are fearful of the levy see the upside as well as the down?

The Select Committee on Trade and Industry was anxious that the levy should not damage sectors of the economy that are already struggling to maintain their profitability. Surely the purpose of the levy should be to make life better for all of us, not appreciably worse. As with all sound Government policy, its effects should be proportionate and considered.

Photo of Tim Loughton Tim Loughton Conservative, East Worthing and Shoreham 8:56 pm, 20th July 1999

I am grateful for the opportunity to speak in the debate. I am a member of the Select Committee on Environmental Audit, and I have had a longstanding interest in green taxes and carbon tax, but what is on offer today is not a carbon tax. Let us dispense with all the spin. The climate change levy is nothing more than an energy tax, and that is rightly the title of the debate. It is a tax by stealth, another red herring of a green tax, and a masterful piece of political presentation by the Government.

Worse still, the proposals are indiscriminate and unfocused. As Labour Members have said, no allowance is made for businesses that have already heavily invested in energy efficiency, or for more environmentally friendly energy such as combined heat and power and liquid petroleum gas. This is a downstream tax with no regard to the carbon content of the production method used. It prompts the question whether a genuine carbon tax was ruled out because of the powerful vested interests in the coal industry.

In energy-intensive industries, energy is a raw material for the production processes. It is integral to those industries, which will be hit particularly hard. Industries will be constrained from switching to more environmentally friendly gas by the Government's moratorium on gas-fired power stations. The Economic Secretary to the Treasury had the audacity to suggest that there is no moratorium on gas-fired power stations. I fought long and hard to get such a power station built in my constituency in the teeth of opposition from the Government, so she cannot tell me the opposite.

This tax represents a massive cross-subsidy from manufacturing to service industries. One of the biggest beneficiaries will be the Government, as a major employer in the service industry. Contrary to what the Economic Secretary said, the proposals contain no safeguards to preserve competitiveness, which is not the case in the many European countries that have differing forms of energy tax. Despite all the Government's reassurances about the rebate on national insurance, it is highly arbitrary, and we have had no undertakings on how long the NI rebate will last. Is it a one-off? Will energy tax rates change in the future, while the rates of NI rebate, if they remain, stay static? My right hon. Friend the Member for Wells (Mr. Heathcoat-Amory) referred to the landfill tax, and the fact that the Government have been raking in more cash without recycling any of it, contrary to the previous Government's intention when they introduced the tax in the first place. Can we expect from the Government, as we patently can from the Liberal Democrats, an energy tax escalator? I am sure that that would be just as counterproductive to the environment as the road fuel duty escalator is proving to be.

Photo of Dominic Grieve Dominic Grieve Shadow Minister (Scotland)

My hon. Friend will recollect the criticism of the Conservatives' change in stance on the fuel escalator. However, is not it the case that the Labour Government have ratcheted up the fuel escalator vastly higher than the Conservatives ever did? Furthermore, is not evidence emerging that, however well intentioned the tax may have been, its impact on road haulage is minimal and its impact on competitiveness considerable?

Photo of Tim Loughton Tim Loughton Conservative, East Worthing and Shoreham

That point is well made. The Government have turned out to be past masters at escalating the escalators. Where companies and industries have no alternative, that must impact on their competitiveness, with resulting losses of jobs and profits to this country.

The Government set up the commission under Lord Marshall of Knightsbridge, but they seem to be ignoring his words. In his report, he said that any measures must be subject to careful design to protect the competitiveness of British industry and maximise the environmental benefit; any tax must be designed in a way that protects the competitiveness of British industry; the design of any tax should ensure that combined heat and power is not disadvantaged; and revenues should be recycled in full to business, with at least some of the revenues channelled into schemes aimed directly at promoting energy efficiency and reducing greenhouse gas emissions. On all counts, these proposals fail dismally, and they must be radically overhauled. That is despite the warm words from Treasury Ministers in support of Lord Marshall's report.

The Government have not thought this one through, as the words of the hon. Member for Ochil (Mr. O'Neill), the Chairman of the Select Committee on Trade and Industry suggest. The figures do not add up, and this is another example of an unlevel playing field. The Government claim that the measure is intended to raise £1.75 billion, but, on the anticipated rates of 0.21p per kWh for coal and gas and 0.6p for electricity, it will raise over £2.1 billion if it is applied evenly to all companies.

It was a bold measure by the UK Government to sign up to a 12.5 per cent. reduction in carbon dioxide emissions as our target by 2010. It was particularly bold when one considers that the average for our European neighbours was just 8 per cent. It was an even bolder measure for the Government to claim a 20 per cent. reduction in their manifesto, which may turn out to have been foolhardy.

Of those six or seven European countries which have some form of energy tax, all but one reflect a carbon content—which this proposal does not. Every one grants special treatment to some parts of industry—as much as 100 per cent. relief for the steel manufacturers of Belgium, France, Luxembourg and Spain.

We have signed up to a 12.5 per cent. reduction in greenhouse gases, so that we will have 87.5 per cent of our 1990 emissions by 2010. However, some EU countries will have a licence to increase their greenhouse gas emissions by 2010. The target for Greece will be 125 per cent. of its 1990 levels; for Portugal, 127 per cent.; and for Spain, 115 per cent. France will be level, at 100 per cent—that is, no reduction on its 1990 levels.

Photo of Dominic Grieve Dominic Grieve Shadow Minister (Scotland)

Is it not the case that, in France, there is no belief in climate change and global warming at an official level?

Photo of Tim Loughton Tim Loughton Conservative, East Worthing and Shoreham

That is another story, and a much higher proportion of electricity comes from nuclear power in France—something that Labour Members would not countenance.

There is a licence to pollute more in the case of greenhouse gases for the countries to which I referred because they do not have the incentive to decrease. Yet we are being saddled with one of the heaviest decreases. We support that, but it should be acknowledged that the UK had one of the best records of decreasing carbon dioxide emissions between 1990 and 1995, under the Conservative Government. In many cases, therefore, our European partners have far greater leeway than we do. Nevertheless, the Government expect British industry to bear the full brunt, the effect of which on industry will be quite catastrophic.

As for end users, CO2 emissions from industry comprise about 27 per cent. of the overall target, whereas domestic emissions are 28 per cent., and road transport 22 per cent. However, by source, iron, steel and other industrial combustion and production processes account for only 17 per cent. of CO2 emissions, as against power stations—which are by far the largest source of such emissions—at 28 per cent.

As we have heard, the Department of Trade and Industry is having to update its 10-year-old figures on energy use by United Kingdom industry sector to identify which firms and plant are energy intensive. Therefore, the Government are largely struggling in the dark on which sectors will be hit hardest—yet, they want to bulldoze ahead with their proposals.

The energy tax has universally been given the cold shoulder by industry. The head of the Confederation of British Industry has said: We do not believe that an energy tax levy is the most cost-effective way of encouraging business to make carbon reductions and are extremely concerned as to the likely impact of the current proposals on UK global competitiveness. I entirely agree.

The most damning response has perhaps come from the British iron and steel industry, which exports 50 per cent. of its production to 200 different countries around the world. It is a fiercely competitive business. The chairman of British Steel said: Making it impossible for us to operate our plants profitably is not a sensible policy. Forcing us to close plants here which will be replaced by inefficient plants in other parts of the world is the height of NIMBY nonsense.There is no need for an energy tax. We can meet the Government's environmental goals without it. Steel—even on the very rough figures provide by the Government—will be the biggest loser of all the industrial sectors. The fact is that £238 million in tax will be taken from the sector, but only £5 million will be rebated to it in national insurance. If we take the hints of the hon. Member for Rotherham (Mr. MacShane) that there will be a generous 50 per cent. rebate of energy tax, we reach the figure of £119 million—which will still be more than 20 times what steel receives in national insurance rebate. Even his own figure of £55 million in energy tax would be more than 10 times what the industry will receive in rebate.

Not only the iron and steel industries but the chemicals industry will be hit by the tax. That industry will pay £175 million in tax, but receive only £25 million in national insurance rebate. Paper will pay £60 million, but get back £2.5 million. Cement will pay £40 million, to get back £600,000. Aluminium will pay £30 million, to get back £1.6 million—and so it goes, on and on. So much for revenue neutrality in any of those sectors.

Water will be another victim. It will spend £36 million, but receive back only £3 million in national insurance rebate. Surely that must impact on the industry's water quality improvement schemes.

The tax's effect on the steel industry will be ironic, as the industry has been one of the greatest proponents of improving energy efficiency. In the past 25 years, the amount of energy needed to produce a tonne of steel has decreased by 40 per cent., and the amount of CO2 involved in the process has been halved. British Steel has been a pioneer in producing lighter steels that are most cost-effective and efficient in car production, so that production requires less energy. British Steel, with other intensive users, has invested greatly in energy efficiency.

Other European Union countries ensure a zero net effect for their steel industry. In Germany, the energy tax is equivalent to only 4p per tonne of steel. The Government's proposals, implemented at the full rate, will be the equivalent of £6.70 per tonne of steel—whereas the average in Europe is only 40p.

After closures—because of sheer competitiveness and foreign competition—in the steel industry, British Steel was a big contributor in recycling jobs into new industries. With the tax, British Steel will of course lose out to foreign competitors. Even more damaging, however, is the fact that 40 per cent. of the world's steel is made in countries that are not covered by the Kyoto agreements.

Last year, for the first time, Europe became a net importer of steel. Last year, steel imports from non-Kyoto-covered countries increased by 113 per cent, and such imports into the United Kingdom alone increased by 60 per cent.

The Government do not seem to realise that, as of the end of June, 84 countries had signed up to Kyoto. However, the figure does not include countries such as South Korea, India, Turkey, South Africa, Hungary, Singapore or Taiwan, many of which have burgeoning iron and steel industries that are simply slavering at the lips to pick up business that will be lost by the United Kingdom if the Government's proposed energy tax is levied. China may, on the face of it, have signed up to Kyoto, but how many people here genuinely believe that it will stick to the strict limits? There will be a big redistribution of funds within the steel industry, from Wales and the north to London and the south-east, where the service industry jobs are.

My right hon. Friend the Member for Wells (Mr. Heathcoat-Amory) said what a highly global industry the aluminium industry was, and described how it had introduced significant measures to reduce energy use since 1990.

Photo of Brian Iddon Brian Iddon Labour, Bolton South East

Has the hon. Gentleman carried out an analysis of the effects of the tax proposed by Lord Marshall compared with those of a carbon tax? How would a carbon tax damage the steel industry less? That is what he claims, and his entire speech is based on such comparisons, so may we have the analysis, please?

Photo of Tim Loughton Tim Loughton Conservative, East Worthing and Shoreham

The iron and steel industry, like many other industries, has set up alternative forms of fuel, such as combined heat and power, and renewables. Under the blanket measures proposed, it would have no capacity to diversify into more environmentally friendly forms of energy. The hon. Gentleman, who served on the same Committee as me, knows that perfectly well.

I shall not go into detail about the aluminium industry. The tax will also affect material producers and the sugar industry, in particular British Sugar, which has been in the forefront of promoting investment in combined heat and power, on which it has spent a great deal of money. It now faces unfair competition—for example, from Germany, which has a 100 per cent. rebate for its domestic industry.

Retailing, too, will be affected. The British Retail Consortium said: This tax is a blunt instrument. It will not meet the Government's targets under the Kyoto protocol to reduce carbon emissions, as it is targeted at energy consumption rather than carbon emissions. Neither will it encourage suppliers to switch to green sources of electricity. I could also mention water, farming, food and drink, chemicals and many other sectors, including many smaller businesses. What the Government say about small businesses is another red herring in their proposals. The CBI report identifies many small industries that will lose considerably by the proposals. It gives the examples of a west midlands castings manufacturer that will pay £13,000 and get back only £230 in reduced national insurance contributions, and a Welsh mould maker that will pay £2,000 in tax and get back only £70. The tax will affect all areas of business and industry.

I shall not go into the details of the report by the Select Committee on Trade and Industry, because my hon. Friend the Member for Banbury (Mr. Baldry) has told us about it in great detail.

The liquid petroleum gas industry is highly environmentally friendly, so it is ironic that the tax will worsen environmental conditions in the United Kingdom by encouraging LPG users to switch to more polluting, less efficient fuels. Calor estimates that the price of LPG will have to rise by 10 to 15 per cent., whereas hydrocarbon oils will not be affected because they are already subject to excise duty.

That is ironic because, in the Budget, the Government rightly made much play of reducing excise duty on road fuel gases by 29 per cent., recognising that they produce less carbon dioxide, benzene, and sulphur dioxide, and fewer particulates. Yet now the industry concerned will be clobbered by the blunt instrument of the energy tax.

I could also talk about renewables, but my hon. Friends have already mentioned those.

The energy tax represents an enormous missed opportunity, especially as it means that we shall not be forging ahead with emission permit trading systems, as Lord Marshall suggested in his report. Such a system would exert much stricter control over CO2 emissions, with less cost to industry. The United States, Canada, Norway and Australia already have such systems. In the Sydney futures market, a facility has been set up for trading pollution emission permits, and that suggests enormous opportunities for the City of London, which could take on that challenge and set up such a system rapidly.

BP Amoco has its own internal emissions trading system, and PowerGen and British Gas have endorsed the idea. Trading permits between countries would go some way towards reducing the likelihood of distortions emerging in national economies as emissions are reduced, and costs and patterns of energy use change.

The Marshall report highlights the attractions of the scheme but, for some reason, the Government do not seem to want to take it on. Ironically, however, they have recognised the scheme's attractions by backing plans being drawn up by 24 large companies and six business organisations for an emissions trading system.

The Government have set up a steering committee under Rodney Chase, deputy chief executive of BP Amoco, which will report in October, but the proposals contain no agreement about whether companies taking part in the schemes will still face the full rigours of the energy tax. The Government's inaction represents an amazing lost opportunity to arrange the voluntary agreements that have been set up in the chemical and steel industries, and by energy users.

The Government compound that lost opportunity by sticking with the gas moratorium, even though the Under-Secretary of State for the Environment, Transport and the Regions, the hon. Member for Mansfield (Mr. Meale) has admitted that the switch to gas and nuclear made a major contribution to the fall in CO2 emissions in the 1980s and 1990s.

It is also a scandal that a Government who have talked about hypothecation—as the Secretary of State for the Environment, Transport and the Regions has done so proudly—should propose to recycle into energy efficiency programmes only £50 million, or less than 4 per cent. of the revenues from the tax. The amount recycled is much greater on the continent: for example, about 20 per cent. of the take from Austria's energy tax is recycled. The Under-Secretary told the Select Committee on Environmental Audit that the amount was as much as could be "squeezed" out the Treasury.

The recycled tax revenue could be put to so many uses, such as promoting home energy grants and tackling the problem of fuel poverty. It could also be used for house energy efficiency schemes, renewable subsidies, or even for handing our energy-saving light bulbs. All those represent more missed opportunities. Above all, however, the Government have missed an opportunity to introduce a genuine carbon tax and establish the UK at the forefront of the establishment of a new permit trading system.

The Government have a word to say to the following people: wise users of energy, who have voluntarily invested millions of pounds in more efficient and therefore more environmentally friendly energy use and who intend to continue that investment; those who have switched to cleaner forms of energy, such as combined heat and power or liquid petroleum gas; those who have made internal arrangements to help achieve Kyoto targets; those who have supported the Government's warm words on greenhouse gas emissions; those who operate in an industry facing intense competition from overseas companies not subject to such rigorous energy tax applications; and those who operate in countries that have not signed up to Kyoto. That word is, tough. Those people will have to bear the full brunt of the energy tax, or a reduced amount that is still woefully inadequate.

The watchword must be flexibility. Forcing industry into rigid frameworks will impact on costs and competitiveness. We need a mix of taxes and tax reliefs, of emissions permits trading, and a culture change by domestic and business users. The energy tax proposed by the Government is far too rigid. It is a blunt instrument, disguised in a green wrapper. Ultimately, the main beneficiary of the extra revenue to the Exchequer will be the Government who, as a major employer, will also benefit from the reduction in national insurance payments in service industries.

The revenue-neutral tag will ring hollow in the steel, chemical, paper, cement, aluminium industries, and in many others. One environmental economist has said that it will be close to useless, except as a revenue-raising instrument. As such, it is a major disappointment to those of us who want a comprehensive approach, involving genuine and practical environmental taxation and incentive measures.

Photo of Denis MacShane Denis MacShane Labour, Rotherham 9:18 pm, 20th July 1999

I have an amazingly long speech, which I shall throw away to allow other hon. Members to contribute. However, I shall make a short declaration of interest, in that my constituency of Rotherham, in which steel has been made for some 300 years, has in it Europe's most advanced engineering steel plant. I am proud to say that I work closely with the industry, and with the Iron and Steel Trades Confederation, the main union.

The debate will have served some purpose. We have heard some remarkably lightweight speeches about heavy industry from Conservative Members, but I hope that my hon. Friend the Financial Secretary will take on board many of the comments that have been made.

To announce a tax and then discuss it for a full year is a remarkable fiscal innovation. No doubt my hon. Friend feels that she is getting all the pain and little of the gain, but I pay tribute to her and to my hon. Friend the Economic Secretary to the Treasury for their willingness to receive delegations and to speak either privately or formally. I am not necessarily the Treasury's biggest fan but they exemplify the new Labour listening Treasury, and I hope that some of the points made will be taken on board.

We need not take lessons from the Conservatives, whose main interest in manufacturing lies in manufacturing offshore tax havens to secure the flow of funds into the sleaze bag at central office. When in Government, the Tories destroyed 150,000 jobs a year, and no Conservative Member from the asset companies and the financial sector could makes the same speeches in Rotherham as they give to the House.

My constituents were most offended by the article written by the hon. Member for Hazel Grove (Mr. Stunell) in The Parliamentary Monitor. He suggested that those concerned about the tax represented dinosaur interests, but manufacturing is sick and tired of being patronised by Liberal Democrats, Greens and the City boys from the Conservative party. Manufacturing is sick of being told that it represents the past; it is in fact the internationally traded competitive sector of our economy, and the men who work in manufacturing, from top management to new recruits, deserve much more time and attention than the Conservative party has given them over the past 20 years.

I find some of the language used in the debate disagreeable. There is an idea that we tax "bads" and give tax relief to "goods". We cannot moralise about taxation in that way. Manufacturing, particularly the steel sector, is full of good men who make good products. The hon. Member for East Worthing and Shoreham (Mr. Loughton) read us the British Steel handout, and I agree with it. If anything, it needs to be reinforced, because manufacturing trades competitively in international markets.

The biggest hit taken by the British steel sector in recent years will not come from the tax. The forced rise in the pound engineered by the previous Conservative Government during their last year in office put the pound up from DM2.17 in May 1996 to DM2.70 in May 1997. The pound has been stuck ever since at that rate, which ripped the guts out of British steel's profitability. The export-killing pound inherited by the Government has caused much damage. The utter hostility of the Conservatives to Europe reinforces it, although the hon. Member for Grantham and Stamford (Mr. Davies) is strongly pro-euro and pro-European and will doubtless set out minds at rest in his summing up of the debate.

I wish t hat our steel plants would paint themselves bright green. They are among the most ecologically minded sections of our heavy industry. They recycle 2 million cars a year and contribute massively to ensuring that British manufacturing is strongly committed to recycling. When compared with other sources of CO2 emissions, industry since 1991 has reduced its energy input by 12.5 per cent. By comparison, since 1980—roughly during the 18 years of Conservative rule—road transport increased by 50 per cent. The Conservatives failed to tackle the problems.

Europe has much more integrated policies, and the contempt and indifference of Conservative Governments towards action to reduce energy sources and CO2 emissions has left us with problems to clear up. When measured by the usage of end-users, the iron and steel sector's reduction per million tonnes of CO2 energy since 1988 is about 12.5 per cent. while that of road transport has risen by 50 per cent. There has been a 150 per cent. increase in the use of diesel fuel since 1985. Let us name the bads in our economy, and let us accept that the steel industry can reasonably be defined as a good.

I shall not go through the figures that I have already presented to the Treasury. The hon. Member for East Worthing and Shoreham listed some of them. Let us be clear that the Treasury has been a little fox in the chicken coop and over-alarmed and over-excited the industry. The figures quoted are indicative or illustrative. I am not sure what that means, but I have to say bluntly to my hon. Friend the Minister that they have alarmed many in the manufacturing sector and especially the steel industry.

We do not know what the final figures will be. I appeal to the Government in the continuing negotiations—months of negotiations and consultation that lie ahead—to practice joined-up government and combine the Treasury with the Department of the Environment, Transport and the Regions and the Department of Trade and Industry. Such a troika could work together so that when the final rate is set, and it will be set, it is set on the basis of consultation.

What needs to be done? I suggest a few simple measures. We need to focus on negotiated agreements based on reduction targets for different sectors. We need, not just revenue-neutral taxes, but fiscal neutrality. There is genuine concern about a cross-subsidy from the north to the south; from Labour heartlands to the asset management boys in the City; from steel to Whitehall Ministries. We need full transparency in pricing. That is a huge problem. We have the highest energy prices for industry. They have come down since 1990, but they started at such a high level as a result of the inefficient, racketeering way in which energy was privatised by the Conservative party.

Photo of Denis MacShane Denis MacShane Labour, Rotherham

If the hon. Gentleman will forgive me, I want to finish. We need to permit trading to encourage more flexible market responses to energy reduction.

We also need to look at the broader EU approach. It was fascinating to hear the manic Europhobes in the Conservative party speaking up for Europe and citing European examples of support for industry through fairer taxation.

We need to involve our social partners in reducing emissions. The trade union movement is deeply concerned about the matter. It does not have a vote in the House, but it has a voice and I believe that it will make it heard.

We also need far more research into CO2 reduction policies. Only a couple of years ago British Steel was making £2 billion profit and this year alone it has transferred £700 million to shareholders, including a cheque for £450 million that has gone across the Atlantic because only American investors have invested in British Steel. Money could be found for a private-public research institute to examine CO2 reduction policies. We need much stronger public engagement from the manufacturing sector, the Confederation of British Industry, and the United Kingdom Steel Association. They should enter into a dialogue with the green lobby and people campaigning on environmental reduction policies.

The way forward is partnership, consultation and dialogue, not dispute. I congratulate the Opposition parties on tabling the motion and the amendment. Although the language of some Tory Members has been adversarial, long-winded and pompous, this is part of the new listening, sharing, consulting Government whom the people of Britain voted in and will confirm in the Eddisbury by-election on Thursday.

Photo of Dominic Grieve Dominic Grieve Shadow Minister (Scotland) 9:29 pm, 20th July 1999

The speech of the hon. Member for Rotherham (Mr. MacShane) was an example of casuistry. He moved from one position to another in the course of a few minutes. It defies emulation and I shall not attempt to follow it.

This is a non-partisan issue. It is quite apparent that all major parties in the House believe in the motherhood and apple pie idea of trying to improve the environment and tackling global warming. The only difference between the Government and the Opposition is that the Opposition know that the reality of motherhood in government is that one often has sleepless nights and the apple pie gets spilt on the floor. On the other hand, the Liberal Democrats—not having experienced motherhood in government for about the past 60 years—have no sense of realism when it comes to policy decisions and the problems of implementation.

As a Member of the Environmental Audit Committee, I have always turned what I hope is a constructive eye and ear to all the ideas on tackling global warming and to the evidence that I have heard during the past two years. When the measure was first floated before the Committee, it seemed to have some attractive features. It might succeed in constructing a taxation system whereby, although people would be taxed more on their energy costs, they would immediately be offered compensation through the reduction of their national insurance charges. That would leave them with the superficial possibility of having reduced national insurance charges, while cutting down their electricity and energy consumption to make themselves more efficient, thereby improving their profits.

However, when one considers the detail of the ratio between the amount of energy used and the number of employees, the problem is apparent: the figures do not add up. The measure is a good idea, but when one examines it closely, it does not work. As a result of this fiscal adjustment, vast amounts of money will be siphoned off from manufacturing industries—heaven knows that they have had a rough enough time in a competitive world environment, whether under this or the previous Government—and will go to public service industries, which are not wealth producers in this country. The proposed measure simply does not add up.

I am quite happy to hear Ministers' constructive suggestions—now and in the future—as to how adjustments might be made or exemptions granted. However, I have considered the measure and spoken to those in my constituency who will be the worst affected. In Taplow, there is a paper-mill, which already suffers enormous economic difficulties; after my recent visit to the mill, I am satisfied that it will become completely uneconomic. However hard the business tries, it is a major energy consumer and it will become uneconomic if the proposals are implemented.

I do not want to take up too much of the House's time; I hope that there will be time for other hon. Members to speak. However, the Economic Secretary to the Treasury rightly asked Opposition Members for their proposals. The problem is that, although we all believe in motherhood and apple pie, when it comes down to the detail and the reality, none of us is able to produce valid proposals.

I have some suggestions that may be more important than the wholly counterproductive proposals for an energy tax. First, we should face the fact that there is an exponential growth in the domestic use of energy—whether it be in our homes or the motor car. That is a major political challenge—because the individuals are voters. We must address that challenge.

In relation to the point about VAT on fuel, I am most conscious of the problem of fuel poverty and that we must address it. I accept that it is a long-running national scandal. However, the problem can be solved in ways other than merely reducing the VAT rate, and refusing to contemplate its increase for most of the population, who are able to afford to pay it. The reduction in VAT was a counterproductive move and the Conservative Government made a considerable mistake by taking that route.

The whole culture in this country needs to be re-examined. What is the point in having a policy of telling people that they should save energy domestically, when all they have to do is go out for a drive to see that motorway lighting provided by the Government and road lighting generally provided by local authorities is in continuous growth, apparently for safety reasons? That contrasts with policies in Scandinavia: in Denmark, I noted with interest that, to make the point of energy saving, every second street light in Copenhagen is switched off. Those might be small things, but they add up. What is necessary energy use and what is unnecessary—if not decorative, something that we can do without?

Until we start to address those questions, we will never set in motion the culture change that will ultimately sweep through the whole issue of global warming: just as people will change their habits domestically, so they will insist that every possible cost-saving and energy-saving device should be used in their business environment. Unfortunately, we are failing to do that. I have to tell the Financial Secretary that the climate change levy—no doubt, a well-intentioned idea when it came off the drawing board—is in danger of becoming a nightmare. I hope that the Government will think again and start to consider carefully ways in which we can tackle an extremely difficult issue in a more constructive way.

Destroying our wealth-producing industries will not stop global warming. As the Government themselves have pointed out, it is our nation's ability to produce wealth that enables us to find the funds to introduce the measures we need to tackle global warming.

Photo of Dr Alan Williams Dr Alan Williams Labour, Carmarthen East and Dinefwr 9:36 pm, 20th July 1999

I am grateful to the hon. Member for Beaconsfield (Mr. Grieve) for allowing me time to say a few words in this debate.

I am pleased that the Government have taken strong action to curb the problem of global warming in signing up, not to a 12.5 per cent., but to a 20 per cent. reduction in carbon dioxide emissions by 2010. In that context and to achieve that target, energy taxes have a legitimate role to play.

Since the oil price collapse in 1986, energy prices have been relatively low in historical terms. Since 1990, electricity prices have dropped by 22 per cent. and gas prices by 46 per cent. It is against that background that the climate change is to be introduced, and the indicative figures that I have seen for the tax are a good deal lower than those price decreases.

The clear intention is that the levy should be revenue neutral, which means that there will be both those who gain and those who lose in the national insurance contribution cuts. Not surprisingly, in tonight's debate, attention has focused on the losers, but in the economy as a whole the result will be a gain of 14,000 jobs and there will be some protection for energy-intensive industries.

The total revenue to be raised from the tax is £1.75 billion and the amount of carbon emissions saved will be 1.5 million tonnes. That is £1,000 per tonne of carbon saved, so the tax is rather inefficient. Although I have always supported carbon taxes and the general concept of an energy tax, £1,000 for every tonne of carbon saved is a high price to pay.

Think of fuel prices: the world price for coal is about £30 a tonne and energy prices generally are well below £100 a tonne, so to pay £1,000 for a company to save one tonne of carbon is a high price. I should prefer the £1.75 billion to be reinvested in conservation measures and renewables. In that way, far more than 1.5 million tonnes of carbon emissions could be saved.

I am pleased that there is to be a limited opportunity for emissions trading. I would like to see emissions trading in the form of carbon absorption. Part of the revenue could have been used to provide an incentive to plant woodlands because that will be an important way of limiting carbon emissions internationally.

Photo of Quentin Davies Quentin Davies Conservative, Grantham and Stamford 9:40 pm, 20th July 1999

I begin by reminding the House of my interests—which are listed in the Register of Members' interests—as a director of SGE, and an adviser to NatWest Global Financial Markets and the Chartered Institute of Taxation. As far as I can surmise, those three organisations are likely to be net beneficiaries of the Government's proposal. However, as hon. Members will learn in a moment, that does not influence my views about the Government's plans in any way.

Before I turn to the substance of the matter, I should comment about something that must be more important even than this proposal. There is continual evidence of the attitude of Labour Front-Bench Members towards this place, which can be charitably described as one of levity. The Economic Secretary, who introduced the debate, told the House that she had something better to do than remain in the Chamber at the end of the debate. Unless she had received a summons from Buckingham palace, whatever activity she preferred to staying here to listen to a debate that she had launched was more important than her duties in the House. There is something seriously wrong with the hon. Lady's priorities.

Photo of Mrs Barbara Roche Mrs Barbara Roche Financial Secretary, HM Treasury

I am grateful to the hon. Gentleman for giving way, but I had hoped that he would show rather more courtesy. At the beginning of the debate, my hon. Friend the Economic Secretary explained that she had unbreakable commitments and, therefore, would be unable to stay for the winding-up speeches. She also explained that I would respond to the debate. I had hoped that the hon. Gentleman would receive her remarks in the spirit in which they were intended.

Photo of Geraint Davies Geraint Davies Labour, Croydon Central

I am afraid that the Minister makes the matter even worse because she proves that the hon. Lady's conduct was not just the aberration of an individual, but is endorsed by the entire Front-Bench team. No commitment should be unbreakable when compared with Ministers' accountability to the House. Ministers should treat this place with courtesy. Parliamentary democracy can survive only on that basis. If the Economic Secretary does not know that, she had better rethink her priorities.

This was a very bad debate for the Government because, once again, not a single Labour Back Bencher had a good word to say about their policies. We even had the amusing spectacle—

Photo of Geraint Davies Geraint Davies Labour, Croydon Central

I will not give way to the hon. Gentleman, but I shall deal with the point that I know he wants to make. We witnessed the amusing spectacle of the hon. Member for Rotherham (Mr. MacShane), who is normally so meticulous—I have tried to use a flattering term—in supporting whatever happens to be the ministerial line of the moment, agonising publicly about this subject. He spoke of the steel industry's alarm at the proposed levy and said that the trade union movement was deeply concerned. His speech was very revealing from that point of view. The hon. Member for West Bromwich, East (Mr. Snape) actually suggested that he might not be able to support the Government in the Division Lobby on the levy. Similar reservations were expressed by the hon. Members for Derby, North (Mr. Laxton) and for East Carmarthen and Dinefwr (Mr. Williams).

We heard a powerful speech from my hon. Friend the Member for Beaconsfield (Mr. Grieve) and a well informed speech from my hon. Friend the Member for Banbury (Mr. Baldry). He is a member of the Trade and Industry Select Committee, and he pointed out that the Government's proposals do not meet the criteria set out in the Treasury's initial document—which is a pretty damning revelation. My hon. Friend the Member for East Worthing and Shoreham (Mr. Loughton) demonstrated a masterly grasp of the detail of the subject.

The first thing that must be said about the Government's proposals is that they reflect the incompetence that is rapidly becoming the hallmark of this Government. The first prerequisite of a competent policy is that it should be rational. It should reward, and thereby encourage, desired behaviour and sanction undesired behaviour. This policy fails that ultimate test of competence. The energy tax proposals do not reward those who have made efforts to reduce the carbon content in the energy used in their processes.

In the energy-intensive sector, the tax will have a particularly brutal effect, because companies in that sector that have made a great effort—as many of them have—to reduce their energy use will now find themselves disadvantaged. Competitors who have made no such effort and who therefore have greater scope for reducing energy use will have an advantage in the negotiations for a rebate on the levy which will now be held with the Government. That is unjust, but is also irrational and utterly incompetent.

Even more seriously, the proposals provide absolutely no incentive for industry or commerce to switch to sources of energy that produce less carbon. The opposite is the case because, with typical inconsistency and, once again, incompetence, the Government have introduced what is, for all practical intents and purposes, a moratorium on the building of new combined cycle gas-fired power stations which generate about a quarter of the carbon that coal-fired stations produce for a given kilowatt of generation. So it is impossible for firms to switch to a form of hydrocarbon generation that produces less carbon even if they want to do so. The Government's proposals offer no reward for industries that decide to move in that direction.

Most extraordinary of all, there is absolutely no recognition of those who might want to invest in energy that does not generate any carbon at all. That is a missed opportunity. The Government had an opportunity to change the economics of electricity generation in this country to create a new basis for people to invest in renewables or nuclear generation, which does not emit any carbon at all. Not only has that opportunity been missed, but people who invest in such energy sources or are prepared to sign contracts to use those sources receive no recognition in the proposals. They will be made to look like fools if they follow that line. The whole basis on which we might have addressed the need to reduce global warming has been obliterated before we have started. That is massive incompetence.

The charge does not even end with incompetence because the country now faces a set of extremely destructive policies. They are set out in the report of the Select Committee on Trade and Industry, which was published yesterday. That report is very clear. It said that the Teesside Chemical Initiative estimated that, if applied in full, the Levy would cost Teesside chemical firms £37.3 million per annum, causing up to 1,000 job losses". The report also said that the Energy Intensive Users Group estimated that even if there is a 50 per cent. reduction in the levy, as many as 28,000 jobs might be lost in energy-intensive firms. The report went on to say that the Aluminium Federation estimated that the aluminium industry would incur a net cost of £38 million as a result of the Levy, leading to the closure of four primary aluminium smelters and 4,000 job losses. The Country Landowners Association has said: Intensive horticultural operations, which are major contributors to the balance of payments, may be put out of business. Of course, those businesses do not, on a net basis, emit any carbon dioxide. The prospect of damage goes on.

The Government's incompetence will lead to the loss of people's employment, the shattering of individuals' prospects and the displacement of industry. And that is not the end of it. The proposals are also fraudulent. They have been sold to the House and the public as revenue neutral, but as we have discovered during the debate, they are not revenue neutral for individual firms, sectors or regions. They represent an enormous levy on the north and the midlands in favour of the south-east.

Most of all, the proposal is not revenue neutral because the public sector will be a net gainer. I understand that local authorities alone will gain some £250 million net. What is a levy that is so recycled that the public sector is a net gainer and the private sector a net loser? The answer is, by definition, a tax. Here we have another way of taking money out of the private sector and giving it surreptitiously to the public sector. We have uncovered yet one more stealth tax in the Labour Government's catalogue. They ought to be ashamed of the policy, and even more ashamed of the way in which they are trying to disguise it from the British public and from Parliament, which they treat with such derision.

Photo of Mrs Barbara Roche Mrs Barbara Roche Financial Secretary, HM Treasury 9:50 pm, 20th July 1999

That was an extraordinary speech by the hon. Member for Grantham and Stamford (Mr. Davies). It was yet another example of the understated way in which he makes his case. He would have better spent his time being present for the entire debate, as I have been, rather than just making his ridiculous remarks at the end of it. In the short time remaining to me, I shall deal, as he should have done, with the remarks that have been made on both sides of the House. I think that that is what the House expects from a winding-up speech.

The right hon. Member for Wells (Mr. Heathcoat-Amory) said that heavy industry already had an incentive to be energy efficient. As Lord Marshall noted, the best evidence available of possible achievements comes from the energy technology support unit. Its work suggests that there is scope for further improvements in energy efficiency across industry.

The hon. Member for Hazel Grove (Mr. Stunell), who speaks for the Liberal Democrats on these issues, said that, according to the consultative document, the levy will not be shown on bills. That is clearly not so. We are consulting on several design issues, including whether to show the levy on bills. As my hon. Friend the Member for West Bromwich, East (Mr. Snape) rightly said, the Liberal Democrats must decide once and for all whether they are in favour of this measure. Once again, they talk big on the environment, but when it comes to supporting constructive Government proposals, they are found wanting.

The hon. Member for Hazel Grove asked why renewables could not be exempt. As he will know if he has considered the matter carefully, we have not ruled that out. We have proposed that some of the revenue raised will be used to provide additional support for renewable sources of energy. He said that the £50 million for energy efficiency was not enough, yet the present budget for the energy efficiency best practice programme is about £15 million a year. We are, therefore, proposing a considerable step up, and it would be nice if, for once, the hon. Gentleman gave us some credit for it.

Photo of Mrs Barbara Roche Mrs Barbara Roche Financial Secretary, HM Treasury

No, I do not have time.

My hon. Friend the Member for West Bromwich, East asked me to take into account the situation in his constituency. We shall of course consider in great detail what he says to us. If he will send me the details of the example that he gave, we will consider them carefully. He asked what revenue neutral means. We have said right from the beginning that the levy will entail no increase in the burden of tax on business as a whole.

The right hon. Member for Wells mentioned the 50 per cent. figure, but did not say that it is purely illustrative. He paid no heed to that whatever.

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

There is one figure that is not illustrative, because it is in the Government arithmetic, which is that this tax will raise £1.75 billion a year. If the Minister starts making concessions, as she is now hinting, or if other companies exempt themselves from the tax by moving abroad, how will she obtain that extra revenue from other companies?

Photo of Mrs Barbara Roche Mrs Barbara Roche Financial Secretary, HM Treasury

The right hon. Gentleman has a cheek. We have set out—

Photo of Francis Maude Francis Maude Shadow Chancellor of the Exchequer

She has no idea what the answer is.

Photo of Mrs Barbara Roche Mrs Barbara Roche Financial Secretary, HM Treasury

The right hon. Gentleman asked a question and, if the shadow Chancellor will give me the opportunity instead of heckling from a sedentary position, I will give him the reply. We set out the figure. We have made it absolutely clear right from the start that we would consult. As my hon. Friend the Member for Rotherham (Mr. MacShane) has said, it is unprecedented for a Government to allow that period of consultation, and we shall ensure that it takes place.

I tell my hon. Friend the Member for West Bromwich, East that we would be happy to receive any suggestions for the design of the levy that would increase its environmental effectiveness while protecting competitiveness. [Interruption.] The Members on the Opposition Front Bench continue to chatter throughout this. I would have thought that they would have been interested in hearing about the competitiveness of British industry, but they obviously are not.

The hon. Member for Banbury (Mr. Baldry), a member of the Select Committee on Trade and Industry, mentioned the cut in national insurance. I remind him that it was the Government of whom he was a member who introduced a cut in NICs, when introducing the landfill tax in 1996. Yet again, the Opposition are suffering from collective amnesia.

The hon. Member for Banbury also said that the levy was badly targeted and inefficient. The design very closely follows Lord Marshall's recommendations and, as my hon. Friend the Economic Secretary has said, many other countries believe that carbon or energy taxes have a role to play in helping to meet the climate change targets.

My hon. Friend the Member for Derby, North (Mr. Laxton) mentioned mineral oils. Mineral oils are subject to excise duty, and the Budget announced phased increases in gas oil and fuel oil duties.

The hon. Member for East Worthing and Shoreham (Mr. Loughton) drew attention to what is happening with regard to the electricity pool. We shall take the review of the electricity pool trading arrangements into account in designing the levy, and the Government, unlike the previous Conservative Government, will clean up the situation that was left for us and deal with it.

The hon. Member for Beaconsfield (Mr. Grieve) seemed to be saying, "Yes, something needs to be done, but what can we do?" He seemed to suggest that we return to the discredited system of the Conservatives' imposition of VAT on fuel. We know what they did and what it did to fuel poverty—and the hon. Gentleman wants to return to that. The Conservatives generally are still wedded to that.

My hon. Friend the Member for East Carmarthen and Dinefwr (Mr. Williams) rightly mentioned energy incentives. We shall look at those.

In Conservative Members, we see a party that, when it was in government, spoke big on the environment, but did nothing about it, and which turns its views in opposition. The Leader of the Opposition said: We must protect our environment for future generations and strike a balance with the needs of the economy and society's demands for goods and services". Now the Conservatives change their mind. Conservative Members all stood on a manifesto that said: we will continue to use the tax system and other incentives to encourage the use of vehicles and fuel which do not pollute the environment. And, we will continue to explore policies based on the principle of polluter pays". It is rich. They say one thing to the country when they are seeking votes and another in the House.

Photo of James Arbuthnot James Arbuthnot Shadow Chief Whip (Commons)

rose in his place and claimed to move, That the Question be now put.

Question, That the Question be now put, put and agreed to.

Question put accordingly, That the original words stand part of the Question:—

The House divided: Ayes 132, Noes 346.

Division No. 261][9.59 pm
AYES
Ainsworth, Peter (E Surrey)Davies, Quentin (Grantham)
Amess, DavidDavis, Rt Hon David (Haltemprice)
Ancram, Rt Hon MichaelDay, Stephen
Arbuthnot, Rt Hon JamesDonaldson, Jeffrey
Atkinson, David (Bour'mth E)Dorrell, Rt Hon Stephen
Atkinson, Peter (Hexham)Duncan, Alan
Baldry, TonyDuncan Smith, Iain
Beggs, RoyEvans, Nigel
Bell, Martin (Tatton)Faber, David
Bercow, JohnFabricant, Michael
Beresford, Sir PaulFallon, Michael
Blunt, CrispinFilght, Howard
Body, Sir RichardForsythe, Clifford
Boswell, TimForth, Rt Hon Eric
Bottomley, Peter (Worthing W)Fowler, Rt Hon Sir Norman
Bottomley, Rt Hon Mrs VirginiaFox, Dr Liam
Brazier, JulianFraser, Christopher
Brooke, Rt Hon PeterGale, Roger
Browning, Mrs AngelaGarnier, Edward
Bruce, Ian (S Dorset)Gibb, Nick
Burns, SimonGillan, Mrs Cheryl
Chapman, Sir Sydney (Chipping Barnet)Gorman, Mrs Teresa
Gray, James
Chope, ChristopherGreen, Damian
Clappison, JamesGreenway, John
Clarke, Rt Hon Kenneth (Rushcliffe)Grieve, Dominic
Gummer, Rt Hon John
Collins, TimHague, Rt Hon William
Colvin, MichaelHamilton, Rt Hon Sir Archie
Cran, JamesHammond, Philip
Curry, Rt Hon DavidHawkins, Nick
Heathcoat-Amory, Rt Hon DavidRobathan, Andrew
Hogg, Rt Hon DouglasRoe, Mrs Marion (Broxbourne)
Horam, JohnSt Aubyn, Nick
Howard, Rt Hon MichaelSayeed, Jonathan
Hunter, AndrewShepherd, Richard
Jackson, Robert (Wantage)Simpson, Keith (Mid-Norfolk)
Jenkin, BernardSoames, Nicholas
Johnson Smith, Rt Hon Sir GeoffreySpelman, Mrs Caroline
Spring, Richard
Key, RobertStanley, Rt Hon Sir John
King, Rt Hon Tom (Bridgwater)Steen, Anthony
Kirkbride, Miss JulieStreeter, Gary
Lansley, AndrewSwayne, Desmond
Leigh, EdwardSyms, Robert
Lewis, Dr Julian (New Forest E)Tapsell, Sir Peter
Lidington, DavidTaylor, Ian (Esher & Walton)
Lilley, Rt Hon PeterTaylor, John M (Solihull)
Lloyd, Rt Hon Sir Peter (Fareham)Taylor, Sir Teddy
Loughton, TimTownend, John
Luff, PeterTredinnick, David
Lyell, Rt Hon Sir NicholasTrend, Michael
MacGregor, Rt Hon JohnTyrie, Andrew
McIntosh, Miss AnneViggers, Peter
MacKay, Rt Hon AndrewWalter, Robert
Maclean, Rt Hon DavidWardle, Charles
Waterson, Nigel
McLoughlin, PatrickWells, Bowen
Malins, HumfreyWhitney, Sir Raymond
Maples, JohnWhittingdale, John
Maude, Rt Hon FrancisWiddecombe, Rt Hon Miss Ann
May, Mrs TheresaWilletts, David
Nicholls, PatrickWilshire, David
Norman, ArchieWinterton, Mrs Ann (Congleton)
Ottaway, RichardYeo, Tim
Page, RichardYoung, Rt Hon Sir George
Paice, James
Pickles, EricTellers for the Ayes:
Randall, JohnMrs. Jacqui Lait and
Redwood, Rt Hon JohnMr. Geoffrey Clifton-Brown.
NOES
Abbott, Ms DianeBrown, Russell (Dumfries)
Adams, Mrs Irene (Paisley N)Browne, Desmond
Ainger, NickBruce, Malcolm (Gordon)
Ainsworth, Robert (Cov'try NE)Buck, Ms Karen
Alexander, DouglasBurden, Richard
Allan, RichardBurgon, Colin
Allen, GrahamButler, Mrs Christine
Anderson, Janet (Rossendale)Caborn, Rt Hon Richard
Armstrong, Rt Hon Ms HilaryCampbell, Alan (Tynemouth)
Ashton, JoeCampbell, Mrs Anne (C'bridge)
Atkins, CharlotteCampbell, Ronnie (Blyth V)
Baker, NormanCampbell-Savours, Dale
Ballard, JackieCann, Jamie
Banks, TonyCaplin, Ivor
Barron, KevinCasale, Roger
Battle, JohnCaton, Martin
Bayley, HughChapman, Ben (Wirral S)
Beard, NigelChaytor, David
Beckett, Rt Hon Mrs MargaretChidgey, David
Begg, Miss AnneChisholm, Malcolm
Beith, Rt Hon A JClapham, Michael
Bell, Stuart (Middlesbrough)Clark, Rt Hon Dr David (S Shields)
Benn, Rt Hon Tony (Chesterfield)Clarke, Charles (Norwich S)
Bennett, Andrew FClarke, Rt Hon Tom (Coatbridge)
Benton, JoeClarke, Tony (Northampton S)
Best, HaroldClelland, David
Betts, CliveClwyd, Ann
Blackman, LizCoffey, Ms Ann
Blunkett, Rt Hon DavidCohen, Harry
Boateng, PaulColeman, Iain
Bradley, Keith (Withington)Colman, Tony
Bradley, Peter (The Wrekin)Connarty, Michael
Brake, TomCook, Frank (Stockton N)
Brand, Dr PeterCorbett, Robin
Brinton, Mrs HelenCorbyn, Jeremy
Cousins, JimHesford, Stephen
Cox, TomHill, Keith
Cranston, RossHinchliffe, David
Cryer, Mrs Ann (Keighley)Hodge, Ms Margaret
Cryer, John (Hornchurch)Hoey, Kate
Cummings, JohnHood, Jimmy
Cunliffe, LawrenceHopkins, Kelvin
Cunningham, Jim (Cov'try S)Howarth, George (Knowsley N)
Dalyell, TamHowells, Dr Kim
Darling, Rt Hon AlistairHoyle, Lindsay
Darvill, KeithHughes, Kevin (Doncaster N)
Davey, Edward (Kingston)Hughes, Simon (Southwark N)
Davey, Valerie (Bristol W)Hutton, John
Davidson, IanIddon, Dr Brian
Davies, Rt Hon Denzil (Llanelli)Illsley, Eric
Davies, Geraint (Croydon C)Jackson, Ms Glenda (Hampstead)
Davis, Terry (B'ham Hodge H)Jackson, Helen (Hillsborough)
Dean, Mrs JanetJenkins, Brian
Dismore, AndrewJohnson, Miss Melanie (Welwyn Hatfield)
Donohoe, Brian H
Doran, FrankJones, Rt Hon Barry (Alyn)
Dowd, JimJones, Mrs Fiona (Newark)
Drew, DavidJones, Helen (Warrington N)
Drown, Ms JuliaJones, Ms Jenny (Wolverh'ton SW)
Dunwoody, Mrs Gwyneth
Eagle, Angela (Wallasey)Jones, Jon Owen (Cardiff C)
Eagle, Maria (L'pool Garston)Jones, Dr Lynne (Selly Oak)
Edwards, HuwJones, Martyn (Clwyd S)
Efford, CliveJowell, Rt Hon Ms Tessa
Ellman, Mrs LouiseKeeble, Ms Sally
Ennis, JeffKeen, Alan (Feltham & Heston)
Etherington, BillKeen, Ann (Brentford & Isleworth)
Fearn, RonnieKeetch, Paul
Field, Rt Hon FrankKemp, Fraser
Fisher, MarkKhabra, Piara S
Fitzpatrick, JimKidney, David
Fitzsimons, LornaKilfoyle, Peter
Flint, CarolineKing, Ms Oona (Bethnal Green)
Flynn, PaulKirkwood, Archy
Follett, BarbaraLadyman, Dr Stephen
Foster, Rt Hon DerekLawrence, Ms Jackie
Foster, Don (Bath)Laxton, Bob
Foster, Michael Jabez (Hastings)Lepper, David
Foster, Michael J (Worcester)Leslie, Christopher
Foulkes, GeorgeLevitt, Tom
Fyfe, MariaLewis, Terry (Worsley)
Galloway, GeorgeLinton, Martin
Gapes, MikeLock, David
Gardiner, BarryMcAllion, John
George, Andrew (St Ives)McAvoy, Thomas
George, Bruce (Walsall S)McCabe, Steve
Gerrard, NeilMcCafferty, Ms Chris
Gibson, Dr IanMcDonagh, Siobhain
Gilroy, Mrs LindaMacdonald, Calum
Godsiff, RogerMcDonnell, John
Golding, Mrs LlinMcGuire, Mrs Anne
Gordon, Mrs EileenMcIsaac, Shona
Gorrie, DonaldMcKenna, Mrs Rosemary
Griffiths, Jane (Reading E)Mackinlay, Andrew
Griffiths, Nigel (Edinburgh S)McNamara, Kevin
Griffiths, Win (Bridgend)McNulty, Tony
Grocott, BruceMacShane, Denis
Grogan, JohnMactaggart, Fiona
Gunnell, JohnMcWalter, Tony
Hain, PeterMcWilliam, John
Hall, Mike (Weaver Vale)Mahon, Mrs Alice
Hall, Patrick (Bedford)Mallaber, Judy
Hamilton, Fabian (Leeds NE)Mandelson, Rt Hon Peter
Hancock, MikeMarsden, Gordon (Blackpool S)
Harman, Rt Hon Ms HarrietMarshall, David (Shettleston)
Harris, Dr EvanMarshall, Jim (Leicester S)
Harvey, NickMarshall-Andrews, Robert
Heal, Mrs SylviaMartlew, Eric
Healey, JohnMeale, Alan
Henderson, Doug (Newcastle N)Merron, Gillian
Heppell, JohnMichie, Bill (Shef'ld Heeley)
Michie, Mrs Ray (Argyll & Bute)Singh, Marsha
Milburn, Rt Hon AlanSkinner, Dennis
Mitchell, AustinSmith, Rt Hon Andrew (Oxford E)
Moffatt, LauraSmith, Jacqui (Redditch)
Moore, MichaelSmith, John (Glamorgan)
Moran, Ms MargaretSmith, Llew (Blaenau Gwent)
Morgan, Ms Julie (Cardiff N)Smith, Sir Robert (W Ab'd'ns)
Morley, ElliotSnape, Peter
Morris, Ms Estelle (B'ham Yardley)Soley, Clive
Mudie, GeorgeSpellar, John
Mullin, ChrisSquire, Ms Rachel
Murphy, Denis (Wansbeck)Starkey, Dr Phyllis
Murphy, Jim (Eastwood)Steinberg, Gerry
Murphy, Rt Hon Paul (Torfaen)Stevenson, George
Naysmith, Dr DougStewart, David (Inverness E)
Norris, DanStewart, Ian (Eccles)
Oaten, MarkStinchcombe, Paul
O'Brien, Bill (Normanton)Stoate, Dr Howard
O'Brien, Mike (N Warks)Stott, Roger
O'Hara, EddieStrang, Rt Hon Dr Gavin
Olner, BillStringer, Graham
Öpik, LembitStuart, Ms Gisela
Osborne, Ms SandraStunell, Andrew
Palmer, Dr NickSutcliffe, Gerry
Pearson, IanTaylor, Rt Hon Mrs Ann (Dewsbury)
Pendry, Tom
Pickthall, ColinTaylor, Ms Dari (Stockton S)
Pike, Peter LTaylor, David (NW Leics)
Plaskitt, JamesTemple-Morris, Peter
Pollard, KerryThomas, Gareth (Clwyd W)
Pond, ChrisThomas, Gareth R (Harrow W)
Pope, GregTimms, Stephen
Pound, StephenTipping, Paddy
Powell, Sir RaymondTonge, Dr Jenny
Prentice, Ms Bridget (Lewisham E)Touhig, Don
Prentice, Gordon (Pendle)Trickett, Jon
Prescott, Rt Hon JohnTurner, Dennis (Wolverh'ton SE)
Primarolo DawnTurner, Dr Desmond (Kemptown)
Prosser GwynTurner, Dr George (NW Norfolk)
Purchase, KenTwigg, Stephen (Enfield)
Quin, Rt Hon Ms JoyceTyler, Paul
Rapson, SydVaz Keith
Raynsford, NickVis, Dr Rudi
Reid, Rt Hon Dr John (Hamilton N)Walley, Ms Joan
Rendel, DavidWard, Ms Claire
Robertson, Rt Hon George (Hamilton S)Wareing, Robert N
Webb, Steve
White, Brian
Robinson, Geoffrey (Cov'try NW)Whitehead, Dr Alan
Roche, Mrs BarbaraWicks, Malcolm
Rooker, JeffWilliams, Rt Hon Alan (Swansea W)
Rooney, Terry
Rowlands, TedWilliams, Alan W (E Carmarthen)
Roy, FrankWillis, Phil
Ruane, ChrisWills, Michael
Ruddock, JoanWilson, Brian
Russell, Bob (Colchester)Winnick, David
Salter, MartinWise, Audrey
Sanders, AdrianWorthington, Tony
Sarwar, MohammadWray, James
Savidge, MalcolmWright, Anthony D (Gt Yarmouth)
Sawford, PhilWright, Dr Tony (Cannock)
Sedgemore, BrianWyatt, Derek
Sheerman, Barry
Sheldon, Rt Hon RobertTellers for the Noes:
Shipley, Ms DebraMr. David Hanson and
Simpson, Alan (Nottingham S)Jane Kennedy.

Question accordingly negatived.

Question, That the proposed words be there added, put forthwith, pursuant to Standing Order No. 31 (Questions on amendments):—

The House divided: Ayes 311, Noes 162.

Division No. 262][10.13 pm
AYES
Abbott, Ms DianeDavey, Valerie (Bristol W)
Adams, Mrs Irene (Paisley N)Davidson, Ian
Ainger, NickDavies, Rt Hon Denzil (Llanelli)
Ainsworth, Robert (Cov'try NE)Davies, Geraint (Croydon C)
Alexander, DouglasDavis, Terry (B'ham Hodge H)
Allen, GrahamDean, Mrs Janet
Anderson, Janet (Rossendale)Dismore, Andrew
Armstrong, Rt Hon Ms HilaryDonohoe, Brian H
Ashton, JoeDoran, Frank
Atkins, CharlotteDowd, Jim
Banks, TonyDrew, David
Barron, KevinDrown, Ms Julia
Battle, JohnDunwoody, Mrs Gwyneth
Bayley, HughEagle, Angela (Wallasey)
Beard, NigelEagle, Maria (L'pool Garston)
Beckett, Rt Hon Mrs MargaretEdwards, Huw
Begg, Miss AnneEfford, Clive
Bell, Stuart (Middlesbrough)Ellman, Mrs Louise
Benn, Rt Hon Tony (Chesterfield)Ennis, Jeff
Bennett, Andrew FEtherington, Bill
Benton, JoeField, Rt Hon Frank
Best, HaroldFisher, Mark
Betts, CliveFitzpatrick, Jim
Blackman, LizFitzsimons, Lorna
Blunkett, Rt Hon DavidFlint, Caroline
Boateng, PaulFlynn, Paul
Bradley, Keith (Withington)Follett, Barbara
Bradley, Peter (The Wrekin)Foster, Rt Hon Derek
Brinton, Mrs HelenFoster, Michael Jabez (Hastings)
Brown, Russell (Dumfries)Foster, Michael J (Worcester)
Browne, DesmondFoulkes, George
Buck, Ms KarenFyfe, Maria
Burden, RichardGalloway, George
Burgon, ColinGapes, Mike
Butler, Mrs ChristineGardiner, Barry
Caborn, Rt Hon RichardGeorge, Bruce (Walsall S)
Campbell, Alan (Tynemouth)Gerrard, Neil
Campbell, Mrs Anne (C'bridge)Gibson, Dr Ian
Campbell, Ronnie (Blyth V)Gilroy, Mrs Linda
Campbell-Savours, DaleGodsiff, Roger
Cann, JamieGolding, Mrs Llin
Caplin, IvorGordon, Mrs Eileen
Casale, RogerGriffiths, Jane (Reading E)
Caton, MartinGriffiths, Nigel (Edinburgh S)
Chapman, Ben (Wirral S)Griffiths, Win (Bridgend)
Chaytor, DavidGrocott, Bruce
Chisholm, MalcolmGrogan, John
Clapham, MichaelGunnell, John
Clark, Rt Hon Dr David (S Shields)Hain, Peter
Clarke, Charles (Norwich S)Hall, Mike (Weaver Vale)
Clarke, Rt Hon Tom (Coatbridge)Hall, Patrick (Bedford)
Clarke, Tony (Northampton S)Hamilton, Fabian (Leeds NE)
Clelland, DavidHarman, Rt Hon Ms Harriet
Clwyd, AnnHeal, Mrs Sylvia
Coffey, Ms AnnHealey, John
Cohen, HarryHenderson, Doug (Newcastle N)
Coleman, IainHeppell, John
Colman, TonyHesford, Stephen
Connarty, MichaelHill, Keith
Cook, Frank (Stockton N)Hodge, Ms Margaret
Corbett, RobinHoey, Kate
Corbyn, JeremyHood, Jimmy
Cousins, JimHopkins, Kelvin
Cox, TomHowarth, George (Knowsley N)
Cranston, RossHowells, Dr Kim
Cryer, Mrs Ann (Keighley)Hoyle, Lindsay
Cryer, John (Hornchurch)Hughes, Kevin (Doncaster N)
Cummings, JohnHutton, John
Cunliffe, LawrenceIddon, Dr Brian
Cunningham, Jim (Cov'try S)Illsley, Eric
Dalyell, TamJackson, Ms Glenda (Hampstead)
Darling, Rt Hon AlistairJackson, Helen (Hillsborough)
Darvill, KeithJenkins, Brian
Johnson, Miss Melanie (Welwyn Hatflield)Pearson, Ian
Pendry, Tom
Jones, Rt Hon Barry (Alyn)Pickthall, Colin
Jones, Mrs Fiona (Newark)Pike, Peter L
Jones, Helen (Warrington N)Plaskitt, James
Jones, Ms Jenny (Wolverh'ton SW)Pollard, Kerry
Pond, Chris
Jones, Jon Owen (Cardiff C)Pope, Greg
Jones, Dr Lynne (Selly Oak)Pound, Stephen
Jones, Martyn (Clwyd S)Powell, Sir Raymond
Jowell, Rt Hon Ms TessaPrentice, Ms Bridget (Lewisham E)
Keeble, Ms SallyPrentice, Gordon (Pendle)
Keen, Alan (Feltham & Heston)Prescott, Rt Hon John
Keen, Ann (Brentford & Isleworth)Primarolo, Dawn
Kemp, FraserProsser, Gwyn
Khabra, Piara SPurchase, Ken
Kidney, DavidQuin, Rt Hon Ms Joyce
Kilfoyle, PeterRapson, Syd
King, Ms Oona (Bethnal Green)Raynsford, Nick
Ladyman, Dr StephenReid, Rt Hon Dr John (Hamilton N)
Lawrence, Ms JackieRobertson, Rt Hon George (Hamilton S)
Laxton, Bob
Lepper, DavidRobinson, Geoffrey (Cov'try NW)
Leslie, ChristopherRoche, Mrs Barbara
Levitt, TomRooker, Jeff
Lewis, Terry (Worsley)Rooney, Terry
Linton, MartinRowlands, Ted
Lock, DavidRoy, Frank
McAllion, JohnRuane, Chris
McAvoy, ThomasRuddock, Joan
McCabe, SteveSalter, Martin
McCafferty, Ms ChrisSarwar, Mohammad
McDonagh, SiobhainSavidge, Malcolm
Macdonald, CalumSawford, Phil
McDonnell, JohnSedgemore, Brian
McGuire, Mrs AnneSheerman, Barry
McIsaac, ShonaSheldon, Rt Hon Robert
McKenna, Mrs RosemarySimpson, Alan (Nottingham S)
Mackinlay, AndrewSingh, Marsha
McNamara, KevinSkinner, Dennis
McNulty, TonySmith, Rt Hon Andrew (Oxford E)
MacShane, DenisSmith, Jacqui (Redditch)
Mactaggart, FionaSmith, John (Glamorgan)
McWalter, TonySmith, Llew (Blaenau Gwent)
McWilliam, JohnSnape, Peter
Mahon, Mrs AliceSoley, Clive
Mallaber, JudySpellar, John
Mandelson, Rt Hon PeterSquire, Ms Rachel
Marsden, Gordon (Blackpool S)Starkey, Dr Phyllis
Marshall, David (Shettleston)Steinberg, Gerry
Marshall, Jim (Leicester S)Stevenson, George
Marshall-Andrews, RobertStewart, David (Inverness E)
Martlew, EricStewart, Ian (Eccles)
Meale, AlanStinchcombe, Paul
Merron, GillianStoate, Dr Howard
Michie, Bill (Shef'ld Heeley)Stott, Roger
Milburn, Rt Hon AlanStrang, Rt Hon Dr Gavin
Mitchell, AustinStringer, Graham
Moffatt, LauraSutcliffe, Gerry
Moran, Ms MargaretTaylor, Rt Hon Mrs Ann (Dewsbury)
Morgan, Ms Julie (Cardiff N)
Morley, ElliotTaylor, Ms Dari (Stockton S)
Morris, Ms Estelle (B'ham Yardley)Taylor, David (NW Leics)
Mudie, GeorgeTemple-Morris, Peter
Mullin, ChrisThomas, Gareth (Clwyd W)
Murphy, Denis (Wansbeck)Thomas, Gareth R (Harrow W)
Murphy, Jim (Eastwood)Timms, Stephen
Murphy, Rt Hon Paul (Torfaen)Tipping, Paddy
Naysmith, Dr DougTouhig, Don
Norris, DanTrickett, Jon
O'Brien, Bill (Normanton)Turner, Dennis (Wolverh'ton SE)
O'Brien, Mike (N Warks)Turner, Dr Desmond (Kemptown)
O'Hara, EddieTurner, Dr George (NW Norfolk)
Olner, BillTwigg, Stephen (Enfield)
Osborne, Ms SandraVaz, Keith
Palmer, Dr NickVis, Dr Rudi
Walley, Ms JoanWinnick, David
Ward, Ms ClaireWise, Audrey
Wareing, Robert NWorthington, Tony
White, BrianWray, James
Whitehead, Dr AlanWright, Anthony D (Gt Yarmouth)
Wicks, MalcolmWright, Dr Tony (Cannock)
Williams, Rt Hon Alan (Swansea W)Wyatt, Derek
Williams, Alan W (E Carmarthen)Tellers for the Ayes:
Wills, MichaelMr. David Hanson and
Wilson, BrianJane Kennedy.
NOES
Ainsworth, Peter (E Surrey)Gorman, Mrs Teresa
Allan, RichardGorrie, Donald
Amess, DavidGray, James
Ancram, Rt Hon MichaelGreen, Damian
Arbuthnot, Rt Hon JamesGreenway, John
Atkinson, David (Bour'mth E)Grieve, Dominic
Atkinson, Peter (Hexham)Gummer, Rt Hon John
Baker, NormanHague, Rt Hon William
Baldry, TonyHamilton, Rt Hon Sir Archie
Ballard, JackieHammond, Philip
Beggs, RoyHancock, Mike
Beith, Rt Hon A JHarris, Dr Evan
Bell, Martin (Tatton)Harvey, Nick
Bercow, JohnHawkins, Nick
Beresford, Sir PaulHeathcoat-Amory, Rt Hon David
Blunt, CrispinHogg, Rt Hon Douglas
Boswell, TimHoward, Rt Hon Michael
Bottomley, Peter (Worthing W)Hughes, Simon (Southwark N)
Bottomley, Rt Hon Mrs VirginiaHunter, Andrew
Brake, TomJackson, Robert (Wantage)
Brand, Dr PeterJenkin, Bernard
Brazier, JulianKeetch, Paul
Brooke, Rt Hon PeterKey, Robert
Browning, Mrs AngelaKing, Rt Hon Tom (Bridgwater)
Bruce, Ian (S Dorset)Kirkbride, Miss Julie
Bruce, Malcolm (Gordon)Kirkwood, Archy
Burnett, JohnLansley, Andrew
Burns, SimonLeigh, Edward
Chapman, Sir Sydney (Chipping Barnet)Lewis, Dr Julian (New Forest E)
Lidington, David
Chidgey, DavidLilley, Rt Hon Peter
Chope, ChristopherLloyd, Rt Hon Sir Peter (Fareham)
Clappison, JamesLoughton, Tim
Clarke, Rt Hon Kenneth (Rushctiffe)Luff, Peter
Lyell, Rt Hon Sir Nicholas
Collins, TimMacGregor, Rt Hon John
Colvin, MichaelMcIntosh, Miss Anne
Cran, JamesMacKay, Rt Hon Andrew
Curry, Rt Hon DavidMaclean, Rt Hon David
Davey, Edward (Kingston)McLoughlin, Patrick
Davies, Quentin (Grantham)Malins, Humfrey
Davis, Rt Hon David (Haltemprice)Maples, John
Day, StephenMaude, Rt Hon Francis
Donaldson, JeffreyMay, Mrs Theresa
Dorrell, Rt Hon StephenMichie, Mrs Ray (Argyll & Bute)
Duncan, AlanMoore, Michael
Duncan Smith, IainNicholls, Patrick
Evans, NigelNorman, Archie
Faber, DavidOaten, Mark
Fabricant, MichaelÖpik, Lembit
Fallon, MichaelOttaway, Richard
Fearn, RonniePage, Richard
Right, HowardPaice, James
Forsythe, CliffordPickles, Eric
Forth, Rt Hon EricRandall, John
Foster, Don (Bath)Redwood, Rt Hon John
Fowler, Rt Hon Sir NormanRendel, David
Fraser, ChristopherRobathan, Andrew
Gale, RogerRoe, Mrs Marion (Broxbourne)
Garnier, EdwardRussell, Bob (Colchester)
George, Andrew (St Ives)St Aubyn, Nick
Gibb, NickSanders, Adrian
Gillan, Mrs CherylSayeed, Jonathan
Shepherd, RichardTyler, Paul
Simpson, Keith (Mid-Norfolk)Tyrie, Andrew
Smith, Sir Robert (W Ab'd'ns)Viggers, Peter
Soames, NicholasWalter, Robert
Spelman, Mrs CarolineWardle, Charles
Spring, RichardWaterson, Nigel
Stanley, Rt Hon Sir JohnWebb, Steve
Steen, AnthonyWells, Bowen
Streeter, GaryWhitney, Sir Raymond
Stunell, AndrewWhittingdale, John
Swayne, DesmondWiddecombe, Rt Hon Miss Ann
Syms, RobertWilkinson, John
Tapsell, Sir PeterWilletts, David
Taylor, Ian (Esher & Walton)Willis, Phil
Taylor, John M (Solihull)Winterton, Mrs Ann (Congleton)
Taylor, Matthew (Truro)Yeo, Tim
Taylor, Sir TeddyYoung, Rt Hon Sir George
Tonge, Dr Jenny
Townend, JohnTellers for the Noes:
Tredinnick, DavidMrs. Jacqui Lait and
Trend, MichaelMr. Geoffrey Clifton-Brown.

Question accordingly agreed to.

MR. DEPUTY SPEAKER forthwith declared the main Question, as amended, to be agreed to.

Resolved,That this House notes that there is now compelling evidence that climate change needs to be tackled, that there is therefore a need for action to reduce greenhouse gas emissions, and that the United Kingdom has a legally-binding target for reducing greenhouse gas emissions set under the Kyoto Protocol; welcomes the recommendations of Lord Marshall on the case for a climate change levy; further welcomes the measures taken by the Government to help British business, including cutting corporation tax rates to their lowest ever level; welcomes the Government's decision to pre-announce the introduction of the climate change levy by two years to give time for further consultation on its design; and supports the Government's determination to work with industry and other parties to ensure that it meets its environmental objectives whilst safeguarding Britain's international competitiveness.