Economic Growth and Environmental Limits

Clive Lewis Excerpts

Wednesday 10th July 2019 Westminster Hall

[Caroline Lucas]

I thank the hon. Gentleman for his wise intervention. Certainly, if we are not going to make the economy bigger by growing it and growing it—we simply cannot, within environmental limits—arguments about redistribution become absolutely central to the whole debate. Everything that I am saying is about social justice and environmental justice being inextricably linked. They must be, because we have to tackle them together. Although it is quite hard to find opportunities when the environmental data is so grim, there is an opportunity to get our social systems and inclusiveness right, and to get our inequality sorted, at the same time as taking serious steps towards making the way we organise our economy genuinely sustainable.

On climate, as on biodiversity, I believe strongly that we must look at the science. The Intergovernmental Panel on Climate Change’s October report, entitled “Global Warming of 1.5 ºC”, says that we need

“rapid, far-reaching and unprecedented change across all aspects of society”.

We have barely a decade to cut global emissions by half. As the co-chair of an IPCC working group put it,

“The next few years are probably the most important in our history.”

The Treasury is doing a very good impression of ignoring the urgency of taking action. The Government boast about emission cuts and about legislating for a net zero emission goal to be reached in three decades’ time. However, the Committee on Climate Change said in its new report, which was published this morning, that the next 18 months are make or break, especially as the UK

“is lagging far behind what is needed, even to meet previous, less stringent, emissions targets.”

The UK’s carbon reduction statistics ignore consumption-based emissions. Our exported emissions are one factor that explains why global emissions continue to rise, and why we are still heading for a devastating 3° of warming, even if countries deliver on their Paris pledges.

This is all to say that the pursuit of economic growth is devouring our efforts to decarbonise. I will quote the work of Jason Hickel, a leading environmental economist at Goldsmiths. He has explained the situation by examining the IPCC’s trajectories on reaching net zero by mid-century. The IPCC is telling us that we have until 2050 to get to net zero, but the global economy is set to nearly triple in size during the same period, which means three times more production and consumption. It is hard enough to decarbonise the current economy in such a short time span. The idea that we will be able to do it three times over is, frankly, for the birds. However heroic our assumptions about the potential for decoupling, there is no evidence that it can be completed quickly enough in the timeframe that we have.

There is some hope, because the IPCC report contains one lifeline scenario that does not rely on speculative and harmful negative emissions technologies to keep global heating under 1.5°. That scenario is our emergency exit from climate breakdown. So what does it look like? Fundamentally, it is about scaling down material consumption by 20% globally, with rich countries such as the UK leading the way. As yesterday’s European Environmental Bureau report concluded,

“Policy-makers have to acknowledge the fact that addressing”

the climate and biodiversity crises

“may require a direct downscaling of economic production and consumption in the wealthiest countries.”

I should add, “among the wealthiest people in the wealthiest countries,” because I take the point made by the hon. Member for Luton North (Kelvin Hopkins); equality and justice needs to be at the heart of this process.

As I say, the ONS work on wellbeing indicators beyond GDP and on natural capital is important and welcome, but it is clearly not the priority. It is not a primary consideration in Treasury decision making. Nor is the wellbeing work integrated with environmental considerations. Will the Minister commit to ensuring the ONS has the resources and the direction required to integrate environmental limits into its “Beyond GDP” work, including, as a priority, consumption-based carbon emissions? While I am making requests of the Minister, can he tell us what has happened to the latest release of those “Beyond GDP” statistics? If they are quarterly, as the ONS website states, the latest were due a couple of months ago, back in May.

I turn to the positive case for ousting GDP as a measure of progress, and to some of the alternatives that we could adopt. There is an extensive and expanding evidence base to suggest that ousting GDP as a measure of progress is essential to achieve both environmental and social justice. Transitioning away from the growth dogma is not about hurting people’s welfare—quite the opposite. It is about placing wellbeing centre stage, reducing inequalities, cutting out waste and inefficiencies, and prioritising quality of life over quantity of things.

There is a chorus of experts—academics, economists and campaigners—proposing concrete, credible alternatives to get us out of the GDP gulag. Many of them are members of the global Wellbeing Economy Alliance. I will briefly give four examples. The hon. Member for Leeds North West (Alex Sobel) will be very happy, because the first example I will give is from the University of Leeds, where researchers are exploring a

“good life for all within planetary boundaries.”

This shows that the UK and other wealthy nations are well past the tipping point at which

“using even more resources adds almost nothing to human well-being.”

The researchers explain that this means countries such as the UK could

“substantially reduce the amount of carbon emitted or materials consumed with no loss of well-being.”

A second example comes in the shape of a doughnut. In her book, “Doughnut Economics: Seven Ways to Think Like a 21st-Century Economist”, Kat Raworth sets out to replace the dominant image of the economy as a closed, self-generating loop with a picture of the economy that shows energy flowing in from the sun, and waste and heat flowing out. Her doughnut image requires us to recognise that all economic activity is embedded in the Earth’s living systems and in society. Instead of maximising GDP, we need to change our goals to meet

“the human rights of every person within the means of our life-giving planet.”

Crucially, this model combines environmental limits with social factors such as housing, equity, political voice, education and income. The inner boundary of the doughnut is the social floor, below which wellbeing suffers. The outer boundary is an ecological ceiling, beyond which we overshoot the Earth’s support systems. The doughnut’s fundamental point, which the Treasury seems to have not yet grasped, is that the current economic system is failing on both human wellbeing and environmental health grounds.

A third example is a call from 238 academics for the EU and member states to plan for a post-growth future, in which human and ecological wellbeing are prioritised over GDP. They say:

“Growth is…becoming harder to achieve due to declining productivity gains, market saturation and ecological degradation. If current trends continue, there may be no growth at all in Europe within a decade. Right now the response is to try to fuel growth by issuing more debt, shredding environmental regulations, extending working hours, and cutting social protections. This aggressive pursuit of growth at all costs divides society, creates economic instability, and undermines democracy.”

The academics end by offering some measured and moderate practical next steps, including constituting

“a special commission on Post-Growth Futures”

in order to

“actively debate the future of growth, devise policy alternatives for post-growth futures, and reconsider the pursuit of growth as an overarching policy goal.”

I would love to see citizens’ assemblies play a major part in that.

Secondly, the academics suggest prioritising alternative indicators over GDP in all economic decision making. Thirdly, they propose establishing a Ministry for economic transition, to drive the shift to a new economy that focuses directly on human and ecological wellbeing, and away from one that is structurally dependent on economic growth.

The fourth and final example is New Zealand, where the Treasury has conducted the world’s first wellbeing budget. Finance Minister Grant Robinson explained that GDP growth was simply not translating into higher standards or better opportunities. Instead, the wellbeing budget looks at spending on the basis of a project’s contribution to the wellbeing of the population, as measured through four dimensions: human capital, social capital, natural capital, and financial and physical capital. The former Cabinet Secretary, Lord Gus O’Donnell, recently launched a report by the all-party parliamentary group on wellbeing economics that makes a similar case for wellbeing to replace growth as the main aim of UK spending in the forthcoming spending review. Those are just some examples.

[Clive Lewis (Norwich South) (Lab)]

The hon. Lady is giving a fantastic speech. She has mentioned the views of four different people on the limits of using GDP, what it is, what good it does in our economy, and what good growth does. Some 51 years ago, Robert F. Kennedy—hardly an economic radical; he was a Democrat—gave a speech on the limits of GDP. I add that because he is someone that I and many people across the political divide can respect. He was well ahead of the curve on this issue.

[Caroline Lucas]

The hon. Gentleman is a very good friend and colleague, but he has just taken my final point; I was building up to that speech from Bobby Kennedy. I forgive him, because he is a good colleague and it was very good point.

I give a shout out to the all-party parliamentary group on economic wellbeing and the APPG on limits to growth, of which I am a co-chair, and which works closely with the Centre for the Understanding of Sustainable Prosperity under the leadership of Professor Tim Jackson, who does good work in this area.

I want to leave time for the Minister to respond, so I will conclude. The climate and biodiversity crisis means that urgency is becoming emergency, in terms of getting economic transformation going. I will skip most of my lovely Bobby Kennedy quote, but his words ring as true today as they ever did, so I will keep the last bit. He said that GDP

“measures neither our wit nor our courage, neither our wisdom nor our learning, neither our compassion nor our devotion to our country, it measures everything in short, except that which makes life worthwhile.”

I have three requests of the Treasury to which I hope the Minister will respond. First, will he put rocket boosters behind the ONS “Beyond GDP” work, ensure that the environment is fully integrated alongside social factors, and commit to adopting those indicators and using them alongside or, even better, instead of GDP growth? I would even let him use them alongside GDP growth, as long as that were done regularly, so that we could see those indicators as a key measure of the nation’s progress.

Secondly, from this year on, will the Minister publish consumption-based carbon emissions, material throughput and wellbeing statistics alongside quarterly GDP figures? Thirdly, will he meet me and some of the leading economists, academics and practitioners working on this issue, to inform the forthcoming spending review?

As Kenneth Boulding said more than 50 years ago,

“Anyone who believes exponential growth can go on forever in a finite world is either a madman or an economist.”

Thankfully, we now have a new generation of environmentally literate economists, and it is time that we listened to what they have to say.

--- Later in debate ---

[The Exchequer Secretary to the Treasury (Robert Jenrick)]

I thank the hon. Member for Brighton, Pavilion (Caroline Lucas) for tabling this debate and other hon. Members who intervened or who came to listen to and support her. I am always partial to a good Robert Kennedy quote, so I am sorry to see that the hon. Lady’s thunder was stolen at the end of her speech, but I enjoyed it none the less.

As the hon. Lady eloquently set out, it is now more important than ever that the Government and institutions such as the Treasury, which is at the heart of this debate, confront head on the question of how we continue to grow the economy while protecting our environment and tackling climate change with all the vigour and urgency that she and others would like. I believe that the two can and will be done together, and can be mutually beneficial.

The UK is a world leader in this area, but I appreciate that many people—me included—would like us to go further. Between 1990 and 2016, the UK reduced its greenhouse gas emissions by 42% while growing the economy by more than two thirds, demonstrating that environmental action need not come at the cost of economic prosperity.

The Government are determined to continue to build concern for the environment into our economic model. In a moment, I will explain some of the workstreams that we have already undertaken and where we could go further. We want to ensure that environmental policies are well considered and that the Treasury as an organisation is leading them, as I believe it is. The hon. Lady argued that it is time fundamentally to change economic models if we want to address the climate emergency. She questioned in particular whether GDP is a sensible measure of our economic wellbeing, so I will begin by addressing that.

GDP remains one of the most important economic indicators, but it is by no means the only one that is of concern to us or which is used by other major economies around the world. It is closely correlated with employment, incomes and tax receipts, which makes it perhaps the most useful indicator currently available to us. It is used by the Government, the Treasury, and the Bank of England to set economic policy and manage the public finances and, as the system of national accounts framework is set at UN level, GDP is easily comparable across countries and time periods, both historically and in the future. It is important that any changes in the economic modelling that we use are made internationally, and the UK needs to show leadership on that.

The Government recognise, however, that GDP undoubtedly has its limitations and should not be seen as an all-encompassing measure of welfare and wellbeing, and we entirely accept that it was never designed to be. Former Chancellor George Osborne commissioned Sir Charles Bean to undertake an independent review of economic statistics. The review acknowledged some of those limitations, such as the challenge of capturing activities where no market transaction takes place, the challenge posed to GDP and to some of our existing modelling by technology, transforming the way that we measure welling and productivity and, as the hon. Lady mentioned, the fact that GDP estimates make no allowance for the depletion of natural resources,

The Government fully supported the recommendations of the Bean review, which we commissioned, and we have provided the ONS with an additional £25 million to help improve UK economic statistics and implement the Bean review. That was the “Beyond GDP” initiative that the hon. Lady mentioned, which aims to address the limitations of GDP by developing a broader measure of welfare and activity. In response to the hon. Lady’s question about the publication of statistics, the ONS is an independent organisation, so we do not control it in that respect, but I am happy to pass on her comments and ask the ONS to respond.

In the time left, I will briefly mention a number of other steps that the Government have taken. The Treasury’s Green Book, our guidance on the appraisal and evaluation of infrastructure and other investments, is essential to a number of decisions that are made by the Government. In 2018, we refreshed the Green Book to include additional environmental values, such as greenhouse gases, air quality and noise pollution. We also included a social cost-benefit analysis, which I hope is making a significant difference. It will be very important in the upcoming spending review. That work is well perceived internationally. My right hon. Friend the Chancellor of the Exchequer has now convened international Finance Ministers, and the area that the UK will likely lead on internationally is that of economic modelling and how we can do that better on a global scale.

[Clive Lewis]

The Minister spoke about the Green Book, which is still—despite the changes—essentially a neoclassical economic model based on equilibrium economics. Most scientists and economists on the fringes of economic thinking would tell us that we are moving into a disequilibrium position in our economic model. The two are completely incompatible and the Green Book is not fit for purpose as we enter a climate crisis in which many of its assumptions are no longer credible.

[Robert Jenrick]

I do not agree with the hon. Gentleman, but the theme behind his remarks is one of the reasons why we have amended the Green Book. We have created this concept of social value, so we now take into account negative externalities to the environment and to people’s lifestyles as a result of greenhouse gas emissions, for example. I am happy to have a further conversation with him on that after the debate, as there is very little time left.

We are working closely with Dieter Helm’s review and recommendations. I met him to discuss the issue of natural capital accounts, which we are taking seriously—it is a big endeavour. We are working with the ONS and the Department for Environment, Food and Rural Affairs to bring that forward. I hope that we will be one of the first countries in the world to take the issue forward.

Following the report by the Committee on Climate Change, the Chancellor and I met Lord Deben and accepted his recommendation over the summer that the Treasury should do a major and urgent piece of work on how we can fund in a fair way the changes that we need to make as a society as a result of the Committee’s recommendations. That work is under way. I am very happy to meet the hon. Lady to give her more detail on some of those initiatives, which are extremely important. We want to take them forward with gusto in the months ahead.

Question put and agreed to.

Oral Answers to Questions

Clive Lewis Excerpts

Tuesday 9th April 2019 Commons Chamber

[Robert Jenrick]

The UK Government are supporting tidal energy. We have looked at any schemes that have become available to us. We have to balance the interests of the ratepayer, the taxpayer, to ensure that the schemes that we do support are the right strategic technology and the right value for money for the UK.

[Clive Lewis (Norwich South) (Lab)]

Will the Minister join me in paying tribute to one of this country’s most successful publicly funded renewable energy programmes ever? I am of course talking about the last Labour Government’s export tariff, the feed-in tariff scheme, the biggest single democratisation of energy that the UK has ever seen, cutting 700,000 tonnes of carbon. This month, however, in an act of supreme national and international self-harm, the Government killed it off—kaput, finito, game over. In the real world, how can anyone, anywhere believe that this Government take their climate change obligations seriously?

[Robert Jenrick]

The facts speak for themselves. The UK is on track to over-deliver comfortably on the first three carbon budgets out to 2022. The clean growth strategy sets out how we will meet our fourth and fifth carbon budgets, which take us to 2032, while keeping down costs for consumers, creating good jobs in the clean energy market and growing the economy.

Oral Answers to Questions

Clive Lewis Excerpts

Tuesday 5th March 2019 Commons Chamber

[Mr Hammond]

I started work in 1977 and I am not sure I ever remember that traditional nine-to-five, but the Government are helping people to be more productive and work flexibly by committing over £1 billion of public money to next-generation digital infrastructure, including full fibre broadband and 5G. Obviously, the primary investment will come from the private sector, but the public investment ensures that those parts of the country that would not otherwise be served because they are not commercial can share in this important technology. We are also supporting workplace productivity in other ways, including by investing £56 million to help small businesses to develop leadership and management skills in partnership with “be the business” programme.

[Clive Lewis (Norwich South) (Lab)]

I am sorry, but when it comes to funding the new technologies that really matter, this Government, and especially the Treasury, have been abysmal. The climate crisis is upon us now, but this Government’s reaction has been to axe carbon capture and storage funding; to cancel the Swansea lagoon, despite the fact that we were poised to be a world leader in tidal technology; and to slap innovative emerging storage technologies with business rates. At the same time, they are throwing billions into new tax breaks for oil and gas. Does the Chancellor agree that this Government are not facing the climate emergency but creating it?

[Mr Hammond]

No, we are committing additional funding to innovation and to research and development—the Faraday battery challenge is a good example—and lots of that money is going into the technologies that will underpin the decarbonisation of our economy. However, we have to get the balance right. Consumers of energy in this country do not want to see their bills rising because we have made imprudent decisions. We have to do this in a way that takes public opinion with us as we decarbonise our energy sector, our homes and our industry in a sustainable way.

Draft Small Charitable Donations Act (Amendment) Order 2019

Clive Lewis Excerpts

Tuesday 12th February 2019 General Committees

[Clive Lewis (Norwich South) (Lab)]

Good morning, Mrs Moon. As the Minister outlined, the Small Charitable Donations Act 2012, which came into force on 6 April 2013, introduced a new scheme to enable charities and community amateur sports clubs to claim a gift aid-style top-up payment on small cash donations of up to £20 in circumstances in which it is not practical or feasible to obtain a gift aid declaration. The draft order will increase to £30 the maximum individual small charitable donation on which such payments can be claimed. My understanding is that eligible charities and CASCs can claim top-up payments up to £8,000 for small donations each year.

As hon. Members are probably aware, the gift aid small donations scheme was established in 2012 with cross-party support. The Small Charitable Donations and Childcare Payments Act 2017 then made several changes to gift aid small donations to simplify and increase access to the scheme, particularly for smaller and newer charities, including allowing small donations covered by the scheme to be made by contactless payment from April 2017. Although the Opposition welcomed that streamlining to create legislative clarity and coherence, we have continued to emphasise the need for robust Government monitoring of the gift aid small donations scheme, especially in relation to its use for fraud or tax evasion. Will the Government publish any information that they have on the matter?

Unfortunately, there have been cases of charities being used as vehicles for tax avoidance and fraud. It is incumbent on us to make it as hard as possible to abuse charitable status. During the passage of the 2017 Act, the Opposition tabled a new clause that would have required a review of the prevention of fraud and abuse in the small donations scheme. Such a review would need to address the number of penalties imposed under the 2012 Act and the circumstances giving rise to the imposition of such penalties. It should also include HMRC’s assessment of the extent to which charities have been established or have operated for the primary purpose of securing benefits from the small donations scheme, and of the evidence available on the role of the gift aid matching rule in preventing fraud and abuse. Will the Minister update us on whether the Government will consider such a review?

Has there been any evidence of the gift aid small donations scheme being used for fraud or tax evasion? Will the Government publish any information that they have on it? Will the Minister also update us on the Treasury’s monitoring of any potential loopholes? The explanatory memorandum to the draft order notes that

“20 per cent of organisations currently participating in the GASDS are already claiming at, or close to, the overall limit of £8,000 per charity (or community building).”

I note that charities can claim up to £8,000 per building; do the Government have data on how many organisations are claiming for more than one building? How much of the gift aid small donations scheme benefit has accrued to large organisations claiming for more than one building? Are there any plans to increase or decrease the £8,000 limit after the donation size has been increased?

The Government’s policy paper states:

“Following stakeholder feedback the government has decided to increase the individual donations limit for GASDS to £30. A consultation is not needed to make this small change.”

However, an increase of 50% from £20 to £30 is very significant. What is the evidence base for that figure? What estimate have the Government made of the effect on how and by whom donations are made? The policy paper further states:

“This measure will be monitored through information provided in correspondence and regular feedback from the charity sector.”

The draft order is exempt from the requirement to provide a review provision in accordance with section 28(3)(c) of the Small Business, Enterprise and Employment Act 2015, as it relates to

“the giving of grants…by…a public authority”.

None the less, as the Opposition have noted a number of times, it would be advantageous to have a more comprehensive and transparent process in place.

[Patrick Grady (Glasgow North) (SNP)]

The spokesperson for the official Opposition, the hon. Member for Norwich South, raised some interesting points, but I did not pick up whether he supports the draft order. It is important that his questions be answered and considered, but the draft order will make a relatively minor change that I think will broadly be welcomed by the charitable sector. In my experience in the sector before coming to Parliament, I have seen the difference that gift aid can make to the operation of charities, especially small and community-based organisations and churches, which the Minister mentioned. The opportunity to reclaim from the likes of street collections, where it is not physically possible to collect gift aid information, is valuable.

[Clive Lewis]

We will probably abstain, but may I pick up the point the hon. Gentleman is making? It is easy to assume that all charities are charitable in their nature and how they operate, but clearly there are some with the potential not to do what they say on the tin. According to the Lloyds Bank Foundation,

“the proliferation of larger public service contracts meant that new types of charity had emerged, which had little interest in meeting local community need, but were instead ‘driven by market share’ and ‘prepared to slash costs to win contracts, with little regard to service quality.’”

We also know that there can be fraud and that charities can be used as a front for it. Our position is simply that there needs to be transparency.

[Patrick Grady]

That is very helpful. I do not necessarily disagree with any of it, but I would be concerned about standing in the way of a relatively minor uplift that would be beneficial, taking into account inflation and the increasing frequency and popularity of contactless donations. I totally agree with the points on transparency and on the need for that kind of scrutiny to continue. On that basis, I will not oppose this measure.

I want to respond to one other point that the Minister made. He said that not all small charities—legitimate local charities—necessarily take all this up. Perhaps there is a job for some us as constituency Members to encourage smaller community organisations that do not realise that this opportunity is available to them.

On at least one note of consensus, I notice that paragraph 8.1 of the explanatory memorandum states:

“This instrument does not relate to withdrawal from the European Union.”

I am sure that we all look forward to the day when we see that more frequently in explanatory notes.

Equitable Life

Clive Lewis Excerpts

Thursday 31st January 2019 Commons Chamber

[Clive Lewis (Norwich South) (Lab)]

I thank the hon. Member for Harrow East (Bob Blackman) for securing this debate, which has been thoughtful and considered. Both he and my hon. Friend the Member for Leeds North East (Fabian Hamilton) have persisted to ensure that this important issue remains high on the political agenda over the years. They have worked tirelessly and they should be commended by this House.

The hon. Member for Harrow East set out the situation clearly, and it is a very unsettling picture. Hon. Members have spoken of the debt of honour and of the erosion of trust in this House that we face for failing to rectify this injustice. My hon. Friend the Member for Stretford and Urmston (Kate Green) said that she herself has been affected by the collapse of Equitable Life, highlighting the sheer scale of the impact this issue has had across the country. My hon. Friend the Member for Lincoln (Karen Lee) explained how it has affected people across a wide swathe of society—nurses, doctors, teachers and civil servants. Hon. Members have spoken of the despair and distress that this failure and collapse has caused to so many of our constituents. My hon. Friend the Member for Leeds North East described it as one of the greatest financial scandals of the modern age. I hope that the Minister has heard the clear and unambiguous views of many Members from across the Chamber.

As has been set out, this issue stretches all the way back to 2000, when Equitable Life Assurance Society closed to new business and was forced to acknowledge that it could not deliver for its policyholders, leaving up to 1 million people out of pocket through no fault of their own. Following the society’s collapse, the Government of the day set up the independent Penrose inquiry, which raised serious questions about the practices that had been happening at Equitable Life. This decade of mismanagement, combined with maladministration, was a major contributor to the society’s collapse. As we have heard, the Penrose inquiry was followed by an ombudsman report in 2008 that found that this mismanagement had corresponded with

“a decade of regulatory failure”.

This included an inadequate response to the chief executive’s appointment; inadequacy of advice by the Government Actuary’s Department; and poor transparency on the part of other Departments, including the Treasury.

In 2009, the Government apologised and appointed an independent adviser, Sir John Chadwick, to provide guidance on how to determine and resolve various technical issues. During this time, both the European Parliament and the Public Administration Committee had published sympathetic independent reports. It is worth noting that in 2010, the Conservative party manifesto, as many Members have mentioned, included a commitment to making

“fair and transparent payments to Equitable Life policy holders”.

All this culminated in a payment worth £1.5 billion in compensation to policyholders. As we have heard, the Equitable Members Action Group campaigners remain unsatisfied with this response, arguing that their losses amounted to more than £4 billion. This leaves a significant disparity in the losses faced and compensation awarded that so far has not been adequately explained or addressed by the Government. Instead, the Chadwick report of July 2010 concluded that relative loss should be defined as “those who have suffered financial loss”, but pointed out that the ombudsman recognised that losses in policy values were only partly due to maladministration, and that the backdrop to cuts in policy values was a sharp fall in world stock markets that all life insurance companies were forced to respond to. Similarly, the report argued that compensation should be assessed on the cost of maladministration as opposed to the size of investor losses.

However, we are politicians, and we can revisit decisions and choices. The Minister has been asked to consider carefully whether the Government should make different decisions or choices today, with the benefit of hindsight. After all, regardless of how fault is distributed among the institutions involved, these policyholders have found themselves significantly out of pocket, through no wrongdoing of their own.

Many Members from across the House, including colleagues from the shadow Front Bench, as well as the leader of the Labour party, have met the campaign to listen to its concerns and the full details of the case. I would therefore like to ask the Minister whether he has met the campaign, and whether he might consider doing so in the days following this debate, to hear its case directly.

Given that the Government have accepted that there were regulatory failures and offered some compensation already, they may be open to further discussions, to respond to the clear dissatisfaction that so many policyholders feel about how this matter was resolved. I hope the Minister will give a clearer sense of the Government’s willingness to look again at this matter.

My hon. Friend the Member for North Tyneside (Mary Glindon) raised the important matter of policyholders’ data. The campaign is anxious that the necessary data is retained, to ensure that policyholders can be identified were there to be a change in Government policy. The campaign has hoped for reassurance from the Minister, and perhaps we will have that today.

Lastly, while I have discussed the position of Equitable Life policyholders throughout my speech, there is also the question of the regulatory environment now. We have to ensure that lessons have been learned, so that such an awful case can never happen again. The regulatory frameworks that operate in this country must be continually stress-tested and reviewed. Regulatory organisations need the appropriate resources to ensure that proper regulation occurs. We have to consider that 100 or 150 people are looking at 200 insurance companies. What protections have the Government put in place to guarantee that similar regulatory failures cannot happen again? That seems an important consideration, not only to reflect on the past and seek justice for those affected, but to ensure that we do not repeat the same mistakes.

I hope the Minister will be able to offer a satisfactory answer to the questions I have raised. Clearly a serious injustice was faced by policyholders at Equitable Life, which has been the source of much discussion, inquiry and debate over many years, yet those affected do not feel that this has been resolved adequately. The Government have looked at this matter before, and I hope they will resolve to look at it again and begin a full and proper process of consultation with the campaign. Ultimately, people’s savings are in question, lost through no fault or wrongdoing of their own but a combination of factors outside their control. I look forward to the Minister’s response.

Finance (No. 3) Bill (Seventh sitting)

Clive Lewis Excerpts

Committee Debate: 7th sitting: House of Commons
Thursday 6th December 2018 Public Bill Committees

[Clive Lewis (Norwich South) (Lab)]

I beg to move amendment 108, in clause 57, page 40, line 12, at end insert—

“(10) The Chancellor of the Exchequer must review the revenue effects of the changes made to the Vehicle Excise and Registration Act 1994 by this section and lay a report of that review before the House of Commons within six months of the passing of this Act.”

This amendment would require the Chancellor of the Exchequer to review the revenue impact of Clause 57.

[The Chair]

With this it will be convenient to discuss the following:

Amendment 109, in clause 57, page 40, line 12, at end insert—

“(10) The Chancellor of the Exchequer must review the expected effects on levels of CO emissions and the UK’s ability to meet its fourth and fifth carbon budgets of the changes made to the Vehicle Excise and Registration Act 1994 by this section and lay a report of that review before the House of Commons within six months of the passing of this Act.”

This amendment would require the Chancellor of the Exchequer to review the impact of clause 57 on CO2 emissions and climate change targets.

Amendment 110, in clause 57, page 40, line 12, at end insert—

“(10) The Chancellor of the Exchequer must review the expected effects on the volume of traffic on the roads of the changes made to the Vehicle Excise and Registration Act 1994 by this section and lay a report of that review before the House of Commons within six months of the passing of this Act.”

This amendment would require the Chancellor of the Exchequer to review the impact of clause 57 on road congestion and traffic levels.

Amendment 111, in clause 57, page 40, line 12, at end insert—

“(10) The Chancellor of the Exchequer must review the expected effects on air quality standards of the changes made to the Vehicle Excise and Registration Act 1994 by this section and lay a report of that review before the House of Commons within six months of the passing of this Act.”

This amendment would require the Chancellor of the Exchequer to review the impact of Clause 57 on air quality standards.

Clause stand part.

--- Later in debate ---

[Clive Lewis]

It is a pleasure to serve under your chairmanship, Mr Howarth. I am pleased to have the opportunity to speak to the clause and our amendments. As the Minister might outline shortly, the clause provides for changes to certain levels of vehicle excise duty, which I will refer to as VED, by amending the Vehicle Excise and Registration Act 1994, which will now be known as VERA—there are lots of acronyms in this.

Changes to the rates are due to take effect in relation to vehicle licences taken out on or after 1 April 2019. VED is chargeable on vehicles, dependent on various factors, such as vehicle type, engine size, date of first registration, carbon emissions data—indirectly—and other emissions’ impacts, such as air quality and public health. I will not go through all the changes to the various excise duty rates as they apply to the different types of vehicle covered by the clause. At this stage, I will simply note that they are relatively small.

The amendment would require the Chancellor to review the revenue impact of the clause and to publish the findings. That would allow the House, not to mention the drivers of those classes of vehicle and the public at large, to understand the impact on the public purse. Without such an assessment, neither the Government nor indeed Committee members would know how much additional money was available to redirect into measures to help drivers—in particular those on low incomes—to take up cleaner vehicles to the benefit of the natural environment and public health. Will the Minister tell us whether the Government have undertaken any such assessment? If so, will he commit to publish it? If they have not, will he undertake to do so?

The amendment would require the Chancellor to review the impact of the clause on carbon dioxide emissions and the UK’s climate change targets, and to publish that analysis. As the Minister might confirm, road transport accounts for 22% of total UK carbon dioxide emissions—a major contributor to climate change. The European Union has agreements with motor manufacturers that aim to reduce average CO₂ emissions from new cars. Colour-coded labels, similar to those used on washing machines and fridges, are now displayed in car showrooms, showing how much CO₂ new models emit per kilometre. However, as traffic levels are predicted to increase, road transport will continue to be a significant contributor to greenhouse gas emissions.

Given that light vehicles and other vehicles covered by the clause contribute substantially to carbon and greenhouse gas emissions, will the Minister explain why no such climate impact assessment has been carried out? How will the Government take a lead internationally in the fight to keep average atmospheric temperatures below 1.5° C in the absence of full monitoring and measurement of all greenhouse gas emissions from all sources? He will surely also need to apply “polluter pays” disincentives in the form of increased taxes, for example, including relevant changes to VED.

Finally, will the Minister give a commitment that any such planned or future increase in VED will be recycled into helping drivers to adopt low-emission fuel alternatives, such as electric vehicles or, in future, hydrogen-powered vehicles—that is particularly important to help drivers who must use their vehicles for work purposes as well as for leisure activities—or, where convenient, into helping public transport alternatives, which are rarely available in some parts of the country and many rural areas?

Amendment 110 would require the Chancellor to review the impact of the clause on road congestion and traffic levels and to publish the results. Vehicle use affects our whole quality of local life: traffic can be dangerous and intimidating, dividing communities and making street life unpleasant, while air pollution and traffic noise can make urban living uncomfortable. As the Institute for Fiscal Studies points out, taxing only fuel consumption and car ownership, no matter how the taxes are differentiated by emissions and engine size, cannot result in anything approaching an optimal tax, because neither is a good proxy for the impact of car use on congestion.

Many journeys occur on relatively empty roads. Those journeys are overtaxed because the congestion cost imposed on other road users is minimal. Rural road users are overtaxed relative to those who regularly drive in towns during busy periods. The result is too much driving in towns relative to the amount of driving in less congested areas, and the build-up of noxious fumes and climate-changing pollution. Those adverse impacts are in addition to the disruption for all drivers, who are less able to move freely and go about their business or other driving activities efficiently and without wasting so much time stuck in their vehicles. Not only is that personally frustrating and a contributor to so-called road rage, but the impact on economic and social productivity should be minimised. Will the Minister therefore explain why there has been no assessment of the impact of the clause on road congestion and traffic levels, or publish any that has been carried out?

Amendment 111 is similar, requiring the Government to assess the impact of the clause on air quality standards. As the Minister must be aware, air pollutants in transport include nitrogen oxide, particles, carbon monoxide and hydrocarbons, all of which have a damaging impact locally on the health of people, animals and vegetation. Air quality in the UK might be slowly improving, but many areas still fail to meet the health-based national air quality objectives and European limit values, particularly for particles and nitrogen dioxide.

In town centres and along busy roads, vehicles are responsible for most local pollution. Vehicles of all types tend to emit more pollution during the first few miles of a journey, when their engines are warming up. Although new technology and cleaner fuel formulations will continue to cut emissions of pollutants, these benefits are being eroded by the increasing number of vehicles on the road, including motorcycles, and the number of miles driven. Can the Minister please explain why he does not believe that any such assessment, as set out in our amendment, is necessary to understand the impact of the clause on such a critical aspect of road use?

Amendments 108 and 111 also allow us to address a particular aspect of the total revenue impact and the impact of the measure on air quality: the specific amount raised from VED in London and the extra amount that would be raised as a consequence of the clause, and the consequent impact on air quality.

[Alex Sobel (Leeds North West) (Lab/Co-op)]

Are our amendments not particularly important in the light of fact that the Government have been taken to court three times by ClientEarth for failing European air quality standards and have lost three times?

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[Clive Lewis]

My hon. Friend makes a very valid point. The point has not been lost on many people, including in my own city of Norwich, where some people are part of a court case against the Government on this issue and on others relating to climate change. It is something that many people are concerned about, especially given the impact on very young children, who are often lower to the ground and closer to the fumes. I welcome the point my hon. Friend has raised.

This issue is directly relevant, because an element of VED revenue take, including the extra amount raised by the clause, is ring-fenced to provide a fund of about £500 million for air quality. Londoners are contributing to this, in common with the rest of the country. The Government have allocated about £255 million of that funding for clean air zone implementation and another £220 million for the clean air fund, including supporting measures to soften the impacts of clean air zones on the poorest and on small businesses. They also allocated an extra £20 million to £25 million in the Budget for city air quality measures.

London, however, is excluded from all that funding. The Government previously said that this is because London received a generous air quality settlement in 2015 under the then Mayor, who is now better known as the failed former Foreign Secretary. Frankly, that is an absurd claim, and I hope the Minister will not stretch his credibility by repeating it to the Committee today. In reality, the Government reduced the revenue grant by a far greater amount than any extra funding for air quality, reducing it from £700 million to nothing in this financial year. The Mayor’s office received no air quality funding from the Government as part of the last comprehensive spending review. Unlike other cities, London is not getting help to implement the ultra low emission zone, and nor can the Greater London Authority access the mitigation funding to help small businesses and low-income people in other cities to meet new vehicle emission standards. That is perverse.

In addition, that predates the changes to VED, which Londoners are contributing to, and ignores the fact that, quite frankly, the current London Mayor has far greater ambition on air quality than his predecessor did. London is introducing the first, biggest and most ambitious clean air zone—the ultra low emission zone—on 8 April 2019. This is an essential part of the national air quality plan to achieve compliance with our legal obligations.

[Anneliese Dodds (Oxford East) (Lab/Co-op)]

Is my hon. Friend aware that my city, Oxford, is due potentially to be the first city in Europe with a zero emissions zone? We need more support for such initiatives from the Government—more than has been forthcoming up to this point.

[Clive Lewis]

Yes, I was aware of that. Labour local authorities in Oxford and across the country do fantastic work on the issue, but they often do so in isolation and with limited support from central Government. The Government should really be getting behind them, given the severe impact that poor air quality can have, not just on children, but on all of us—it is now believed to be connected to the onset of Alzheimer’s and other degenerative diseases.

The London Mayor has proposed a targeted scrappage scheme that uses camera data to ensure that only vehicles that are regularly in the ultra low emission zone receive scrappage funding. The proposal meets the criteria set out in the five-case model in the Treasury’s Green Book and has a positive business case ratio.

Will the Minister confirm that none of the general VED revenue will be spent in London, because the Treasury plans to give it to Highways England to maintain strategically important roads outside London? Strategically important roads in London are maintained by Transport for London without any Government support or a share of VED income. Frankly, I suspect that any assessment made under our amendments would reveal that money is available from the proceeds of VED, which of course will rise under the new rates proposed in clause 57. I am also confident that any assessment under amendment 111 would show that reducing harmful emissions in London is vital to our national effort on climate change and air quality, let alone the fact that it would address the suffering of ordinary people in our most congested city.

It is fair to say that there is a strong suspicion that the Government’s political refusal to support Londoners owes more to Londoners’ refusal to support them at the ballot box than to the best interests of the city or the country as a whole. If the Minister wants to dispel that impression, will he clarify what share of VED revenue comes from London now and what share he expects to come from London after the passage of the Bill?

[Bambos Charalambous (Enfield, Southgate) (Lab)]

I am a London MP and my constituency borders the North Circular road. The Mayor has introduced a low emission zone for part of the road, but more is needed to reduce emissions. Does my hon. Friend agree that funding from this measure should go towards introducing low emission zones in other parts of London as well?

[Clive Lewis]

Yes, I do. I do not think that there is a lack of ambition from the Mayor of London or from local authorities around the country; ultimately what holds them back is a lack of resources. Will the Minister commit to using the revenue to offer London the same air quality funding that is being made available to other parts of the country, to ensure that ultra low emission zones are a success?

[The Exchequer Secretary to the Treasury (Robert Jenrick)]

It is good to be back, Mr Howarth. As we have heard, clause 57 will make changes to vehicle excise duty rates for cars, vans and motorcycles with effect from 1 April 2019. As announced in the Budget, those rates will increase in line with the retail prices index from that date. As a result, they will have remained unchanged in real terms since 2010, with additional significant incentives for ultra low and zero emission cars. That comes on top of the Government’s decision to freeze fuel duty rates for the ninth successive year, which by April 2020 will have saved the average car driver £1,000 compared with the pre-2010 escalator.

Cars first registered on or after March 2001 pay VED based on their carbon dioxide emissions; 87% of those cars will pay no more than £5 extra in 2019-20. From April 2017, a reformed VED system was introduced that strengthens the environmental incentives when cars are first purchased, with all cars paying a standard rate in subsequent years. The standard rate will increase by £5 only. Expensive cars with a list price of more than £40,000 pay an additional supplement for five years of paying the standard rate. That will increase from £310 to £320, so it is only a modest increase, and it will affect about 7% of new car purchases. Finally, the flat rate for vans will increase by £10, and for motorcyclists there will be no more than a £3 increase in rates. We believe that those are modest, incremental changes, which protect the public finances but also pay careful attention to the cost of living for motorists.

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[Robert Jenrick]

I take the hon. Lady’s point, but the information is mostly already in the public domain. It is not clear to me what information is not available. With respect to air quality, the Government will very shortly publish our ambitious clean air strategy. I encourage her and other hon. Members who, perfectly understandably, want to scrutinise our clean air commitments to pay attention to that document and scrutinise the Environment Secretary at that point. No doubt he will come to the House to make an announcement on the strategy.

The hon. Member for Norwich South also mentioned London. London already has a separate comprehensive funding settlement from the Department for Transport, which includes measures to deliver compliance with legal air quality limits. The Mayor has significant powers to take additional measures. Londoners also receive further funding for ultra low emission vehicles such as taxis. Indeed, measures in the Bill support the uptake of ultra low emission taxis. We took those measures a year early, as we will discuss later, and they have had a significant impact on the number of taxis on the streets of London. There are now between 500 and 600 electric or ultra low emission taxis that did not exist at the beginning of the year, incentivised by the measures taken by the Treasury. We are also supporting low emission buses and charging infrastructure. The Committee has already discussed the £200 million public investment in charging infrastructure, which we hope will spur at least a further £200 million of private investment. That will support charging infrastructure in all parts of the United Kingdom.

I hope hon. Members respect the fact that we consider the funding settlement for London’s roads as separate from that for the rest of the United Kingdom. That is a long-standing convention. We occasionally provide additional money. For instance, in the Budget the Chancellor provided more than £400 million for potholes. He included London in that, so London boroughs are able to take advantage of that money, but in general the funding settlement for London’s roads is separate from the negotiation with respect to Highways England.

I urge the Committee to reject the amendments, as I believe the reports they would require are unnecessary. The changes outlined in the clause will ensure that the Government continue to support motorists with the cost of living while ensuring that they continue to make a fair contribution to the public finances. As a result of our decision to hypothecate VED revenues, we will see a major increase in investment in our strategic roads, which I hope will benefit everyone in all parts of the United Kingdom. I therefore commend the clause to the Committee.

[Clive Lewis]

I thank the Minister for trying to answer some of our questions, but I still find myself with questions. It seems that there is a basic issue of transparency here. If, as he is saying, the Department for Transport has given certain funding to London—I am sure that is true—it would do no harm to make transparent what other funding is going to other parts of the country, so that the figures can be compared and contrasted to ensure that London is getting its fair share. The Mayor of London clearly does not believe that it is getting its fair share. It is the capital city—it has a large population, many vehicles on the road and a high population density—and all that is being asked for here is transparency.

On the issue of there being no assessment of the impact of the clause on road congestion on traffic levels, the Minister said that VED has a limited impact on that, but that is quite an arbitrary statement. Taxes have two effects: they can raise revenue and they can change behaviour. It is normally one or the other, but there are variations and it is sometimes a bit of both. I do not think it is beyond the ken of the Government to assess the potential impact of the VED increases on congestion levels, given that we have all agreed that air quality in this country is in a pretty poor state. Tens of thousands of people are dying prematurely or are adversely affected every single year.

To echo the sentiment of the hon. Member for Aberdeen North, it would not be too much trouble to write a report along the lines that we have asked for and make it available to Parliament. So go on, please.

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[Robert Jenrick]

My hon. Friend makes a very important point. It is certainly important to me, as a midlands and northern MP. The Government have made a significant effort both to increase the levels of public investment in infrastructure over the course of this Parliament to the highest levels in my lifetime—the highest level since the 1970s—and to redress the regional imbalance. Over the course of this Parliament, for example, investment in transport will be highest in the north-west of England, and London and the south-west will be among the lowest. There is a great deal more to do, not least because London has the ability to raise significant amounts of money from local government, which has co-funded projects such as Crossrail. My hon. Friend makes an extremely valid point.

[Clive Lewis]

I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 57 ordered to stand part of the Bill.

Clause 58

VED: taxis capable of zero emissions

[Clive Lewis]

I beg to move amendment 112, in clause 58, page 41, line 16, at end insert—

‘(6) The Chancellor of the Exchequer must review the revenue effects of the changes made to the Vehicle Excise and Registration Act 1994 by this section and lay a report of that review before the House of Commons within six months of the passing of this Act.’

This amendment would require the Chancellor of the Exchequer to review the revenue impact of Clause 58.

[The Chair]

With this it will be convenient to discuss the following:

Amendment 113, in clause 58, page 41, line 16, at end insert—

‘(6) The Chancellor of the Exchequer must review the effects on the taxi and private vehicle hire sectors of the changes made to the Vehicle Excise and Registration Act 1994 by this section and lay a report of that review before the House of Commons within six months of the passing of this Act.’

This amendment would require the Chancellor of the Exchequer to review the impact of Clause 58 on the taxi and private car rental industry.

Amendment 114, in clause 58, page 41, line 16, at end insert—

‘(6) The Chancellor of the Exchequer must review the effects on levels of CO emissions and the UK’s ability to meet its fourth and fifth carbon budgets of the changes made to the Vehicle Excise and Registration Act 1994 by this section and lay a report of that review before the House of Commons within six months of the passing of this Act.’

This amendment would require the Chancellor of the Exchequer to review the impact of this measure on CO2emissions and climate change targets.

[Clive Lewis]

I am pleased to be speaking—again—to our amendments relating to clause 58, on vehicle excise duty and taxis capable of zero emissions. The clause seems to rectify an obvious mistake made by the Treasury during the 2017 Budget, which saw electric vehicles fall into the luxury vehicle segment of the new VED regime for cars costing over £40,000.

VED rates are based on carbon emissions, and zero-emissions vehicles below £40,000 have a zero standard rate and a first year rate. Standard rate on zero-emissions vehicles above £40,000 is currently £310 a year for the first five years. To include electric vehicles in that policy was clearly a major oversight by the Treasury in last year’s Budget. The correction, although somewhat late in the day, is none the less welcome and, indeed, essential if we are to seriously encourage the uptake of electric vehicles, specifically taxis.

[Anneliese Dodds]

I am sure that my hon. Friend is aware that back then, Opposition Members warned about the potential unintended consequences of those measures, including for the private hire and taxi industries. Those warnings were not heeded at the time. It is rather frustrating that they have only now been dealt with.

[Clive Lewis]

My hon. Friend makes a very good point; that is one lost year of support.

To include electric vehicles—ah, I have already said that. I will recap, though. [Laughter.] To include electric vehicles in that policy was clearly a major oversight by the Treasury in last year’s Budget. The correction, although somewhat late in the day, is none the less welcome and, indeed, essential if we are to seriously encourage the uptake of electric vehicles, specifically taxis.

That is particularly pertinent as local regulations are tightening around clean air and greenhouse gas emissions, as we have seen with the implementation of the ultra low emissions zone in London. Amendments 112 to 114 require the Government to undertake a review that we believe is essential to understand the consequences of the clause, which range over the impact that it is likely to have on the Exchequer, on the taxi and private car rental industry, and on CO₂ emissions and climate change targets. Amendments 112 and 113 focus on the economic impact of the clause, both on the Exchequer and on taxi and private car rental companies. Can the Minister provide an assessment of the revenue implications of the measure?

Similarly, while we understand from the published documents relating to the clause that industry response to the Government consultation was supportive, will the Treasury do further analysis of the potential economic impact on taxi companies and the private car rental industry, should the change come into effect? The Minister may wish to resist the amendments, but regardless of any legal obligation, will he commit to conducting such an analysis and presenting it to the House in due course?

Amendment 114 refers to carbonisation and improving air quality. It would seem, in that respect, that taxis are low-hanging fruit. They are used frequently, often in urban areas with poor air quality. Similarly, according to the Mayor of London, drivers stand to benefit from lower fuel costs—by around £2,800 a year—and from avoiding present and future congestion and air quality charges. We believe, however, that the Government have failed to put in place necessary fiscal incentives to encourage the transition to the electric vehicles needed to ensure a reduction in CO₂ emissions. Simply removing the excess tax for luxury vehicles, as the clause would do, does not go far enough to encourage the uptake of zero-emission vehicles.

The primary driving forces behind the reluctance to take up electric vehicles are cost and an anxiety about range. The costs of electric vehicles are explained by high manufacturing costs, specifically of their batteries. The anxiety about range affects taxi drivers far more than private vehicle owners or private car hire companies, as they do not have access to the range in the ultra-low emissions vehicle segment of the market for mid-range to luxury. That is due to licensing conditions, as they need to fulfil accessibility requirements. In London, for example, that means that many drivers are mandated to buy a London-style hackney taxi in many districts. Will the Minister agree to assess the impact of clause 58 on CO₂ emissions and the UK’s climate change targets, and whether that policy goes far enough in encouraging the purchase of zero-emissions taxis?

I have a few questions on the clause. At present, a grant of £7,500 is available for new zero-emissions taxis. We believe that the Government should be looking to increase available grants and encourage the transition to electric vehicles, specifically taxis, in areas outside Greater London. There are currently only a few limited pots of funding, not all of which are available for taxis, and they are largely skewed towards Greater London.

Similarly, the Government have yet to invest a penny of the £400 million charging fund announced in the 2017 Budget, half of which should be public money, with the other half contributed by the private sector, as we have already heard. Will the Minister tell us whether the issue that the clause seeks to rectify will aid the Government in finally setting up the charging fund that they promised to deliver to encourage the use of zero-emissions vehicles? Will he give us a clear timetable of when that fund will be operational? Will he commit that he or another relevant Minister will come back to the House with more detail when it is due to launch?

Available charging infrastructure is a requirement of accelerating the transition. Outside London and a few select places, availability is poor. Drivers face a postcode lottery that is a barrier to electric vehicle growth. For example, there are more chargers available in the Orkney Islands than in Blackpool, Grimsby and Hull combined. Even if grants are available, drivers in some areas will be unable to perform their work using EVs, due to the unavailability of charging infrastructure. It could therefore be argued that even if the Government increased grants and ensured that availability, poverty of EV infrastructure would mean that a majority of taxis would not be in a position to benefit from the change suggested in clause 58. Will the Minister comment on that? What assessment has been undertaken of the availability and adequacy of the infrastructure, and what steps are being taken to ensure that it does not undermine the good intentions behind the clause? Although the current situation is a mistake, it should not have happened in the first place. The measure is important in seeking to undo the bias created by classing zero-emissions taxis as luxury vehicles, and in encouraging the uptake of zero-emissions vehicles.

We will support the clause—we ask only that the Government assure us that the right analysis will be done to assess the impact of the measure on the Exchequer, the companies that will be affected, and the environment. We urge the Government to take such matters into consideration. I hope the Minister can give us some assurance on those points.

[Robert Jenrick]

I thank the hon. Gentleman for those questions. I hope that I can answer them all and reassure him. Clause 58, as we have heard, makes changes to ensure that purpose-built taxis that are capable of zero emissions do not have to pay the VED supplement applicable to expensive vehicles, which are those with a list price of more than £40,000. Having listened to representations on the issue, the Government announced in March that the exemption for such taxis would be brought forward a year earlier than planned.

We do not believe that the purchases of many vehicles, if any, were adversely affected. For example, the London Electric Vehicle Company, which manufactures these vehicles, had sold almost no vehicles by the time of the announcement and has subsequently sold more than 500 vehicles—I do not have the exact figures but I am happy to supply them to the hon. Gentleman—so from the time of our announcement in early March to the present day, the incentives have clearly made a significant difference in stimulating the market. We do not believe that many purchases, if any—I will confirm that point—were disadvantaged as a result of this matter, which was an unintended consequence of the earlier policy.

An exemption will encourage the transition to ultra-low and zero-emissions taxis. The figures show that, certainly in London, there has already been a significant take-up in vehicles, although it is less in other parts of the United Kingdom. I believe that the manufacturers are now targeting other cities, including Manchester and Nottingham—my nearest city—to improve their air quality. We want to see that rolled out as soon as possible in all part of the United Kingdom.

It will make the system fairer. The Government recognise that a number of technical requirements exist for purpose-built taxis, including, as the hon. Gentleman said, access for disabled passengers and turning circles, meaning that only a limited number of options are available. Most other motorists have a range of vehicles available to them, many costing less than £40,000, and can therefore choose not to pay the supplement.

In passing, the hon. Gentleman mentioned other private hire vehicles. Our argument—a valid one, I think —has always been that there are a range of other options available to drivers of private hire vehicles. They do not have to purchase a vehicle costing over £40,000. That would be a choice because they want to enter a particular segment of the market. Those driving a registered London taxi do not have that discretion. Therefore, it would not be right for drivers buying a taxi capable of zero emissions to pay the VED supplement targeted at cars at the luxury end of the market. As the supplement is only due from the second licence onwards, this means that almost all taxi drivers who have purchased an eligible taxi from April 2018 will never have to pay the supplement. This will save those drivers up to £1,600 in total.

The changes made by the clause will provide the power to exempt purpose-built zero-emissions taxis from the supplement for expensive cars, through regulations. This will enable the Government to apply the exemption to further models as they become available in the future.

I will turn briefly to the amendments tabled by the hon. Member for Norwich South. Amendment 112 would require the Government to review the revenue effects of the changes made by the clause. The Government have already published a tax information impact note, in line with normal practice, which sets out that the revenue impact of the changes will be negligible. Amendments 113 and 114 would require the Government to review the effect of the clause on the taxi and private hire sectors, and the impact on carbon dioxide emissions and our carbon budgets. The measure applies to purpose-built taxis only, enabling a quicker switch to greener models by saving drivers that £1,600. It is not expected to have an impact on the number of taxis on the roads, but it is intended to increase the proportion of those that are capable of zero emissions. By strengthening the incentive to purchase such taxis over conventionally fuelled alternatives, the measure is expected to have a small positive impact on our ability to meet our fourth and fifth carbon budgets, although isolating its impact would be challenging and uncertain. I am not sure what value, if any, that analysis would provide. Again, these impacts were covered in the published tax information and impact note. I respectfully urge the Committee to reject the amendments, on the grounds that they are unnecessary.

The hon. Gentleman asked important questions about electric vehicle charge points. Clearly it is important for taxi drivers in London, and indeed in any other part of the United Kingdom, to know that the relevant charge points are available to them. Range anxiety is just as valid, if not more so, for a taxi driver as it is for a private citizen. Significant investment is underway in London, particularly for fast charge points, which are critical for taxi drivers, so they do not have to spend hours waiting to recharge or top-up their vehicle. The Mayor of London is leading that effort and making good progress.

With regard to the charge point infrastructure fund, which I spoke about in relation to the previous clause, we are close to appointing a fund manager and expect it to be launched in January or February. I am happy to write to him with more details and to inform him when it is launched, but I expect that to be at the very beginning of the new year.

[Clive Lewis]

There is £200 million in public money and £200 million in private money. Will the Minister confirm whether the £200 million in private funding has actually arrived and is available for the Treasury to spend on EV infrastructure?

[Robert Jenrick]

The answer is that the fund has not actually been launched yet. We are committed to the £200 million, but we will not know until the fund is launched the amount of private capital we are able to crowd in as a result of that. I am happy to write to the hon. Gentleman with more detail about that. As I said, I expect in the first two months of the new year to be in a position to launch the fund and to inform hon. Members across the House of its detail, should they wish to direct businesses in their constituencies that are interested in this area to it. With that, I commend the clause to the Committee.

[Clive Lewis]

I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Amendment proposed: 114, in clause 58, page 41, line 16, at end insert—

“(6) The Chancellor of the Exchequer must review the effects on levels of CO₂ emissions and the UK’s ability to meet its fourth and fifth carbon budgets of the changes made to the Vehicle Excise and Registration Act 1994 by this section and lay a report of that review before the House of Commons within six months of the passing of this Act.”—(Clive Lewis.)

This amendment would require the Chancellor of the Exchequer to review the impact of this measure on CO₂ emissions and climate change targets.

Question put, That the amendment be made.

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HGV road user levy

[Clive Lewis]

I beg to move amendment 115, in clause 59, page 44, line 9, at end insert—

“(11) The Chancellor of the Exchequer must review the revenue effects of the changes made to the HGV Road User Levy Act 2013 by this section and lay a report of that review before the House of Commons within six months of the passing of this Act.”

This amendment would require the Chancellor of the Exchequer to review the revenue impact of Clause 59.

[The Chair]

With this it will be convenient to discuss the following:

Amendment 116, in clause 59, page 44, line 9, at end insert—

“(11) The Chancellor of the Exchequer must review the effects on levels of CO₂ emissions and the UK’s ability to meet its fourth and fifth carbon budgets of the changes made to the HGV Road User Levy Act 2013 by this section and lay a report of that review before the House of Commons within six months of the passing of this Act.”

This amendment would require the Chancellor of the Exchequer to review the impact of Clause 59 on CO₂ emissions and climate change targets.

Amendment 117, in clause 59, page 44, line 9, at end insert—

“(11) The Chancellor of the Exchequer must review the expected effects on the volume of traffic on the roads of the changes made to the HGV Road User Levy Act 2013 by this section and lay a report of that review before the House of Commons within six months of the passing of this Act.”

This amendment would require the Chancellor of the Exchequer to review the impact of Clause 59 on road congestion and traffic levels.

Amendment 118, in clause 59, page 44, line 9, at end insert—

“(11) The Chancellor of the Exchequer must review the expected effects on air quality standards of the changes made to the HGV Road User Levy Act 2013 by this section and lay a report of that review before the House of Commons within six months of the passing of this Act.”

This amendment would require the Chancellor of the Exchequer to review the impact of Clause 59 on air quality standards.

Clause stand part.

[Clive Lewis]

I begin by welcoming the long overdue change to the heavy goods vehicle road user levy. As the Minister will no doubt lay out, the clause will differentiate the rates paid by efficiency, rewarding freight operators for using less polluting trucks on the UK’s roads.

Department for Transport statistics show that HGV traffic has grown on average by 2.3% per year since 2008, making it the second fastest growing type of traffic in that period. That has resulted in HGV traffic increasing, on motorways and rural A roads in particular, to an overall 17.1 billion vehicle miles. Inevitably, that has had an enormous impact on greenhouse gas emission and climate change targets, road congestion and traffic levels, road safety, and air quality—the key issues on which our amendments are based.

Amendment 115 would require the Chancellor to review the revenue impact of the clause. We believe that there is an urgent need for a financial assessment of the measure, as the freight sector has been left in the dark about the overall impact of these tax reforms. The Department has failed to publish any conclusions from its call for evidence, which closed in January. We therefore argue that it is the Treasury’s responsibility either to produce the evidence and conclusions or to undertake any new research that is needed.

We believe the analysis should focus on the costs and benefits of remaining on a time-based charging system rather than one based on distance. Will the Minister tell us what comparative analysis has been undertaken to date by Government, and agree either to publish it or to commission the relevant work and publish it in due course?

The analysis should also assess how well the HGV road user levy reflects the costs imposed by road freight on other road users, the road network itself and society at large. Metropolitan Transport Research Unit research, issued in April 2017 and sponsored by the DFT, suggests

“that a very significant amount of the real marginal costs imposed by the largest HGVs is not being met.”

That has led to poor economic efficiency and a misallocation of scarce resources. Will the Minister undertake a review of the real marginal costs imposed by the latest HGVs so that we may assess their relative economic efficiency?

Similarly, when considering the overall revenue effect of differing levels of road user levy for different categories of heavy goods vehicles, we believe it is important to factor in the huge disparity between the costs of wear and tear on road surfaces caused by HGVs and those caused by cars and lighter vehicles. The Campaign for Better Transport estimates that the standard 44-tonne HGV does 100,000 times more damage to road surfaces than a Ford Focus.

[Jonathan Reynolds (Stalybridge and Hyde) (Lab/Co-op)]

One hundred thousand times!

[Clive Lewis]

Yes. An update of the DFT’s mode shift benefit values technical report in 2015 doubled previous estimates of the cost per HGV mile to road infrastructure. Campaign for Better Transport research suggests that HGVs are paying for only 11% of their UK road infrastructure costs, predicting a shortfall of about £6 billion.

Will the Minister tell us whether the Government have made their own such estimate during the development or passage of the Bill, or does our amendment give them the opportunity to assess it for the first time? Will he produce a fresh assessment of the cost shortfall that the new HGV road user levy rates will leave for other road users and taxpayers in general to pick up? In any case, will he give us the Government’s view of whether the total revenue raised will reflect a fair share of the total tax take from road users, as compared with that of those who drive smaller vehicles? In the Chamber, many MPs complain about potholes and funding for them. The statistics give a clue as to where in part the responsibility lies for so many potholes on our roads.

[Bambos Charalambous]

As the driver of a Ford Focus, I want to clarify something. Does my hon. Friend agree that yes, a greater proportion of the money ought to go towards repairing potholes, because that will leave more money available for schools and other resources?

[Clive Lewis]

My hon. Friend makes an interesting point from his Ford Focus. The issue is that there is a massive externality that those HGVs are causing on our roads. No one wants to see HGV businesses go out of business, but everyone in Committee would agree that it is right for people to pay the appropriate level of tax for the damage that they cause to our road infrastructure. If they are to be subsidised, that subsidy ought to be transparent, so that we can appreciate and make a proper assessment of the value that HGV companies contribute to our economy, while taking into account the externalities that they create as well, because there are impacts on other tax areas where the Government would need to spend—he mentioned schools, and there are hospitals and so on and so forth.

Amendment 116 would require the Chancellor to review the impact of the clause on CO₂ emissions and climate change targets. As I have described, the use of HGVs has increased hugely in recent years. Inevitably, that has had an adverse effect on the UK’s greenhouse gas emissions. Studies from the Government’s own 2017 freight carbon review proved that HGVs are also disproportionately responsible for pollution when compared with other road vehicles. In 2014, HGVs were estimated to account for about 17% of UK greenhouse gas emissions from road transport, and about 21% of road transport nitrogen oxide emissions, while making up only 5% of vehicle miles. Will the Minister confirm those figures?

Clearly, if we are to stay in line with EU emissions targets, which have themselves been agreed at the necessary level to ensure that we meet our Paris climate agreement targets, CO₂ emissions from HGVs must drop by at least 15% by 2025, and be at least 30% lower by 2030. Will the Minister agree to conduct an analysis of just how far the changes in the clause go towards the country’s ability to meet our climate targets? Will he also consider addressing the generality of the need to meet those targets with either taxation of the sector, or other measures that the Government might put in place to meet our obligations and to safeguard our shared environment?

Amendment 117 would introduce a similar requirement to review the impact of clause 59 on the overall volume of traffic on roads, which is fairly self-evidently a major contributory factor to road traffic congestion. The Centre for Economics and Business Research estimates that congestion will cost the economy as much as £307 billion by 2030. Similarly, the latest INRIX figures show that the UK currently ranks as the fourth most congested developed country, and the third most congested in Europe.

Will the Minister tell us what assessment the Government have made of the economic—not to mention environmental —impact of traffic congestion? I hope he will agree that it is undeniable that the increase in HGV traffic is contributing to the problem. Is he willing to undertake a formal assessment of the impact of HGVs on overall road congestion and traffic, which in turn clearly has a significant impact on the economy? If he intends to resist the amendment, perhaps he will tell us what assessment the Government have made to date and how it informed their choice of the relative levels of taxation that the clause sets for more or less polluting vehicles.

The amendment also addresses the important issue of road safety. The volume of traffic is clearly relevant to road safety outcomes. The Campaign for Better Transport’s analysis of Department for Transport road safety statistics shows that HGVs are twice as likely to be involved in a fatal collision on minor roads as they were 10 years ago. In 2016, HGVs were almost seven times more likely than cars to be involved in fatal collisions on minor roads, despite making up just 5% of overall traffic miles. There has been little or no improvement in recent years in the rates of fatal collisions involving HGVs either on motorways or on A-roads. In 2014, HGVs were involved in almost half of all fatal collisions on motorways, although they accounted for only 11.6% of the miles driven on them. Will the Minister tell us whether, in the course of considering the relative levels of taxation for different types of HGV, the Government have made any assessment of the impact on road safety of HGVs on motorways and A-roads across the UK? In developing the clause, did they consider whether the tax system for vehicles might in any way be used to improve the safety record of HGVs?

Amendment 118 would make equivalent provision in relation to air quality standards. In launching its call for evidence about the HGV road user levy, the DFT conceded the importance of working

“with industry to update the Levy so that it rewards hauliers that plan their routes efficiently, to incentivise the efficient use of roads and improve air quality.”

As the results of the consultation are yet to be published, I ask the Minister whether the Treasury is able to review whether the changes proposed in clause 59 will succeed in encouraging an improvement in air quality standards.

If the Minister does not intend to accept the amendment, perhaps he will tell the Committee whether, and when, the Government intend to publish the evidence they have gathered, and their formal response to it, for scrutiny by the House and the public. Perhaps he will also confirm that the evidence that they have gathered to date shows that, nationally, 20% of lorries are now driving around completely empty and only 36% are full by volume. Not only is that a highly inefficient use of scarce road space, but it exacerbates the existing problem that more than 40 towns and cities in the UK have already exceeded air pollution limits set by the World Health Organisation. Can he confirm that air quality standards will be assessed when looking at the important impacts of the HGV road user levy? Can he give us any timetable or detail?

The Committee will note that our amendments have a similar theme. Perhaps I can ask the Minister to outline in general terms what assessment or review of the success of these measures the Government have planned, what impacts they will consider, how they will measure them and how they will publish their results. I also reiterate my point about the Government’s various calls for evidence that relate to the measure in clause 59. Will he commit to publishing the evidence received and giving a formal response from the Government? We often hear about evidence-based policy making, but as legislators we, too, need to hear that evidence if we are to agree to the legislation that implements that policy.

I look forward to the Minister’s response to our amendments, but I want to make one final argument about the clause itself. While it is to be expected that the reforms in clause 59 will lead to improvements in fuel efficiency and reductions in pollution from HGVs on Britain’s roads, we believe that those reforms are incomplete and unsatisfactory because the HGV levy will continue to be charged according to time spent on UK road networks. It is widely acknowledged that the existing time-based charging system is inefficient and not cost-effective. As it stands, the current daily charge bears no direct relationship to the amount of use of the network and therefore the system does not incentivise efficient use of the network. To improve economic efficiencies, there should be a direct relationship between taxes per mile travelled and the marginal cost that a distance-based charging system can provide.

--- Later in debate ---

[Robert Jenrick]

I shall try to respond to the many points that have been raised. My hon. Friend the Member for Poole in part answered the challenge from the hon. Member for Norwich South as to whether hauliers pay their fair share. It is worth remembering that they pay a range of taxes, as my hon. Friend pointed out. They pay the levy that we are discussing and vehicle excise duties. They also pay tax on fuel. Taken as a package, hauliers pay a considerable amount of tax. British hauliers as an industry are highly taxed, going by European and international comparisons. The reforms mean that some hauliers will pay more. The VED system is based on both weight and axles, so to some extent it reflects wear and tear on the roads, although I appreciate the point made by the hon. Member for Norwich South that HGVs make a significant impact on the roads. I did not realise it was 100,000 times that of a Ford Focus, but that puts things in perspective.

The hon. Gentleman asked whether the HGV levy was specifically hypothecated to tackle such issues as potholes and strategic roads. It is not. However, as I have described, the VED system will be, which will significantly increase the amount of investment that the country makes in roads at every level: £28.8 billion is the spending envelope for roads investment announced by the Chancellor in the Budget, and £25 billion of it will be spent on strategic roads in the road investment strategy that will be announced later next year. That will be about 170% of the first road investment strategy, so there is almost double the amount of investment going into roads to tackle congestion and improve strategic roads in all parts of the country.

The hon. Member for Aberdeen North made a valid point about the European standards. It is our intention to remain closely aligned to those. That seems sensible and it is our intention in a number of respects, such as climate change, emissions and carbon budgets, as is indeed set out elsewhere in the Bill. For example, we have not yet made a final decision on carbon trading, but we shall monitor it and review the matter. If I can give the hon. Lady any further information I will write to her to set out the position of the Department for Transport.

On the broader question of why we are not using the VED system for HGVs to encourage greater take-up of zero-emission or ultra-low emission HGVs, it comes back to the point made by the hon. Lady: currently there are very few commercially available ultra-low emission alternatives for HGV drivers, which prevents the broad uptake of new vehicles. Clearly, we would like to do all we can to stimulate the market and see rapid progress, but we have to be mindful of that. Through the Road to Zero strategy that was published earlier this year, the Government have committed to working with the industry to reduce HGV greenhouse gas emissions significantly by 2025. The strategy sets out the Government’s plans to use a variety of different tools to meet that commitment.

The hon. Member for Norwich South made a number of important points about HGVs and road safety. I will write to him on that and find out what information I can about DFT’s work, because it is important that we take note and see what can be done to improve road safety, particularly as the number of vehicles going down smaller roads and country lanes as a result of online shopping is becoming more important. Through the Road to Zero strategy and other initiatives, DFT is paying attention to how we can improve the last mile of delivery to tackle air quality and reduce the number of vehicles on our roads.

The clause introduces a lower rate of HGV levy for vehicles that meet the latest emission standard, and a higher rate for vehicles that do not. As we have discussed, the change will incentivise hauliers to move to cleaner, less-polluting vehicles. It is only right that everyone plays their part in protecting our natural environment so that we leave a cleaner, greener Britain for our children. HGVs currently account for approximately 20% of harmful nitrogen oxide emissions from road transport but only 5% of total miles travelled, so they will play an important part in tackling the problem.

The changes made by the clause will reduce HGV levy rates by 10% for vehicles that meet the latest emission standards, reflecting the fact that they generate 80% less NOx emissions than the older HGVs. The clause will also increase rates by 20% for HGVs that do not meet those standards. Many hauliers will pay less as more companies move to cleaner lorries—we have introduced it to improve air quality and not to raise revenue.

On amendments 115 to 118, to which the hon. Member for Norwich South spoke, the Government have published a tax information impact note outlining the impact assessment of these reforms, including the forecasted revenue effects, which have been certified by the Office for Budget Responsibility. I believe those amount to £25 million over the scorecard period. These reforms to the HGV levy are part of wider action by the Government to tackle challenges in the areas highlighted by the amendments. Isolating the impact of the HGV levy reforms would be extremely challenging and, I suspect, of limited use, as they cannot be separated from other actions the Government is taking in these areas.

The Government’s draft clean air strategy sets out an annual reporting process for the monitoring of air pollution, which is the appropriate mechanism for assessing the effectiveness of those changes and others over time, rather than introducing a new method to review it, as proposed by the amendments. I therefore urge the Committee to reject the amendments. The changes outlined in the measure will ensure that both foreign and domestic HGVs play their part in meeting the Government’s air quality targets.

[Clive Lewis]

I thank the Minister for his contribution. I note that he was unaware of the 100,000 figure between the damage caused by an HGV compared with the damage caused by a Ford Focus. Have the Government made any assessment of whether HGVs currently cover the cost of the impact they have on UK road infrastructure? It sounds like they have not, but the Treasury should be able to amend VED or the taxation system that it will use in order to better reflect that.

To pick up on some of the comments made by the hon. Member for Poole, we are talking about externalities. Everyone wants to see everybody pay their fair share, and I am aware that haulier companies pay not just the excise for HGVs, but road tax and fuel tax. So do drivers of Ford Focuses: they also pay their fair share of tax, including income tax and other taxes as well. We all pay our fair share of tax, but if HGVs are damaging the roads to that extent and having such an impact in terms of road traffic accidents, that calls into question whether they are paying excise duty appropriately, and whether that excise duty is a genuine reflection of the cost that those HGVs are exacting on society and on our road systems.

Finance (No. 3) Bill (Eighth sitting)

Clive Lewis Excerpts

Thursday 6th December 2018 Public Bill Committees

[Kirsty Blackman]

I will not speak for a terribly long time, because I am sure the Committee is not keen on being detained for any longer than necessary.

The devolution of air passenger duty has not been properly completed, so the Scottish Government are unable to put in place air departure tax, which we committed to introducing, or to make our proposed changes first to halve that tax and then to remove it completely. We are keen to do that because we believe it is important that we can attract people to visit, live and work in our country, and those steps were in the manifesto we were voted in on in 2016.

Complete devolution has not happened due to an issue with our exemption for the highlands and islands. I understand that the UK Government and the Scottish Government are working on that. It would have been great if it had been dealt with before, because we hoped to have air departure tax in place in April. It has not been dealt with, but I get the impression that people are still around the table trying to solve the issue, which is good news.

In lieu of APD being properly devolved and our having the powers to make our planned changes in Scotland, we support a UK-wide reduction in APD. That is why we tabled amendment 104, which would require the Chancellor of the Exchequer to

“review the effects of a reduction in air passenger duty rates from 1 April 2020”—

we chose that date because the industry has asked us to ensure that any change in rates is not made immediately—

“and lay a report of that review before the House of Commons within six months”.

The review would have to

“consider the effects of a reduction on—

(a) airlines,

(b) airport operators,

(c) other businesses, and

(d) passengers.”

One of the key issues for us is that the comparatively high taxes in the UK sometimes cause difficulties for airlines and airport operators. If we take into account VAT, air passenger duty and other taxes, the UK is one of the more highly taxed places to visit as a tourist. We are keen to see changes so that we can secure the routes we have and run more routes.

Given the remoteness of some communities in Scotland, it is important that we have good access to flights. I live in Aberdeen, which is about two and a half or three hours’ drive from Glasgow and Edinburgh. There are international flights out of Aberdeen, but not as many as I would like—there are lots of places we cannot get to unless we drive to Glasgow, Edinburgh or even further afield. I have previously looked at flying from Newcastle to get a better range of flights.

I would appreciate it if the Minister, if he cannot accept the amendment, talked a bit about what he thinks would be the impact on airlines, airport operators, other businesses and passengers of reducing air passenger duty. If he does not want to talk about that because it is not the Government’s policy to reduce air passenger duty, it would be interesting to hear why it is not their policy given my concerns. We are calling for a review because the amendment of the law resolution does not allow us to change it in a serious way. I hope I have laid out the Scottish National party’s position clearly.

[Clive Lewis (Norwich South) (Lab)]

With your leave, Mr Howarth, I will speak to amendments 120 and 121, and press them to a vote if necessary, before moving on to other significant questions that we feel need answering in relation to the clause. As numerous environmental non-governmental organisations, scientists and even the chair of the Committee on Climate Change have observed, the Government are failing to tackle the climate crisis that is already upon us, and we believe that that is reflected in their policy on air travel. There is an awkward mismatch between our world-leading climate change legislation and our policy and prevailing political attitudes towards aviation.

The purpose of amendment 120 is to force the Government to share with Parliament the impact, or the lack thereof, of their proposed changes to air passenger duty on a variety of environmental concerns. The Committee will be aware that the projected impact of climate change poses severe risks, not just to the natural environment but to the prosperity of the British nation and the welfare of the people we represent in the House.

Aviation has a significant and growing impact on climate change. Emissions from the sector rose by 1.2% in 2016. It currently represents about 7% of the UK’s total emissions yet, on current projections, that figure will reach 25% by 2050 as a result of increases in aviation demand and carbon reduction in other sectors. That is because aviation currently enjoys a uniquely generous target under our national framework for reducing emissions through to 2050—namely, it is not expected to make any contribution in our carbon budgets to those reductions, and is instead required to conform to a level of emissions in 2050 that are no higher than 2005 levels, which is 37.5 megatonnes of carbon dioxide. That is known as the Committee on Climate Change planning assumption for aviation. That generous target is in recognition of the difficulty of decarbonising air travel through technology and operational improvement, and of the utility and social value of air travel for those who are lucky enough to use it.

Department for Transport aviation forecasts show that UK aviation emissions are currently on course to exceed even that generous limit, thus potentially jeopardising our ability to meet our overall climate change targets in the form of the fourth and fifth carbon budgets. The Committee on Climate Change has repeatedly called on the Government to develop a robust domestic mitigation policy framework for international aviation emissions for flights taking off from UK airports. Most recently, its 2017 and 2018 progress reports in Parliament highlighted the need for a new strategy and new policies to ensure UK aviation emissions are at about 2005 levels in 2050. In its 2018 assessment of the Government’s clean growth strategy, it warned that they are falling far short of the necessary action. It noted that no progress has been made on this requirement.

The Committee on Climate Change is currently working to update its advice to the Government on mitigating aviation emissions. It is due to report on that in the spring—we await that with interest. One aspect of its guidance that is unlikely to change and is highly salient to the clause is the recognition that the UK’s participation in international mitigation programmes for aviation emissions, such as the International Civil Aviation Organisation’s CORSIA—carbon offsetting and reduction scheme for international aviation—agreement to offset growth from 2020 and the EU’s emissions trading scheme will simply not be sufficient to keep UK aviation emissions within safe limits, as defined by the Committee on Climate Change.

Likewise, even if some fairly heroic assumptions are made about technology, operational improvements and the uptake of genuinely sustainable biofuels, the projected growth in demand for air travel is expected to outstrip these efficiency gains, causing emissions to rise above the safe limit. In 2009, the Committee on Climate Change advised the Government that:

“Deliberate policies to limit demand below its unconstrained level are therefore essential if the target is to be met.”

That has remained its formal position ever since.

The statutory advice to Government by the committee—renowned, by the way, as among the best climate change advisers in the world—is therefore that the growth in demand for UK air travel must be limited if our climate change targets are to be met. That is clear. However, no Government, least of all this one, has yet proposed any such policies. On the contrary, this Government have acted to remove constraints to growth in UK air traffic, such as by approving a third runway at Heathrow Airport without any corresponding measures to meet climate change commitments.

That is why we seek through amendment 120 to compel the Government to review air passenger duty, its effect on the demand for air travel and the consequent effect on greenhouse gas emissions. That is not to say that APD is the only lever that the Government have, but it is incumbent on them to make it clear how they will achieve the climate objectives agreed by consensus of the House. Perhaps the Minister will answer some questions—I am sure the Committee on Climate Change will be interested in hearing the answers.

What impact do APD rates have on demand today? How high would APD rates need to be, or what other measures would have to be in place, to constrain growth in emissions to within the safe limits advised by the Committee on Climate Change? Was that even a consideration of the Government when developing the Bill? Assuming that the Minister agrees it is indeed the Government’s goal, he might say that APD is not the best or most equitable route to achieve that goal, but we need to be clear that there is another route. The answers we hope to receive will help us all as legislators to decide whether APD and the suggested rate changes are indeed an effective mechanism to achieve the Government’s stated policy, or whether alternative measures would be more economically efficient and fiscally progressive.

We understand that limiting growth in demand for air travel is politically fraught, and that important social justice dimensions must be considered when designing any policies to achieve that aim. The issue, however, cannot be ducked forever. The Government have been, and continue to be, remiss in their duties by failing to make any assessment of the potential for different fiscal measures or other policy approaches to constrain UK aviation emissions in line with Committee on Climate Change guidance.

Modal shift from air to rail is an important feature of nearly all decarbonisation scenarios intended to deliver zero net emissions by the middle of the century, as per the UK commitment under the Paris agreement. At the moment, however, it is much cheaper to travel from London to Edinburgh by plane than by train. That is in part a product of the chronic failure of Britain’s ill-advised experiment with the privatisation of our railways, but there is an argument that it is also due to tax advantages enjoyed by aviation over other modes of transport, which brings us back to the clause.

Under international air service agreements, it is prohibited to tax aviation fuel—an anachronism from the earliest days of international aviation, when only a handful of passenger planes were in the sky and Governments sought to do all they could to nurture this exciting new economic sector. Seventy years later, more than 23,000 aircraft are in the global fleet, and yet this highly mature industry continues to enjoy tax-free fuel, a perk it has retained through a combination of lobbying and the structural difficulties of levying a tax on an activity that, by its nature, crosses national boundaries.

That anomaly is the subject of intense debate in France, where motorists are rightly pointing out the gross disparity between the high rates of duty in the form of a carbon tax levied on petrol and diesel at the pump, and the total absence of taxation on aviation fuel. Former French environment Minister, Nicolas Hulot, last week joined calls for kerosene to be taxed. Serving members of the French Government say that they are now speaking with the European Commission.

In addition to duty-free fuel, airline tickets, planes, parts, repairs and fuel are all zero-rated for VAT, alongside items such as baby clothes and wheelchairs. There is also the duty-free shopping in airports. Given that history, the price of air travel does not reflect the environmental damage caused by flight. Taxing air travel appropriately is clearly a difficult political problem to solve, and I want to make it clear that we do not advocate that such travel should become a privilege available only to the rich. However, it is important to understand the social justice dimensions of the challenge clearly.

APD has been criticised in the past as a blunt instrument. That may be true, but it is overall a fiscally progressive tax in the sense that it is mostly collected from households at the upper end of the income spectrum. Government survey data suggests that about half of British residents do not take any flights in a given year, while about a fifth say they never fly. Research suggests that 70% of all flights by UK residents are taken by 15% of the population—the so-called frequent fliers. That group probably includes many people in this room. Only 1% of the general population fly more than seven times a year, but the richest 5% of households fly 13 times a year. Growth in demand for air travel is likewise being driven by the UK’s wealthiest residents. Perhaps the Minister can share any official figures the Government hold.

In any event, to avoid catastrophic global warming, we must collectively limit carbon emissions from aviation. Ordinary people taking occasional family holidays or visiting relatives abroad should not be the priority for any policy designed to curb demand growth.

[Kirsty Blackman]

The hon. Gentleman makes a strong case for the amendments. Given that more information is better, we are happy to support them. For the avoidance of doubt, I would love to stop flying every week. An independent Scotland would mean we could do that, and it would reduce our carbon footprint.

[Clive Lewis]

The hon. Lady makes a good point—

[Anneliese Dodds (Oxford East) (Lab/Co-op)]

It is not that good a point.

[Clive Lewis]

It is a very good point in the sense that the hon. Lady cannot not come down here—I understand that. It is not such a good point about breaking away from the United Kingdom, and independence. However, we understand that she has to make the journey for work purposes.

It is a small minority of people who have to work in the way that the hon. Lady does, but many people now talk about the use of new technologies, and there may come a time, in the near future, when a holographic image of her could be here to represent her constituents. That may soon be upon us—who knows? We have been talking about the impact of technology.

[The Chair]

Order. I should tell the hon. Gentleman that no hologram form will be recognised in this Committee.

[Clive Lewis]

Thank you, Mr Howarth, for that clarification, which was clearly needed.

As I was saying, it would be neither socially fair nor environmentally effective if ordinary people taking occasional family holidays or visiting relatives abroad were made the priority for any policy designed to curb demand growth. Therefore, as amendments 120 and 121 would provide, the Government need to make an assessment of the distributional impact of increasing aviation tax rates on specific groups who could be disproportionately affected.

The Opposition fully accept that, ultimately, APD may not be the right instrument to bring aviation growth into line with the planning assumption of the Committee on Climate Change. However, without the reviews we are calling for in amendments 120 and 121, it will be all but impossible to know whether it can play a role, or whether there are better alternatives. There have, for instance, been proposals for a per-plane tax, which would more closely link taxation to carbon emissions, and be a better incentive for more efficient use of passenger capacity in planes. Alternatively, there could be a frequent flyer levy designed to protect access to a reasonable amount of flying for low-income households, while targeting the most frequent flyers with an incrementally rising tax, thus addressing the elasticity of demand for air travel in relation to low prices or high income—or the fact that the key determinant of the propensity to fly is income, not ticket price.

I take no view of those options today, because we simply need to understand more about how they would work; but that is precisely why we need the Government to undertake formal assessments that allow us to compare the impact of potential options on the factors set out in the amendment. Small changes in price have little impact on demand for flights, so increasing the cost of flights to a level that exerts significant downward pressure on demand is difficult to do fairly via the taxes that the clause deals with, and could mean pricing the poor out of the skies when the richest air travellers cause most of the environmental damage. In any event, without the Government carrying out the necessary assessments, which our amendments would require, we cannot know what APD rates are required to meet the planning assumption of the Committee on Climate Change, or the relative efficacy of APD and alternative fiscal approaches, such as a per-plane tax or a frequent flyer levy, for achieving this policy goal.

Let me end with a sobering fact. As the widely respected naturalist David Attenborough warns the world at COP 24 that the collapse of our civilisation is on the horizon, the two largest aircraft manufacturers in the world—Boeing and Airbus—have more than 13,000 new fossil fuel-powered planes on order. Given the long operational lifespan of passenger jets, most of those planes will still be in the air in 2050, as will many of the 23,000 already in use. Given what is at stake, can the Minister, hand on heart, genuinely say that the Government’s policies, future techno-fixes aside, are really up to the existential challenge that we all face?

[The Exchequer Secretary to the Treasury (Robert Jenrick)]

I will respond to as many comments as I can. I will come to the amendment tabled by the hon. Member for Aberdeen North, but we agreed and legislated to devolve air passenger duty to the Scottish Government. The delay in so doing is unfortunate—it is not what we wished to happen—but it is a result of the Scottish Government’s asking us to postpone the implementation of devolution. They did so for the perfectly understandable reason that they wished to pursue the measure with respect to the highlands and islands, but it was essentially their decision, which we respected in agreeing to postpone the turning on of devolution, if that is the right phrase, at their suggestion.

--- Later in debate ---

[Robert Jenrick]

I will write to the hon. Lady again to set out some of the information. I discussed the matter with my officials in preparing for this Committee, and they listed some of the international meetings they have attended, where they represented the United Kingdom exactly as she would like us to have done.

I hope I have addressed amendment 104 in my earlier comments. This is a matter that the Scottish Government could take forward themselves, given that we have already legislated for the devolution of APD. The impacts of any future reductions in Scotland are a matter for the Scottish Government, and they will clearly become more so once we proceed to the long-term arrangement that the hon. Lady wishes for.

The changes being made by clause 60 ensure that the aviation sector continues to play its part in contributing towards the funding of our vital public services, raising £3.4 billion a year. I therefore commend the clause to the Committee.

[Clive Lewis]

I want to raise a couple of things before we vote on amendments 120 and 121. The Committee on Climate Change has clearly stated that we are heading towards a substantial breach of the generous headroom that has been provided for aviation in the UK. The Government are going to overshoot that, to use a pun. There is a pressing climate emergency on this planet. As we speak, millions of people—many of them in the world’s poorest countries—are already being affected by climate change. My dad is from Grenada, and he has retired there. People there, and in the West Indies generally, cannot get insurance as a result of the hurricanes that destroy vast swathes of the islands year in, year out, because of climate change. I feel as though we are hearing once again from the Government about business as usual, even though a climate emergency is taking place.

I understand the APD. It is not designed as an environmental tax or a demand management tool; it is a revenue raiser. Given that we find ourselves heading towards a breach of the headroom that the Committee on Climate Change has provided, surely the Government should be looking at ways to control and push down demand for flights, so that we can begin to make a real impact on our commitments to tackling climate change. Will the Minister tell the Committee whether he plans to join our French counterparts in lobbying for tax reform on kerosene, as they will shortly talk about with the EU Commission? It seems to me that the aviation industry has enjoyed these 70-year-old tax perks and is now an established sector, but one that has yet to fully play its part in tackling climate change. This country can show leadership on that, starting with the Treasury.

[Kirsty Blackman]

I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Amendment proposed: 120, in clause 60, page 44, line 17, at end insert—

“(3) The Chancellor of the Exchequer must review the effects of the changes made in subsection (1) and related matters specified in subsections (4) and (5) and lay a report of that review before the House of Commons within six months of the coming into force of the changes.

(4) The matter specified in this subsection is the revenue effects of the changes.

(5) The matter specified in this subsection is the effects of the changes on—

(a) CO₂ emissions,

(b) the United Kingdom’s ability to comply with its third, fourth and fifth carbon budgets,

(c) air quality standards,

(d) air travel demand, and

(e) air traffic movements.”.—(Clive Lewis.)

This amendment would require the Chancellor of the Exchequer to review the revenue, environmental and certain other impacts of the changes made by Clause 60.

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Climate change levy: exemption for mineralogical and metallurgical processes

[Clive Lewis]

I beg to move amendment 124, in clause 63, page 45, line 13, at end insert—

“(6) The Chancellor of the Exchequer must review the expected effect of the changes made by this section to paragraph 12A of Schedule 6 to the Finance Act 2000 on companies with up to 250 employees and lay a report of that review before the House of Commons within six months of the passing of this Act.”.

This amendment would require the Chancellor of the Exchequer to review the impact of Clause 63 on SMEs.

[The Chair]

With this it will be convenient to discuss the following:

Amendment 125, in clause 63, page 45, line 13, at end insert—

“(6) The Chancellor of the Exchequer must review the expected effect of the changes made by this section to paragraph 12A of Schedule 6 to the Finance Act 2000 in the event that—

(a) the UK leaves the European Union without a negotiated withdrawal agreement,

(b) the UK leaves the European Union following a negotiated withdrawal agreement.

(7) The Chancellor of the Exchequer must lay a report of the review under subsection (6) before the House of Commons within two months of the passing of this Act.”.

This amendment would review the impact of Clause 63 in the event the UK leaves the EU under (a) no deal or (b) a withdrawal agreement.

Amendment 126, in clause 63, page 45, line 13, at end insert—

“(6) The Chancellor of the Exchequer must review the expected effect of the changes made by this section to paragraph 12A of Schedule 6 to the Finance Act 2000 on divergence between the regime that applies to mineralogical and metallurgical processes in the United Kingdom after it has left the European Union and that which applies in the European Union.

(7) The Chancellor of the Exchequer must lay a report of the review under subsection (6) before the House of Commons within two months of the passing of this Act.”.

This amendment would require the Chancellor of the Exchequer to review the effect of Clause 63 on divergence between the UK’s regime for mineralogical and metallurgical processes and the EU’s, after the UK has left the EU.

Amendment 127, in clause 63, page 45, line 13, at end insert—

“(6) The Chancellor of the Exchequer must publish a statement annually listing the companies to which the exemption for mineralogical and metallurgical processes under paragraph 12A of Schedule 6 to the Finance Act 2000, as amended by this section, applies.”.

This amendment would require the Chancellor of the Exchequer to publish an annual statement listing the businesses to which the exemption for mineralogical and metallurgical processes applies.

Amendment 128, in clause 63, page 45, line 13, at end insert—

“(6) The Chancellor of the Exchequer must carry out an impact assessment of the exemption for mineralogical and metallurgical processes under paragraph 12A of Schedule 6 to the Finance Act 2000, as amended by this section, considering the impact on—

(a) tenanted businesses that carry out mineralogical and metallurgical processes,

(b) revenue effects,

(c) the UK’s ability to meet its third, fourth and fifth carbon budgets,

(d) the UK’s ability to meet its greenhouse gas emission targets.

(7) The Chancellor of the Exchequer must lay the impact assessment under subsection (6) before the House of Commons within two months of the passing of this Act.”.

This amendment would require the Chancellor of the Exchequer to carry out an impact assessment of the changes made by Clause 63 and their impact on tenants, HMRC revenues, the UK’s national carbon budgets, and carbon and other greenhouse gas emission reduction targets.

Clause stand part.

[Clive Lewis]

I am particularly pleased to have the opportunity to speak to our amendments to clause 63, which relate to the climate change levy exemption for mineralogical and metallurgical processes. I hope that I do not have to say that too often—it is a bit of a tongue-twister—and that the Minister will answer some questions on the Government’s proposed measures.

The clause may seem technical, but the overall issue could scarcely be more important, as I hope I illustrated earlier. As the Minister no doubt will outline, business do not have to pay the climate change levy on the energy they use for some specified purposes, including mineralogical and metallurgical processes. The clause amends the definition of mineralogical processes so the exemption for energy used in those processes will remain operable following the UK’s departure from the EU. In addition, it clarifies that a landlord can claim the exemption for both mineralogical and metallurgical processes on behalf of a tenant.

Although it is estimated that the measure will have a minor impact on the Exchequer, we have a number of concerns. We appear to be lacking assessments of the market impact of the clause, its effect on our leaving the European Union and its consequences for the UK’s carbon budgets and other greenhouse gas emissions reduction targets, as well as for tenanted businesses covered by it.

Amendment 124 would require the Chancellor to review the impact of the clause on small and medium-sized enterprises. We are surprised by the Government’s lack of consideration of this matter, as SMEs, which lack the staff and financial resources of large companies, often struggle to cope with the impact of new financial regulation. As SMEs are important to maintaining existing jobs and creating new jobs and apprenticeships, will the Minister support our proposed review and help that critical part of our economy, which is already hard pressed?

Amendments 125 and 126 would require the Chancellor to review the impact of the clause in the event that the UK leaves the EU either in a no-deal scenario or under a withdrawal agreement, and its effect on divergence between the UK and EU regimes for these processes if the UK leaves the EU. Again, we are surprised that the Government have not seen fit to carry out such assessments. Does the Minister intend to do so? If not, why not?

Amendment 127 would require the Chancellor to publish annually a list of the businesses to which the exemption for mineralogical and metallurgical processes applies. As the Government are only too aware, there is nothing like keeping on top of matters to ensure that legislation has the desired outcome and markets respond appropriately to the necessary signals. Will the Minister support our amendment so we can all follow the unfolding impact of the climate change levy and its exemptions in this sub-sector?

Given the stark realities of the latest scientific findings submitted to the conference of the parties under the UN framework convention on climate change, which is meeting this week in Poland, the Minister surely agrees that nothing is more important than continuously monitoring, with an eagle eye, the greenhouse gas emissions of every sector in the UK. Monitoring leads to measurement, which leads to management. We must carry out official assessments if we are most effectively to support British industry and companies to reduce their carbon and other greenhouse gas emissions. That means embracing opportunities to modernise our industrial processes as we rapidly move along the path to a zero-carbon economy and help the world stay within the boundaries of the 1.5° warming target of the Intergovernmental Panel on Climate Change.

Amendment 128 would require the Chancellor to carry out an impact assessment of the effects of the changes made by the clause on tenants, the revenues of Her Majesty’s Revenue and Customs, the UK’s national carbon budgets, and carbon and other greenhouse gas emission targets. The guidance notes to the clause state that its impact on the Exchequer is negligible, but will the Minister please explain how, unless it investigates, HMRC will know how many heavy industry or fossil fuel use tenants will be affected? Without a confident quantification, that assertion is meaningless, as I am sure he agrees.

Moreover, by extending relief, the clause in effect encourages those tenants, alongside existing owners and plant operators, to continue emitting carbon and other greenhouse gases rather than switching to alternative generation methods with lower emissions. Will he please explain why the Government would want that, and what complementary measures they are taking to support businesses that want to convert to lower-emission modes of generation?

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[Robert Jenrick]

Clause 63 makes changes to the definition of mineralogical processes in the climate change levy exemption for energy used in mineralogical and metallurgical processes, to ensure that the exemption remains operable following the UK’s departure from the EU. In response to representations, it also clarifies that tenants can benefit from the exemption where they are supplied with energy via a landlord.

The changes will come into effect following Royal Assent to the Bill. They are minor, technical changes designed to maintain the status quo and to provide continuity for businesses. Overall, we judge that they will have a negligible impact, as we set out in the relevant tax information impact note published in July.

The clause does two things. First, it removes “by a person” and “to a person” from the current wording of the exemption, to clarify that it is the energy used in mineralogical and metallurgical processes that qualifies for exemption, rather than the person carrying out the process, as the current drafting suggests. This means that all firms using energy to carry out these processes can claim the exemption. I believe this will be widely welcomed by those who have approached us previously.

Secondly, the clause replaces the reference to the energy taxation directive in the definition of mineralogical processes with a reference to the appropriate NACE code. These codes are an internationally recognised system for classifying economic activity and are of UN origin. This aligns the definition with the way metallurgical processes are defined, which already refers to NACE codes. I hope that is clear.

Amendments 124 and 128 would require the Government to assess the impact of these changes on small and medium-sized enterprises, tenants, revenue, carbon budgets and greenhouse gas emissions reduction targets. Amendment 127 would require the Government to publish an annual statement listing the companies that have benefited from these changes.

While the first change that the clause makes will have a negligible impact, as set out in the relevant tax information impact note earlier this year, the second change will have no impact on these businesses and sectors. Indeed, if we did not make these changes, there would be an impact as we leave the European Union.

Amendment 125 would require the Government to review the effect of these changes in both a no-deal and a negotiated exit from the EU. Amendment 126 would require the Government to review the effect of those changes on any divergence between the exemption in the UK and similar exemptions in the rest of the European Union. Both changes made by the clause will ensure the exemption continues to operate exactly as intended now and after the UK leaves the EU.

The changes introduced by the clause do not affect how the exemption works in the UK compared with other European countries; they apply equally while we remain in the EU, if we were to leave the EU with a negotiated deal or in the event that we leave with no deal. I therefore urge hon. Members to reject the amendments. The information required to fulfil the requests made in the amendments is either already in the published impact assessment or, for the reasons I have just described, unnecessary.

There was a question from the hon. Member for Norwich South about how the Government know that the impact on revenue from landlords and tenants is negligible. We do not have data in terms of specific numbers, because the tax is paid to HMRC by energy suppliers, not tenants and landlords, but this issue has not resulted in any lobbying or representations to us, which suggests that the numbers are extremely low, if not negligible.

This clause maintains the current scope of the exemption processes following the UK’s departure from the EU and, in response to representations from stakeholders, ensures that businesses entitled to the exemption are not precluded from benefiting, purely because they are tenants. I therefore move that the clause stand part of the Bill.

[Clive Lewis]

I thank the Minister for that response. All I will say is that, if I understand it correctly, the reason he is confident of those numbers is that no one is complaining. That is an interesting statistical analysis on which to base it, but I will accept it for now. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Amendment proposed: 128, in clause 63, page 45, line 13, at end insert—

“(6) The Chancellor of the Exchequer must carry out an impact assessment of the exemption for mineralogical and metallurgical processes under paragraph 12A of Schedule 6 to the Finance Act 2000, as amended by this section, considering the impact on—

(a) tenanted businesses that carry out mineralogical and metallurgical processes,

(b) revenue effects,

(c) the UK’s ability to meet its third, fourth and fifth carbon budgets,

(d) the UK’s ability to meet its greenhouse gas emission targets.

(7) The Chancellor of the Exchequer must lay the impact assessment under subsection (6) before the House of Commons within two months of the passing of this Act.”—(Clive Lewis.)

This amendment would require the Chancellor of the Exchequer to carry out an impact assessment of the changes made by Clause 63 and their impact on tenants, HMRC revenues, the UK’s national carbon budgets, and carbon and other greenhouse gas emission reduction targets.

Question put, That the amendment be made.

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Landfill tax rates

[Clive Lewis]

I beg to move amendment 130, in clause 64, page 45, line 22, at end insert—

“(5) The Chancellor of the Exchequer must review the revenue effects of the changes made by this section to section 42 of the Finance Act 1996 and lay a report of that review before the House of Commons within six months of the passing of this Act.”

This amendment would require the Chancellor of the Exchequer to review the revenue impact of Clause 64.

--- Later in debate ---

[Clive Lewis]

I am not quite sure how I have displeased the shadow Chancellor so that I have to do yet another speech, this time on rubbish—or landfill—but it has fallen to me. I will speak to our amendments to clause 64, and I hope the Minister can answer some of the questions on it. As will become clear, we have some serious doubts about the clause as it stands, which I will explain in greater detail. It might be that the Minister resists our amendments, but in any event I hope he will have some answers to the serious questions we have.

As the Minister will no doubt outline, the clause sets the rates of landfill tax for 2019-20, increasing the standard and the lower rates in line with RPI rounded to the nearest 5p. The Exchequer impact is estimated to be nil. That change was announced in the autumn 2017 Budget and follows the pattern of increasing duty rates in line with inflation, which applied for both 2017 and 2018. In the 2018 Budget, the Government announced that duty rates will be increased in the same way for 2020.

The measure, although it widens the differential between the lower and the standard rates of the tax, is estimated by the Government to have no overall impact on Exchequer revenue, but we are concerned about a number of points to which I will draw the Minister’s attention. As has become something of a theme in our debates today, a number of assessments seem to be lacking: the market and revenue impacts of the clause, its effect on recycling rates and meeting Government targets, its impact on UK waste exports and the amount sent to landfill, the costs of tax collection, its environmental impact, and its impact on the behaviour of waste disposal operators.

Labour Members find it remarkable that the Government should seek to adjust such an important levy on all forms of waste—it is one of the few fiscal tools in the Government’s policy bag to encourage recycling and reuse rates, and to dampen waste streams—without apparently carrying out any assessments in the first instance. Will the Minister explain why the measure is being introduced without such basic information being available to him, let alone the Committee? If such data are available, why have they not been published alongside the Bill with the accompanying Budget documents?

That is especially so given that those types of assessment would surely guide any reasonable adjustment to the tax rates in order first to ensure the most beneficial outcomes for the environment and the Exchequer; secondly to accelerate the roll-out of a functioning, closed-loop, circular resource economy in the UK; and thirdly to do the most we can to stop the illegal dumping of wastes that have such an adverse impact on local communities and environments. Will the Minister confirm that those are indeed objectives of public policy and expand on how he believes that landfill tax and the changes contained in the clause will contribute to achieving them? What is the evidential basis for the Government’s belief that they will do so?

In that vein, the amendment simply requires the Chancellor to review the anticipated impact of the measure on revenue and to publish it for scrutiny. Will the Minister explain precisely why the Government assume no impact at all on revenue given that tax increases on goods and services invariably lead to increases in successful avoidance by some taxpayers? What kind of modelling and analysis has been conducted internally? Has expert opinion been taken? Was there any consultation or was a broad assumption made without detailed consideration behind it?

Similarly, amendment 131 requires the Chancellor to review and publish the analysis of and any findings on the impact of the clause on our ability to meet the EU-mandated target of recycling 50% of our waste by 2020. As the Minister is aware, our low recycling target is unambitious by comparison with that of our northern European neighbours such as Sweden, which has developed highly effective closed-loop resource, recycling and reuse systems for a number of household waste items.

Those more successful countries have achieved that change in significant part through tax changes, such as the decision to cut VAT on repairing bicycles, clothes, household linen, leather goods and shoes from 25% to 12%. Will the Minister tell us whether the Government have given any consideration to such steps given their potential interrelationship with total quantities of landfill waste?

Sweden also allows people to claim back from income tax 30% annually—up to 50,000 Swedish kroner, or some £5,000 per person—of the labour cost of repairs to white goods appliances such as fridges, ovens, dishwashers and washing machines, as well as purchases of data and IT services, and of some social activities such as babysitting, household cleaning and gardening. Will the Minister explain why the Government have not taken similarly innovative steps to tackle throwaway consumption and boost the market for repair and reuse, enhance the economy through the jobs and small businesses that go with it, and enhance social living?

--- Later in debate ---

[Kirsty Blackman]

The hon. Gentleman is making an excellent speech in which he is talking about a lot of sensible measures to reduce waste. I just want to say that the matter covered in this aspect of the Bill is devolved, so if he presses the amendment to a vote, the Scottish National party will not take part in it.

[Clive Lewis]

I thank the hon. Lady—her point is taken on board.

Such a beneficial undertaking would help both businesses and households to reduce drastically their waste streams and so cut their work-related and living costs. It would also go a very long way to helping the UK to meet its energy and greenhouse gas emission targets on the way to becoming a zero-waste, zero-carbon economy. As well as securing existing jobs and helping to create many new ones in the reuse, repair and recycling sectors, adopting the amendments that we are calling for would undoubtedly help to protect urban, suburban and natural environments where illegal waste dumping continues.

Will the Minister tell us how he means to address the very serious concerns of the Environmental Industries Commission and its members about the growing gap between the lower rate and the higher rate of this tax? The existing gap is already causing significant problems in the industry, with some operators presenting for the lower rate inert waste that actually contains asbestos fibres and therefore should be subject to the higher rate. How does the Minister intend to address that imbalance? In the EIC’s view, which is shared by Labour and a number of prominent environmental and countryside non-governmental organisations, the gap should be closed and not made wider, so that the tax acts as a deterrent to illegal waste disposal of all types and so benefits the public purse and society at large in significant environmental ways.

That being the case, in the absence of significant assurances from the Minister, we will struggle to support the clause as it stands. However, I would like to give the Minister the opportunity to provide us both with those assurances and some answers to the questions that we have posed. I look forward to his response.

[Robert Jenrick]

Like the hon. Gentleman, I get all the glamorous jobs, so I will endeavour to answer all his questions about landfill.

Clause 64 increases the standard and lower rates of landfill tax in line with inflation from April 2019, as announced in Budget 2017. Landfill tax has been immensely successful. Since its introduction, the amount of waste disposed of at landfill sites has fallen by more than 70%—of course, we would like to go further—and the benefits of that reduction are twofold. The first is to the economy: we have made better use of scarce resources rather than simply tipping them into holes in the ground across the country. Secondly, greenhouse gas emissions from decomposing waste are reduced. When waste is diverted from landfill, we promote more sustainable waste treatment, such as recycling. We are committed to moving towards a more circular economy, and we are working together with business, industry, civil society and the public to achieve that valuable aim. Landfill tax is an important fiscal lever that we can use to achieve it.

The hon. Gentleman asked why the Government are not doing more to meet their recycling target. The Government are very committed to meeting the target of recycling 50% of household waste by 2020. Through the Waste and Resources Action Programme, we are providing guidance and support to local government to help it to improve recycling services and to communicate with householders so that they recycle more. The next milestone in our campaign is the upcoming resources and waste strategy, on which we at the Treasury have been working closely with the Environment Secretary and the Department for Environment, Food and Rural Affairs. That will outline a number of further measures to increase recycling across the UK.

The hon. Gentleman and others will have noticed other important measures in this regard, including the announcement of a forthcoming consultation with respect to a deposit return scheme and other measures in the Budget—for example, a plastic packaging tax, which is to be consulted on, with the aim of increasing the amount of recycled content in all the plastic packaging that we use in our daily lives.

Landfill tax continues to provide an incentive to reduce waste from landfill and ensure it is recycled and reduced: as landfill is the most expensive form of waste disposal, that makes perfect sense. We have also noted in the Budget that we would be willing to consider a future incineration tax once further infrastructure has been put in place to reduce, for example, the amount of plastics that are incinerated, further improving the environment and reducing the amount of throwaway single-use plastics.

The waste infrastructure delivery programme is providing some £3 billion in grant funding over its lifetime to a number of long-term local authority waste management projects, which has helped to increase recycling rates from 36% in 2008 to 45% in 2017. I hope the hon. Member for Norwich South will await the future resources and waste strategy, which will provide a number of important measures. Those will include further information on the reform of the producer responsibility system, which will play a crucial role in improving recycling capacity and infrastructure in all parts of the country.

The clause also changes the tax on disposal at landfill sites. Each tonne of standard-rated material is currently taxed at £88.95, and lower-rated material draws a tax of £2.80. Those rates per tonne will change to £91.35 and £2.90 respectively from 1 April 2019, which maintains the strong current signal to move waste away from landfill.

Amendment 130 would require a review of the revenue effects of the proposed changes. HMRC published tax information impact notes when the rates were announced at the autumn 2017 Budget.

--- Later in debate ---

[Robert Jenrick]

We do fund the Environment Agency correctly, and it is stepping up its enforcement of these sites. We urged it to do so—that was part of the purpose of the waste crime review. We have also increased the powers available to local authorities. For example, since May 2016, they have been able to issue fixed penalty notices for smaller scale fly-tipping. Fly-tipping is a criminal offence punishable by a fine of up to £50,000 or 12 months’ imprisonment. We wish to see more successful prosecutions, because this is a significant area of criminality that is linked to serious organised crime and other important types of criminality, such as the drug trade and human trafficking, against which we wish to take serious action. That is why fly-tipping was included in the Government’s review of serious organised crime in the waste sector, to which I have already referred.

Amendment 131 seeks to review the effect of these changes on the Government’s ability to meet the waste framework directive target of recycling 50% of waste by 2020, and amendment 132 seeks to review their impact on the amount of waste exported for treatment abroad. As the clause maintains the rates of landfill tax in real terms, we do not expect significant changes to the strong behavioural incentives the tax already provides. Landfill tax continues to play an important role in our meeting our targets for recycling and encouraging alternative forms of waste treatment, and the clause will ensure that landfill remains the most expensive form of waste treatment. Furthermore, I assure the Committee that the Government are committed to meeting the 50% household waste recycling target through the Waste and Resources Action Programme and the upcoming resources and waste strategy, on which we at the Treasury worked extremely closely with the Department for Environment, Food and Rural Affairs. I hope the Committee sees that amendments 131 and 132 are therefore unnecessary.

Amendment 133 would require a review of the expected effect of these changes on the quantity of waste that is sent to landfill. The uprating of landfill tax rates in line with the retail prices index ensures that those rates remain stable in real terms, and means that the tax can continue to help the Government meet their objective. Figures published regularly—annually, I think—by Her Majesty’s Revenue and Customs show a consistent decrease in the amount of waste sent to landfill as a result of increases to the capacity of alternative waste treatment, such as recycling, which is encouraged by our policy on landfill tax rates. As the clause will keep the rates the same in real terms, that decrease is expected to continue. I trust that provides the Committee with sufficient information, and I ask that amendment 133 not be pressed to a vote.

Amendment 134 would require a review of the expected impact on the environment of increasing the difference between the standard and lower rates of landfill tax. The clause seeks to increase landfill tax rates in line with inflation. That is the equivalent of maintaining the rates in real terms, which means there will be no real-terms change to the difference between the standard and lower rates. Although we appreciate there may be concerns about illegal dumping or breaking of the rules, we do not anticipate the clause making any material difference to those. The issues the hon. Member for Norwich South legitimately raised about individuals or companies dumping waste on which the higher rate should be paid, and seeking to pay the lower rate, are exactly the kinds of matters that were considered in the waste crime strategy. I hope that reassures the Committee, and I ask that amendment 134 not be pressed to a vote.

[Clive Lewis]

I thank the Minister for his answers. I also thank my hon. Friend the Member for Oxford East for her timely and useful interventions, which shed light on this issue.

Waste management is often the poor relation when it comes to policy making. It is not sexy, but it is critical. We have spoken about the environment and climate change today. Scientists say that it is entirely possible that we could save ourselves from climate change and its effects, only to destroy ourselves by breaching other planetary boundaries. Recycling and waste management are critical, if we are really to reap the benefits of improved recycling and technological processes that ensure we use resources as efficiently as possible. As we move through the 21st century, and population increases, that will become critical.

I will withdraw amendment 130, and will not press amendments 132, 133 and 135, but will press the remaining amendments to a vote. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Amendment proposed: 131, in clause 64, page 45, line 22, at end insert—

“(5) The Chancellor of the Exchequer must review the expected effect of the changes made by this section to section 42 of the Finance Act 1996 on the UK’s ability to meet the Waste Framework Directive target of recycling 50% of waste by 2020, and lay a report of that review before the House of Commons within six months of the passing of this Act.”.—(Clive Lewis.)

This amendment would require the Chancellor of the Exchequer to review the impact of Clause 64 on the UK’s ability to meet the target of recycling 50% of waste by 2020.

Question put, That the amendment be made.

--- Later in debate ---

The changes made by clause 67 will implement a change to the soft drinks industry levy legislation, meaning that the movement of liable soft drinks will not be seen as an import or export. Businesses liable to pay the levy on liable soft drinks packaged in the UK will no longer be able to claim an export credit when those drinks are moved to the Isle of Man. The changes will also help to reduce the administrative burden on businesses that wish to move their liable drinks from the Isle of Man to the UK mainland, by removing the requirement to register for the levy as importers. The clause is necessary as it ensures that movements of liable soft drinks between the UK and the Isle of Man under the levy are treated in the same way as movements of goods in other taxes and duties. I commend clauses 66 and 67 to the Committee.

[Clive Lewis]

It is a pleasure to address the Committee on behalf of the Opposition for the final time today—I am sure to the great disappointment of all. The two clauses both address the soft drinks industry levy, often known colloquially as the sugar tax, which came into force in the current tax year. Given the scope of the two clauses, you will be relieved to hear, Mr Howarth, that I will not attempt to have a general debate on the basic principle of the tax—as tempted as I was. Nor do the Opposition disagree in principle with the Government’s broad intention in the clauses.

As the Minister said, clause 66 allows penalties to be imposed on businesses eligible to pay the soft drinks industry levy where they fail to submit the required quarterly return by the due date. It also ensures that similar penalties can be imposed for non-payment of the levy, contingent on certain provisions in the Finance (No. 3) Act 2010 being enacted. For context, will the Minister clarify the Government’s plans in relation to the enactment of these provisions? Will he explain why they have come to be made now, rather than during the passage of previous legislation?

On the substantive point, let me start by asking the Minister for some clarity about the number and types of business that might be affected. How many companies are now registered for the soft drinks industry levy, and what analysis can he give us of their size and scale? How does that compare with the number and composition originally anticipated? Will he outline for the Committee what kind of penalties a business might face, first, for failing to submit a quarterly return and, secondly, for non-payment? Is he convinced that the penalties are sufficient to deter tax evasion, while not being so high that genuine errors are disproportionately punished?

To put this in context, will the Minister tell us what level of evasion, late or non-payment, and failure to submit quarterly returns has been recorded to date? What estimate has the Treasury undertaken of any revenues lost to tax evasion? Has HMRC been able to give him any idea of the scale of the failure to submit returns? Is that related to evading payment, or is it simply down to administrative failures? How many returns are submitted late, and how many are not submitted at all?

On a related question, will the Minister tell us how much he expects to be raised through the imposition of these penalties and—perhaps more significantly—through any deterrent effect on tax evaders? Will the penalties, particularly for non-payment, form part of the revenue take for the tax, or will they be considered separately for purposes such as the intended link to funding for child health?

The Minister will be aware that the projected tax take from the levy has declined precipitously since the former Chancellor’s original estimates when he announced the levy. The original forecast was for £520 million in the current fiscal year. The latest “Economic and fiscal outlook” from the Office for Budget Responsibility, produced for last month’s Budget, anticipated that just £240 million will be raised. I assume the Minister stands by that figure, unless it has declined even further in the past few weeks. How much of that difference is down to the kind of deliberate evasion that clause 66 addresses, and how much is simply down to error in Treasury forecasts or—being generous—to changing economic circumstances and the impact of behavioural change? I should say for the record that, in the case of this tax, behavioural change is welcome, because it effectively means less sugar in soft drinks, with consequent benefits for public health. As I will touch on later, the dramatic shortfall in tax receipts has had some less desirable consequences.

I note that this measure comes into force at Royal Assent, rather than in the next tax year. We do not object to that, as measures to tackle tax evasion and avoidance should not be delayed. However, what steps have the Treasury and HMRC taken to ensure that businesses are alerted and that tax collectors can take full advantage? When does the Minister expect the first quarterly returns to be due under this measure?

Perhaps the Minister can explain what will happen should Royal Assent occur around the due date for a quarterly returns. If, for example, a quarterly return is due on 1 February—let us say, for argument’s sake, for the final quarter of the current financial year—and Royal Assent was achieved on 2 February, would the penalties be enforceable on a company that failed to submit, or would they not be retrospectively enforceable? Indeed, it would be helpful if the Minister could tell us what the due dates are for quarterly returns over the next year, what returns are required at the end of the financial year, and whether this measure applies to those or simply to returns at the end of each quarter.

Of course, the Minister is not responsible for the allocation of parliamentary time, so he may not be able to predict when Royal Assent is likely. When it comes to this Government, things are, to put it mildly, a bit unpredictable. Given the apparent trouble with their supply and confidence agreement, in which confidence seems to be somewhat lacking, the passage even of the Finance Bill may be a bit choppy when we go back downstairs to the main Chamber. [Interruption.] I apologise if I am keeping the Government Whip awake. Perhaps the Minister can tell us what the impact of different dates might be, and what consideration the Treasury has given to that in its assumptions and planning?

Clause 67 is designed to facilitate the movement between the UK and Isle of Man of soft drinks on which the industry levy has been paid, without that being designated as an import or export respectively for the purposes of the levy. It also adds the levy, and the Manx equivalent proposed by the Isle of Man Government, to the list of common duties in the Isle of Man Act 1979. After the introduction of the levy in April, eligible soft drinks that were brought into the UK from the Isle of Man were chargeable under section 33 of the Finance Act 2017, and those removed from the UK can attract an export credit. The Isle of Man, however, is introducing Manx SDIL from the next tax year, which is equivalent.

As the UK and Manx Governments have now agreed, in principle, to treat soft drinks that have been levy-paid in the one as being levy-paid in the other, and to share revenue, administration and enforcement of the respective levies, I understand from the Minister that the Government’s view is that those arrangements are, in effect, being superseded. The levy will therefore be treated as a common duty under the 1979 Act, with a commencement date to coincide with the introduction of the levy in the Isle of Man—in other words, at the start of the next tax year in April 2019. The Opposition have no objection to those arrangements, but I would ask the Minister to clarify a few points—before we lose the light completely.

First, the Manx SDIL is described in the Government’s accompanying notes as “modelled” on the UK version. Can the Minister clarify what that means? Is it identical or are there significant differences? The rates are presumably the same, but are there any variations in design? Have the Manx Government made any improvements in the structure or implementation, from which we could learn? Are we confident that they will be able to enforce the levy in a consistent way that does not create any incentives for producers to relocate from one jurisdiction to the other?

In the meantime, can the Minister assure us that we are not missing out on revenue that should be owed, due to failures of collection and enforcement at the point of import? Does he have any figures on the total revenue raised from charges on imported soft drinks from the Isle of Man?

I must confess that my knowledge of the Manx soft drinks industry is sadly limited, so perhaps the Minister can give us a sense of its scale and tell us whether there is a revenue impact. I would hazard a guess that it is likely that our import and export of soft drinks to and from the Isle of Man are not of identical value, but perhaps he can confirm that to the Committee either way.

Before I conclude, I want to return to the point about the overall revenue impacts of the two clauses in the context of the soft drinks industry levy. This is important, because when the levy was created, it was linked directly to investment in projects that would improve the health of our children. A ring-fenced sum was put aside for the healthy pupils capital fund, which would fund schools to create facilities for better physical and mental health, or for disability access. At the time that was announced by the then Secretary of State for Education, the right hon. Member for Putney (Justine Greening), the Government

“pledged to ensure that the amount schools receive will not fall below £415 million regardless of the funds generated by the levy.”

That solemn pledge, still available on the Department for Education website, did not last the year. Instead, the fund was cut by more than three quarters, to just £100 million for the year, when the Government desperately tried to plug their own gap in the main schools’ budget for one year only, by raiding the money that was meant to be ring-fenced for children’s health.

As a constituency MP, I know just how desperate schools in Norwich South are for funding. Schools have had to fire teaching assistants because of the budget constraints they find themselves in, and that money could have been very useful to them in helping our children and their educational attainment. I also know the impact that austerity has had on the health of our children.

When I represented the Opposition in February this year on the Delegated Legislation Committee implementing the levy, I pressed the Minister, and he assured us that

“regardless of how much is raised, the Government remain committed to funding the Department for Education with the £1 billion that we originally expected, and providing the devolved Administrations with the full amount that we promised at the time.”

He went on to say:

“Every penny of England’s share of the spending raised by the levy will go towards improving children’s health”.—[Official Report, Sixth Delegated Legislation Committee, 7 February 2018; c. 3.]

Perhaps he can confirm today whether that remains the case, and that the Government are not counting the £350 million that was cut from the healthy pupils fund towards the latter commitment. Secondly, I hope he can clarify that that applies to any additional revenue raised by the two clauses before us. If he can give us an expected amount, will he indicate how that will be allocated?

[Robert Jenrick]

I will respond to as many of those questions as I can; if I omit any answers, I will write to the hon. Gentleman.

With respect to the Isle of Man’s SDIL in clause 67, I am sorry to disappoint the hon. Gentleman, but no one currently produces soft drinks on the Isle of Man—so there is a business opportunity, should any of us need one in the near future. The Manx soft drinks industry levy is expected to be identical to the existing one in the rest of the United Kingdom. We do not expect that there will be any issues on enforcement, although we will of course continue to monitor that closely.

On the number of registered businesses, 450 have already registered. The top four of those by volume pay 90% of receipts, as one would perhaps expect.

In terms of publicising the changes to businesses, we have not specifically publicised those—we have taken a light touch in the first year of operation—but we do not anticipate any difficulties, given that there is only a small number of registered businesses.

The hon. Gentleman had a particular interest in the duty periods. The duty period runs from April to June, and that is due on 1 August. The July to September duty period is due on 1 November.

In terms of why we are taking this action now, we always intended to be as light touch as possible, but it is sensible to proceed with this housekeeping on behalf of HMRC to ensure the full range of compliance and penalty powers are available to combat non-compliance. We do not have evidence to date of any material degree of fraud or non-compliance, and certainly nothing that should make the hon. Gentleman or any other hon. Member concerned, but it is sensible and prudent for us to take this action, should circumstances change in the future.

The hon. Gentleman asked about some specific details, including how much the penalty will be for late returns. It will be £100 in the first instance, rising to £400 for four or more offences. The first late return will incur that fixed amount of £100. The penalty will then rise to £200 for a second late return within a 12-month period, to £300 thereafter, and eventually to £400. We think that is proportionate given that there has not been a significant problem to date, and that gives HMRC the powers it requires.

Where a return for a particular period is still not filed within 12 months, a further penalty will be issued, in the amount of 5%, 70% or 100% of the liability for the return period, depending on whether HMRC believes there has been a deliberate and concealed effort to withhold information, or £300—whichever is greater. Those are not excessive sums, but they give HMRC the powers it requires.

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The amounts we promised to fund school sports are being honoured. The Department for Education will receive £575 million during the current spending review period. That funding has been allocated to a number of programmes to support pupil health and wellbeing, and includes doubling the funding for the primary physical education sport premium to £320 million a year from 2017. The Department for Education and the Department of Health and Social Care contribute £100 million and £60 million to that premium respectively, with the soft drinks industry levy contributing £415 million over the remainder of the current spending review period. We have provided £100 million in 2018-19 for the healthy pupils capital fund, and £26 million to kick-start or improve breakfast club provision in more than 1,700 schools. Although the Treasury forecasts in this case were not correct, there has been a happy ending.

[Clive Lewis]

Does the Minister think a £400 fine is really a deterrent for a major international soft drinks manufacturer?

[Robert Jenrick]

That is a fair challenge, but given that we have no evidence of non-compliance or fraud, it is sensible to proceed on a relatively light-touch basis. If there were evidence of larger manufacturers being fraudulent or non-compliant, we might change things, but at the moment there is no such evidence. With those reassurances, I commend the clause to the Committee.

Question put and agreed to.

Clause 66 accordingly ordered to stand part of the Bill.

Clause 67 ordered to stand part of the Bill.

Finance (No. 3) Bill (Sixth sitting)

Clive Lewis Excerpts

Tuesday 4th December 2018 Public Bill Committees

[The Exchequer Secretary to the Treasury (Robert Jenrick)]

If I may, I will conclude the remarks I was making earlier—[Hon. Members: “Hear, hear!”]—to widespread acclamation. Clause 36 will establish transferable tax history, which is widely supported across the industry and will help to protect and increase the number of jobs in the oil and gas sector in the whole of the United Kingdom and, in particular, in north-east Scotland. We see this as a great step forward for this important national asset. We believe that it is fiscally responsible, as was certified by the Office for Budget Responsibility. It will bring in revenues to the Exchequer of £65 million, and reports to the contrary are misguided.

[Clive Lewis (Norwich South) (Lab)]

Given that we know that the decommissioning costs could come to around £24 billion and that there is provision in the Bill to double that to £48 billion—I asked this question in my opening remarks, but I will ask it again—what money has the Treasury put aside specifically to cover these costs for future Governments, a little bit further into the future?

[Robert Jenrick]

Decommissioning costs will be covered by future Governments over the course of decades to come. We estimate that the costs will run into something in the region of £24 billion, as the hon. Gentleman says, although, as I said in my remarks earlier, we are working closely with the industry to bring down those costs. We hope the UK will become a world-leading market for decommissioning and that we will see at least a 35% reduction in those costs over time. The measure before us will help the situation by increasing revenues to the Exchequer, which could be set against future decommissioning costs if required.

[Clive Lewis]

We have said that the costs could be up to £48 billion—no insignificant sum of money. If we do not ring-fence some of the petroleum revenues to pay for this, it will fall entirely on future Governments further down the line, and nothing is being done now to prepare for that. That is a lot of money that could hit a future Government and a future Exchequer in goodness knows what economic conditions.

[Robert Jenrick]

The hon. Gentleman is arguing that we should ring-fence revenues from the oil and gas sector, whether through petroleum revenue taxation, the supplementary charge or whatever it might be in the future. That is not what we have done in the past. It is a peculiar argument to make when opposing the transferable tax history measure, which will increase revenue to the Exchequer, extend the life of a number of fields and make decommissioning easier and more affordable in the future. With that, I commend clause 36 to the Committee and ask hon. Members to reject the amendments.

Question put and agreed to.

Clause 36 accordingly ordered to stand part of the Bill.

Schedule 14

Oil activities: transferable tax history

Amendment proposed: 84, in schedule 14, page 260, line 15, leave out sub-paragraph (d).—(Clive Lewis.)

The provision as drafted allows companies to transfer TTH worth double the value of anticipated decommissioning costs. This reduces the incentive for companies towards efficiencies in decommissioning costs and paves the way for decommissioning-related tax repayments far bigger than the companies are currently acknowledging. This amendment removes that provision.

Question put, That the amendment be made.

Finance (No. 3) Bill (Fifth sitting)

Clive Lewis Excerpts

Tuesday 4th December 2018 Public Bill Committees

[Robert Jenrick]

It is pretty clear from the evidence I have just laid out that the current tax reliefs do not work. We are making the changes required to ensure that smaller businesses, through the increased annual investment allowance, will have the allowance they need to make these investments. We will now work closely with other businesses, through the design of the industrial energy transformation fund, and a full consultation on that will be launched at the beginning of next year. We encourage the hon. Lady, businesses and other members of the Committee to take part in that consultation, as we design the successor fund to these reliefs.

The Government remain committed to increasing environmental efficiency, and the savings from ending first-year allowances and tax credits will be used to fund the industrial energy transformation fund. That fund will help businesses with high energy use to cut their energy bills and reduce their carbon emissions, by supporting investment in energy efficiency and other innovative decarbonisation technologies that may become available in the years ahead. Those could include, for example, investment in carbon capture and storage, or fuel-switching technologies. However, decisions on the scheme design, including eligibility and the technologies that will be supported, will be subject to the consultation with industry that I have just described. Establishing the scheme will fulfil our manifesto commitment to establish an energy efficiency scheme for industry, and that has been widely welcomed, including by groups such as EEF, the manufacturers’ organisation; UK Steel and the Energy Intensive Users Group. Since the Budget, I have spoken to a number of heavy users of energy, including car manufacturers, who all welcome this measure.

[Clive Lewis (Norwich South) (Lab)]

Is the Minister aware that some businesses are concerned that the Government are ending one scheme without having another in place? That causes uncertainty for business at a time when they need more certainty than they have had for a long time.

[Robert Jenrick]

I hear that concern, and that was the reason we chose not to end the scheme immediately. The scheme will end in April 2020. Until then it will continue as it does today, and be regularly updated with new technologies. If a company that makes use of it knows of a new technology that it wants to be part of the scheme, it will be possible for that to be added. The scheme will continue exactly as is until April 2020, by which time the new one will be in place. As a result of this year’s Budget, the annual investment allowance will also go up to £1 million, so additional allowances will be available to those businesses.

Amendments 73 and 74 would require the Government to publish a review of the cost of extending first-year allowances to 2030 and 2022. As set out in the policy costings document that we published alongside the Budget, ending the allowances will save £160 million by 2021-22. As we announced in the Budget, savings from ending the allowances will be invested in an industrial energy transformation fund of up to £315 million. Our primary motivation is finding a better way to help businesses be more energy-efficient—not saving money for the Exchequer, as was suggested—and we believe that our approach makes more efficient use of public funds. We anticipate that the average annual cost of extending first-year allowances would remain at around the same level until 2030. The figures are already known and in the public domain, so I urge the Committee to reject amendments 73 and 74 because the information that they request is already available.

Amendments 75 and 76 would require the Government to publish a review of the impact of clause 32 on the energy and water technology sectors. I hope that I have already provided the Committee with an answer to those points, removing the necessity of such reports. As I have set out, there is little evidence that the first-year allowances lead to a greater uptake of environmental technology, so the Government do not believe that such reports would provide any significant additional information. Furthermore, the Government support business investment in other, more efficient and dynamic ways, through the increase in the annual investment allowance and the creation of the industrial energy transformation fund.

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[Robert Jenrick]

I have described it; that is the rationale for replacing the first-year allowance with the energy transformation fund. Had we chosen simply to remove the allowances and replace them solely with the increase in the annual investment allowance, the hon. Gentleman would be correct: 99% of businesses could proceed broadly as they do today, but they would not have a specific incentive to choose environmental equipment, plant and machinery or energy efficiency measures. However, by coupling the increase in the annual investment allowance with the transformation fund, we hope to shift the dial in favour of technology that helps the environment.

Amendment 77 would require the Government to review the impact of clause 32 on the UK’s ability to meet its carbon budgets. I assure the Committee that there are already robust requirements to report on progress towards the UK’s emissions reduction targets. When the measures in the Budget and the Bill become law, they will become part of that regime.

The Climate Change Act 2008 provides a world-leading governance framework that ensures that progress towards carbon targets is robustly monitored and reported to Parliament. First, the Government are required to prepare and lay before Parliament an annual statement of emissions that sets out the total greenhouse gases emitted to and removed from the atmosphere across the UK, and the steps taken to calculate the net UK carbon account. Secondly, the independent Committee on Climate Change is required to prepare and lay before Parliament an annual report, to which the Government are required to respond, on the Government’s progress towards meeting the UK’s carbon budgets. I would expect the committee to take the changes made by clause 32 into account in their deliberations. Thirdly, the Government are required to prepare and lay before Parliament a statement that sets out performance against each carbon budget period and the 2050 target.

[Clive Lewis]

I thank the Minister for his patience. As I understand it, having requested an analysis from the Minister responsible for carbon budgets on whether the Government were going to take into account the recent evidence from the Intergovernmental Panel on Climate Change on the 1.5° warming, the fourth and fifth carbon budgets do not currently do that. I have been told that there will be no assessment of the 1.5° warming until after 2030 when the fifth carbon budget concludes. Was the Minister aware of that and will he comment on the fact that that could have a severe impact on our ability to be able to achieve the targets?

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[Clive Lewis]

It is a pleasure to serve under your chairmanship, Ms Dorries. I look forward to speaking on behalf of the Opposition, and I draw attention to my entry in the Register of Members’ Financial Interests. I am particularly pleased to speak to our amendments to the clauses and schedule that relate to transferable tax history, and I hope that the Minister will answer some questions on the proposed measures.

As the Minister outlined, the clause creates a mechanism for companies that are buying equity in UK oil and gas fields to acquire the tax histories of the selling companies and use them to reduce the future decommissioning costs of those fields. The Government’s intent, as we understand it, is to extend production from late-life oil and gas fields in the UK by encouraging their purchase from companies that are no longer willing to extract from them by companies that are. The Government seek to achieve that by overcoming what they believe is a barrier to sales—namely the concern that new companies will not make enough profit from the field to pay for future decommissioning costs. Transferable tax history will allow the buying company to draw on the taxes paid by the previous owners to claim the maximum tax relief possible for decommissioning.

The Opposition believe there are a number of fundamental flaws to the proposals. Transferable tax history is fiscally irresponsible. It expands the very tax breaks that put the Exchequer on the hook for exorbitant future decommissioning liabilities, which the Government have set aside no money to pay for. It creates perverse incentives, providing a windfall for companies exiting the North sea, and it fails to ensure a long-term commitment from incoming buyers on workers’ rights, capital investment and emissions reductions for the benefit of the UK. It also totally disregards the UK’s role in avoiding catastrophic climate change, and does nothing to address the urgent need for a just transition to a low-carbon economy.

With that in mind, amendments 81 to 89 seek to ensure that no transfers are approved that increase taxpayer liability for decommissioning tax-related rebates. They would also limit TTH transfers to current estimates for decommissioning costs, thus ensuring that transferable tax history does not spiral and is no higher than estimated for current reliefs. The Bill currently allows companies to transfer tax history that is worth double the value of anticipated decommissioning costs. The UK taxpayer is already committed to footing the bill for a staggering £24 billion of the estimated £64 billion decommissioning costs in the coming decades, despite the massive profits made by oil and gas companies from the North sea. Do the Government expect the £24 billion decommissioning bill to double to £48 billion over the life cycle of TTH? The UK cannot keep spending revenues that it knows it will have to pay back and that are derived from oil we cannot afford to burn, yet TTH doubles down on those policy failures. If that is not addressed now by ring-fencing a portion of oil revenue to prepare for those costs, our fiscal and environmental future will become hostage to oil revenues.

The most staggering thing about this measure, which perhaps the Minister will confirm, is that the Government have set aside no decommissioning fund to deal with the consequences of these promises. As it stands, our share of decommissioning costs is completely unfunded, and a consequence of short-term priorities and incentivising investment decisions that have been taken regardless of long-term fiscal planning and environmental exigencies. Will the Minister explain the long-term fiscal strategy for dealing with those costs when they inevitably land on the taxpayer in the not-too-distant future?

The Government’s arguments appear to rest on the assumption that additional decommissioning tax rebates will be compensated for by higher revenues from oil and gas fields, generated by increased investment and production by buyers. There is, however, an alarming lack of evidence to support that assumption, and detailed modelling of the long-term impact on decommissioning costs is conspicuously absent. Indeed, it could be argued that TTH reduces the incentives for the buying companies to increase production and generate more revenues, so have the Government considered the potential implications of that? It is perhaps unsurprising that the Government have provided no data on how much additional decommissioning rebate the Treasury might give away due to TTH, and neither have they undertaken any analysis of what would happen in a future scenario in which the oil price changes. Will the Minister commit to conducting such analysis and present the results to the House?

In our view, the measure reduces the incentive for companies to move towards efficiencies and decommissioning costs, and paves the way for decommissioning-related tax repayments that are far bigger than those companies are acknowledging. The clause is representative of the Finance Bill as a whole: it fails to deliver for the people of this country who are so desperately in need of investment in our public services, and instead it favours tax cuts for the wealthiest corporations, with the taxpayer left vulnerable to huge potential payouts. Our amendment would remove that provision and ensure that runaway decommissioning costs will not become a taxpayer risk.

Moving on, amendments 81, 85 and 86 seek to incentivise capital investment by new purchasers in job creation and emissions reductions—two crucial things that the Bill does not address. Exacerbating the problem is the fact that no clear plan has been set out by Government in the Bill to ensure a commitment to continued investment and employment from incoming buyers. Will the Minister tell us what plans he will put in place to ensure job security? Will he consider making TTH transfers conditional on maintaining employment levels? Similarly, will the Government consider limiting TTH claims to incoming companies’ investment in infrastructure, maintenance, retraining and methane reduction?

The irony of TTH becomes clear when looking at that last point. The stated aim of TTH is to prolong the life of North sea assets, yet it has the potential to do the opposite, reducing incentives for incoming companies fully to develop late-life fields. Currently, a new entrant to the North sea would have to ensure several years of production to generate sufficient taxable profits fully to carry back decommissioning losses. TTH removes that incentive. Rather than ensuring sufficient production, should the oil price dip, a company can simply claim against transfer tax history.

Far from ensuring stable future investment, the irony is that TTH has the potential to subsidise the cost of an early exit should the oil market turn against the companies, thereby making UK jobs in that industry more, not less, vulnerable to market conditions. Amendments 81, 85 and 86 limit the TTH history that may be claimed to an amount equal to such investment, ensuring that the measure will not result in increased future liabilities for the Exchequer. They will also act as a starting point for addressing issues of job security and the environment, which I will come on to in more detail.

Amendment 89 builds on ideas that the Committee has already discussed, and extends them to a decommissioning security agreement. It would require such an agreement to include an assessment of the impact on the Exchequer of the amount spent on staff in order for the agreement to qualify under the schedule. The amendment seeks to encourage transparency and accountability between the seller and the buying company, ensuring that the cost of staff, and expectations for staff retention levels, are made clear, and I look forward to hearing the Minister’s response.

There are a number of additional questions about the clause. The first expands on the issue of workers’ rights. Although the Government may argue that transferable tax history is a way of protecting jobs by extending the life of those assets, research by Oil Change International, Platform and Unite, which represent those workers, found that major North sea tax cuts over the last 40 years have not led to higher employment, and neither did tax rises reduce employment. Will the Minister say what the net flow of revenue has been between the Treasury and North sea oil and gas companies over the last three years? It seems clear that those companies have used the raft of recent tax cuts not to create new jobs—160,000 have gone in the last three years—but to enrich their shareholders.

How can the Government ensure that TTH will work in the interests of workers employed on those assets? No clauses in the Bill provide safeguards for workers’ jobs and workplace rights—it seems that the benefits of TTH will go to the private owners of oil and gas companies, and that the clause has been drafted in their interests alone. We argue that it is the Government’s responsibility to promote the stability of jobs in the region, and to ensure they are protected once smaller businesses take over the running of those sites. Will the Minister commit to conduct an analysis of the stability and security of those jobs, including the impact of the provisions, and to share that with the House?

Secondly, there is a huge concern about the environmental consequences of TTH and the encouragement of further exploitation of oil and gas in the North sea. The Government have yet properly to explain how the proposed policy fits with the UK’s commitment to the Paris climate agreement. Despite the continued claim that the UK is a global leader in taking action to meet those targets, the Government’s policies continue to fall far short of their green rhetoric. Climate science states clearly that to avoid global warming of more than 1.5°, at least 80% of known oil and gas reserves must stay in the ground. Every nation bears some degree of responsibility for leaving a portion of its fossil fuel reserves untouched.

Rather than assessing purely commercial viability, we should also assess how much remaining oil and gas in the UK can be exploited within the confines of the Paris climate agreement. It would therefore be helpful to know if and how the Government intend to assess the compatibility of TTH with that agreement. Do the Government have a view on how much of the UK’s remaining 7.5 million barrels of discovered undeveloped oil and gas resources can be equitably developed if we are to play our part in meeting the Paris goals?

Ultimately, this issue ties into the Government’s wider policy of maximum economic recovery, by which they have committed to extracting as much oil and gas as is commercially viable. Recent reforms, such as tax reduction and the decommissioning relief deed, as well as the proposal before us, are designed to make ageing marginal fields attractive to investment, even if that means reducing the per-barrel tax take or subsidising decommissioning costs to improve corporate returns. That approach is wholly inappropriate in a climate-constrained world, and it is entirely inconsistent with the Paris agreement, which requires not only a moratorium on new exploration, but the winding down of a substantial portion of current projects. In short, we need sustainable economic recovery, with Paris-compatible maximum-production targets, and a strategy to determine which combination of oil fields can most safely, efficiently and equitably exhaust the UK’s quota.

[Kirsty Blackman]

To clarify, is the Labour party position now no longer to maximise economic recovery?

[Clive Lewis]

I sat on the Bill Committee for the setting up of the OGA three years ago, and we put forward amendments for sustainable economic recovery. I recall that the Scottish National party and the Conservative party favoured maximum economic recovery. That was a difference of opinion between the two sides back then.

Thirdly and finally, there are huge risks for the taxpayer. Those risks are acknowledged by the Office for Budget Responsibility, which concluded:

“The underlying tax base is volatile and the behavioural response to these relatively complex tax changes is uncertain. We have assigned this measure a ‘high’ uncertainty rating.”

Ultimately, the policy is based on a gamble on the future oil price. Independent expert research commissioned by Global Witness states that there could be a loss of over £3 billion in tax revenue for the Exchequer over 10 years, as compared with the tax take if TTH is not introduced.

Transferable tax history has an impact on the results of investment decisions only when oil prices are relatively low. When the prices are above $50 a barrel, the impact of and need for transferable tax history is less, or even nil, since the higher prices tend to mean higher taxable income to the acquirer, who would generate enough new taxable income on their own to cover decommissioning costs.

Transferable tax history effectively provides acquirers with a hedge against lower oil prices. It jeopardizes future tax returns to incentivise investment in fields that are likely to be less efficient and with lower yields, without any consideration of climate limits or guarantees on jobs. Why is the Exchequer willing to push that cost on to the taxpayer, rather than on to the multinational companies that make vast profits from production every year and are seemingly unwilling to share them with their own workers?

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[Kirsty Blackman]

It is not often that I will be found in Committee agreeing with clauses in any Government Bill—least of all in a Finance Bill. However, on clauses 36 and 37, I agree with the provisions on transferable tax history and thank the Government for including them.

I first raised the issue of transferable tax history on the record in March 2016 in Westminster Hall. The debate was led by the hon. Member for Waveney (Peter Aldous), the chair of the all-party parliamentary group on the offshore oil and gas industry. It is an active all-party group and does a huge amount of lobbying of the Government. I am sure the Chancellor is sick of hearing from us about things to make the industry more effective and maximise economic recovery, as we have been discussing. We have regularly proposed transferable tax history since we first discovered that the industry was concerned.

I will give a little background on the importance of transferable tax history and the reasons why we have called for it. There are smaller oil and gas fields around the central ones. The decommissioning of the central oil and gas field results in secondary oil and gas fields, and the smaller pools around the site, no longer being accessible without the building of significant new infrastructure. It is therefore important that, whenever the Oil and Gas Authority takes decisions about which assets can and should be decommissioned at a given time, it does so in the full knowledge of the knock-on impact. We need to ensure that we continue to have access, for example, to the small pools that are not economically viable now but are likely to be once the technology has improved. Decisions about decommissioning must be taken with full knowledge of the knock-on impacts.

The other thing that must be taken into account with decommissioning is the effect that removing assets might have on future carbon capture and storage plans. It is incredibly important that some pipelines are kept in place for the carbon capture and storage systems that are currently in train to be viable. That is another thing the Oil and Gas Authority must consider when it decides whether a field is ready for decommissioning.

One recent issue is that big operators that own a huge number of oil and gas fields, some of which are reaching the end of their economic life, must put in enhanced oil recovery mechanisms to get the rest of the oil out, which means working at higher pressures and temperatures. Big companies that have a huge number of operations in the North sea and around the world will not want to put in the necessary effort to maximise the recovery from the asset. It will think, “Actually, we are not fussed about this asset. Potentially we should just decommission it.”

[Clive Lewis]

When the deliberations were taking place with the Government, was any consideration given to climate change, the Paris agreement and the sustainable level of oil extraction? Was the fact that we will need to leave a substantial amount of oil in the ground— 80% by some estimates—to ensure we play our part in tackling climate change and remaining within the Intergovernmental Panel on Climate Change targets taken into account?

[Kirsty Blackman]

The SNP position and the Government position is to maximise economic recovery. Oil extraction does not have a particular impact on carbon levels. It is not about oil extraction; it is about what is done with it afterwards. Carbon capture and storage, for example, has a major impact on reducing the emissions that are produced when oil and gas are used. We have been pushing very hard on carbon capture and storage. If the extracted oil is made into tarmac or plastic products, it would not cause the emissions that would be caused if it is put into a car or turned into heating oil.

The Government have taken steps on electric vehicles and the Scottish Government are doing incredible things to promote them. They are increasing insulation in houses, because domestic heating is a significant contributor to climate change. A lot is being done in this space, and it has been recognised that Scotland has the most ambitious climate change targets in the world.

All of our oil and gas fields will be decommissioned at some point. That is how this works. It was always going to be a time-limited industry, because eventually the oil and gas that can be recovered economically will run out. Once an oil and gas field is decommissioned, there will be no jobs associated with it anymore, and there will be none of the anciliary services, so it reduces the amount of employment. A new player may come into the market and want to take on a field that is not a major asset for a big oil and gas company—it would rather decommission the field because it has had enough of it and cannot be bothered with it anymore. Transferring the asset on to the new company means that, however much technology it uses, jobs will be associated with the asset—there will be no jobs if it is decommissioned. We will still get the decommissioning spend and the jobs associated with decommissioning—we will just get it later. The continuing jobs on the asset will be a good thing.

Vision 2035 is the Oil and Gas Authority’s vision, which has been picked up by the industry. It is still not talked about enough, particularly by parliamentarians. We are doing our best to raise its profile, but more hon. Members could do more. Vision 2035 is about what we want the oil and gas industry to look like in 2035. Hon. Members will understand that it is hugely important for the north-east of Scotland because of the significant percentage of jobs supported by the oil and gas industry, but it is important throughout the UK. A huge number of companies throughout England provide widgets—I tend to call goods widgets—that are used in oil and gas. If we do not have a successful North sea operation, those widgets will not be bought or used in the north.

Vision 2035 is about anchoring the supply chain. It is about a system where, once there is no viable oil and gas left in the North sea, we can continue to have oil and gas jobs anchored in the north-east of Scotland and throughout the UK. The only way we can do that is if we support the industry now and support the jobs that there are now. The Oil and Gas Authority states that the North sea and the UK continental shelf are seen as a gold standard. If a technology is trialled and works in the North sea, other countries will be happy to roll out that technology if it suits their sea conditions, because they know it has been tested in one of the most rigorous regimes and by some of the best people—they will know that the technology works.

For us to continue to have a viable oil and gas industry and a viable anchored supply chain, we need to ensure that we continue to be at the forefront of any technological changes. What we are doing on enhanced oil recovery is genuinely world leading. There are few fields in the world that are at the supermature stage of the North sea, so we are doing some of the most amazing things with technology. We can see by the increase in productivity in the North sea that technological advances have been made. If the companies making the widgets that improve production continue to be anchored here in the UK, we will be able to export those technologies and the services that sit alongside them around the world even when there is no recoverable oil and gas in the North sea.

Many of the companies that I have spoken to in Aberdeen and Aberdeenshire are providing widgets and, yes, they are exporting them, but they are also exporting the people power and the services that go with them through ongoing maintenance contracts, which are a big revenue stream for the region. It is important that we do not talk only about the amount of money oil and gas generates for the Exchequer through petroleum revenue tax and the money that comes in because oil and gas comes out of the ground. We should also talk about the wider impact on the economy, which can be felt particularly in the north-east of Scotland.

When the oil price went down, we had a massive issue with house prices and redundancies in the north-east of Scotland. Very real change took place not just in those jobs directly involved with operating assets in the North sea, but in those jobs working in supermarkets in Aberdeen or in hotels. We saw the knock-on impact on the economy. It is important for the entire economy that we pursue Vision 2035.

As I have said previously, and I think the Minister covered this, this has been a good example of the UK Government and industry working together. I particularly thank Mike Tholen and Romina Mele-Cornish from Oil & Gas UK, who worked incredibly hard on this. Romina had a particularly difficult time trying to explain transferable tax history to a room full of MPs and managed to get there eventually, but that was not an easy task because it is quite complicated. If people do not understand particularly how decommissioning liabilities work, we have to explain that first before explaining why TTH makes a big difference, which I think it really does.

Regarding the amendments tabled by the Labour party, there is a suggestion that companies will try to inflate the cost of decommissioning or will be disincentivised from reducing the cost of decommissioning as a result of TTH. I do not believe for a second that that is the case; the point the Minister made in relation to the increase and potential fluctuation in decommissioning costs is well made, but the other thing is that companies do not want to have to spend that money. They want decommissioning not to cost a huge amount of money. I am clear that when decommissioning is done, it must be done right, and the Oil and Gas Authority must be on top of that. I am not in favour of companies being able to drive down costs to the very furthest reaches. I want them to drive down costs, but I want the decommissioning to be done properly and at the right time.

--- Later in debate ---

I would be interested to see an assessment of how many jobs would be lost. I am concerned that the Labour party is giving up on the north-east of Scotland. As I said, a huge number of jobs are supported by this.

[Clive Lewis]

Given the fact that this could see a doubling in the current estimate of reliefs to about £48 billion—I know there is uncertainty about what that could be, but the legislation here is for that potential for TTH to double the current estimate of £24 billion to £48 billion—can I be cheeky and ask the SNP this? If they did achieve independence, would they carry on with this policy as a sovereign Government and bear the costs associated with it?

[Kirsty Blackman]

In the event of independence, as was laid out in our White Paper, “Scotland’s Future”, the Scottish and UK Governments will have a negotiation about what will happen to decommissioning tax reliefs. We will do what we can to maximise economic harmony in the North sea and create jobs for the long term. It is incredibly important that those jobs are kept in the UK. The jobs could simply relocate if the Government do not take action. They could do more to support the supply chain, which has been squeezed by the cuts that the bigger operators have had to make because of the reduction in the oil price. The Government could do more to ensure that the supply chain companies are provided with the support that they need. The Oil & Gas Technology Centre is doing a very good job in that regard.

Access to finance is incredibly important so that companies can begin to support and monetise the technology that they have created. They have incredible reserves of intellectual property, some of which have not had the chance to be developed. I would rather not see the IP sold on to somebody else. I would rather the Government supported such development.

All the oilfields will need to be decommissioned eventually, but we want the jobs to be kept for the longer term. We are making a case for the maximum economic recovery to be made from the fields. It is important to note that once a field is decommissioned, there are no longer any jobs associated with that field. If we can prolong the life of that asset, we prolong a situation whereby jobs and therefore money for the Exchequer are secured. That is incredibly important for the north-east of Scotland. I will not support the Labour party’s amendments; I will choose to abstain. However, I will support the Government’s clause in relation to TTH. I thank them for taking action, although I would rather they had taken it sooner.

[Robert Jenrick]

In the few minutes that remain, I wish to thank the hon. Member for Aberdeen North for her comments and her helpful exposition of the purposes of this policy, which is to create jobs and wealth for the whole country, and particularly for the area that she represents. We would be concerned, as the hon. Lady said, if we created a two-tier system where new entrants—predominantly smaller and often innovative businesses that want to enter the market—had to live up to higher standards than the predominantly larger and more established businesses that they are trying to take on. As she has done, I thank some of the stakeholders who have helped us to develop this policy, including Oil & Gas UK, which has been excellent throughout the preparation of this measure.

Rather like my hon. Friend the Member for Poole, I am surprised by the Labour party’s position in this area. There has been a broad, cross-party consensus throughout my lifetime that North sea oil and gas are of benefit to the United Kingdom and an important asset to the country. Political risk will deter new investment into that field, if international companies that would like to invest in the North sea oil and gas sector believe that the Opposition in the United Kingdom are likely to increase their taxes, make those taxes more complex and disincentivise future investment.

[Clive Lewis]

We would like to put on the record that we are not giving up on North sea oil. Rather, we have an appreciation for the climate emergency that is taking place, and we ask for a reassessment of how we can sustainably recover those assets. That is all we are asking for.

[The Chair]

Mr Lewis, this is an intervention, not a speech.

[Clive Lewis]

Our amendments are simply about not exposing the Treasury to the vast costs that these companies could unload on to the Treasury and the taxpayer. The Bill contains no protection for the taxpayer in that regard.

Finance (No. 3) Bill (Fourth sitting)

Clive Lewis Excerpts

Thursday 29th November 2018 Public Bill Committees

[Jonathan Reynolds]

I shall speak briefly on this clause. As the Minister said, the clause seeks to restrict relief for certain carried-forward losses and allow them to be used more flexibly. It then drills down into particular details for specific business segments: for instance, insurers require special consideration due to the shock losses they are uniquely exposed to.

Given the rather generous package of corporate support that the Government espouse and the ineffective corporation tax cuts, which we have already had an opportunity to discuss at length, the Opposition clearly have no issue with restricting excessive relief. However, this change appears to be a tidy-up measure on legislation that was only introduced in 2017, suggesting that the Treasury does not quite have a grip on this properly. Clearly, we would all like to see any mistakes on the statute book or in the tax code corrected, but could the Minister explain why this legislation needs correcting such a short time after its implementation? Should we perhaps anticipate further changes to the original legislation? What consultation took place with stakeholders at the time?

It seems that we have always known there were issues with this relief ever since it was first introduced, after consultation in summer 2016, in the Finance (No. 2) Act 2017—perhaps the first Finance Bill for the shadow Chief Secretary, my hon. Friend the Member for Bootle, if he can segment them in his own mind—

[Clive Lewis (Norwich South) (Lab)]

Happy memories!

[Jonathan Reynolds]

Yes, a classic. At the time, the Chartered Institute of Taxation warned that the legislation had not been given proper due consideration. As it said in its briefing:

“From the time the proposals were announced at Budget 2016 it was clear that the legislation would be voluminous and highly complex. As we highlighted in our response to the consultation (in August 2016) the timetable proposed was not sufficient to properly consider all of the issues and to produce clear and workable legislation.

The unsatisfactory draft legislation published as part of Finance (No. 2) Bill 2017 was then removed from the pre-election Finance Bill, which caused more uncertainty for taxpayers. Although the delay in enacting the legislation has allowed a period of further informal consultation, which has improved the legislation, it inevitably led to a degree of uncertainty among those affected and has also resulted in taxpayers having to consider draft legislation which is not yet in force,”

but which will be retrospective once enacted.

“With regard to the short timetable, it is also worth noting that these provisions are not anti-avoidance provisions”,

which is when we tend to use a shorter timeframe for introduction.

“Rather, the changes were proposed as part of a package intended to ‘simplify and modernise the tax regime’, although in our view there are aspects of the changes which are very complicated and, in many cases, will involve a large number of detailed calculations, meaning that simplification will not be achieved.”

That is probably true of much of what the Treasury does, to be honest. The briefing also said:

“Legislation for these new rules has, in our view, been ‘rushed’…and, in this case, the Government has not balanced its desires to raise some modest revenue with its duty to produce legislation that can be followed with predictability and certainty.”

Unfortunately, the Chartered Institute of Taxation’s assessment that the timeframe was too short turned out to be exactly correct, and that is why we are obliged to revisit this legislation today. Continuous tweaks to matters such as these do not help to instil confidence among businesses that rely on this framework. They need certainty in their long-term operation, and endless rounds of changes are not helpful, especially in an environment where Brexit is clearly causing significant wider uncertainty.

I should also be grateful to learn from the Minister what preventive measures have been put in place to ensure that we will not go through the same legislative process in another year’s time, with further nips, tucks and fixes to defects. Finally, I would just like to know whether an estimate is available of the cost up to now of businesses having claimed this relief, which the Minister himself has said may have been excessive, and which we are today removing.