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Amendment of the Law

Part of the debate – in the House of Commons at 7:19 pm on 24th March 2014.

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Photo of Angela Smith Angela Smith Shadow Deputy Leader of the House of Commons 7:19 pm, 24th March 2014

I do not intend to reflect on the broader points about the Budget in relation to deficit reduction and borrowing figures, because my hon. Friends have articulately made those points this evening. My right hon. Friend Mr McFadden did so particularly well in an excellent contribution. I wish to focus on the package of support that the Chancellor promised energy-intensive industries last week.

Before I discuss that, I wish to comment on how the Chancellor intends to balance the books in relation to his tax proposals. The Institute for Fiscal Studies has already raised that question, because the Budget is, of course, not quite as neutral as it looked at first glance. The measures on personal tax allowances and the doubling of relief for business investment, welcome as that is—I do support it—are apparently paid for by forecast savings within the budget from Whitehall itself, but they are not identified clearly in the Red Book. In addition, these things are apparently to be paid for by extra income from measures to reduce tax avoidance. Paul Johnson of the IFS has said:

“A set of definite and permanent tax cuts look to have been matched by more unspecified spending cuts, some changes in the timing of tax receipts, and our old friend tax avoidance measures.”

It is incumbent on the Government to explain to the House just how robust their plans are for reducing tax avoidance and, just as importantly, to give us clear details about exactly how these spending cuts will be made to balance the books and pay for those increases in the personal allowances. It is important that the House is made aware of exactly where the money is going to come from to pay for all this, and it is just showing respect for the House to set out those details.

I wish to discuss in detail the measures designed to help foundation industries, particularly those on the carbon floor price and the renewables obligation. The measures are welcome; my constituency is home to Tata Steel, ceramics companies, British Glass and the paper industry, in the form of SCA, so it is incredibly important to my local economy that these measures go through. However, we must put on the record the fact that the carbon floor price and its freezing from 2016 reflects changes to a policy that was introduced by the Chancellor and which became operational only a year ago. So we are, in effect, seeing a reduction in a tax that was introduced by this Government and which is already levying significant damage to manufacturing industry. It was a unilateral tax not felt anywhere else in Europe. Even when the freeze takes effect in 2016, UK manufacturing will still be paying more for carbon than is paid in any other country in the European Union. Even with the levy freeze in 2016, INEOS at Runcorn will face annual costs of £4 million as a result of the carbon floor price. With UK manufacturers facing wholesale prices for electricity 45% higher than those faced in France and 70% higher than those faced in Germany, the Government have to commit—I would like this from Ministers tonight—to ongoing support for foundation industries in this country, because of course the game is not over. The work that needs to be done to make manufacturing industry cost competitive is not finished, and we need to see much more from the Government. These industries are crucial for jobs and wealth creation in the future.

I wish to make a couple of other brief points. First, we need to hear whether the backdating of the compensation already announced for the carbon floor price will actually be decided. The decision date has already been delayed to 9 April and manufacturing deserves clarity about it. Secondly, we need to know the extent to which compensation for both the carbon floor price and the renewables obligation levies will apply: how many sectors of manufacturing industry will be included in that package? We know that the European Union state aid guidelines are restricting the number of industries that can benefit from that compensation. I want Ministers to say whether they will commit to going to the Commission to argue rigorously for an extension to the number of sectors that will be included in that compensation package. The points made about the EU were relevant; we need to see the Government batting for UK manufacturing within the EU and trying to ensure that we get as comprehensive a compensation package as possible, agreed within the Commission as soon as possible.