Clause 16

Finance Bill – in a Public Bill Committee at 3:45 pm on 10th May 2007.

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Emissions trading: charges for allocations

Question proposed, That the clause stand part of the Bill.

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

Members of the Committee will have received large numbers of representations about some clauses as they are of great interest to outside bodies. As a parliamentarian, one reads some clauses and finds one’s eyebrows rising. When I read the clause, I confess that I went to check the definition of a Henry VIII clause. I will return to that matter in a moment, but before I do, as members of the Committee will see on reading the clause, it empowers the Treasury to charge for community tradeable emissions allowances, which is reasonable enough. It states that the allowances will be allocated by regulation and the people who allocate them will be appointed by regulation. The regulations may impose fees, govern the making or forfeiting of deposits, impose penalties, charge interest on the recovery of penalties, and confer—and I presume withhold—rights of appeal relating to the forfeiting of deposits and the imposition of penalties.

The Financial Secretary is welcome to correct me if I am wrong, but I am not aware that I have seen the regulations yet. In summary, although the clause does not meet the definition of a Henry VIII clause, it does have a certain Tudor flavour. The breadth of its scope invites some questions. [Interruption.] I hear a learned, historical commentary from the Government Whip, but I will not please him by responding to it and compressing my remarks. Some of the simple questions surely are these: who will allocate the allowances; how high will the fees and the deposits be; how large will the penalties be; how much interest will be charged on recovered payments; and, above all, will there definitely be a right of appeal?

I expect the Financial Secretary to say that the answers will be provided in due course if the regulations have not already been published, but one point is clear about any regulations that either have been or will be published: they will not be amendable. No member of this or any Committee will be able to propose that the people who allocate the allowances should be different people or that the levels of fees, deposits, penalties or interest charged should be raised or lowered. Nor will any member of this or any Committee be able to debate the terms of any right of appeal. He or she may simply be faced with the choice of accepting or rejecting the proposals that emerge.

I say “may” be faced rather than “will” be faced with good reason. I have taken advice and I am told that the wording of the clause allows the Financial Secretary to choose either the positive or the negative procedure. That is, as it was put to me, unusual. In short, the proposals may not be considered by the positive procedure route, which is highly questionable.

If the regulations have not been published, when will they be? Can the Financial Secretary at least give the Committee an assurance—I gather that he is usually very reasonable in this regard—that they will be dealt with under the positive procedure, and can he give a guarantee that there will be a right of appeal, because that would seem to be important?

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

All the questions that the hon. Gentleman has raised are valid. I would like to underline the question of when we will get a sense of when the regulations will be produced. I note that the clause is limited in application to “Community tradeable emissions allowances”, but not specifically EU emissions trading schemes. That opens up the possibility of it being extended beyond Europe and beyond greenhouse gases. Given that it has that wider application, will we have to wait for more comprehensive regulations or will they be specifically limited to the EU, and when will we see them?

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

Hon. Members have rightly pointed out that this provision takes us into new territory. It allows us to provide the basis for auctioning some of the allowances under the European Union’s emissions trading scheme, but in phase 2, which does not start until 2008 and runs to 2012. As my right hon. Friend the Chief Secretary to the Treasury said in a letter to, I think, the hon. Members for Falmouth and Camborne and for Chipping Barnet yesterday, the question of regulations cannot precede the detailed design of the allocations and auctioning scheme. That matter will be  dealt with as the arrangements for phase 2 of the EU ETS are firmed up across Europe. Once the scheme design is clearer, we will be in a position to devise the regulations, covering the sort of points that the hon. Member for Wycombe identified. When we produce the regulations, we will do so in draft and we will consult as widely as we need to on them. I can reassure the Committee that the points made this afternoon will be taken into account in drawing up the regulations.

I would not want the Committee to lose sight of the importance of introducing the possibility of auctioning into the allocation of allowances and permits under the EU ETS. They will be an important way of toughening up the trading scheme, hardening the carbon price within it and thus starting to generate the type of investment in alternative technologies that we require to reduce emissions and deal with climate change.

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

The Financial Secretary explained that the scheme has not been fully devised. Can he explain why it is necessary to introduce a provision for the regulations before the scheme has been designed, rather than afterwards?

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

I do not think that the hon. Gentleman would advocate two Finance Bills a year. It would be another year before we had the opportunity to put the legislative framework in place in a Finance Bill, so it seemed sensible to put the regulation-making power in primary legislation, as we may well need it before we get the opportunity to return to it in the next Finance Bill.

Question put and agreed to.

Clause 16 ordered to stand part of the Bill.

Further consideration adjourned.—[Kevin Brennan.]

Adjourned accordingly at Four o’clock till Tuesday 15 May at half-past Ten o’clock.