Clause 80

Climate Change Bill [Lords] – in a Public Bill Committee at 5:00 pm on 8th July 2008.

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Guidance on reporting

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

Photo of Peter Atkinson Peter Atkinson Conservative, Hexham

With this it will be convenient to discuss Government new clause 6 and Government new clause 7.

Photo of Steve Webb Steve Webb Shadow Secretary of State for Environment, Food and Rural Affairs

Clause 80, on corporate reporting of greenhouse gas emissions, was inserted in another place by my noble Friend Baroness Northover, and I warmly support its retention in the Bill, and the rejection of Government new clauses 6 and 7, which are a pale shadow of her version. To give a flavour of the paleness of that shadow—I am not sure how colourfully I can convey the flavour of paleness—the Government’s proposal is to take out the reporting requirements in clause 80 and to insert two other clauses.

New clause 6 refers to publishing guidance to assist reporting, which must be done by October 2009—getting on for 18 months. The first draconian measure planned by the Government on such a vital issue, therefore, is the publication of guidance late next year to assist reporting. It will not necessarily require anyone to do any reporting, but those who do, or would like to, will get some guidance some time late next year.

New clause 7 promises a review of whether the reporting would contribute much, and must be completed no later than 2011. That means that we will get some advice in one year, and a review concluding in three years. One might sense a lack of urgency over the whole issue. The challenge, therefore, is to explain why it matters to the Committee. It has emerged during the debate, and in the contributions from Members on both sides, that we all share a common concern about climate change. The question is what role the corporate sector has, and how far the reporting requirements address those concerns. Our contention is that retention of clause 80, and even stiffening it up, would contribute far more than the Government’s very weak alternative.

Photo of John Gummer John Gummer Conservative, Suffolk Coastal

Is the hon. Gentleman aware that very large numbers of companies were extremely distressed by the Government’s about-turn on the question of reporting? The best companies in the country felt that they had been deeply let down by the then Chancellor of the Exchequer. To them, this is another example of the Government’s unwillingness to recognise that most companies want a common system whereby they are commonly comparable, and do not want the system to be led by the least good companies, whose previous mouthpiece was Lord Digby Jones, who has become a Minister. No doubt that is the reason for this sad situation.

Photo of Steve Webb Steve Webb Shadow Secretary of State for Environment, Food and Rural Affairs

I am grateful to the right hon. Gentleman. I concur that there are companies behaving well, and that others must be dragged, kicking and screaming, to the climate change agenda. It is entirely unacceptable that companies that accept their social responsibilities in this area can be undercut or face unfair competition from those that do not.

One of the aims that we intend through the retention of the clause is consistency and transparency. There is no great desire to impose swingeing burdens on business for the sake of it. If we can ensure that the reporting that takes place is to the greatest extent reporting that companies might be doing anyway, particularly in a world of carbon trading and carbon budgets, measures that enable that to be done consistently and systematically are entirely welcome.

All members of the Committee will have received the letter from the Aldersgate Group, a coalition of businesses, lobby organisations, academics and hon. Members, who are coming together to argue for the retention and strengthening of the reporting requirements. It is worth thinking about why those might be desirable. The first thing to observe is that at present, the extent of reporting in annual reports or equivalent, according to Christian Aid, is quite limited. Although many companies do some reporting, it found only 16 FTSE-100 companies reporting emissions in their annual report or a parallel report, and the coverage of the emissions that were reported was often limited.

Quoting from Christian Aid—I think hon. Members will have seen these figures—only 58 per cent. of the most direct and easily identifiable emissions are reported. Some emissions are omitted, and the indirect emissions caused by the company’s activities further down the chain are also omitted. It is important that there should be comprehensive reporting of the direct emissions from a company, and a view should taken on the indirect impact of the company’s activities and how far and in what way that should be measured. The idea of waiting more than a year for guidance and then three years for a review as to whether anything should happen is staggering in its lack of ambition.

Some companies already have similar obligations. For example, companies that fall within the carbon reduction commitment already have to monitor such matters closely, so for many companies the costs are marginal. Perhaps the data are being collected anyway and would have to be presented in a different or standardised way, but it is not an additional burden for many companies. No one expects the smallest businesses to be part of the scheme. Many of the largest businesses are already covered by such a scheme, but we want greater consistency.

It is worth stressing that we are moving into a new kind of world. In the discussion of earlier clauses, the Minister spoke about the setting of carbon budgets alongside the fiscal Budget. In a world where we are buying, banking and borrowing emissions, trading permits to pollute or selling excess permits where we have saved, such things will be almost literally part of the cash flow of major companies. Companies that have a significant impact on the environment through their activities will need to know what their emissions are, whether those are rising or falling and whether they can save more. As the scope of the emissions trading scheme increases, those issues will become the bread and butter of corporate life in Britain.

With an eye to the London stock exchange and a desire for Britain to be a leading part of carbon accounting and reporting, as the right hon. Member for Suffolk, Coastal has said on other occasions, there is an opportunity for Britain to be a world leader and to establish expertise and advice on such matters, rather than the Government dragging their heels, kicking and screaming, to a destination  that we all know we shall reach. That seems to be a key point. None of us believes that a Committee such as this in the next Parliament or so would imagine a world where businesses, and certainly big businesses, were not reporting such information systematically and on a comparable basis.

The attitudes of business are obviously important. Again, hon. Members will have seen that CBI members have been surveyed on the subject and some are enthusiastic, but the majority are willing to give it a try, with further work. Most businesses are not hostile to reporting. It is an area where, dare I say it, the climate is changing. In other words, people are starting to recognise that that will have to happen sooner or later.

There is inevitably an issue of cost on a matter such as this, but there are also benefits. I should be interested if the Minister gave us some idea as to what assessment the Department has made of the potential benefits in terms of carbon reduction from comprehensive, transparent and consistent reporting. Companies write to all hon. Members boasting of their credentials as socially responsible businesses, whether they sponsor computers in schools or whatever, and telling us what good guys they are. They increasingly do that in respect of carbon reduction, which is welcome, but we have no idea what the relative performance of those different companies is, because all we get are their figures on their definitions, with their coverage over time periods of their choosing. Therefore, there is limited scope for the competitive pressure to drive such things down, whereas if all the major companies had to report those figures consistently, the scope for pressure from shareholders, employees and consumers would be far greater. We all want to see a change of culture whereby this is as important a bottom line to many of the stakeholders in the business as the profit and loss account is to its shareholders.

There are costs involved. The Government have mentioned quite a high figure. We do not want something that is too onerous—it is pointless to be gratuitously onerous—but we want something that will build on the data that have already been collected by businesses and enables the public to know what is happening.

There is widespread support outside the House for the retention of guidance on reporting and, indeed, probably for beefing it up. I suspect that there is precious little support for removing what limited provision there is in the Bill—which the Government did not even include in the first place—and replacing it with lily-livered alternatives that are not worth the paper they are written on.

I urge the Committee to consider retaining clause 80 and rejecting the Government new clauses.

Photo of Gregory Barker Gregory Barker Shadow Spokesperson (Environment, Food and Rural Affairs) 5:15 pm, 8th July 2008

I associate myself with the sensible remarks made by the hon. Member for Northavon. We Conservatives are disappointed that the Government appear intent on weakening the Bill. Their lordships did an excellent job in enhancing the Bill in the other place and I am sorry that the Government are, again, trying to move back from the efforts that were made there.

I have made it clear to the Committee previously that one of the many reasons why we strongly support the Bill is because it gives long-term certainty and clarity to  business, which is sorely lacking and badly needed. Clause 80 is an important part of the Bill because it gives exactly that sought-after clarity. I am aware that there are already a number of voluntary reporting standards for greenhouse gas emissions, such as the carbon disclosure project, but despite the admirable efforts of groups such as the CDP, reporting of clear, comparable information about UK business carbon emissions remains low. The latest carbon disclosure survey, from October 2007, found that only 46 per cent. of the FTSE 350 companies provided quantitative emissions data and, to quote the carbon disclosure project report:

“Investors still lack much of the necessary information to make informed decisions with respect to carbon emissions and embedded costs, given the limited quantitative disclosures by many of the companies listed in the FTSE 350.”

For that reason, Conservative peers supported the inclusion of clause 80 in the Bill, and for the same reason I should like the clause to stay where it is. My party has long been aware of the necessity for greater clarity on carbon reporting, but with two caveats. First, one standard methodology should be agreed to, rather than allowing a situation to develop where a patchwork of different accounting methodologies are being used by different companies, resulting in little more than mutual confusion. Secondly, we do not want small enterprises given additional reporting requirements that would add even more red tape and costs to their businesses.

I draw Committee members’ attention to early-day motion 81, tabled by my hon. Friend the Member for East Surrey (Mr. Ainsworth), which stated:

This House...congratulates businesses that have begun to measure to reduce the carbon emissions resulting from their operations, supply chains, products and services; further notes the difficulties in defining the parameters for such measurement and in agreeing methodologies; believes that such measurements would enable both informed comparison and customer choice; emphasises the need for national and international consensus on such measurement and methodologies; and calls upon the Royal Society to take forward the process for establishing a mechanism for achieving such a consensus” on such measurement and methodologies.

Photo of John Gummer John Gummer Conservative, Suffolk Coastal

Is it not true that, as the cost of carbon becomes an increasingly real cost, companies are going to have to measure their carbon footprint much more effectively? Is it not much more expensive not to do so according to a standard mechanism? They will find, at some stage or other, that the broad-gauge people will have to come into line with the narrow-gauge people. The cost is considerable. Is it not much more sensible to do it now, to the value of everyone, not to give them extra expense, but to reduce it?

Photo of Gregory Barker Gregory Barker Shadow Spokesperson (Environment, Food and Rural Affairs)

That would be eminently sensible. That would enhance economic value, because we would be creating a common market in carbon disclosure, a currency in carbon that would aid understanding, increasing the value and the economies of scale, rather than that haphazard approach. If we are going to have economic growth in those low-carbon industries, it is clear that we must have agreed common parameters. Existing clause 80, if implemented, would achieve that task with the speed and urgency required. Business could then get on with the real job of making important investment and strategic decisions based on clear, uniform information. The first responsibility of a modern Government is to  provide a stable framework within which business can operate. I do not think that anyone, certainly on the Committee, would contest that carbon and the price of carbon are here to stay and will be an increasingly important part of our national and international economy.

Importantly, clause 80 does not apply to smaller businesses, only to any company that is required to produce a business review under the Companies Act 2006. That means that any company that qualifies for any two of the following conditions would be exempt: companies with turnover of less than £5.6 million, a balance sheet of not more than £2.8 million or fewer than 50 employees. That existing clause is enabling only, and is suitably flexible, permitting the Secretary of State to distinguish between different categories of company, such as by sector or size, and by emissions type. It is important to know that clause 80 is supported by a wide range of businesses under an umbrella organisation called the Aldersgate Group, as has been said—companies as diverse as British Telecom, United Utilities and the Co-op. City funds, such as Morley, London Bridge Capital and Quadris, are also supportive. The Government’s alternative, as proposed in new clauses 6 and 7, might not act as an industry driver to the same extent as clause 80 would.

Why does the proposed voluntary statutory guidance not include the requirement on businesses to publish their emissions data in their annual report and accounts? How does the Minister expect regulations to result in greater transparency in carbon reporting when the requirement to report no longer appears in legislation? Does the Minister feel that a review date deadline of 1 December 2011 for assessing the contribution of carbon reporting to meet the Government’s climate change objectives is a date—over three years away—that reflects the urgency with which we need to get to grips with the issue and to get British business emissions under control? In the final analysis, what UK plc needs is a common protocol that is consistent with international reporting standards, that will act as a significant driver for change—real, dynamic industrial change in the corporate sector—and will further enhance the City of London’s ambitions to become a world leader in carbon accounting, reporting, trading and so on. Finally, any solution must create a level playing field, which would allow consumers and investors to make meaningful comparisons between competitors.

At the end of the day, this all smacks of textbook economics on the part of the Labour Government, who seek to do right by business and the private sector but who fundamentally do not understand the dynamics of the private sector and of the wealth creators. It is backward-looking, and failing to understand that progressive, modern, entrepreneurial businesses in Britain today would welcome such forward-looking legislation. The clause is not anti-business; it is creating the necessary conditions for new businesses to grow and flourish in the low-carbon economy and for creating the dynamic change that we must see if we are going to continue to grow. The change is a backward-looking, regressive move. I greatly regret the Minister’s opposition.

Photo of Anne Snelgrove Anne Snelgrove PPS (Rt Hon Ruth Kelly, Secretary of State), Department for Transport

I have been listening with interest to what the hon. Gentleman has been saying. However, I wonder whether he agrees with  the hon. Member for Rutland and Melton (Alan Duncan), the shadow Cabinet spokesman on business, enterprise and regulatory reform, who described corporate reporting of greenhouse gas emissions as “heavy-handed bureaucracy” in The Independent on Sunday on 6 April. Does he agree with that description?

Photo of Gregory Barker Gregory Barker Shadow Spokesperson (Environment, Food and Rural Affairs)

Without seeing the full quotation, I do not think that I could pass comment on a very narrow excerpt. However, I think the hon. Lady will find that there is always concern about any new regulation. Of course we are the party of business and enterprise, and we would rightly exclude from these regulations small business. If the Government were to impose such requirements on small and medium-sized enterprises and small entrepreneurs, they would be unduly excessive at this stage of the development of the low-carbon economy.

However, let us be absolutely clear: we are committed to an ambitious fast-forwarding of the low-carbon economy and that will not happen with a timid, unambitious, step-by-step, incremental approach to business regulation. The fact that the proposed date is 2011, when this Government will have long been swept from power, is simply another sign that this Government talk the talk but are not prepared to walk the walk.

Photo of Nick Hurd Nick Hurd Opposition Whip (Commons)

I refer the Committee to my declaration in the Register of Members’ Interests. I will speak very briefly, because I would like to keep my powder dry for new clause 8, but I support the principle of mandatory disclosure of greenhouse emissions for companies of a certain size, which is how clause 80 is framed.

We recommended that mandatory disclosure in the quality of life policy commission, because we see it as a piece of constructive regulation that will perform a key task in meeting the key challenge of helping us to put a value on carbon. Putting a value on carbon is not necessarily the same as putting a price on carbon. It is a process of elevating the importance of this new currency, this new business risk, which is carbon, to the level of the boardrooms of major British companies, because it is a major business risk that they will have to manage.

In seeking to do that, we are not promoting a piece of excessive bureaucracy that goes against the grain of the market; we are seeking to accelerate an existing market trend. As my hon. Friend the Member for Bexhill and Battle stated, one only has to look at the trend of take-up for the carbon disclosure project and the initiatives run by Trucost to see that there is a trend of growing participation.

Again, when one talks to businesses and asks, “How big a burden is it on business to do this?” the answer is, “This is not insuperable bureaucracy at all”. Having said that, as my right hon. Friend the Member for Suffolk, Coastal pointed out there is an urgent need to develop a common standard, because that would be easier for the businesses involved and it would also make it much easier for increasingly interested private investors—owners of capital—to make comparisons between the companies that they invest in.

So, very briefly, I see clause 80 as a very welcome addition to a Bill that is designed to be a framework Bill, sending the most powerful signals to the market, and it is a nudge at exactly the right time, if one wants,  as we do, the British economy to be in the vanguard of the transition to the low-carbon economy. If one wants that to happen, one wants British companies to be among the most energy-efficient and the most carbon-productive in the world, and we must get on with it, because this is a very real risk that people will have to manage.

It is extremely disappointing in this context, when there is a need for the Government to send strong signals to the market, that we see a Government in retreat from what is, as has been pointed out by the hon. Member for Northavon, really quite a timid proposal. I would actually go further. I would encourage the Minister to look further up the chain of capital, which is extremely apathetic now, and look at the way that pension funds and insurance companies, which own 50 per cent. of the FTSE 350, are engaged with the issue of climate change. The answer is that they are insufficiently engaged with it.

I urge the Government to look at the statutory requirement on pension fund trustees and their fiduciary duty, because companies such as Freshfields are beginning to point out that pension funds’ fiduciary duty must take into account climate change. However, we hear nothing from the Government in this respect and pension fund trustees are not engaged with this issue. Equally, insurance companies have no obligation on them at all in relation to climate change. If we saw activity upstream in the chain of capital, it would drive down through the choices made by fund managers, and we would start to see a process of engagement between capital and business. We have the most powerful capital markets in the world, and they are not being deployed in the interests of the agenda. We talk a lot about how we want the City of London to be the centre of carbon finance, yet when push comes to shove, and when we see a test whereby the Government are asked to take a relatively small initiative that goes with the grain of the market, they retreat rather than advance. The disclosure is insufficient. We need to do more. That would be extremely welcome, and we shall listen carefully to the Minister’s argument.

Photo of John Gummer John Gummer Conservative, Suffolk Coastal 5:30 pm, 8th July 2008

This is the part of the Bill where the Government’s actions seem extraordinary. I find them difficult to follow, and I shall explain why. All the indications are that progressive business is happy with the change in the Bill made in the House of Lords. If the Government, perfectly reasonably, lay a business review requirement under the Companies Act 2006, it looks peculiar, given the Bill, if that business review requirement does not contain the element of carbon reporting that is suggested. In any case, not to do so looks very odd against the rest of the Government’s policy.

There needs to be a significant reason for such action. So far that has not been divulged to us, although perhaps the Minister can produce it. He knows that, if he produces a good reason, people are prepared to support it or, at least, not to oppose it, but it will have to be a very good reason. It will have to explain matters to the co-operative movement, which has after all supported the Labour party for many years and clearly sees the measure as a proper way forward. It is also crucial for business. I hope the Committee will not mind my relating a story about why getting the carbon figures right makes a huge difference.

It is clear that retailers will demand that the carbon cost of every product is shown on the product. That is one of the exciting steps that will be taken. It will be a big step forward. Members of the Committee know my interests in such matters. They are set out in the Register of Members’ Interests. One of the companies that tried to find out its carbon footprint was PepsiCo, with which I am not connected, butI am interested that it did that. It measured the carbon footprint of a packet of crisps and discovered that, for 30 g of crisps, 75 g of carbon were used.

That seemed a large amount, and because measurements had been taken, the company thought that it had better find out the reason for thatamount. It discovered that, because it had quite reasonably denominated a particular size of potato that fitted its machines for chopping, farmers used more water than they would have done otherwise to make sure that the potato was big enough. The potato, being a great user of water in any case, became, so to speak, a bag of water.

Once the potatoes were chopped up, a lot more oil had to be used to fry out the potato water. As a result of measurement, PepsiCo decided that that was a silly waste of money and that it would be better off to change the machines so that they took a smaller potato, and to insist on mass as the measurement of the potato that it wanted. It would use less frying oil, reduce the cost of manufacturing the crisps, and the company could genuinely say that it had used less carbon to produce them. The point of the story is simple. Measurement is a crucial part of what we need to achieve our ends under the Bill. Not to recognise that in the Bill is to repeat the abiding failure of the present Administration.

I do not want to return to the subject of smart metering, but the Government have been in power for 11 years and still have only two pathetic pilot schemes. They cannot manage to roll out smart metering, when the Liberal Democrats have enabled them to do so by statute. If the Government had acted when they had cross-party agreement, that would have made more difference to our energy use than any other single act.

The Government will understand why we are suspicious of their inability to take on board the fact that measurement is crucial for action. We must measure. If we do not measure, we do not act. It is a central part of any sensible policy. To measure, there must be a sensible comparator, and the Carbon Trust has been sensible about that when dealing with carbon footprint marks on packets of crisps. It does not want different marks that do not have the same meaning, so that one cannot be measured against the other. It knows that most people have no idea what 75 g of carbon means, but they know that 75 g is lower than 100 g and that 65 g is lower that 75 g. People know that there is some kind of magnitude and as long as the measurement is done on the same basis, there will be some mechanism for making a judgment.

That is true about the world as a whole. Big businesses are concerned that we are gradually developing a range of different mechanisms for measurement, such as those from the old days when we tried to measure different series of interests. That is why we had the annual percentage rate. It was the only way to ensure that we compared like with like. In the end, people had to bring together a whole series of different mechanisms, which  was complicated. Light-heartedly, I used the example of the broad and narrow gauge. It would have been more sensible if people had decided at the beginning what gauge they wanted. If they had made the correct decision, we would have had broad gauge, which would have been more sensible and comfortable.

We must have certain standards. Governments are usually sensible about that, so why not in this case? It is because there are people in the business world who always want to say no. I hope the Minister will not take this personally, but I must say something in a very direct way. As I am a religious convert, I can say that converts are dangerous because they tend to get rather excited about whatever it is that they have been converted to. I try to be careful about that in matters of religion, but the trouble with the Labour party is that to some extent, it is a convert to capitalism. Its difficulty is that it does not distinguish bad capitalists from good capitalists, as it has never understood the system. It gets led astray by the worst voices in the whole set-up.

The least good businesses do not want any regulation and do not see why they cannot continue doing what they have always done. When they are brought forward, the Labour party believes them. Those of us who have always been capitalist—cradle capitalists, if I may make that comparison—know perfectly well that people cannot be allowed to get away with that. We should look at the best and ask how we can enable the best to do better and the least good to catch up, and how we can do that in a way that is not too heavy handed.

We should take those who are big enough to bear the burdens and set the standards, and give them higher standards and expect more of them. That is what we should do. Oddly, the Government accept that idea in the context of health and safety. They expect businesses of all kinds to report the number of accidents, and nobody says that adding up accidents is too difficult. It is the first thing that must be done before action can be taken. If we do not know how many accidents there have been, we cannot put them right. If we do not know what the carbon footprint is, we cannot do anything to reduce it.

Big companies have enough vision to know that they must take such measures anyway, that it is good for them and enables them to reduce costs, and that it is not an incubus but something that might be valuable. They would like to get some competitive advantage, so they want a standard through which to compare one with another so that the system is not misused. All that seems sensible, so why on earth do the Government not want to do it? There might be some remarkable explanation that we have not yet discovered, but which we shall hear. Let us assume that there is.

Why will the Government’s alternative take so long? What on earth are we proposing? The problem is supposed to be urgent. We are faced with real difficulties. It is the biggest threat facing mankind, and the biggest danger to the continuation of civilisation. The Committee agrees on all that, yet the Government say, “It will take us 18 months to produce the guidelines, which will be entirely voluntary, and then we will have a review in 2011.” My goodness! That is absolutely the wrong example to set to the nation. Even if there is a frightfully good reason that no one has heretofore heard for not  reporting such basic facts, there is no possible reason for not doing something quickly. Even if the Government began to convince us of the first of those circumstances, they could not convince us of the second. A leisurely march along the promenade at Worthing—that is the attitude that the Minister suggested—

Photo of John Gummer John Gummer Conservative, Suffolk Coastal

Because it is a more polite word than Bognor! A leisurely stroll on a Saturday afternoon is the sort of thing one might do when one has nothing much more in mind. Instead, we should be setting an example by getting on with the most serious job facing us.

The Government’s proposal has the worst possible connotations, sets the worst possible example and gives full rein to the worst possible suspicions. If I considered the proposal afresh, and was told that the Government do not want to insist that big businesses tell the public their carbon intensity in a form that is measurable and comparable, but say instead, “We will take 18 months to produce some guidelines, after which we will take another couple of years before we are prepared to review the situation”, I would suspect that the Government did not mean anything at all. I would suspect that the Government had not got it.

This is a serious matter for the Minister. I know that he has got it, but I suspect that bits of the Government have not. The ill-named DBERR seems to be at the heart of all this, and I suspect that a particular Minister there is even more at the heart of it, as he was at the heart of the disgraceful U-turn by the then Chancellor of the Exchequer, who now happens to be the Prime Minister, in seeking a bit of extra kudos.

The Government must be very careful. They promised us proper reporting, but that changed, not as a result of any ministerial decision, of proper investigation or of real concerns, but following an overnight decision by the then Chancellor in order to curry favour, pressed by the man who then became a Minister in the Department of so-called enterprise. That is why we feel so suspicious, not of the Minister who is present, but of the Government’s whole history on reporting and measurement. It is a sorry tale. I would very much like my fears and suspicions to be allayed, but I suspect that they will not be. I hope very much that those with broader minds, bigger hearts and a greater understanding of what this is all about will join us in insisting on retaining the clause and throwing out those two pusillanimous suggestions, neither of which is worth a row of beans.

Photo of Phil Woolas Phil Woolas Minister of State (Environment), Department for Environment, Food and Rural Affairs 5:45 pm, 8th July 2008

We have had a tremendous debate on this issue. It has been fascinating to witness Committee members’ political and ideological acrobatics. We have heard some excellent soundbites and accusations. The proposals have been described as “haphazard” and “textbook economics”. I thought at one point that the hon. Member for Bexhill and Battle was going to accuse me of being old Labour. My solicitors have been e-mailed in case he repeats that outside the room.

This has been an interesting debate, but it is based on a false premise. The debate has been caricatured as a choice between mandatory or voluntary. We believe that the Government’s strategy that is being presented  to the House will be effective. It is all very well to act in haste, but if we do so and it does not work, we will not achieve the objectives that have been set out by hon. Members.

First, let us look at the clauses that we are discussing.

Photo of Anne McIntosh Anne McIntosh Shadow Minister (Environment, Food and Rural Affairs)

Will the Minister satisfy me that he is not refusing to stick to the reporting procedures under clauses 80 on the grounds of cost? Proof has been given that the costs will be minimal and that there will be direct benefits to business for the reasons given by my right hon. Friend the Member for Suffolk, Coastal. Will the Minister satisfy me that he is not refusing to acquiesce on reporting procedures on the grounds of cost?

Photo of Phil Woolas Phil Woolas Minister of State (Environment), Department for Environment, Food and Rural Affairs

Yes, and I hope to persuade the hon. Lady of much more than that. The strategy outlined by the Government in the Bill and elsewhere is an effective way to achieve reporting. The Government are making an important point and it is supported by the CBI. I do not raise this argument just to reassure the right hon. Member for Suffolk, Coastal. The CBI briefing states that

“The CBI supports carbon reporting by firms and has an initiative underway to assess the feasibility of a common standard of carbon reporting that all firms could use.”

The crucial point is that we should not prejudge how this measure should be implemented. Therefore, we do not support the amendment made in the Lords on corporate reporting. The Government’s argument is that it would be tokenistic to say that we support mandatory reporting before we have the common methodology that hon. Members have been arguing for. We must develop a common method of reporting before it can be made mandatory. To say that it should be mandatory and to caricature the Government by saying that BERR Ministers have been foot-dragging is unfair. We are laying out a strategy to achieve carbon reporting.

Photo of Martin Horwood Martin Horwood Shadow Minister (Environment, Food and Rural Affairs)

I must declare my connection to Business in the Community through the all-party group on corporate responsibility.

It is quite extraordinary that the Government are talking about prejudging common criteria. There is a plethora of common criteria out there, such as ISO 14001, Business in the Community and the environment index. There are many indices and bases. As the right hon. Member for Suffolk, Coastal pointed out, a lot of work went into the operating and financial review, and it was ready to be implemented days before it was dropped on a whim by the Government. It is naive and disingenuous of the Government to suggest that there has not been sufficient time to prepare common criteria. That is clearly nonsense.

Photo of Phil Woolas Phil Woolas Minister of State (Environment), Department for Environment, Food and Rural Affairs

I will ignore the phrase “naive and disingenuous”. One cannot have a plethora of common methods. If an auditor told a company to choose the method of accounting that it wanted and there was no national regulation on which one to use, companies would collapse.

Photo of Martin Horwood Martin Horwood Shadow Minister (Environment, Food and Rural Affairs)

That is precisely the process that business went through in the preparation of the operating and financial review. The whole thing was designed to  provide a common framework that took the best from other reporting criteria and provided a common basis on which all business was agreed, but the Government ditched it.

Photo of Phil Woolas Phil Woolas Minister of State (Environment), Department for Environment, Food and Rural Affairs

The hon. Gentleman is urging me to do exactly what the Government are doing. That is why we have laid down the timetable. I shall repeat what the CBI said:

“How this might be implemented”— the common standard of carbon reporting—

“should not be prejudged.”

That is the point. We have a number of methodologies and a debate in this country. Government new clause 6 is stronger in this regard than clause 80. If hon. Members who oppose clause 80 read new clause 6, they will see that it states:

“The Secretary of State must publish guidance”.

However, clause 80 gives no date by which that should take place. Clause 80 is silent on the date, and it would allow the Secretary of State to ignore any compulsion on reporting. The Government’s new clause states:

“The guidance must be published not later than 1st October 2009.”

I remind hon. Members that we are in the financial year 2008-09, so that is the earliest date.

Photo of Gregory Barker Gregory Barker Shadow Spokesperson (Environment, Food and Rural Affairs)

The Minister is right that we need guidance, but he fails to grasp that people are looking to the Government for leadership. They are looking for that elusive quality of courage that the Government talk about but do not show. People want the Government to make a decision, but why should we have to wait until 2011? The Manhattan project was completed in less time than that. The Minister has made no case at all for why it should be spun out until 2011—it is pathetic.

Photo of Phil Woolas Phil Woolas Minister of State (Environment), Department for Environment, Food and Rural Affairs

In which case why is the hon. Gentleman supporting clause 80, which is silent on a date? The Government’s new clause provides that the guidance must be published no later than 1 October 2009—at the end of the current financial year—as I shall explain, using the powers that we already have in the Companies Act 2006. Many companies are already reporting, so it would be folly to put in place a mandatory system without being able to define what that system was. That would be dangerous for all concerned.

Photo of John Gummer John Gummer Conservative, Suffolk Coastal

It would not be folly at all. All it would mean is that there would be a clear, mandatory framework. All the Minister needs to say to the Committee is that the Government will announce the guidance within six months—it cannot be any longer than that because they already have it in the work that was done for their foolishly disbursed original arrangement—and follow the rules. Why not? We would then have put in place the whole of the package. For some reason unknown to me, the Government are always saying that they must do this, that and the other bit before it is ready, yet they want the general framework. That is how the Government normally operate, which is why the House of Commons spends its time in such a way.

That is all the Minister needs to do, so will he please now say, “I will do it in six months; I guarantee that that is what we will do, and we will follow what the mandatory arrangement means, because it will then be mandatory”?  Under the Minister’s proposals, there is no assurance that it will be mandatory, even if the Government meet the dates, have the discussions and go to review.

Photo of Phil Woolas Phil Woolas Minister of State (Environment), Department for Environment, Food and Rural Affairs

Will the right hon. Gentleman tell me which system I am to mandate?

Photo of John Gummer John Gummer Conservative, Suffolk Coastal

The point is that it would be perfectly possible today to mandate the system that industry had agreed in the original proposals for reporting. As the Minister does not want to do that, I have suggested that, given that there is no date, it does not stop him giving the Committee a commitment that within six months he will have come to an agreement to mandate what he will then decide is the best system. That is what the Government should do. They should decide on that, in company with the CBI and other organisations, and if he were to promise to do that in six months, we would get ahead with a mandated system. That would fit perfectly well.

Photo of Phil Woolas Phil Woolas Minister of State (Environment), Department for Environment, Food and Rural Affairs

The new clause sets a deadline, which is after the current financial year. One has to be realistic about such things.

Photo of Phil Woolas Phil Woolas Minister of State (Environment), Department for Environment, Food and Rural Affairs

We are talking about requiring companies to report. That means that we have to give them advance notice before the year in which they are required to report the methodology behind what they are reporting.

Mr. Gummerrose—

Photo of John Gummer John Gummer Conservative, Suffolk Coastal

I feel frustrated because this is a ridiculous argument. The fact is that we do not need 18 months to give people a year’s notice. We want six months. They will still have to have a year’s notice; we know that. Let the Government show that they can do something in six months. Six months is a very long time in which to get this done. We can do it perfectly well. All the evidence is there. It is a question of getting three or four parties around a table and saying, “Which of these are you going to go for?” The Government have to go for it and make the announcement. The mandatory arrangements are here, and we proceed. We have taken a year off the Minister’s present timetable, as far as the first stage is concerned, and two years off the second stage. Have we not saved three years?

Photo of Phil Woolas Phil Woolas Minister of State (Environment), Department for Environment, Food and Rural Affairs

With respect, the right hon. Gentleman is repeating himself. It is a responsible course of action to give companies advance notice. The right hon. Gentleman’s argument would have strength if there was an agreed reporting system, but there is not. Many people argue that the system should be international as well as domestic. Different systems are proposed. That is why the CBI, in its considered opinion, supports the Government’s position, which sets out a timetable for  moving forward. Let me put some of the more technical arguments, and then I will come back to the policy argument in an attempt to persuade the Committee that the Government are not dragging their feet. We are setting out a procedure to get to where we want to be.

Photo of Steve Webb Steve Webb Shadow Secretary of State for Environment, Food and Rural Affairs

The Minister has assured us of his intent. As ever, I do not doubt him. However new clauses 6 and 7 would not have been drafted if the Government had not lost in the Lords. Why were new clauses 6 and 7 not in the Bill in the first place if the Government are so committed to such things?

Photo of Phil Woolas Phil Woolas Minister of State (Environment), Department for Environment, Food and Rural Affairs

The hon. Gentleman is having his cake and eating it—or trying to. Let me quote what my noble Friend Lord Rooker said in response to the debate in the other place. He said:

“As I and others have already said, when the Bill goes to the other place”— by that he meant here—

“the Government’s collective view and individual views will determine how the Bill finally ends up and the lines that are taken. There are no lines in the sand in that respect. Every amendment that this place”— the other place—

“sends to the other place will be considered and either rejected or modified, as happens when the Government think again.”—[Official Report, House of Lords, 31 March 2008; Vol. 700, c. 774.]

That was what my noble Friend undertook to do. He took the spirit of what the other place was saying and said, “I will look at this. I will work out a pathway to get there.” Rather than criticising the Government, I was expecting that hon. Members would say, “Well done, we have a way forward on which we have consensus.”

Photo of John Gummer John Gummer Conservative, Suffolk Coastal

Let me try not to be frustrated with the Minister, but very direct. The difference is this: under the clause, people have to do something. Under the Government’s new clauses, there is no reason why they should have to do something. Those are two different things. That is not carrying the spirit of one, but merely using the words and the form. It is a hollow shell. If the Minister guarantees that he will use some other powers in a sensible time scale, we are willing to listen to him. As long as he asks us to accept that it takes 18 months to come to a conclusion—when most industrial spokesmen believe that it can be done much more quickly—and then does not commit himself to impose the measure in the way in which the clause in the Bill insists, we really have to say to him that the proposal is a pale shadow that is unconnected with the spirit of what was happening in their lordships’ House.

Photo of Phil Woolas Phil Woolas Minister of State (Environment), Department for Environment, Food and Rural Affairs

I have accused the right hon. Gentleman of repeating himself, and I am repeating myself now. That argument would be fine if existing clause 80 told me what to do—which system of mandatory reporting—and by when. It does not say by when. There is no date.

I can do better than the right hon. and hon. Members are asking. Not only can I give a commitment, but I can point to a power that already exists. If we wanted to impose different requirements on companies, there are  already comprehensive powers to vary reporting and accounting requirements in the Companies Act 2006. Section 416 gives the Secretary of State the power to make provision by regulation about matters to be disclosed in the directors’ reports. Section 468 includes a power for the Secretary of State to make provision by regulation about the reports that companies are required to prepare, and their form and content. There is already a requirement on companies to report the environmental impacts of their activities.

The debate is taking place in a vacuum. Opposition Members are trying to portray the Government as somehow backtracking and foot-dragging. Instead, we are setting out a strategy to achieve the reporting of greenhouse gas emissions. Let me make an additional point: the existence of climate change agreements, the European Union emissions trading scheme and the new carbon reduction commitment already require companies to do what is being asked of the Government. The idea that the Government are foot-dragging is not borne out by the facts or the proposals before the Committee.

Mr. Hurdrose—

Photo of Nick Hurd Nick Hurd Opposition Whip (Commons)

The requirement to report the impact on the environment is not the same as the requirement to report greenhouse gas emissions directly. Will the Minister be clear? Do the Government support the mandatory disclosure of greenhouse gas emissions from companies that are required to produce a business review under the Companies Act 2006?

Photo of Phil Woolas Phil Woolas Minister of State (Environment), Department for Environment, Food and Rural Affairs

As the hon. Gentleman knows, the Government, like him, support the idea of cap and trade and of carbon trading. In order to pursue that policy, one has to have common standards of measurement, verification and reporting. It would be irresponsible for the Government to pursue a mandatory system of reporting until there was a clear understanding of what that system should be for those companies that would be taken in by the wider measures. That is why we have set out what we believe to be a sensible pathway forward. Hon. Members are expressing frustration, but they should remember that companies are already required to report on their activities under the environmental requirements of the Companies Act. Those requirements could include the point made by the hon. Gentleman. They cover other matters, as I have explained in the past 60 seconds.

Photo of Nick Hurd Nick Hurd Opposition Whip (Commons)

Entirely correctly, the Minister has laboured the point about the need for a consistent system. The debate is more about timing than purpose. However, he is still dodging the question. Do the Government believe that it should be mandatory for companies that are required to produce a business review to report specifically their greenhouse gas emissions, not their impact on the environment?

Photo of Phil Woolas Phil Woolas Minister of State (Environment), Department for Environment, Food and Rural Affairs

I am not dodging the question, but the question that would have to be answered would be, “On whom?” Would we be talking about all companies in the United Kingdom, including those many tens, if not hundreds, of thousands for which it might not be practical? That is why I think that this method is a good way forward.

New clause 6 commits the Secretary of State to produce guidance on reporting by 1 October 2009. That is the time scale in which we believe that we shall have a common understanding. It also fits in with the international timetable.

Photo of John Gummer John Gummer Conservative, Suffolk Coastal

It is clear that the Government require the business review from only companies of a certain size. Is it not fair to come back to the Minister and ask a simple question? Do the Government believe that it is right to have mandatory reporting of greenhouse gas emissions from companies of the size for which a business review is required?

Photo of Phil Woolas Phil Woolas Minister of State (Environment), Department for Environment, Food and Rural Affairs

I understand why the right hon. Member for Suffolk, Coastal and the hon. Member for Ruislip-Northwood are pressing me on this point. I repeat that we already have a system in place for companies that fall within the cap-and-trade schemes to report. Let me remind the Committee that one half of UK emissions are covered by schemes. That is already the case, and the schemes include the major companies, some of which have been referred to today.

I will not fall into making what I believe to be a tokenistic gesture—given the suggestion that this is somehow an environmental virility test—by saying that I will require all companies under all circumstances to report when I do not know what the methodology of such reporting would be. Frankly, that would be irresponsible. The right hon. Member for Suffolk, Coastal seems to shake his head in frustration, but he has not answered my question. What system of reporting does he want me to mandate?

Photo of John Gummer John Gummer Conservative, Suffolk Coastal

I have often sat in the Minister’s position and I know that it is embarrassing. He knows that he wants to confuse two questions because it is easier to answer one than the other. Let me un-confuse him on the questions, of which there are two.

The first is about the method on which the reporting is based. The Minister has already admitted that half the companies have a method for reporting, so this is not as far removed as he sometimes makes it sound, but let us put that on one side.

We are asking about the principle, not about every company or medium-sized company or anything else. We are talking specifically about the companies that the Government already cover with their business review requirements—the companies that they have said are big enough to make this sort of system work. Will he please tell the Committee whether he thinks that they should report under a mandatory requirement, once a system is designed that fits everyone?

Photo of Phil Woolas Phil Woolas Minister of State (Environment), Department for Environment, Food and Rural Affairs

The right hon. Gentleman has dissected the question fairly. We would not support a comprehensive mandatory system that involved all companies, irrespective of whether there was a view that such reporting would contribute towards the reduction of emissions. As I expect that he knows, mandating a common reporting standard for companies requires something that is proportionate and that works.

I hope that I have answered the question to the right hon. Gentleman’s satisfaction. If not, let me add that the strategy that we are laying out in new clause 7 is to commit the Secretary of State to reviewing the contribution of mandatory corporate reporting to achieving the  UK’s climate change objectives and to reporting back to Parliament. That review should take account of reporting under the new reporting requirements introduced by the Companies Act 2006. Companies are now beginning to draft their first business reviews under the new requirements, and DBERR has already announced that it will look at the first batch in 2010. For my Department, I intend to ensure that that reporting is contributing to a reduction in emissions.

My timetable is responsible, given companies’ reporting periods. It is based on existing powers in the 2006 Act, and, if the Committee accepts the Government’s new clauses, that will be further strengthened by a timetable for the role of the Secretary of State for Environment, Food and Rural Affairs.

Clause 80 does not require a timetable. It sets out that reporting should be mandatory without expressing—I repeat this—what the definition of the common standard is or what timetable should be put forward. My argument is that the Government’s position has been caricatured. This is not a debate on the difference between saying, “Let’s be bold and let’s be brave; let’s get on with it and do it,” and a Government who are dragging their feet because of a misunderstanding of capitalism, as has been described. Instead, it is a debate between the tokenism of Opposition Members and, as suggested by this side, a sensible way forward that will provide for a reduction in UK emissions and provide the world leadership that I know that the hon. Member for Ruislip-Northwood and the right hon. Member for Suffolk, Coastal seek.

Photo of John Gummer John Gummer Conservative, Suffolk Coastal

If the situation is as the Minister says, why is he not prepared to amend the clause with a date by which the guidance would be laid and to accept the rest of the mandatory arrangements? It is not just a question of whether a company makes a major contribution to meeting our climate change requirements. It is a matter of interest for stakeholders all over the country as to how far a company carries forward its responsibilities for reducing its greenhouse emissions. All of us ought to know about that and make our businesses decisions in respect of it. Why did he not table two amendments so that we could have agreed with them?

Photo of Phil Woolas Phil Woolas Minister of State (Environment), Department for Environment, Food and Rural Affairs

If we were to make reporting mandatory at this stage, before reviewing whether the compiling of the information took place across the board—this is the right hon. Gentleman’s PepsiCo example—we would be doing that before we knew whether it improved the situation. We should remember that we are talking about many thousands of companies, especially beyond the existing carbon trading schemes. Perhaps I should have put more emphasis on that point.

I reject the argument that the Government are dragging their feet. We have set out a way forward that is based on an effective strategy that will allow Governments to consider the experience and that fits into the reporting timetable. As I emphasised, we have the power under the Companies Act 2006 to do what hon. Members are urging us to do.

I urge Committee members to reject existing clause 80 and to agree to the Government new clauses.

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

The Committee divided: Ayes 6, Noes 10.

Division number 12 Nimrod Review — Statement — Clause 80

Aye: 6 MPs

No: 10 MPs

Ayes: A-Z by last name

Nos: A-Z by last name

Question accordingly negatived.

Clause 80 disagreed to.