(Except clauses 4, 7, 10, 19, 35 and 72) - Clause 77 - Supplies of commodities to be used in producing electricty

Finance (No. 3) Bill – in a Public Bill Committee on 9th June 2011.

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Amendment proposed (this day): 184, in clause 77, page 44, line 5, at end add—

‘(2) The Schedule shall come into force on a date specified by the Treasury by an order made by Statutory Instrument, which may not be made until an impact assessment of the effect of this Schedule has been laid before the House of Commons; and approved by resolution of the House of Commons; and the dates specified in paragraphs 8(3) and 9(5) of the Schedule shall be replaced by the date specified in the order under this section if it is later.’.—(Nic Dakin.)

Question again proposed, That the amendment be made.

Photo of Roger Gale Roger Gale Parliamentary Assembly of the Council of Europe (Substitute Member)

I remind the Committee that with this it will be convenient to discuss the following: clause stand part and that schedule 20 be the Twentieth schedule to the Bill.

Photo of Stephen Williams Stephen Williams Liberal Democrat, Bristol West

Good afternoon to you, Mr Gale, and to all fellow members of the Committee. We are on the home straight, which I am sure we are all very happy about. I was just warming up as we adjourned this morning, and I know that Members want to discuss several other clauses—

Photo of Roger Gale Roger Gale Parliamentary Assembly of the Council of Europe (Substitute Member)

Order. I am just about into the second half of my parliamentary career. I do not want to spend the whole of it listening to this. [ Laughter]

Photo of Stephen Williams Stephen Williams Liberal Democrat, Bristol West

When we adjourned at 25 minutes past 10, I was dealing with an intervention from my constituency neighbour, the hon. Member for Bristol East. I had said that one of the ways we can deal with the impact of the carbon tax is to decide what to do with the proceeds in helping the disadvantaged in society and that something we could do is help such people to retrofit their houses. I think that was as far as I had got.

I recently visited a house that it is now in my constituency, and was in the hon. Lady’s, in Easton, where the Technology Strategy Board has paid for retrofitting to provide wall insulation, window insulation, an energy efficient boiler and so on. That shows people what the green deal, which is being discussed along the corridor as part of consideration of the Energy Bill, can do for us all when  it is introduced next year. Those are several of the ways we can deal with the extra costs that we all will face when the carbon tax is introduced.

Those are some of the incentives. Of course, we need disincentives to cause a change in behaviour as well. That is why the carbon tax is necessary: to drive the burning of carbon out of our economy as far as we can. The carbon tax is an essential measure. The Budget proposed that the tax should start at £16 per relevant tonne of equivalent CO2 from 2013. That will increase to £70 by 2030, so the trajectory is clear and the Government’s intention to meet the demanding climate targets that we have set for ourselves should be clear to every business, whether an energy company or a manufacturing company.

In the long run, the carbon tax should replace the plethora of existing taxes and schemes. I say to the hon. Member for Scunthorpe that it is not as if we do not already have taxes on high-energy-consumption industries in our country. We are not starting from scratch. We already have the climate change levy in place, and other fiscal measures as well, which it could be argued already put us at a competitive disadvantage with other countries. Over time, I hope that the carbon tax will replace many of those measures.

Photo of Nicholas Dakin Nicholas Dakin Labour, Scunthorpe

What does the hon. Gentleman say to manufacturers who would agree with much of what he has said in his passionate contribution, but who would say that it is disadvantageous to British industry for Britain to be ahead of Europe and the rest of the world in introducing a carbon floor tax? That will export jobs elsewhere and not defeat global warming, as we want it to. What does he say to the point that people such as Karl Kohler are making on behalf of their industries?

Photo of Stephen Williams Stephen Williams Liberal Democrat, Bristol West

The hon. Gentleman is making a very important point, as did the hon. Member for Middlesbrough South and East Cleveland. I do not decry them for doing that. I grew up in south Wales in the 1980s and saw what a rapid contraction of manufacturing and industry, such as coal mining and steel working, can do. Whole communities can be put at a disadvantage and I certainly do not want the Government to risk any repetition of that contraction of the 1980s. I also know that my right hon. Friend the Secretary of State for Energy and Climate Change has said that the needs of the manufacturing sector in our economy will be taken into account. The Secretary of State for Business, Innovation and Skills has also said that that sector is a vital part of the Government’s growth strategy.

The tax is not being introduced until 2013. It is not starting in this fiscal year, or even the fiscal year starting in April 2012, so there is still much time to discuss the details of how it will operate.

Photo of Tom Blenkinsop Tom Blenkinsop Labour, Middlesbrough South and East Cleveland

The amendment is looking for a pause for thought on the policy. We obviously want to reduce our carbon emissions in the long run, but instead of taxation going straight to the Treasury and being lost there, would it not be better to recycle that pot of funds back into industry to pay for further programmes to reduce emissions?

Photo of Stephen Williams Stephen Williams Liberal Democrat, Bristol West

I thank the hon. Gentleman for his intervention. I am about to deal with that point, but will first conclude the points I was making. I hope not only that the carbon tax will replace the plethora of existing green taxes, but that road pricing, for instance, will replace fuel duty, which we discussed at length earlier.

The amendment tabled by the hon. Member for Scunthorpe essentially proposes a delay in introducing the carbon tax measure. However, as I have just pointed out, we are not introducing it immediately. There is a already a substantial period to reflect on how the tax will work, for industries to plan and for the Government to formulate their response on how the tax will impact on different industrial activities and domestic behaviour.

We know that it is urgent to deal with climate change. We have probably all said that, if we are honest, to different non-governmental organisations and constituents who have lobbied us in this place. Right outside this room, in the Committee corridor just now, I met constituents who are lobbying us today, asking us to deal with those important measures. We cannot make promises and then say we will do it tomorrow. There is always going to be a better time to do this. The tax does not start until 2013, so there is already a delay built into the legislation and the Budget proposals announced by the Chancellor.

Photo of Roger Williams Roger Williams Liberal Democrat, Brecon and Radnorshire

Does my hon. Friend agree that the argument that we should not introduce best practice because it would make us uncompetitive could be used in other areas such as safety? Surely we should have high safety standards in this country to protect our people. It is for us to adopt best practice in those matters.

Photo of Stephen Williams Stephen Williams Liberal Democrat, Bristol West

My hon. Friend makes an important point. As I pointed out at the start, we will not be trailblazers in Europe in introducing a carbon tax. Sweden, Denmark and the Netherlands already have it.

Tom Blenkinsop rose—

Photo of Stephen Williams Stephen Williams Liberal Democrat, Bristol West

I will give the hon. Gentleman one last chance.

Photo of Tom Blenkinsop Tom Blenkinsop Labour, Middlesbrough South and East Cleveland

The hon. Gentleman is making a slight error. We are complaining about not a policy to reduce our emissions, but the destination of the taxation. Once that tax is gained from manufacturing, the destination is the Treasury coffers; it goes straight in there and is not distributed back to manufacturing. That is the main issue. If we are going to talk about safety, we could make the point that the budget of the Health and Safety Executive has been reduced by 35%.

Photo of Stephen Williams Stephen Williams Liberal Democrat, Bristol West

Of course, the initial collection point for all taxes is the Treasury. It is what the Treasury or the Government do with them afterwards that we should debate. Over the next two years, before the carbon tax is introduced, I am sure we will have several debates about how the carbon tax should operate and what should be done with the proceeds. I am going to publish a pamphlet before the end of this parliamentary Session and will send it to any member of the Committee who is interested, especially the hon. Members for  Scunthorpe, for Middlesbrough South and East Cleveland and for Walthamstow, so that they can contribute to the debate.

On the problems that have been identified, manufacturing has had a good airing from Opposition Members. Rather than look at the impact on industry itself, I want to deal with the impact on sources of energy, from which stems the concern of Greenpeace and the other NGOs that have approached several members of the Committee. The carbon tax will fall most heavily on energy produced from coal, gas and oil, and not on renewable sources, nor to any great extent on the nuclear industry, as it is not carbon intensive at the point of electricity generation.

The hon. Member for Bristol East correctly mentioned that I am not opposed to nuclear energy. Although most of my hon. Friends are opposed to it on principle, I have never shared that view. It is anti-science to say that we cannot have peaceful use of nuclear energy. It should form part of our energy mix, at least for the next couple of decades, because we cannot move from a high-carbon-dependent economy to a low-carbon economy in such a short period without help along the way—at least temporarily—from the nuclear industry, but I do not want to go back to the nuclear industry being dependent on huge subsidies from the taxpayer. If nuclear energy is to succeed, it should do so on its own merits without subsidy, direct or hidden, from the taxpayer. That is the commitment the coalition Government gave.

Is a carbon tax a subsidy to the nuclear industry? In a way, yes, of course, it is, in the same way that an alcohol tax is a tax on something that is bad, although that does not make it a subsidy to any other beverage or substance that we consume that might be harmful to humans. The nuclear industry will benefit and probably make more profit from a general rise in electricity prices, and we must respond to that. I am not saying that there should be no Government response, but to make that response we need to understand the impact of the carbon tax while it is in operation—not necessarily delay while we speculate about what it might do, but understand its impact in practice. If we find that the nuclear industry receives an indirect boost from the operation of the tax, we should act on that evidence and tax the nuclear industry differently.

Photo of Alec Shelbrooke Alec Shelbrooke Conservative, Elmet and Rothwell

As usual, it is a pleasure to serve under your chairmanship, Mr Gale. If the Opposition vote for the amendment—they seem to be pushing for a Division—will not that send the message that when the lights go off we once again we will know where the blame lies?

Photo of Stephen Williams Stephen Williams Liberal Democrat, Bristol West

Yes, that is a very colourful way of putting the point. If the amendment were agreed to, it would send the signal that we, as a Parliament, do not think that there is any urgency in tackling climate change and instituting a carbon tax, which has existed for many years in other countries. A delay would send entirely the wrong signal about the seriousness with which all Members, on both sides of the House, consider climate change.

Photo of Stella Creasy Stella Creasy Labour, Walthamstow

Has the hon. Gentleman had the chance to read the parliamentary answer that revealed that the tax will deliver a windfall profit of £50 million a year to existing nuclear reactor  operators? Given what he has said about his concern that there could be a subsidy to the nuclear industry, I am puzzled about why he will not back the amendment, which would ensure that we had information on which to make decisions. He cannot have it both ways: he cannot say that we need to tackle unintended subsidies and then say that we must press on without addressing the concerns.

Photo of Stephen Williams Stephen Williams Liberal Democrat, Bristol West

The hon. Lady will find that members of the Committee can often have things both ways. We are concerned about the same issue, but differ on how to address it. The amendment tabled by the hon. Member for Scunthorpe calls for a delay, but I am calling for a study while the tax is in operation and in the period to 2013 before it is introduced. We have just under two years prior to its introduction in which to carry out the study that the amendment calls for so as to understand better how the tax will operate. I ask my hon. Friend the Minister to commit the Government to annual reporting on how the tax works in practice.

It is important for the Treasury to report to Parliament annually so that we can see how the tax’s impact is felt by different industries—manufacturing, steel production and the different energy generation sectors. We could see which parts of our economy were paying carbon tax year on year and where the carbon tax was being reduced due to changed behaviour, which is exactly what we want people to do, and we could see whether the economy was being skewed by the operation of the tax to the advantage of a particular industry such as the nuclear industry.

I am looking for an assurance from Ministers that the Treasury and the Department of Energy and Climate Change will monitor closely how the carbon tax operates, report back to Parliament annually and include in that report segmented reporting so we can see how the carbon tax is working in practice. I want it to work in practice and we should delay no longer.

Photo of Justine Greening Justine Greening The Economic Secretary to the Treasury 1:15 pm, 9th June 2011

It is a pleasure to see you in the Chair for the last time, Mr Gale, although in the nicest possible way.

Clause 77 and schedule 20 amend the climate change levy to introduce a carbon price floor for electricity generation. I very much welcome the Opposition’s support for that policy, although I found their arguments about the challenges from both manufacturing industry, which I will come to shortly, and the environmental lobby very contradictory. If there are aspects of the policy that both parties do not like, we may have managed to get something that is just about right because it has created the environment for the right behaviour change to happen.

We are introducing the measure because the UK needs significant new investment in low-carbon electricity over the coming decades. We need clean, secure supplies of electricity to support growth and reduce carbon emissions, but this will happen only if investors have greater certainty that such capital-intensive investment is economic over the long term. The UK’s out-of-date energy infrastructure faces significant challenges. First, we need to replace a quarter of our old electricity  generation capacity by 2020, as well as prepare for an increase in demand for electricity over the coming decades. Secondly, the UK needs to meet its legally binding CO2 emissions reduction targets, which require an 80% reduction from 1990 levels by 2050.

To meet those objectives, the UK must encourage significant new investment in low-carbon generation—wind, wave, nuclear, and carbon capture and storage technology. The EU emissions trading system has played a key role in pricing the negative externalities associated with carbon emissions. Unfortunately, the price of carbon has neither been consistent enough nor high enough to drive investment in low-carbon electricity generation. In fact, it has led only to changes in behaviour at the margins.

Photo of Tom Blenkinsop Tom Blenkinsop Labour, Middlesbrough South and East Cleveland

I take issue with that. The funding for the carbon capture strategy is being reduced to the extent that, where we could have had four projects, we have money for only one. Also, under the existing energy policy, never mind these new policies, we have a 10-year-old power plant on Teesside that is now half mothballed.

Photo of Justine Greening Justine Greening The Economic Secretary to the Treasury

I do not agree that we are dragging our heels on carbon capture and storage. The spending review announced funding to support the first plant and our intention is that it will be the first of four, so it is not right to say that. Perhaps it will help if I run through the broad changes in the clauses and some of the concerns that are being raised, then talk about the amendment specifically.

Most fossil fuels used to generate electricity are exempt from the climate change levy. Schedule 20 will remove that exemption for supplies of gas, liquefied petroleum gas and solid fuels, such as coal and coke, to electricity producers. It will also introduce the climate change levy—carbon price support rates—for supplies used in electricity generation, and introduce some anti-avoidance provisions effective from Budget day to protect revenue.

From 1 April 2013, businesses that make the final supply of those fossil fuels to a generator that burns them to produce electricity will be liable to pay the relevant carbon price support rate. Different rates will apply for different taxable commodities—gas and coal, for example—and will be based on the carbon content of those supplies. Each rate will be determined by the carbon content of the taxable fuel, with the equivalent rate of £4.94 per tonne of carbon dioxide. That rate will ensure a minimum price for carbon in the power sector, which will begin at £16 per tonne of carbon dioxide and rise to £30 per tonne in 2020. Those figures are expressed in 2009 prices.

The carbon price support rates will be set out two years in advance to provide certainty to low-carbon investors, electricity generators and the market. As the Budget sets out, we intend to set the tax payable two years in advance, which will provide an indication of the tax rates in the subsequent two years. We believe that that will provide the certainty to incentivise investors to invest substantially in lower-carbon electricity generation, which is what we want.

The measure has been welcomed by a number of key stakeholders. Centrica, for example, has described it as “an important first step”. EDF has said that the policy “strikes the right balance”, so we are moving in the right direction.

Concerns have been expressed about the involvement of BIS and DECC. BIS has been involved in the policy as it has developed, and it has had ample chance, and has taken that opportunity, to be part of the analysis as we pulled it together. DECC has been involved in drafting the proposal. I will shortly go on to talk about how the consultation was run and the range of engagement that we had.

Photo of Nicholas Dakin Nicholas Dakin Labour, Scunthorpe

Before the Minister moves on, is she comfortable with the way the proposals will, as her written answer states, give a £50 million windfall to the existing nuclear industry for no additional work? It is just an advantage.

Photo of Justine Greening Justine Greening The Economic Secretary to the Treasury

I will come to the nuclear issue, because I recognise that it has been raised by members of the Committee, but may I briefly talk about our informal consultation with Her Majesty’s Revenue and Customs?

HMRC has had discussions with energy companies and oil and gas suppliers to ensure effective implementation of the carbon price floor. We support an approach that reduces the administrative burden on industry and HMRC, in line with our broader objective of tax simplification.

The Finance Bill 2012 will tax fuels used to generate electricity in combined heat and power plants at a lower rate. The Government continue to work with the Combined Heat and Power Association and its members to assess the most appropriate level of relief. CHP can play an important role in supporting energy intensive sectors such as chemicals, steel and refining to improve energy efficiency and competitiveness.

We also intend to introduce a partial relief for fossil fuels used in carbon capture and storage plants at the earliest practical opportunity, following further discussions with the CCS sector on how to implement and administer the relief. At the Budget, the Government announced that the relief from carbon price support rates will be equivalent to the proportion of carbon dioxide that is captured, not emitted. That approach is consistent with the overall environmental rationale of the tax.

It has been mentioned that the policy is a subsidy to the nuclear industry, which is not the case. The price floor does not subsidise any specific technology, because it allows the market, not the Government, to decide the most cost-effective mix of generation. Any benefit arising to existing low-carbon infrastructure is a result of marginally higher costs for high-carbon generation feeding through to the wholesale electricity price. In other words, it is a result of changes to the market, rather than a subsidy or state aid. The points about the measure effectively bringing in revenue to the Treasury demonstrate that it is not a subsidy for nuclear.

The carbon price floor helps to rebalance economic incentives in the power sector away from high-carbon generation. All types of low-carbon technology, whether nuclear, renewable or any other, as well as efficient gas-fired electricity generation, will be incentivised by the price floor. Government policy is clear that there will be no public subsidy for new nuclear power.

The hon. Member for Bristol East expressed concerns about fuel poverty, which is something the Government take very seriously. She will be aware that Ofgem is carrying out some work to ensure that we have good competition in the energy industry, including looking at  the recent proposals that stem from the retail market review that Ofgem launched in November last year. We are taking a range of actions to increase people’s control over, and to help them to reduce, their energy bills.

My hon. Friend the Member for Bristol West spoke eloquently about some of his experiences of buildings and homes that have been retrofitted to make them more energy efficient, and we are setting up the green deal to help consumers to make their homes more energy efficient. We are supporting the energy company obligation. We are working with companies to roll out smart meters, which will enable consumers to manage their energy use better. We are introducing the warm homes discount to provide cash rebates to about 2 million vulnerable households by 2014 or 2015. We are also taking action to improve the cost-effectiveness of policies that have an impact on fuel bills, including through the electricity market reform and by not taking forward the previous Government’s proposal to fund renewable heat and carbon capture and storage through an additional levy on energy bills, which would have pushed up consumers’ bills and worsened fuel poverty.

Photo of Tom Blenkinsop Tom Blenkinsop Labour, Middlesbrough South and East Cleveland

An impact assessment on agriculture and food products would also be worth while, because the majority of cereals, which are used to feed animal stock but which go into other cereal products as well, require a lot of fertiliser. Fertiliser is a product of gas-intensive industries, which will be affected by carbon floor pricing.

Photo of Justine Greening Justine Greening The Economic Secretary to the Treasury

That is one reason why the measure and the policies that DECC is considering as part of the electricity market review are so important. We want to move to a low-carbon electricity generation mix over time; we know that if we do not, we will face higher energy bills in the long run. The hon. Gentleman sets out clearly why that would be so damaging to our economy, because those high energy bills would feed through, and we are trying to avoid that. Taking action now will mean that we can transition to a low-carbon mix of electricity generation and avoid those higher costs.

Photo of Tom Blenkinsop Tom Blenkinsop Labour, Middlesbrough South and East Cleveland

One more point: will an assessment also be made of the water industry, which is one of the largest process industries in the country? It feeds into manufacturing, and it is a high user of electricity and gas in delivering clean water to UK citizens.

Photo of Justine Greening Justine Greening The Economic Secretary to the Treasury

I direct the hon. Gentleman’s attention to the carbon price floor consultation that we published last December. It has a 28-page impact assessment, which he can leaf through and which considers the impact on businesses and households. In answer to the hon. Member for Bristol East, figures relating to the impact on fuel poverty can be found on page 23 of that document.

I want to address some of the concerns that were expressed about the impact on manufacturing, particularly on energy-intensive industries. The Government have looked at that incredibly closely. We absolutely do not want to export only emissions; we want this policy to work and succeed. We are starting to see more and more progress being made on recovering our manufacturing industry, which many people would say had been somewhat hollowed out under the previous Government. BMW has today announced £500 million of extra investment  in its production network, which I hope all members of the Committee would welcome. Today, the Prime Minister himself is meeting the board of directors of the European Automobile Manufacturers Association in Downing street, which shows that we are serious about our intention to support businesses across the board. In particular, there is a huge opportunity for our country to rebuild the manufacturing base that was eroded so badly under the previous Government.

Photo of Alison McGovern Alison McGovern Labour, Wirral South 1:30 pm, 9th June 2011

It is a pleasure to serve under your chairmanship this afternoon, Mr Gale. The Economic Secretary makes the case for manufacturing. As a talented Minister, does she agree that we are in an entirely different situation because of having a low pound, compared with the relatively high pound under the previous Government? What does she think of the purchase manufacturing index that fell sharply last month? It looked as if there were rocky roads ahead for manufacturing; perhaps it is not so rosy in the garden.

Photo of Justine Greening Justine Greening The Economic Secretary to the Treasury

It is a lot rosier in our garden than it would be if we were faced with a Government who had no economic policy whatsoever, and the potential threat of a downgrade to our credit rating status. That is what the country faced before the election. Instead, we have brought forward a range of policies across the board that support businesses. Rather than having corporation tax rise for large and small companies, we are cutting it year on year. In particular, we are targeting, providing for, and introducing measures to support energy intensive industries and manufacturing.

Let me run through some of the things that we are doing. As I have said, we reduced corporation tax, and an extra 1% reduction was announced in the March Budget. We also announced an increase in the discount on electricity for participants in the climate change agreement scheme, from 65% to 80%. That will be worth £50 million to those participants from April 2013. A consultation on options to simplify the scheme will be published by this summer. In addition, we responded to requests from industry concerning its uncertainty about the future of climate change agreements, and we have extended those agreements to 2023. We are not going ahead with the planned complex and costly carbon capture and storage levy. That would have weighed heavily on those companies about which Labour Members have raised concerns, and it would also have increased electricity bills by 2% from 2015.

We put a cap on the cost of policies funded through energy bills, which we know means a lot to businesses and consumers. More broadly, a range of policies in the plan for growth are intended to stimulate growth and support job creation, not only in the south-east and the financial sector—as we saw over the past 10 years—but across the whole country. A plan is already in place, but members of the Committee will also be pleased to hear and will welcome the announcement made by the Secretary of State for Energy and Climate Change on 17 May:

“We are working up a package of measures, to be announced by the end of the year, to help energy intensive industries adjust to the low-carbon industrial transformation while remaining competitive.”—[Official Report, 17 May 2011; Vol. 528, c. 176.]

We are tackling the issues raised by hon. Members.

Photo of Justine Greening Justine Greening The Economic Secretary to the Treasury

I will give way one last time—that is the second time I have said that. Perhaps this really will be the last time.

Photo of Tom Blenkinsop Tom Blenkinsop Labour, Middlesbrough South and East Cleveland

I thank the Minister. With all due respect, the Secretary of State for Energy and Climate Change said that we would watch what our European competitors are doing, and that when they shift their policy on carbon emissions, we will match it. There is no incentive for financial investment in manufacturing capital if we are watching, and then matching our competitors. Why do the Government not wait for a universal policy across the EU, rather than having a unilateral policy that makes us less competitive?

Photo of Justine Greening Justine Greening The Economic Secretary to the Treasury

Because we know that if we do not take action, our households and businesses will, in the longer term, face higher energy bills if we simply wait. Over the past 10 years, it has been a difficult issue for Government to grapple with. It was challenging for the previous Government, and I remember regular stories in the newspapers discussing the fact that we may face the lights going out.

Clearly, we need to renew our electricity generation capacity, but we need to do that in a way that is consistent with the need to move to a low-carbon economy. In fact, the carbon price floor will increase energy bills in the short to medium term, and that is clear in the impact statement. By 2020, however, gross domestic product will only be 0.1% lower than it would be without the price floor. In the long term, of course, bills will be lower than they otherwise would have been, because low carbon capacity leads to cheaper electricity.

Photo of Ian Murray Ian Murray Labour, Edinburgh South

I congratulate the Minister on being nominated as the Commons’ best Minister in the Dod’s parliamentary awards, and if she votes for the amendment, I am sure that she can count on 14 votes from this side of the Committee.

Will the Minister reflect on what she just said about the impact assessment stating that energy bills will go up in the short term and on whether that is desirable when household incomes are being squeezed considerably by the Government?

Photo of Justine Greening Justine Greening The Economic Secretary to the Treasury

One reason why I ran through the measures that we are taking was, first, to understand the Bill’s impact on fuel poverty. The amendment is no doubt well-intentioned, but given some Opposition Members’ questions about the kind of analysis that they wanted, those who had actually read the carbon price floor consultation could be forgiven for thinking that some Opposition Members had not read it. A huge amount of analysis—29 pages—covers a whole range of the policy’s aspects and impacts. In fact, even Robert Peston commented on his BBC blog how transparent the consultation had been. Of course, we always believe whatever Robert Peston says, but even he acknowledged that we had worked hard to ensure that we were transparent about the policy’s impact, so that we could understand what that would be.

The amendment calls for the publication of an impact assessment, which would delay the implementation of the measure. That would create uncertainty for investors, which is the exact opposite of what we need to achieve if we are to get the investment that we need in our low-carbon electricity capacity. Three impact assessments have now been published.

Photo of Justine Greening Justine Greening The Economic Secretary to the Treasury

No, I will not, actually. The first one was published with the carbon price floor consultation back in December, and that was actually 28 pages long. I said that it was 29 pages. The final impact assessment, which is now called the tax impact and information note, was also published at the Budget and alongside a third assessment, which appeared in the Government’s response to the consultation. The amendment is really not necessary, because the Government have already published detailed assessments of the impact of the policy.

The tax impact and information note sets out clearly the economic and fiscal impacts, including a cost-benefit analysis, and it also sets out that the policy would incentivise an estimated additional £30 billion to £40 billion of investment. We also set out the short and long-term impact on household electricity bills and the impact on business and the third sector, including those electricity and trade intensive sectors that may be most affected. We also did further analysis on the equalities impact and the operational impact for HMRC.

The Government were clear that, assuming full pass-through of the tax, average household electricity bills will increase by about 1% in 2013, by about 4% in 2016, and for businesses, by about 2% and 6% respectively. However, the additional investment that the policy will deliver will ultimately lead to lower bills. In the late 2020s, households and businesses will save between 2% and 5% more on their bills than would be the case without the policy.

We have a range of other policies to help mitigate the impact on households, including the green deal, which supports households to increase their energy efficiency. Extending the carbon emissions reduction target is expected to support energy efficiency measures in 3.5 million extra homes by 2012. To support businesses and growth, the Chancellor delivered a balanced Budget, which included an additional 1% reduction in the corporation tax rate and an increase in tax relief on electricity of 15% for energy intensive businesses. In addition, as part of the Government’s commitment to tackling climate change through the fourth carbon budget, we will also announce a package of measures by the end of the year to help our energy intensive industry adjust to the low-carbon transformation. The Department for Business, Innovation and Skills and the Treasury are working on that issue collectively, across Government. We have already made a full assessment of the measure’s impacts, so the amendment is not necessary. To coin a phrase, the policy does what it says on the tin.

Furthermore, I am advised by Revenue and Customs—[Interruption.] Members missed that joke, I am afraid. I am advised by Revenue and Customs that the amendment could undermine the anti-avoidance provisions that were included to prevent businesses from forestalling payment of the carbon price floor for several years. As  the price floor is designed to provide greater clarity for low-carbon investors, any amendment that undermines it would jeopardise the entire policy and objective of encouraging more low-carbon investment into the UK, when we need to replace our out-of-date energy infrastructure.

Photo of Tom Blenkinsop Tom Blenkinsop Labour, Middlesbrough South and East Cleveland

I thank the Minister for her generosity. Will she answer this simple question? How many gas central heating boiler systems in this country currently run off electricity that is generated by nuclear power?

Photo of Justine Greening Justine Greening The Economic Secretary to the Treasury

Anybody would find that question virtually impossible to answer, because they would need information about individual boilers, consumer consumption, and the mix of consumption that people are purchasing. Unless, for example—

Photo of Stella Creasy Stella Creasy Labour, Walthamstow

So you do not know then?

Photo of Justine Greening Justine Greening The Economic Secretary to the Treasury

The hon. Lady may say that, but I challenge her to find that data, if she can. As a member of the Public Accounts Committee and perhaps with her superior intelligence, she may be able to do her own modelling and come back to the Committee. I await with interest the note that she will no doubt prepare, which will tell me how many boilers are powered by nuclear.

I can tell the hon. Lady that only one house on my street has its boiler powered by solar: it is, in fact, my house. I confirm that my personal transition to a low-carbon energy mix is saving me a lot of money. It is that kind of mix that we want to transform in the broader electricity generation capacity that we have in our country, so that we will all get the benefits of low-carbon electricity, which will ultimately have a lower cost than if we take no action.

I therefore urge the hon. Member for Scunthorpe to withdraw the amendment. The Government are clear; the price floor signals our move away from the more favourable treatment of high-carbon industry, which is clearly in line with our pledge to be the greenest Government ever. The price floor is designed to incentivise all types of low-carbon technologies, which include nuclear and renewables, as well as efficient, gas-fired electricity generation. The Government are clear in their commitment that a market-based approach to pricing carbon provides the most efficient and cost-effective policy framework to meet our environmental goals. That will minimise the cost to consumers, support growth, and ensure that we maintain a sound fiscal position, so I move that the clause should stand part of the Bill.

Photo of Nicholas Dakin Nicholas Dakin Labour, Scunthorpe 1:45 pm, 9th June 2011

I thank the Minister, who has done as able a job as ever in putting the Government’s case but, as hon. Members have demonstrated, that does not alter the detrimental impact of the proposals: to the environment, as my hon. Friend the Member for Walthamstow pointed out; to manufacturing, as my hon. Friend the Member for Middlesbrough South and East Cleveland pointed  out; and to emissions and the consumer, as my hon. Friend the Member for Bristol East pointed out. A plethora of studies demonstrating the difficulties does not alter the fact that the difficulties are there.

Two central points have not been satisfactorily addressed by the Minister. First, what will happen to the windfall to the existing nuclear industry? Should the industry have a windfall through this process, or should the moneys be channelled to support manufacturing or to encourage growth in new technologies? What should be happening? The hon. Member for Bristol West is right that all such carbon taxes ought to be brought together into a simplified tax, but at the moment we are far from simplification as well as being in danger of not having a level playing field. Secondly therefore, will we have more severe carbon taxes in this country than in, in particular, the rest of Europe?

We do not know what is happening with the windfall, or with the level playing field. If there is not a level playing field, and we are not able to maximise the green advantage of the windfall, this is not the right thing to do. The amendment would give us the opportunity to look at the challenge of how we green the economy while growing it in a balanced way. I would like to press it to a vote.

Question put, That the amendment be made.

The Committee divided: Ayes 14, Noes 18.

Division number 12 Decision Time — (Except clauses 4, 7, 10, 19, 35 and 72) - Clause 77 - Supplies of commodities to be used in producing electricty

Aye: 14 MPs

No: 18 MPs

Nos: A-Z by last name

Question accordingly negatived.

Clause 77 ordered to stand part of the Bill.

Schedule 20 agreed to.

Clause 78 ordered to stand part of the Bill.

Photo of Roger Gale Roger Gale Parliamentary Assembly of the Council of Europe (Substitute Member)

We now come to a situation that needs to be explained to the Committee. The Minister would have been welcome to do so if she had chosen to do it, but I shall do it for her. The Government have decided that clause 79 is otiose. I have to put the question to dispose of it, but understand that the Government would vote no if necessary. The Opposition, of course, would be entitled to vote as they wished.

Clause 79 disagreed to.