New Clause 9 — Energy efficiency and water conservation: fiscal and economic report

Finance (No. 2) Bill [Ways and Means] – in the House of Commons at 9:30 pm on 4th July 2006.

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'(1) The Chancellor of the Exchequer must, within one year of the passing of this Act and annually thereafter prepare and publish a report on such fiscal measures he considers appropriate to assist with—

(a) energy efficiency; and

(b) microgeneration; and

(c) small scale local energy generation;

(d) the conservation of water by householders.

(2) In preparing the report under subsection (1), the Chancellor of the Exchequer shall take reasonable steps to consult local authorities and such persons as in his opinion have an interest in—

(a) enhancing the United Kingdom contribution to combating climate change; and

(b) alleviating fuel poverty; and

(c) conserving supplies of water.

(3) In this section—

"microgeneration" has the same meaning as in section 82 of the Energy Act 2004;

"small scale local energy generation" means generation of energy—

(a) in the case of electricity, generation by plant not exceeding 20 megawatts, and

(b) in the case of heat, production by plant not exceeding 100 megawatts thermal.'.— [Alan Simpson.]

Brought up, and read the First time.

Photo of Alan Simpson Alan Simpson Labour, Nottingham South

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

Photo of Michael Martin Michael Martin Chair, Speaker's Committee on the Electoral Commission, Speaker of the House of Commons, Chair, Speaker's Committee on the Electoral Commission

With this it will be convenient to discuss the following:

New clause 10— Energy efficiency: lower rate of stamp duty land tax—

'(1) The Finance Act 2003 (c. 14) is amended according to the provisions of Schedule—(Stamp Duty Land Tax: lower rate for certain measures).

(2) The Schedule (Stamp Duty Land Tax: lower rate for certain measures) has effect.'.

New schedule 1— Stamp duty land tax; lower rate for certain measures——

'Schedule

Stamp Duty Land Tax; lower rate for certain measures

21 After section 92 of the Finance Act 2003 insert—

"92A Lower rate where notice given relating to specified measures

(1) This section applies where—

(a) the purchaser is liable to pay the tax in respect of a chargeable transaction,

(b) the relevant land consists entirely of residential property, and

(c) the purchaser has given notice of an intention to undertake or to have undertaken relevant specified measures within the relevant period.

(2) Where this section applies, regulations shall prescribe a lower rate of tax chargeable in respect of the transaction, and different lower rates may apply to the undertaking of different relevant measures.

(3) The lower rate in regulations under subsection (2) may be expressed as—

(a) a percentage of the chargeable consideration,

(b) a percentage of the amount of the tax in respect of the chargeable transaction that would be payable if this section were not to apply, or

(c) a specified monetary reduction in the amount of tax payable.

(4) In determining the lower rate in regulations under subsection (2), the Treasury shall have regard to—

(a) any energy efficiency aims for residential accommodation designated under section 2 or 3 of the Sustainable Energy Act 2003 (energy efficiency in residential accommodation: designation by Secretary of State and by the National Assembly for Wales), and

(b) the duty of the Secretary of State under section 217(1) of the Housing Act 2004 (duty in relation to increase in energy efficiency of residential accommodation in England), and

(c) the microgeneration strategy published pursuant to section 82 of the Energy Act 2004; and

(d) the need to conserve water.

(5) Notice for the purpose of subsection (1)(c) shall be given in writing in such terms as may be prescribed by regulations.

(6) Regulations shall—

(a) prescribe 'relevant specified measures' for the purposes of this section, and

(b) specify the extent to which the lower rate prescribed under regulations under this section is payable in relation to different specified measures undertaken.

(7) The prescribed definition under subsection (6) shall include—

(a) measures to improve the thermal insulation of the property,

(b) other measures to improve the energy efficiency of the property,

(c) the installation of microgeneration measures,

(d) the installation of water saving measures.

92B Arrangements in relation to lower rate under s. 92A

(1) Where section 92A applies, regulations may require a person or body other than the purchaser to retain the relevant amount until a decision is made that the relevant specified energy efficiency measures have been undertaking by or on behalf of the purchaser.

(2) Regulations may prescribe the person or body that is to decide whether or not the relevant energy efficiency measures have been undertaken.

(3) Any such decision must be taken within, or as soon as practicable after the relevant period.

(4) Where it is decided that the relevant specified measures have been taken within the relevant period, the relevant amount, and any interest payable on it, shall be paid to the purchaser.

(5) Where it is decided that the relevant specified measures have not been taken within the relevant period, the relevant amount, and any interest payable on it, shall be payable in the same manner as the tax.

(6) Interest payable under subsections (4) and (5) shall be determined in accordance with the provisions of section 87.

(7) Regulations may amend Schedules 10 and 12 so as to provide for—

(a) the making of returns in relation to the provisions of section 92A and this section and regulations made under them,

(b) duties to keep and preserve records in relation to those provisions and regulations,

(c) appeals against decisions under those provisions and regulations, and

(d) the recovery of relevant amounts and interest payable on them.

(8) The powers to make regulations under section 92A and this section are exercisable by the Treasury.

22 In section 92A and this section—

"the relevant amount" means an amount that is the difference between—

(a) the amount of the tax in respect of the chargeable transaction that would be payable if section 92A were not to apply, and

(b) the amount of tax in respect of the chargeable transaction that is payable under section 92A;

"the relevant period" means a period to be specified in regulations beginning with the date on which the tax becomes payable.

23 In section 114 (orders and regulations made by the Treasury or Inland Revenue), in subsection (4), at the end, insert "paragraph 9A(1) of Schedule 19 (commencement of sections 92A and 92B."24 In Schedule 19 (Stamp duty land tax: commencement and transitional provisions), after paragraph 9, insert—

" Commencement of sections 92A and 92B

9A. (1) Sections 92A and 92B shall come into force in accordance with the provisions of an order made by the Treasury.

(2) No order may be made under sub-paragraph (1) before the coming into force of section 155 of the Housing Act 2004 (duty to have a home information pack).".'.

Photo of Alan Simpson Alan Simpson Labour, Nottingham South

The provisions have been tabled by members of all parties represented in the House, and if you will allow me, Mr. Speaker, I shall speak to new clause 10 and new schedule 1 as well as to new clause 9.

New clause 9 makes the revolutionary proposal that the Chancellor submit to the House an annual report on fiscal measures—and their success—to assist with energy efficiency, microgeneration, the development of local energy systems and water conservation measures, all of which are the subject of Government policies and targets. However, there is a gap between the wish to deliver those targets and the way in which we do so.

It could be argued that it is not necessary to require the Chancellor to make such a report to the House. After all, in section 82 of the Energy Act 2004, which sets the basis of a Government policy promoting the development of microgeneration systems, there is a duty to report. Under the Climate Change and Sustainable Energy Act 2006, which was wonderfully piloted through the House by my hon. Friend Mark Lazarowicz, a duty will follow for the Department for Environment, Food and Rural Affairs and the Department of Trade and Industry to report, one on climate change and the other on the sustainable energy implications.

It is worth noting that both those Acts started out with a presumption that there would need to be a Treasury reporting role addressing the fiscal measures that were necessary to make the policies work, but in order to get both Acts on the statute book, the Treasury required itself to be excluded from the reporting process. That leaves an enormous hole in the coherence of Government plans for tackling climate change and the delivery of sustainable energy strategies. How can we exclude fiscal measures from the sustainability programme, when they are at the very centre of it?

In Germany the Government have transformed the energy market through an inversion of the fiscal rules that govern that market, so that microgeneration becomes the norm in developments, rather than being stuck on at the end. Elsewhere, particularly in Denmark and the Netherlands, fiscal measures have been used to promote the development of decentralised energy systems in ways that will offer a new approach to energy security in the 21st century.

My argument is that for us in this country, this Parliament and this Government it is not coherent to talk about joined-up government if we suggest that fiscal measures, and a Treasury lead on those measures, should be the exemption clause in our overall sustainable energy strategies. Everyone knows of the Prime Minister's support for renewable energy, and the DTI estimates that 40 per cent. of UK energy needs could be met by decentralised energy by 2050. The difficulty is that no one seems to know how we get from where we are now to where we would like to be in 2050—at least, not without a clear fiscal lead that comes from the heart of Government and the heart of the Treasury.

Every Budget report since 2002 has made reference to energy efficiency and the reduction of carbon emissions. Every Budget has brought with it some measure relating to domestic energy efficiency or microgeneration, but in most cases those have been limited to VAT adjustments or enhanced capital allowances. Fiscal measures have been small scale, piecemeal and unconnected to an overall Government strategy. A specific duty would allow us to develop such a fiscally strategic approach to how Britain will meet its climate change challenge and its fuel poverty targets in the 21st century.

It is not that we do not know the scale of the problems that we face. It is just that we do not engage with the scale of the solutions that we need. Let me put that in context. From the figures provided to us by DEFRA, we know that carbon emissions over recent years have started to increase again and are 158.4 million tonnes a year. Of that, the domestic contribution to increasing carbon emissions has risen to 41.2 million tonnes a year.

Fuel poverty is also back on the increase. The last figures that we have before Labour came to power are those for 1996, when 5.1 million people were officially recognised as living in fuel poverty in the UK. By 2003, a succession of Labour Government programmes had reduced that figure to 1.2 million. By 2005, however, the number of households was back up to 2.2 million, and the projection for this year is sitting at around 3 million households now living in fuel poverty.

Why have the numbers started to increase? One simple set of figures speaks volumes—those for the change in energy prices. Between January 2003 and March 2006, average gas prices in the UK increased by 57 per cent. and electricity prices by 37 per cent. Therefore, increasing energy prices are pushing more people back into fuel poverty than our Warm Front programme is able to take out of it.

Photo of Peter Bone Peter Bone Conservative, Wellingborough 10:00 pm, 4th July 2006

Does the hon. Gentleman agree that part of the rise in prices for consumers that has affected poverty is accounted for by the fact that the EU has not fully liberalised the gas market in continental Europe, and that has added £186 a year to the cost for an average family?

Photo of Alan Simpson Alan Simpson Labour, Nottingham South

No, I do not agree. One of the problems that we have in the UK is that we are now paying the price for the way in which we have sought to liberalise our energy markets. I have taken the trouble to ask most of the energy suppliers in the country to tell me what their long-term plans are for selling people less energy, and encouraging less energy consumption. Not a single one can do that. They just look at anyone who asks that question as if they were barking mad. Yet they know that we cannot continue to live in a world where we consume ourselves to death through the energy inputs that are responsible for the climate change outputs that devastate the rest of the planet. We will have to move to a different way of thinking about energy use and energy generation.

The difficulty is that when one asks the energy suppliers why they cannot make that move, even though intellectually they can understand the necessity of it, they say that they are required to engage in a market driven by short-term price considerations. How to break out of that short-term trap is one of the biggest challenges that we face, not just in this House but in this society. That is why we need a Treasury lead and a coherent fiscal strategy for how we set about delivering on our sustainability policies.

At the moment, 10 million people in the south of England face a hosepipe ban. In addition, millions of others are being warned of long-term water shortages that will be part of the cost and consequences of the climate change damage that we have done during the past 30 years. It is inconceivable that the public will allow us to go far down a path that ignores those issues, or excludes them from being at the heart of our Budget thinking about how we manage the economy. Putting that at the heart of our thinking, rather than having responsibility devolved into a series of separate, often unconnected and at times conflicting departmental policies, adds to the weight of argument about why there needs to be a Treasury lead—a Chancellor's lead—in addressing the issue head-on.

New clause 10 and the schedule attached to it is the one specific proposal that would allow for the introduction of a lower rate of stamp duty or a rebate for the introduction of energy efficiency measures. In support of that I want to cite a number of points. Members should just cast their eyes over early-day motion 214, which was submitted by my right hon. Friend Mr. Barron. It has 262 signatures from Members of all parties in the House, and it makes precisely the point about the need for a stamp duty rebate tied to the introduction of energy efficiency measures in the home.

Just over a week ago, the Energy Saving Trust and the Policy Studies Institute held a seminar for virtually all sectors of the energy industry, along with environmental and fuel poverty organisations. Officials from both the Department for Environment, Food and Rural Affairs and the Treasury were also present. Those at the seminar considered a long list of proposals about the sort of fiscal measures that would effectively promote the introduction of energy efficiency in the home. The single measure that emerged as by far the most popular way of achieving that was the introduction of a stamp duty rebate. It is important that we acknowledge the weight of pressure that people who are in the business of making things work feel that we could achieve if we wanted to make that happen.

Photo of Frank Field Frank Field Labour, Birkenhead

Does my hon. Friend accept that he would simply be developing existing Government policy? In our inner-city areas in which sales needed stimulus, the Government gave stamp duty exemptions, and the policy was successful.

Photo of Alan Simpson Alan Simpson Labour, Nottingham South

I had forgotten about that point, so I am grateful to my right hon. Friend for reminding me of it. He is absolutely right to say that I tabled this measure in support of Government policy, rather than in opposition to it.

Let me give the clearest example that I can offer. In our energy White Paper, the Government made a specific commitment by setting a target that 4.5 million of the homes with cavity walls should be fully cavity wall insulated by 2010. At present, there are about 9 million homes with cavity walls throughout the UK. Each year, about 80,000 of those homes become fully insulated. If we were to deliver on our programme by 2010, there would have to be a sixfold increase in the rate at which the existing policy is working.

How do we deliver such a sixfold increase? When we talk to people in the industry and the relevant sectors, they point out that by and large, the most successful time for intervention is when people are moving house. When people are in the process of buying a new home or trying to sell their existing home, they examine what they have to sell and consider what they want to buy. At that point, stamp duty is a significant financial consideration for many such people. If we could tie rebate measures into delivering the strategies and policies that we have set out our stall to carry out by 2010—without looking for new ones—we might deliver what we promised.

There would be not only a big environmental plus to that, but a big creditability plus. There is nothing worse for the credibility of Parliament and Governments than making promises but failing to deliver on them. I am proposing a simple measure, and almost everyone in the industry is saying, "Give us this mechanism and we'll deliver the outcomes that you in Parliament say you want." The proposal has the support of the Energy Saving Trust, the Royal Commission on Environmental Pollution and the House's own Environmental Audit Committee.

Photo of Frank Field Frank Field Labour, Birkenhead

Given my hon. Friend's normal stance, is there not some originality in his position of encouraging the Treasury Bench to adopt and support a market-led solution?

Photo of Alan Simpson Alan Simpson Labour, Nottingham South

That might tempt me to re-think my position. I accept that there is important validity in what my right hon. Friend says. My explanation cum defence is that I have always said that there is nothing moral about markets. Left to their own devices, markets are entirely amoral. They acquire a morality only if politicians and political leaders of the day have the courage to deliver a moral framework. Since we have said this in our policies and set this out in our targets, why can we not say it in the measures on which we seek to deliver? I hope that the House will have the courage to do so.

Photo of Paul Goodman Paul Goodman Shadow Minister (Childcare), Treasury

The House owes a debt to Alan Simpson and to all his accomplices, if that is exactly the right word, for enabling us to debate microgeneration, energy efficiency and sustainability under the terms of the Finance Bill. Indeed, as the hon. Gentleman emphasised, those accomplices come from all parts of the House, and include my hon. Friend John Bercow, who is in his place.

I will set out why the official Opposition intend to support new clause 9 if it is to be pressed to a vote, but why we do not feel, as matters stand, that we can support new clause 10 and new schedule 1, which are grouped with it. As for new clause 9, Mr. Field, in his characteristically mischievous way, set out exactly why the Opposition would be likely to look on the new clause favourably. He referred, if I can read my scribble, to a market-led solution, which is exactly what the hon. Member for Nottingham, South has proposed.

New clause 9 is rather more modest because it merely asks that the Chancellor should, within a year, produce a report on "fiscal measures" that would assist

"energy efficiency...microgeneration...small scale local energy generation" and the

"conservation of water by householders."

It asks also that in producing his report

"the Chancellor...shall...consult local authorities and such persons" that

"have an interest in...enhancing the United Kingdom contribution to combating climate change...alleviating fuel poverty and conserving water supplies."

To the Opposition, that seems to be a sensible and balanced way of speeding up the plans that the Government announced in March to increase local level energy production and to reduce carbon emissions. I suspect that many Members across the House share that view. The direction of travel outlined in the microgeneration strategy in March is welcome but it does not go far enough, so we believe that new clause 9 is helpful in pushing those plans forward.

After eight years, Ministers are still reviewing planning policy and debating the potential of microgeneration technologies. The new clause is a positive response to the exciting potential of emerging microgeneration technologies. A most serious and robust strategy should have been an integral part of the energy review, not a precursor to it. Rather than laying down a challenge to the industry, we believe that the Government are following in its wake. Rather than setting the international pace, they are reacting to developments abroad. As it stands, the strategy will do little to address the sizable advantage that our international competitors enjoy in this sector or make a meaningful impact on carbon dioxide emissions before 2010.

I mentioned economic growth on the one hand and environmental gain on the other, because the two go hand in hand. The choice for the future is not between slower growth and lower emissions and faster growth and increased emissions. As the hon. Member for Nottingham, South said, between the option of either a highly centralised and extremely wasteful energy system in which power is, in effect, monopolised in the hands of a few producers, or a more decentralised and energy efficient system in which power generation is put into the hands of households and consumers lies an energy market in which other countries are leading the way. By the end of 2004, 200,000 Japanese homes had fitted photovoltaic cells, while 300,000 micro-renewable systems have been installed in Germany. As the hon. Member for Nottingham, South said, Germany is one of the countries that is giving a lead on such energy generation. More than 10 per cent. of householders in Sweden already use micro-renewable technology to heat their homes. Furthermore, the global market for new energy products and services, including micro-renewables, may be worth trillions of pounds over the course of this century. German companies already generate half the entire turnover of the global wind industry, while Japanese firms are at the forefront of fuel cell and hybrid engine technologies. American companies are leading the way in bringing affordable renewable technologies to the market. That is why my hon. Friend Mr. Osborne recently visited silicon valley to examine the work of pioneering green companies, which are building on ideas coming out of Stanford university.

I concede that new clause 9 will not in itself make our micro-renewables sector more competitive or have a serious short-term impact on reducing emissions, but it has the potential to allow the Chancellor to return to the House in due course and on a regular basis with not only a series of fiscal measures and incentives, but a framework within which those measures should fit. My hon. Friend the Member for Tatton set out that framework in three parts shortly before his visit to silicon valley.

First, the Government should consider how the planning system might take into account the benefits of micro-renewables while also recognising the need to protect the local and wider environment. As hon. Members know, the planning system is not always friendly to micro-renewables.

Secondly, the Government should address the lack of information available to consumers. We need a clear and stable policy for micro-renewables, so consumers can make long-term predictions whether the cost of fitting a wind turbine or solar panel makes financial sense.

Thirdly, the Government must tackle the inadequate infrastructure and regulatory framework. As well as the need to buy less electricity, part of the attraction of micro-renewables is the potential to make money by selling any excess electricity back into the national grid. In summer, for instance, photovoltaic cells—this comment is apposite given the current weather—may well generate more electricity than a household needs, especially if the occupiers are away on holiday. At the moment, however, that is being made much too difficult by inadequate infrastructure and burdensome regulations.

I would doubtless go wide of new clauses 9 and 10 if I were to describe in detail how the national grid is largely configured for one-way energy flows, but we would like to see the grid operate more flexibly, which is why my hon. Friend the Member for Tatton has asked the quality of life policy group to examine the experiences of other countries that have introduced feed-in tariffs.

In summary, we shall support new clause 9, since it makes a sensible and practical proposal which is enactable now. Since we will produce our own proposals in due course on the fiscal framework in relation to microgeneration and energy efficiency, we will not support the tax cut in new clause 10 and new schedule 1. I am sorry to disappoint the hon. Member for Nottingham, South in that regard, but if he presses new clause 9 to a vote, we will certainly support him.

Photo of Julia Goldsworthy Julia Goldsworthy Shadow Chief Secretary To the Treasury, Treasury 10:15 pm, 4th July 2006

The Liberal Democrats sympathise with what Alan Simpson is seeking to achieve with new clause 10 and new schedule 1.

I want to refer to early-day motion 214, which has attracted nearly 270 signatures and which relates to new clause 10. Andrew Selous has added his name to it, so I shall be intrigued to see how the Whip on the Finance Bill advises his troops to vote.

New clause 10 would add complication to the stamp duty system, if the discounts were to operate in the same way as the already complex slab system. Furthermore, I am not sure whether I would be happy to subsidise improvements, environmentally laudable as they may be, to the home of Mr. Cameron.

It is a good opportunity to press the Government on how they intend to improve environmental standards in existing buildings. Like, I am sure, many other hon. Members, I look forward to the Financial Secretary's response. However, I have a couple of queries about enforcement.

I understand that, if people say at the point of purchase that they wish to undertake improvements, they would qualify for a lower rate of stamp duty. However, what would happen if they did not carry out the improvements? Furthermore, with the Government proposing many plans to build many new houses, what incentives will there be to ensure that environmental measures are included when they are built?

Photo of Alan Simpson Alan Simpson Labour, Nottingham South

The hon. Lady's initial questions were legitimate but matters were left open because it would be for the Chancellor and the Treasury to set a framework. It is inappropriate to try to nail everything down in the new clause—it does not try to do that.

The process of operating a rebate is relatively simple. The Chancellor and the Treasury would devise the criteria against which a rebate could be claimed. One would define a period in which the works were to be undertaken and the process of reclaiming. There would therefore be a straightforward process of compliance. There are technical details to iron out but the problem is simply whether one wants to choose what I have described as an intervention point and whether one believes that it would work.

Photo of Julia Goldsworthy Julia Goldsworthy Shadow Chief Secretary To the Treasury, Treasury

I thank the hon. Gentleman for that clarification.

New clause 9 highlights many of the issues that I raised on Second Reading about the strategy for dealing with environmental measures—or its lack— in the Budget and the Bill, even though, in the week of the Budget, the Chancellor described lack of action on the environment as a scar on his conscience. New clause 9 tries to make explaining the strategy a requirement.

Clearly, we have a fundamental problem. As the hon. Member for Nottingham, South pointed out, emissions are rising. Between 1997 and 2004, carbon dioxide emissions rose from 150 million tonnes to 158 million tonnes, of which domestic carbon dioxide emissions now account for 41.2 million tonnes. That figure, too, is increasing. There is a problem that must be tackled and the Government are not dealing with it at the moment.

Whatever action the Government are taking, there is no shortage of words and consultation. The Treasury has spoken plenty of fine words. The Budget report of 2002 states:

"The Government recognises that energy-efficiency improvements by the domestic sector are key to reducing fuel poverty and carbon emissions".

The Budget report of 2003 states:

"The Government recognises that energy-efficiency improvements in the domestic sector are key to reducing carbon emissions and alleviating fuel poverty."

The Budget report of 2004 states:

"The Energy White Paper highlights the key contribution that energy efficiency can make to the Government's energy policy goals."

The Budget report of 2005 states:

"Improving energy efficiency is the most cost-effective way of reducing greenhouse gas emissions and reducing the costs of fuel bills."

In addition, there has been plenty of consultation. In 2002-03, there was consultation on the economic measures to improve domestic energy efficiency. In 2003-04, further consultation took place on those measures and, in 2004-05, stakeholder consultation took place on green landlord schemes to improve energy efficiency in the private sector.

The Government and the Treasury have also made several proposals. In 2002, they introduced enhanced capital allowances for investment in heat pumps, air heaters and solar heaters and a 5 per cent. VAT rebate on grant-funded installation of factory insulated hot water tanks, micro-combined heat and power and renewable energy heating systems. In 2003, there was an additional consultation on specific measures. I could go on. However, the list ends in 2006, with the allocation of an additional £50 million to the low-carbon buildings programme.

Of course, those changes are welcome but they hardly constitute a strategy. They are piecemeal. They encourage energy efficiency but only among a small number of people. Most householders will not be affected. We therefore need a strategy that means that the improvements will have an impact on a much wider group of people.

The Department of Trade and Industry's own microgeneration strategy and low-carbon building programme consultation identified the wider benefits that microgeneration could bring. It showed that a clearer strategy would have the benefit of reducing carbon dioxide emissions as well as creating a series of other positive impacts on the people who would benefit from the improvements. The renewables innovation review suggests that buildings contribute about 47 per cent. of such emissions, and microgeneration has the potential to reduce that figure.

The DTI's consultation paper also suggests that microgeneration would help to ensure reliable energy supplies, because its widespread use would reduce the load on the distribution network. More diverse local generation would also reduce transmission losses and, if deployed on a widespread scale, would help the UK to avoid becoming over-dependent on energy imports. Furthermore, microgeneration would help to promote competitive markets by introducing an additional aspect to the energy markets, giving people a wider choice of products from which to obtain their electricity and heat.

Microgeneration would also offer the opportunity for affordable heating for all. Many people in my constituency face fuel poverty but do not have access to gas, so their only option is to install oil-fired central heating. Microgeneration would be a more environmentally friendly alternative and a more cost-effective way of tackling fuel poverty.

For all those reasons, I welcome new clause 9. It represents a clear way for the Treasury to set out a strategy on this issue. It would have no financial implications and I will have no problem in supporting it. I shall also encourage my colleagues to do so, and I hope that the Minister will take the same approach.

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

I shall speak only briefly on new clause 9. In response to Mr. Goodman, I regard myself not as an accomplice but as part of a team that needs to drive through the agenda for tackling global warming. I congratulate my hon. Friend Alan Simpson on ensuring that we have an opportunity to debate this most pressing issue in our deliberations on the Finance Bill. My only hope is that everyone understands these issues and that we can gain the support of the nation for these proposals on a similar scale to the support that they give to what happens on the football pitch. It is critical that these matters should be debated not only here in Parliament but right across the country.

I have just two questions on these proposals for my hon. Friend the Financial Secretary. What are we waiting for? How can we move more quickly? I was encouraged by the comments made about these proposals by my right hon. Friend the Secretary of State for Environment, Food and Rural Affairs to the all-party group on the environment earlier this evening. He said that he intended to put environmental issues centre stage, and that he was taking the lead at DEFRA to enable all Government Departments to play their part in tackling global warming. I desperately want the Treasury to do even more than has already been done to make progress.

We have to ensure that we meet our targets, and to do that we must drive forward this agenda at national and local level. The Government have done a certain amount of reporting so far, but they could do more. New clause 9 will not cost the earth. It simply asks for an annual report from the Treasury so that we can have an informed national and local debate on the fiscal measures needed to speed up energy efficiency and introduce systems for microgeneration, small-scale energy generation and the conservation of water. That would signal to local authorities that they, too, were part of the team, and that their work in the local strategic partnerships was important in this regard. When the Environmental Audit Committee visited Woking, we saw the work that had been done there. Admittedly, it had perhaps been done on the basis of market initiatives rather than of environmental concerns, but it had nevertheless been done. We have also seen the work that has been done in Nottinghamshire. It is important that local authorities should be part of the UK's collective effort to address climate change. I do not see why we should not all sign up to that as quickly as possible—hence the important debate that we are having now.

Let me say something about energy efficiency. My constituency has very low standards of heating and insulation, and a very high incidence of fuel poverty. The Government are spending a massive amount on initiatives to improve health through warmth. They should take great credit for improving building regulations, and for seeking to make improvements through the code for sustainable homes. However, as our Environmental Audit Committee's report on sustainable housing points out, even more could be done. The steps that the Government have taken could be greatly reinforced by a review of fiscal measures, as paragraph 50 of our report explains.

We should take each and every opportunity to promote microgeneration, but we will need capital grant assistance to promote such technologies and help low-income households to benefit. The new Department for Communities and Local Government has already announced its intention to end planning restrictions on the domestic installation of wind turbines and solar panels. The Government are starting to make a great deal of progress. What is needed now is a way of overcoming the barriers to microgeneration, and securing the incentives that supply companies can provide for innovative action. It is vital for the Treasury to be part of all that.

I welcome the opportunity to debate stamp duty. Our report said that the next steps should involve more support for the 70 per cent. of households that are owner-occupiers and mostly not in fuel poverty. We recommended that the Treasury should consider reducing both stamp duty and council tax in the case of houses built to higher environmental standards, and asked for consultation on the issue, to be completed by September 2007 as part of the spending review.

I acknowledge that the Government have made a huge amount of progress, but we must accelerate it. It is vital to have a time frame consistent with consultation, but we also want to see real progress on the Select Committee's recommendations.

Photo of Elliot Morley Elliot Morley Labour, Scunthorpe 10:30 pm, 4th July 2006

It is a pleasure to follow my hon. Friend Joan Walley. I agree with much of what she said. I also welcome the new clause tabled by my hon. Friend Alan Simpson. The issues are important—there is a real debate to be had about how fiscal measures can encourage the developments that society needs, such as increased energy efficiency and the combating of climate change.

The Treasury and, indeed, the Chancellor have an excellent record. The Chancellor has not been afraid of innovation through fiscal measures. The climate change levy, for instance, has been extremely successful. Climate change agreements have reduced emissions from major users. The pioneering of carbon trading in the United Kingdom has greatly influenced the European Union's scheme, and is a great success. Even measures that do not receive the attention that I think they deserve, such as the reforms of company car taxation, are having a huge impact on emissions and the buying habits of the companies that are major purchasers of cars in our country. That decision alone was a bold one. The fact that the Treasury took that decision demonstrates that it has not shied away from the bold and radical use of fiscal measures to encourage environmental improvements. I greatly welcome that and the thrust behind the new clauses will continue it.

Of course there is a role for reporting and some very good points have been raised. DEFRA has already made a commitment to providing an annual report on measures to reduce emissions and on the sort of steps that need to be taken. My hon. Friend Mark Lazarowicz brought forward measures in his successful Bill, which he introduced with great skill. I am pleased that the Government supported and endorsed his Bill, which included reporting measures both to the DTI and to DEFRA.

There has always been a great deal of argument about the Government having a co-ordinated approach to sustainable and environmental measures. It is absolutely right that the Government adopt such an approach, so we need to think carefully about how best to carry out the reporting. We do not want individual reports from individual Departments—we need some co-ordination in a cross-government approach. Those issues can be discussed in respect of the shape of the reports and the commitments that have been given. That perhaps still requires some extra thought.

There is no doubt about the great role for microgeneration or the great role of small-scale decentralised power. As my hon. Friend the Member for Stoke-on-Trent, North mentioned, there are also barriers. The buying price of electricity needs to be resolved, as it is unsatisfactory at present. I welcome the steps taken to remove some of the planning barriers to microgeneration. Other important issues are the cost of new technology and the Government's role in moving new technology from the development stage into the marketing stage. The inertia that acts as a barrier to new approaches, new ideas and innovation is another problem.

Fiscal measures are crucial and I greatly welcome measures announced in the Budget, such as the additional £50 million to help promote microgeneration. Together with the existing budget, it amounts to about £70 million. Energy efficiency commitments are also important and the Government have been successful in developing them.

I saw for myself how British Gas, as part of its contribution to its energy commitments, gave discounts on council tax for people who took up the option of having cavity wall insulation. It was hugely successful. The discounts were quite modest, but it proved attractive to consumers to secure the discount by taking up the subsidised cavity wall insulation that was part of the energy efficiency commitment. I very much hope that the EEC3 format provides an opportunity to develop some radical innovative ideas about using microgeneration and encouraging new measures for energy efficiency.

Similar measures can be applied to stamp duty. Personally, I think that some form of discount on stamp duty is a good idea. I accept that it is a complicated argument: does it apply to new homes; can it be applied to retro-fit those who modernise their homes through energy efficiency measures; can it be linked to a new code of sustainable building; can it be applied to zero emission homes? There is a lot of debate on those matters and a great deal of working out still to be done about the shape that will emerge. For those reasons, I hope that my hon. Friend the Member for Nottingham, South will not press the new clause to the vote.

There remains a lot of work to be done on the final shape, although I support the principle of the new clause. I know very well that within the Government there has to be discussion and issues of timing and costs have to be dealt with and resolved. I would not expect Treasury Ministers to accept the new clauses tonight, but we have seen what the Chancellor and the Treasury team can do in using fiscal measures to reach outcomes on climate change and sustainability. They have demonstrated that they are prepared to use such measures and apply them—and we know that they work and that they are successful. I recognise that the Government cannot accept these amendments as they stand, but I urge my hon. Friends on the Front Bench to give serious consideration to the very sound principles that they advocate. They make economic and financial sense, and they certainly make environmental sense in the light of the Government's ambitious objectives, targets and commitments. Every section of government has to make a contribution if we are to be successful.

There is no doubt that fiscal measures and economic drivers are key to an overall integrated strategy. I hope that Ministers will give them serious consideration.

Photo of John Healey John Healey The Financial Secretary to the Treasury

This has been an interesting debate. It seems that the on-off relationship between the Tories and the Liberals in respect of environmental policies—that elusive cross-party consensus—may be on again.

I think that the areas of agreement between the Government and my hon. Friend Alan Simpson are much greater than the areas of disagreement. We agree about the importance of energy efficiency and water conservation, and about the potential of microgeneration. We agree too with the assessment that the UK market for the available technologies is in its infancy, and that fiscal and other economic measures may have a role to play, along with regulation, public spending and, in some cases, information campaigns.

The differences between the Government and my hon. Friend the Member for Nottingham, South result from the specific details of new clause 9. I hope that my hon. Friend will take account of what my hon. Friend Mr. Morley said in that regard. Much of this ground was covered in the debates on the private Member's Bill successfully introduced by my hon. Friend Mark Lazarowicz. My hon. Friend Joan Walley made a number of telling points, and she is one of the most assiduous and consistent campaigners on the environment in the House.

My hon. Friend the Member for Scunthorpe also made some telling points when he talked about the progress that has been made on the environment since 1999, and the important measures that the Government have introduced in that time. He played a pivotal part in that process, during his time as a Minister with responsibility for the environment. He rightly said that my right hon. Friend the Chancellor has an excellent record on the environment, and that he has used fiscal and other economic instruments to good effect.

My hon. Friend the Member for Scunthorpe was also right in what he said about the climate change levy. The Opposition opposed it when it was introduced, and still do so now. The measure contributes almost one fifth of our emissions savings, as we pursue our climate change objectives. I must advise the Opposition that it is fine to will the ends but, in the end, they must back the means and the measures that will deliver those ends.

We also recognise the importance of household energy efficiency, as my hon. Friend the Member for Nottingham, South and other hon. Friends urged. It is central to reducing further—

Photo of John Healey John Healey The Financial Secretary to the Treasury

No, I will not. The hon. Gentleman came into the Chamber only two minutes ago. He was not here for the debate—[ Interruption.]

Photo of Sylvia Heal Sylvia Heal Deputy Speaker

Order. Whether someone decides to give way or not is entirely up to the hon. Member on his feet.

Photo of John Healey John Healey The Financial Secretary to the Treasury

Thank you, Madam Deputy Speaker.

Household efficiency measures are of central importance if we want to reduce greenhouse gas emissions and if we want to provide greater security for the future. Improvements in energy efficiency are also essential if we are to reduce some of the unacceptable levels of fuel poverty in this country. That is why we have introduced all the measures to that end since 1997, many of which Julia Goldsworthy outlined. She saved me a job by doing that, but she missed the support that the Government have given to the Energy Saving Trust, and the reduced rate of VAT on all the significant microgeneration technologies.

I come now specifically to new clause 9. I remind my hon. Friend the Member for Nottingham, South, and all those who signed the new clause, that my right hon. Friend the Chancellor publishes two documents, the pre-Budget report and the Budget, that set out our analysis of the situation and our plans for appropriate fiscal measures in this area. If my hon. Friend looks at the Budget, he will see that chapter 7, which runs to 24 pages, covers issues relating to water conservation, measures to protect natural resources and, in a substantial section, climate change and energy efficiency.

Chapter 7 also sets out a range of new measures introduced at the Budget. It outlines the extra £20 million that we promised to help local authorities to promote energy efficiency, £50 million to try to give a boost to microgeneration markets and the installation of up to 25,000 microgeneration units in schools, community buildings and homes. It sets out a new agreement we have reached with energy suppliers to provide an extra 250,000 subsidised insulation installations by 2008. Those measures will help with our carbon savings and will help to reduce annual fuel bills for those in most poverty.

New clause 10 and new schedule 2 set out proposals on stamp duty. We have been pressed for some time on the matter, but are still not convinced by the case for the proposals—and my hon. Friend the Member for Nottingham, South has not convinced us in his arguments tonight. The new clause and the new schedule duck some of the core questions, such as the level of relief, the qualifying threshold and the nature and scale of the rebates. It is hard to cost the impact of the proposals on the public purse and the contribution they might make to our climate change objectives.

There is a series of principled problems with the proposed policy measure. First, it would make the design and collection of stamp duty much more complex and costly. Secondly, it would require someone—perhaps the conveyancer—to withhold money for a period. I am not sure whether my hon. Friend has discussed the proposal fully with conveyancers, because it will impose significant new burdens on small businesses at a time when we want to reduce them.

R

Now Mark Lazarowicz's Bill has become an act, can we see some action by Central Government on Local Government (in Manchester, Trafford and elsewhere) who still insist people who wish to put up a wind turbine have to go through the same planning process. The Planning Rules are a total ass: One has to go through the same process when putting up a pole as a property developer does when building a housing estate. I've a mind to send some typical details through to my MP. She can then peruse the myriad of technical drawings, and technical information backed by the "One size fits all" planning form and a letter making a forceful case. Also, the social input one has to put in: Trying to find favour with the neighbours and enlisting the support of their local councillors. Getting planning permission for a domestic wind turbine is akin to a campaign to save the local hospital if one wants more than a cat in hell's chance of getting approval! People who have satellite dishes need no planning permission. A satellite dish topbox uses perhaps 40 watts of power requiring up to 80 watts at a distant power station. That is around 250 grammes of co2 per hour per satellite dish. Why is something destructive to the environment allowed over someting which could avoid our economy collapsing and mass dieoff occurring? Because loads of people and businesses ignored these planning rules and they became a nonsense. We all need to defy the planning pathocrats in local government and put these devices up. We need to rebel against our Local Government obstruction to domestic wind turbines. The argument that "someone might not like the look of your wind turbine. Well, I might not like the look of that lamp post, or that "Keep Left" sign! If exemption is not granted, then some kind of mass ignoring will have to occur for the environment, the economy and our well being. Local and National...

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Photo of John Healey John Healey The Financial Secretary to the Treasury

No, I will not; the hon. Gentleman has only just come into the debate.

Thirdly, I point out to my hon. Friends who may be tempted to consider the proposals that a large number of buyers are exempt from stamp duty. Last year, at the Budget, we doubled the starting threshold for stamp duty to £120,000. This year, we increased it to £125,000 and have thus taken 400,000 homes a year out of the stamp duty system. About 50 per cent. of homebuyers are exempt from stamp duty, either through the new threshold or due to the fact that they are buying homes in disadvantaged areas. I ask my hon. Friends how we could refund the tax to people who had not paid it in the first place?

Does not it strike my hon. Friends as unfair that the proposed support would not be available to most people in the country? Fifty per cent. is the nationwide figure for exemptions. In the constituency of my hon. Friend the Member for Nottingham, South the figure is 58 per cent. In the constituency of my hon. Friend the Member for Scunthorpe, the residential sales transactions of 79 per cent. of households are exempt from stamp duty each year; in the constituency of my hon. Friend the Member for Stoke-on-Trent, North the figure is 85 per cent.

The proposed scheme would subsidise certain areas of the country much more than others. It would also subsidise people who are able to pay while doing nothing to help those in fuel poverty or on low incomes.

Photo of John Healey John Healey The Financial Secretary to the Treasury

I will not give way at this stage.

Members have urged us to do even more on the environment, and both in the Treasury and as a Government we shall do so, but the measures proposed in the new clause are not the steps we should take. If the new clause is pressed to a vote, I ask my hon. Friends to resist.

Photo of Alan Simpson Alan Simpson Labour, Nottingham South

The Financial Secretary has made an excellent speech, but one in support of new clauses 9 and 10 and new schedule 1. He is absolutely right to tell hon. Members on both sides of the House that there is no point in willing the ends if we do not will the means, and the means that we invite the House to sign up to tonight is to begin with the reporting process. I have yet to be convinced of the arguments against reporting that have been used either in the Chamber tonight or elsewhere, so I wish to press the new clause to a vote.

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

The House divided: Ayes 214, Noes 279.

Division number 276 Finance (No. 2) Bill [Ways and Means] — New Clause 9 — Energy efficiency and water conservation: fiscal and economic report

Aye: 214 MPs

No: 279 MPs

Ayes: A-Z by last name

Tellers

Nos: A-Z by last name

Tellers

Question accordingly negatived.

Further consideration adjourned.—[Mr. Heppell.]

To be further considered tomorrow.