Finance (No.2) Bill (Third sitting)
Debate between Kemi Badenoch and Peter Grant(3 years, 7 months ago)
Public Bill CommitteesRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Abena Oppong-Asare (Erith and Thamesmead) (Lab)
It is a pleasure to serve under your chairship, Dame Angela. I thank the Minister for her explanation of clause 98, which restricts the entitlement to use red diesel and related biodiesel for most sectors from April 2022.
We support the Government’s intention behind the measure, which was first announced in the 2020 Budget. There is a clear need to ensure that fuel duty rebates are as limited as possible in order to meet our net-zero commitment. I note that several sectors retain their entitlement to use red diesel, including agriculture, rail transport and permanently moored houseboats. More recently, the Government have announced further exemptions, including generating power from non-commercial premises for amateur sports clubs and for travelling fairs and circuses.
I have a couple of questions for the Minister about the impact on individual sectors. I know that the waste sector made a representation to the Treasury arguing that removing its red diesel entitlements
“could increase the cost of recycling, which may result in waste being diverted to landfill instead and the cost of recycled goods increasing relative to virgin materials.”
Would the Exchequer Secretary assure us that that issue was looked at carefully and that the impact on recycling was considered? Would she also say a little about compliance in the industries where the entitlement is being removed? She mentioned that the Treasury had been working closely with the Department for Business, Energy and Industrial Strategy to ensure that compliance was followed, but what monitoring and enforcement will the Government use to ensure that red diesel is used only for approved purposes?
May I turn briefly to recreational boat owners in Northern Ireland? The Government have confirmed that private pleasure craft in Northern Ireland will have to use white diesel from June this year in order to implement a ruling of the European Court of Justice. The Royal Yachting Association, British Marine and the Cruising Association have raised concerns about the practical effects of the decision, including the limited supply of white diesel for private pleasure craft users in Northern Ireland. Would the Minister reassure us that HMRC and the Treasury will work closely with those organisations to minimise disruption? Would she give us more information on the steps that have been taken so far to ensure that? Finally, will the Government take any further action to encourage the growth of cleaner fuel alternatives in sectors such as the construction industry?
Peter Grant (Glenrothes) (SNP)
It is a pleasure to serve under your chairmanship, Dame Angela. I could repeat much of what I have to say about new clause 3 when we debate new clause 5, but in the interests of brevity I will not make the same comments again at that point.
We welcome the fact that the tax system is used to encourage individuals and businesses to operate in a more environmentally responsible and sustainable way, but it is important that when we make changes we are prepared to look at them afterwards to see whether they are having the expected impact. That can be quite difficult with Government changes to tax policy, because the policy aim is not always immediately obvious. How much of this change is an income-raising exercise for the Treasury, and how much is designed to reduce the use not only of severely environmentally damaging hydrocarbon fuels, but of other fuels which, although they may be less damaging, are damaging none the less?
Biofuels are not a guilt-free pass. Even though they may appear to be renewable, their use has an impact on the environment, for example where the resources of less well-off countries are used to grow biofuels for us to use instead of food to eat for the people who live there. We should not fool ourselves into thinking that simply by converting our excessive use of fuel to use of renewable fuels, we are somehow doing all we need to.
The second reason why regular reviews are needed is that as well as unintended consequences, there will be mistakes. One third of the Government amendments in Committee of the whole House were introduced to correct drafting mistakes, either in the Bill itself or in related legislation. People make mistakes—hon. Members may even have noticed the drafting mistake in the wording of our new clause 3, which the Exchequer Secretary so kindly pointed out. However, given that her objection to new clause 3 is that the timing does not work, I would appreciate a commitment from her that the Government will comply with the spirit of the new clause in a more appropriate timescale when the impact of the changes can be measured.
The Scottish National party supports the Government’s stated aim of encouraging a more environmentally sustainable and responsible approach to use of the earth’s resources; we just think that they should acknowledge that they might not always get it right the first time. They should build in a process by which we can review the policy after a reasonable time and make the changes that may be needed, sooner rather than later.
Kemi Badenoch
I will take hon. Members’ questions in turn, starting with the question on private pleasure craft in Northern Ireland.
From later this year, private pleasure-craft users in Northern Ireland will no longer be able to use red diesel for propelling their craft, as the hon. Member for Erith and Thamesmead mentioned. This will achieve consistency with the 2018 judgment by the Court of Justice of the European Union and ensure that the UK meets its international obligations under the Northern Ireland protocol. That is the primary reason for it, but it will also align with the way in which fuel used by private pleasure craft in the Republic of Ireland is treated, which should make it simpler for craft users to access the fuel that they need if they sail between Northern Ireland and Ireland. On the hon. Lady’s point about easy access to white diesel, I think that it will work in the same way as in the Republic of Ireland. The Government also intend to introduce a new relief scheme in Northern Ireland to ensure that the average private pleasure-craft user will not pay a higher rate of duty on non-propulsion use than they do now.
On new clause 3, we fully understand the point that the hon. Member for Glenrothes makes, but it takes time for us to be able to analyse what is happening with changes to tax. That is why we want to monitor fuel-duty receipts for red and white diesel, which will enable us to evaluate the extent to which the users of red diesel who have lost their entitlement are switching to greener alternatives. It is really important that we allow time for the policy to bed in before we carry out reviews, but the Treasury always keeps all tax policy under review. We want to ensure that we encourage the transition to net zero as well as maximising revenue for the Exchequer. We do not want to lose money, nor do we want emissions. I reassure him that we are all on common ground and will work together to achieve those stated goals.
On the sectors that continue to have the red diesel entitlement, I can tell the hon. Member for Erith and Thamesmead that we looked very hard at the sectors that could not easily switch to alternatives, and at those in which the impact on the consumer would be quite high, as opposed to those within the supply chain. That is how we came to specific sectors such as travelling circuses and amateur sports clubs, which we feel would benefit from continued red diesel entitlement.
On the question of biofuels, to respond to the hon. Member for Glenrothes, all users of biofuels will be taxed at the same rate as ordinary diesel, to reflect the fact that biodiesel releases just as much carbon dioxide when burned. The Government recognise that renewable biofuels deliver greenhouse gas savings, as they are sourced from feedstocks that extract CO2 from the atmosphere. To incentivise the use of these low-carbon fuels and reduce emissions from fuel supplied for use in transport, the Government introduced the renewable transport fuel obligation in 2008, whereby all road transport fossil-fuel suppliers in the UK are required to show that a percentage of the total road and non-road mobile machinery fuels they supply come from sustainable and renewable energy sources. Again, I remind him that the Government keep all of these rates under review.
Question put and agreed to.
Clause 98 accordingly ordered to stand part of the Bill.
Schedule 20 agreed to.
Clause 99
Rates of tobacco products duty
Question proposed, That the clause stand part of the Bill.
Kemi Badenoch
Clauses 105 and 106 make changes to ensure that the climate change levy’s main and reduced rates are updated for years 2022-23 and 2023-24, to reflect the rates announced at Budget 2020. Clause 107 increases both the standard and the lower rates of landfill tax in line with inflation from 1 April 2021, as announced at Budget 2020. Clause 108 repeals the provisions in the Finance Acts 2019 and 2020 relating to carbon emissions tax, which were not commenced following the Government’s decision to implement a UK emissions trading scheme from 1 January 2021 instead.
The climate change levy came into effect in April 2001. It is a UK-wide tax on the non-domestic use of energy from gas, electricity, liquefied petroleum gas and solid fuels. It promotes the efficient use of energy to help meet the UK’s international and domestic targets for cutting greenhouse gas emissions. At Budget 2016, it was announced that electricity and gas climate change levy rates would be equalised by 2025, because electricity is becoming a much cleaner source of energy than gas as we reduce our reliance on coal and use more renewable sources instead.
Landfill tax has been immensely successful in reducing the amount of waste sent to landfill. That tax provides a disincentive to landfill and has contributed to a 70% decrease in waste sent to landfill since 2000. Reducing waste sent to landfill provides both economic and environmental benefits.
Peter Grant
How much of the reduction in waste going to landfill is due to a reduction in waste being produced, and how much of it is waste ending up in farmers’ fields and play parks and just being fly-tipped illegally, at further increased cost to the environment, and indeed to the public purse, for clearing it up?
Kemi Badenoch
I believe that a significant amount of it is due to the landfill tax. We have been looking at the rate in comparison year on year, and our analysis shows that the landfill tax is having a significant impact. There will always be fly-tipping, irrespective of what the tax rate on landfill is.
Clauses 105 and 106 make changes to the climate change levy rates for 2022-23 and 2023-24, to continue the rebalancing of electricity and gas rates announced in Budget 2016. The 2022-23 and 2023-24 rates were announced in Budget 2020 in order to give businesses plenty of notice to prepare for the changes. At Budget 2020, it was also announced that rates for liquified petroleum gas would be frozen to 31 March 2024.
To limit the economic impact of the tax rate changes on energy-intensive businesses, participants in the climate change agreement scheme will see their climate change levy liability increase by RPI inflation only. That protects the competitiveness of more than 9,000 facilities from energy-intensive industries across some 50 sectors.
When disposed of at a landfill site, each tonne of standard-rated material is currently taxed at £94.15, and lower-rate material draws a tax of £3.00 per tonne. These changes will see rates per tonne increase to £96.70 and £3.10 respectively from 1 April 2021. By increasing rates in line with RPI, we maintain the crucial incentive for the industry to use alternative waste treatment methods and continue the move towards a more circular economy. The changes made by clause 108 will repeal the provisions in the Finance Acts 2019 and 2020 relating to carbon emissions tax, which were not commenced.
New clause 5, tabled by the hon. Members for Glasgow Central, for Glenrothes, for Gordon and for Midlothian, would require the Government to publish a report, within six months of the passing of the Act, on the effects of what would then be sections 105, 106 and 108 on progress towards the Government’s climate emissions targets. As clauses 105 and 106 make changes to ensure that the climate change levy’s main and reduced rates are updated for years 2022-23 and 2023-24, such a report would not be able meaningfully to assess the impact of these changes within six months of the passing of the Act. The Government currently assess and monitor environmental impacts across existing tax measures, and do that alongside other, complementary measures, such as regulation and spending, to understand the impact of policy making in the round. That alludes to the point made by the hon. Member for Glenrothes about landfill tax.
Clause 108 repeals the provisions in Finance Acts 2019 and 2020 relating to a carbon emissions tax, which was not commenced because the Government decided that a UK emissions trading scheme administered by the Department for Business, Energy and Industrial Strategy would be the best replacement for the EU emissions trading system from 1 January 2021.
As it was not commenced, the carbon emissions tax’s role in meeting the Government’s climate emissions targets cannot be measured. However, Opposition Members should be reassured that the UK ETS, a market-based measure covering a third of UK emissions, will help to deliver a robust carbon price signal. The energy White Paper committed to exploring expanding the UK emissions trading scheme to other sectors and set out our aspirations to continue to lead the world on carbon pricing in the run-up to COP26. The Treasury will continue to work closely with BEIS on the introduction of the UK emissions trading scheme and will keep all environmental taxes under review to ensure that they continue to support the Government’s climate commitments.
In conclusion, the changes made by clauses 105 and 106 will update the climate change levy main and reduced rates for 2022-23 and 2023-24, as announced at Budget 2020 and to deliver on previous Budget announcements. Clause 107 will increase the two rates of landfill tax in line with inflation from 1 April 2021, as announced at Budget 2020. Clause 108 will ensure that the statute book is up to date by repealing the provisions in Finance Acts 2019 and 2020 relating to a carbon emissions tax that were not commenced. I therefore commend the clauses to the Committee and ask that the Committee rejects new clause 5.
Abena Oppong-Asare
If I may, I will address the clauses in reverse order. Clause 108 repeals the carbon emissions tax. As the Minister said, the Government introduced this legislation when deciding what to replace the EU emissions trading system with. We welcome the fact that the Government have decided to implement a UK emissions trading system, rather than a carbon emissions tax. The Minister and I recently debated regulations relating to the UK ETS, and I will not repeat the points I made then. However, I stress that our belief is that the UK ETS must be linked with the EU ETS in order to achieve a robust system of carbon pricing to meet our net zero target.
Clause 107 increases the landfill tax in line with inflation. We welcome this small, uncontroversial measure. We talked at considerable length about waste and recycling during our discussion of the plastic packaging tax. I repeat only the point that the Government should invest the revenue from these taxes into recycling facilities and technology. Finally, clauses 105 and 106 make a number of changes to the climate change levy over the coming years, including raising the gas levy and adjusting the climate change agreement rates. Could the Minister set out whether the Government intend to keep the climate change agreement scheme beyond its current period, and if not, what they will replace it with?
As we come to the end of the group of environmental clauses, I will make a few points about tax and our net zero commitment. In February, the National Audit Office published a report into environmental tax measures. The NAO criticised the Treasury and Her Majesty’s Revenue and Customs for failing to properly consider and evaluate the impact of these taxes on the Government’s environmental targets.
Does the Minister agree that we need information on the environmental impact of all taxes and reliefs? Will she commit to working with HMRC and other bodies to publish this information regularly? Currently, UK taxes with a positive environmental impact account for only 7% of tax revenue, and those with an explicit environmental purpose, such as the climate change levy or landfill tax, account for only 0.5%. So far, and particularly in the last Budget, we have seen a lack of vision from the Chancellor on the environment. We await the Treasury net zero review, but will the Minister set out what steps the Government will take in the short, medium and long term to ensure that our tax system plays a role in meeting our net zero commitment?
Peter Grant
The reason why a regular report to Parliament is needed on these taxes is that despite the optimistic assessment that the Exchequer Secretary set out, there are far too many taxes, including the landfill tax. With far too many of the officially designated environmental taxes, and an awful lot of taxes that are not officially environmental but that have an impact on the environment, the Government do not have a very clear handle on what is going on.
In February, the National Audit Office report “Environmental tax measures” stated:
“The exchequer departments do not specify how they will measure the impact of environmental tax measures.”
Before the tax has even been introduced, nobody is clear about what environmental impact they want it to have. The report also states:
“HMRC’s approach to evaluation provides it with limited insight into the environmental impact of taxes.”
Whether those taxes’ main intention is to influence behaviour rather than raise money, or whether they are introduced as a revenue-raising measure that we hope will also have beneficial environmental impacts, the Government’s track record has been that they do not really know what they intend the environmental impact to be before they start, and they usually do not collect information to give a reliable assessment of what the environmental impact has been once the tax is in place. In fact, the revenue consequences of the very small number of taxes that are officially environmental taxes are dwarfed by those of tax reliefs against other forms of taxation for reasons of environmental sustainability.
I will not press new clause 5 to a vote just now, and we will not oppose clauses 105 to 108, but I want to give a message to the Government about their forward setting of objectives and their monitoring of the environmental impact of taxes of all kinds: they really have to do better, and they have to start doing better very quickly.
Kemi Badenoch
On environmental impact, it is important for the hon. Gentleman to realise that where there are multivariable reasons why things occur, measurement will never be 100% accurate. We give the impact that we can measure; others may dispute it, but the Government have taken a view.
The hon. Gentleman mentioned the landfill tax in an intervention that I responded to in my speech, but it is a tax that is devolved in Scotland. He did not tell us what the Scottish Government are doing differently from the UK Government—while he was criticising the UK Government’s landfill tax policy, I think he probably forgot that it was a devolved matter.
Kemi Badenoch
No, I will not give way.
The overall impact on the environment has been positive, with the landfill tax contributing to a reduction. The hon. Gentleman and the hon. Member for Erith and Thamesmead asked about recycling. The fact is that all these things are having an impact. We bring these taxes into play and they change behaviour; we cannot then say that it has nothing to do with the tax that the behaviour has changed. All these things are directly linked.
The hon. Member for Erith and Thamesmead asked a specific question about climate change agreements. For my part within the Treasury, that is being dealt with by the net zero review, but those agreements are a BEIS lead. She also asked about linking the UK emissions trading scheme to the EU emissions trading scheme. We are open to linking the UK ETS internationally in principle and we are considering a range of options, but no decisions on preferred linking partners have been made. We are looking to innovate and create a scheme suited to the UK and to our climate commitments.
We started—as the hon. Lady will know, given our debates on the Greenhouse Gas Emissions Trading Scheme Auctioning Regulations 2021—by reducing the cap on emissions by 5%, compared with what it would have been within the EU. We will set up further plans ahead of COP26, but we are going further and faster than EU representatives on this matter.
Question put and agreed to.
Clause 105 accordingly ordered to stand part of the Bill.
Clauses 106 to 108 ordered to stand part of the Bill.
Ordered, That further consideration be now adjourned. —(David Rutley.)
10.36 am
Adjourned till this day at Two o’clock.
Finance (No.2) Bill (Third sitting)
Debate between Kemi Badenoch and Peter Grant(3 years, 7 months ago)
Public Bill CommitteesRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Abena Oppong-Asare (Erith and Thamesmead) (Lab)
It is a pleasure to serve under your chairship, Dame Angela. I thank the Minister for her explanation of clause 98, which restricts the entitlement to use red diesel and related biodiesel for most sectors from April 2022.
We support the Government’s intention behind the measure, which was first announced in the 2020 Budget. There is a clear need to ensure that fuel duty rebates are as limited as possible in order to meet our net-zero commitment. I note that several sectors retain their entitlement to use red diesel, including agriculture, rail transport and permanently moored houseboats. More recently, the Government have announced further exemptions, including generating power from non-commercial premises for amateur sports clubs and for travelling fairs and circuses.
I have a couple of questions for the Minister about the impact on individual sectors. I know that the waste sector made a representation to the Treasury arguing that removing its red diesel entitlements
“could increase the cost of recycling, which may result in waste being diverted to landfill instead and the cost of recycled goods increasing relative to virgin materials.”
Would the Exchequer Secretary assure us that that issue was looked at carefully and that the impact on recycling was considered? Would she also say a little about compliance in the industries where the entitlement is being removed? She mentioned that the Treasury had been working closely with the Department for Business, Energy and Industrial Strategy to ensure that compliance was followed, but what monitoring and enforcement will the Government use to ensure that red diesel is used only for approved purposes?
May I turn briefly to recreational boat owners in Northern Ireland? The Government have confirmed that private pleasure craft in Northern Ireland will have to use white diesel from June this year in order to implement a ruling of the European Court of Justice. The Royal Yachting Association, British Marine and the Cruising Association have raised concerns about the practical effects of the decision, including the limited supply of white diesel for private pleasure craft users in Northern Ireland. Would the Minister reassure us that HMRC and the Treasury will work closely with those organisations to minimise disruption? Would she give us more information on the steps that have been taken so far to ensure that? Finally, will the Government take any further action to encourage the growth of cleaner fuel alternatives in sectors such as the construction industry?
Peter Grant (Glenrothes) (SNP)
It is a pleasure to serve under your chairmanship, Dame Angela. I could repeat much of what I have to say about new clause 3 when we debate new clause 5, but in the interests of brevity I will not make the same comments again at that point.
We welcome the fact that the tax system is used to encourage individuals and businesses to operate in a more environmentally responsible and sustainable way, but it is important that when we make changes we are prepared to look at them afterwards to see whether they are having the expected impact. That can be quite difficult with Government changes to tax policy, because the policy aim is not always immediately obvious. How much of this change is an income-raising exercise for the Treasury, and how much is designed to reduce the use not only of severely environmentally damaging hydrocarbon fuels, but of other fuels which, although they may be less damaging, are damaging none the less?
Biofuels are not a guilt-free pass. Even though they may appear to be renewable, their use has an impact on the environment, for example where the resources of less well-off countries are used to grow biofuels for us to use instead of food to eat for the people who live there. We should not fool ourselves into thinking that simply by converting our excessive use of fuel to use of renewable fuels, we are somehow doing all we need to.
The second reason why regular reviews are needed is that as well as unintended consequences, there will be mistakes. One third of the Government amendments in Committee of the whole House were introduced to correct drafting mistakes, either in the Bill itself or in related legislation. People make mistakes—hon. Members may even have noticed the drafting mistake in the wording of our new clause 3, which the Exchequer Secretary so kindly pointed out. However, given that her objection to new clause 3 is that the timing does not work, I would appreciate a commitment from her that the Government will comply with the spirit of the new clause in a more appropriate timescale when the impact of the changes can be measured.
The Scottish National party supports the Government’s stated aim of encouraging a more environmentally sustainable and responsible approach to use of the earth’s resources; we just think that they should acknowledge that they might not always get it right the first time. They should build in a process by which we can review the policy after a reasonable time and make the changes that may be needed, sooner rather than later.
Kemi Badenoch
I will take hon. Members’ questions in turn, starting with the question on private pleasure craft in Northern Ireland.
From later this year, private pleasure-craft users in Northern Ireland will no longer be able to use red diesel for propelling their craft, as the hon. Member for Erith and Thamesmead mentioned. This will achieve consistency with the 2018 judgment by the Court of Justice of the European Union and ensure that the UK meets its international obligations under the Northern Ireland protocol. That is the primary reason for it, but it will also align with the way in which fuel used by private pleasure craft in the Republic of Ireland is treated, which should make it simpler for craft users to access the fuel that they need if they sail between Northern Ireland and Ireland. On the hon. Lady’s point about easy access to white diesel, I think that it will work in the same way as in the Republic of Ireland. The Government also intend to introduce a new relief scheme in Northern Ireland to ensure that the average private pleasure-craft user will not pay a higher rate of duty on non-propulsion use than they do now.
On new clause 3, we fully understand the point that the hon. Member for Glenrothes makes, but it takes time for us to be able to analyse what is happening with changes to tax. That is why we want to monitor fuel-duty receipts for red and white diesel, which will enable us to evaluate the extent to which the users of red diesel who have lost their entitlement are switching to greener alternatives. It is really important that we allow time for the policy to bed in before we carry out reviews, but the Treasury always keeps all tax policy under review. We want to ensure that we encourage the transition to net zero as well as maximising revenue for the Exchequer. We do not want to lose money, nor do we want emissions. I reassure him that we are all on common ground and will work together to achieve those stated goals.
On the sectors that continue to have the red diesel entitlement, I can tell the hon. Member for Erith and Thamesmead that we looked very hard at the sectors that could not easily switch to alternatives, and at those in which the impact on the consumer would be quite high, as opposed to those within the supply chain. That is how we came to specific sectors such as travelling circuses and amateur sports clubs, which we feel would benefit from continued red diesel entitlement.
On the question of biofuels, to respond to the hon. Member for Glenrothes, all users of biofuels will be taxed at the same rate as ordinary diesel, to reflect the fact that biodiesel releases just as much carbon dioxide when burned. The Government recognise that renewable biofuels deliver greenhouse gas savings, as they are sourced from feedstocks that extract CO2 from the atmosphere. To incentivise the use of these low-carbon fuels and reduce emissions from fuel supplied for use in transport, the Government introduced the renewable transport fuel obligation in 2008, whereby all road transport fossil-fuel suppliers in the UK are required to show that a percentage of the total road and non-road mobile machinery fuels they supply come from sustainable and renewable energy sources. Again, I remind him that the Government keep all of these rates under review.
Question put and agreed to.
Clause 98 accordingly ordered to stand part of the Bill.
Schedule 20 agreed to.
Clause 99
Rates of tobacco products duty
Question proposed, That the clause stand part of the Bill.
Kemi Badenoch
Clauses 105 and 106 make changes to ensure that the climate change levy’s main and reduced rates are updated for years 2022-23 and 2023-24, to reflect the rates announced at Budget 2020. Clause 107 increases both the standard and the lower rates of landfill tax in line with inflation from 1 April 2021, as announced at Budget 2020. Clause 108 repeals the provisions in the Finance Acts 2019 and 2020 relating to carbon emissions tax, which were not commenced following the Government’s decision to implement a UK emissions trading scheme from 1 January 2021 instead.
The climate change levy came into effect in April 2001. It is a UK-wide tax on the non-domestic use of energy from gas, electricity, liquefied petroleum gas and solid fuels. It promotes the efficient use of energy to help meet the UK’s international and domestic targets for cutting greenhouse gas emissions. At Budget 2016, it was announced that electricity and gas climate change levy rates would be equalised by 2025, because electricity is becoming a much cleaner source of energy than gas as we reduce our reliance on coal and use more renewable sources instead.
Landfill tax has been immensely successful in reducing the amount of waste sent to landfill. That tax provides a disincentive to landfill and has contributed to a 70% decrease in waste sent to landfill since 2000. Reducing waste sent to landfill provides both economic and environmental benefits.
Peter Grant
How much of the reduction in waste going to landfill is due to a reduction in waste being produced, and how much of it is waste ending up in farmers’ fields and play parks and just being fly-tipped illegally, at further increased cost to the environment, and indeed to the public purse, for clearing it up?
Kemi Badenoch
I believe that a significant amount of it is due to the landfill tax. We have been looking at the rate in comparison year on year, and our analysis shows that the landfill tax is having a significant impact. There will always be fly-tipping, irrespective of what the tax rate on landfill is.
Clauses 105 and 106 make changes to the climate change levy rates for 2022-23 and 2023-24, to continue the rebalancing of electricity and gas rates announced in Budget 2016. The 2022-23 and 2023-24 rates were announced in Budget 2020 in order to give businesses plenty of notice to prepare for the changes. At Budget 2020, it was also announced that rates for liquified petroleum gas would be frozen to 31 March 2024.
To limit the economic impact of the tax rate changes on energy-intensive businesses, participants in the climate change agreement scheme will see their climate change levy liability increase by RPI inflation only. That protects the competitiveness of more than 9,000 facilities from energy-intensive industries across some 50 sectors.
When disposed of at a landfill site, each tonne of standard-rated material is currently taxed at £94.15, and lower-rate material draws a tax of £3.00 per tonne. These changes will see rates per tonne increase to £96.70 and £3.10 respectively from 1 April 2021. By increasing rates in line with RPI, we maintain the crucial incentive for the industry to use alternative waste treatment methods and continue the move towards a more circular economy. The changes made by clause 108 will repeal the provisions in the Finance Acts 2019 and 2020 relating to carbon emissions tax, which were not commenced.
New clause 5, tabled by the hon. Members for Glasgow Central, for Glenrothes, for Gordon and for Midlothian, would require the Government to publish a report, within six months of the passing of the Act, on the effects of what would then be sections 105, 106 and 108 on progress towards the Government’s climate emissions targets. As clauses 105 and 106 make changes to ensure that the climate change levy’s main and reduced rates are updated for years 2022-23 and 2023-24, such a report would not be able meaningfully to assess the impact of these changes within six months of the passing of the Act. The Government currently assess and monitor environmental impacts across existing tax measures, and do that alongside other, complementary measures, such as regulation and spending, to understand the impact of policy making in the round. That alludes to the point made by the hon. Member for Glenrothes about landfill tax.
Clause 108 repeals the provisions in Finance Acts 2019 and 2020 relating to a carbon emissions tax, which was not commenced because the Government decided that a UK emissions trading scheme administered by the Department for Business, Energy and Industrial Strategy would be the best replacement for the EU emissions trading system from 1 January 2021.
As it was not commenced, the carbon emissions tax’s role in meeting the Government’s climate emissions targets cannot be measured. However, Opposition Members should be reassured that the UK ETS, a market-based measure covering a third of UK emissions, will help to deliver a robust carbon price signal. The energy White Paper committed to exploring expanding the UK emissions trading scheme to other sectors and set out our aspirations to continue to lead the world on carbon pricing in the run-up to COP26. The Treasury will continue to work closely with BEIS on the introduction of the UK emissions trading scheme and will keep all environmental taxes under review to ensure that they continue to support the Government’s climate commitments.
In conclusion, the changes made by clauses 105 and 106 will update the climate change levy main and reduced rates for 2022-23 and 2023-24, as announced at Budget 2020 and to deliver on previous Budget announcements. Clause 107 will increase the two rates of landfill tax in line with inflation from 1 April 2021, as announced at Budget 2020. Clause 108 will ensure that the statute book is up to date by repealing the provisions in Finance Acts 2019 and 2020 relating to a carbon emissions tax that were not commenced. I therefore commend the clauses to the Committee and ask that the Committee rejects new clause 5.
Peter Grant
The reason why a regular report to Parliament is needed on these taxes is that despite the optimistic assessment that the Exchequer Secretary set out, there are far too many taxes, including the landfill tax. With far too many of the officially designated environmental taxes, and an awful lot of taxes that are not officially environmental but that have an impact on the environment, the Government do not have a very clear handle on what is going on.
In February, the National Audit Office report “Environmental tax measures” stated:
“The exchequer departments do not specify how they will measure the impact of environmental tax measures.”
Before the tax has even been introduced, nobody is clear about what environmental impact they want it to have. The report also states:
“HMRC’s approach to evaluation provides it with limited insight into the environmental impact of taxes.”
Whether those taxes’ main intention is to influence behaviour rather than raise money, or whether they are introduced as a revenue-raising measure that we hope will also have beneficial environmental impacts, the Government’s track record has been that they do not really know what they intend the environmental impact to be before they start, and they usually do not collect information to give a reliable assessment of what the environmental impact has been once the tax is in place. In fact, the revenue consequences of the very small number of taxes that are officially environmental taxes are dwarfed by those of tax reliefs against other forms of taxation for reasons of environmental sustainability.
I will not press new clause 5 to a vote just now, and we will not oppose clauses 105 to 108, but I want to give a message to the Government about their forward setting of objectives and their monitoring of the environmental impact of taxes of all kinds: they really have to do better, and they have to start doing better very quickly.
Kemi Badenoch
On environmental impact, it is important for the hon. Gentleman to realise that where there are multivariable reasons why things occur, measurement will never be 100% accurate. We give the impact that we can measure; others may dispute it, but the Government have taken a view.
The hon. Gentleman mentioned the landfill tax in an intervention that I responded to in my speech, but it is a tax that is devolved in Scotland. He did not tell us what the Scottish Government are doing differently from the UK Government—while he was criticising the UK Government’s landfill tax policy, I think he probably forgot that it was a devolved matter.
Finance (No.2) Bill (Second sitting)
Debate between Kemi Badenoch and Peter Grant(3 years, 7 months ago)
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Kemi Badenoch
Clauses 51 to 53 set out the circumstances when plastic packaging tax can be deferred or exempted and when tax paid packaging is eligible for a tax credit. As I explained before, the rationale of the tax is to encourage the use of recycled plastic instead of new material within plastic packaging. To maximise the incentive for businesses to use recycled plastic, the Government, as a general rule, believe it is important to include types of plastic packaging even where it may be challenging to increase the level of recycled plastic. That will encourage further investment in the recycling infrastructure and innovation required to overcome these challenges.
These clauses provide for the deferral of PPT and the provision of tax credits for packaging that is exported. They also exempt packaging used in the immediate packaging of licensed human medicines; aircraft, ship and train stores; and packaging used to transport imported goods. I will go through the rationale for each of these in turn. These and other clauses in the plastic packaging tax legislation use the term “plastic packaging component”. However, for ease, from this point onwards I will use the term “plastic packaging” instead.
Clause 51 sets out that plastic packaging imported into or manufactured in the UK that is intended for export within 12 months is not chargeable. Based on consultation feedback, the clause requires that the export must be made within 12 months of when a plastic packaging component is manufactured or imported. The packaging must always have been intended for export. This relief will not apply to transport packaging used to export goods such as plastic pallets and wrap, given the administrative challenges of tracking and evidencing that this packaging has been exported. Clause 52 provides for exemptions from PPT for certain plastic packaging.
Peter Grant (Glenrothes) (SNP)
I apologise for my late arrival, Sir Gary; I was held up in another Committee. Could the Minister expand more on the rationale behind exempting plastic packaging that is manufactured for export? The whole problem with plastics is that plastics that are manufactured here end up in the stomachs of animals in the south Atlantic and the south Pacific. Has she considered, for example, exempting only materials being exported to countries where it is known that there is a similar tax system in place when they are imported? I can understand that we do not want a double tax if the plastic is being exported to a country where there is also an import tax, but is she concerned that the environmental impact of the tax will be reduced if companies can manufacture this stuff and then export it anywhere in the world without having to pay the tax?
Kemi Badenoch
The clause sets out requirements relating to the inclusion of a PPT statement on certain invoices and allows for further regulations specifying what the statement must contain. In consultations, stakeholders told us that customers often have influence over the specification and design of plastic packaging. Including the amount of PPT on invoices will help encourage the behavioural shift towards using more recycled plastic. It will also increase the visibility of the tax and show businesses how much more they are paying for their plastic packaging by not switching to using more recycled plastics. The clause assists with the environmental behaviour shift that is sought by the tax, and I therefore recommend that it stands part of the Bill.
Peter Grant
I have just a few points on the clause. I can certainly understand the thinking behind it, but I note that it applies when the goods are first supplied—it applies to the person who is liable to pay the tax. Has the Minister considered what happens if there is a chain of supply but the intermediaries do not do anything that makes them liable to pay the tax? My reading of the clause is that the final user—the final customer—does not necessarily get the statement of how much tax has been paid. If the intention is to affect the behaviour of not only the manufacturers but customers, we are missing a trick, in that the customer might not realise how much of the final cost has been covered in the plastic packaging tax.
My second point is very simple. Is it envisaged that the statement of plastic packaging tax would be required to be printed on the face of the invoice, or could it simply be attached as a separate document? It is not clear what the commissioners are likely to put into any regulations. My concern is partly that if it is required to be put on the face of the invoice, that potentially requires quite a lot of changes to software by companies that use accounting software. Alternatively, if it is supplied as a separate document, are there not enforcement difficulties? It could be difficult to establish afterwards that it was not attached, whereas if somebody provides an invoice without accounting for VAT, it is quite clear to anybody that the requirement to give a VAT invoice has not been complied with. Have those two issues been considered by the Government in the precise wording of the clause?
Abena Oppong-Asare
The clause sets out the requirement for the PPT statement on certain invoices. The only point I want to make is to urge the Treasury and HMRC to work with businesses to ensure that they understand the requirement and implement it with the least burden possible.