Finance (No. 3) Bill

Andrew Percy Excerpts

Tuesday 5th July 2011 Commons Chamber

[Kerry McCarthy]

The Whip is telling me that we do not have time to reply to that point. It is a bit rich of the Economic Secretary to say that, when she made great play of going to Europe and saying that we would not accept any rise in the EU budget—there was a lot of grandstanding and playing to the crowd on that issue—and then her party’s MEPs tabled no proposals at all to tackle the issue. That is far more relevant to what we are discussing than something that happened many years ago.

[Andrew Percy (Brigg and Goole) (Con)]

I am encouraged by what I think I am hearing about the European Union. My policy would be simply to leave it. Is it now the policy of the Labour party to cut the EU budget? If so, why did it not seek to negotiate a reduction in the EU budget when it was in power?

[Madam Deputy Speaker]

Order. Perhaps we can stick to this debate. If the hon. Gentleman wants to know the answer to his question he can discuss it privately with the hon. Lady outside the Chamber. We should return to the important issue of climate change.

--- Later in debate ---

I think amendment 12 would help the financial and economic environment for energy policy, provide the certainty needed for boards to make substantial investment in the UK and be the catalyst for wealth creation in my area. It would also help to safeguard the manufacturing capacity of vital industries. I hope the Government and Government Members will support it.

[Andrew Percy]

I will try to avoid further outbursts over the EU, Madam Deputy Speaker—I can never resist the opportunity to get my views on the EU written into Hansard.

I agree with much that has been said. I am not going to get into an argument with the hon. Member for Hartlepool (Mr Wright) over whose constituency glows redder, but in my constituency a significant amount of power is generated locally—by the Drax power station, which is just outside, by Eggborough power station and by Keadby gas power station. Furthermore, I share the Scunthorpe steel works in my constituency with the hon. Member for Scunthorpe (Nic Dakin)—unsurprisingly —and I will say something about that in a moment.

I echo some of the concerns expressed by colleagues on both sides of the House. In the Humber, the petrochemical industry is a huge employer, and we are hoping for further growth. Indeed, the whole renewables sector in the Humber is incredibly important, and it would be perverse were we to bring Siemens and other tower and turbine producers to the Humber only for them to be unable to use steel from Scunthorpe because it has been rendered uncompetitive.

I am not going to rehearse all the arguments on climate change. I am not a scientist—I do not understand a lot of these things—but I understand that it is probably a good thing to do something about the amount of carbon we are putting into the atmosphere. Of course, however, jobs must always come first. We need no greater reminder of that than what is happening in Scunthorpe at the moment with Tata Steel—1,200 jobs are going already because of losses going back a few years. In fairness to Tata, it has not blamed this policy, but it has said that it has considerable concerns about its impact on future growth at Scunthorpe. I would like to hear from the Minister—she and I have had conversations about this on several occasions, as she will remember—what the Government plan to do to support the high-energy users. The Humber economy is very much based around high-energy use, so this policy could impact on us disproportionately. I know that the Government are considering that point, but the sooner we can get some certainty the better.

As I mentioned, much has already been said, and in the interests of brevity I do not propose to go over it all. [Interruption] But I have not quite finished. Something needs to be said about general support for manufacturing. What has happened to manufacturing in this country not only over the past decade but over the past couple of decades is a scandal. I welcome the fact—I believe in being as positive as possible—that the Government are committed to a resurgence in manufacturing, which, as I said, is very important in the region represented by me and neighbouring colleagues. That is why we welcome the enterprise zones, which the hon. Member for Hartlepool mentioned, and we are hopeful of getting another one approved for the Humber shortly. I welcome the emphasis on skills and sending young people the clear message that working in manufacturing is just as valuable as trotting off to university to get a degree and become a doctor.

We are hearing all the right things from the Government, and I support that entirely. However, I have concerns about where we are heading with this policy, which is why I think that both the amendments have some merit. Before deciding how to vote, I will listen to the response from the Minister, who I know is very much alive to the issue. Clearly the Government will not want to do anything that puts manufacturing jobs at risk, so I look forward to her response. On that note, I will end this brief, four-minute speech, and look forward to hearing from other hon. Members.

[Nic Dakin (Scunthorpe) (Lab)]

I am pleased to follow my neighbour, the hon. Member for Brigg and Goole (Andrew Percy), and I support many of his comments.

For the Government to unite the representatives of manufacturing industries with Greenpeace, Friends of the Earth and the World Wildlife Fund in opposition to their proposals is a masterstroke. I do not accept the ingenious argument that the Economic Secretary to the Treasury gave in Committee, which was that such a range of opposition to the tax was proof positive that the right balance had been achieved. That is patently not the case: as we have already heard, the arguments of the high-energy manufacturers and the environmentalists are complementary, not contradictory. The key challenge that we face as a nation is how to balance greening the economy with growing the economy. The Government’s proposals fail to meet that challenge. The UK is competing internationally for investment. The Humber is competing with Bremerhaven and Esbjerg for green investment. As we have already heard, those making investment decisions too often sit outside these shores. In the real world, the carbon floor price represents a serious threat to our competitiveness. We are in danger of seeing multinational companies choose to invest not in the UK but elsewhere.

--- Later in debate ---

[Justine Greening]

The scenarios we looked at as part of the consultation asked stakeholders what carbon price they felt we should start at, and where they felt it should finish—the trajectory from the first to the last point. As suggested by respondents, we used the market price of carbon, which is low, although we used DECC’s central carbon price as an illustration in the consultation. The hon. Gentleman referred both in his intervention and in his contribution to the balance we have to strike in setting a carbon price floor that will actually make a difference while putting in place one that does not in the meantime make the energy-intensive industries in our country uncompetitive, as we heard in powerful contributions from my hon. Friends the Members for Redcar (Ian Swales) and for Brigg and Goole (Andrew Percy) and, in an intervention, from the hon. Member for Scunthorpe (Nic Dakin). I want to provide the House with some reassurance about the steps we are taking to ensure that we manage to strike that balance. Despite the various contributions we have heard today, when we take the time to read Hansard tomorrow we shall probably see that there was more agreement in the approaches than may have come across from the tone of the debate. The challenge for us on both sides of the House is to strike the right balance, and I want to talk a little more about how we intend to try to do that.

We know that ultimately we have to make the transition to low-carbon electricity generation cost-effectively, and that will happen only if investors have greater long-term certainty about the cost of carbon emissions. The shadow Minister, the hon. Member for Bristol East (Kerry McCarthy) talked about uncertainty, but the measure is about introducing more certainty so that the extra investment we need can take place. The impact assessment that was part of the consultation showed that although the carbon price floor will increase electricity bills in the short to medium term, bills will be lower in the longer term than would have otherwise been the case, as more low-carbon capacity leads to cheaper electricity. I shall talk about how we want to see fuel poverty tackled over coming years, because that is obviously important.

[Andrew Percy]

I particularly welcome my hon. Friend’s comments about supporting industry as we move forward. I had to pop out of the Chamber after my speech to meet people from Drax. One of the things they told me was that at the moment the system is so structured that it discourages them from buying UK coal in favour of foreign coal. Will she take that into account when looking at the extra support that can be provided? If not, could she meet us to discuss this important issue in a bit more detail?

[Justine Greening]

My hon. Friend makes a helpful contribution. I am always happy to meet hon. Members. In fact, only last week I wrote back to the hon. Member for Stoke-on-Trent Central (Tristram Hunt) to say that I would be happy to meet representatives of his local industry. One of the reasons we are working across Government—not just the Treasury, but BIS and DECC—is to make sure that we consider all the different aspects of the support we want for the energy-intensive industries, and get it right.

I am conscious of the time, and the fact that Members want to debate the remaining amendments, so I now want to make progress. In Committee we discussed at length the issues raised in the amendments. Not all Members present in the Chamber today will have heard those debates, so I shall go through my response to both amendments, taking amendment 21 first, as it raises some important points. It would require the Government to lay, and Parliament to approve, an agreed package of mitigation measures for energy-intensive industries.

A number of Members from across the House made powerful cases on behalf of their local industry about why the issues are so important. The Government recognise the issues and want to take steps to address them. There is, as I said, clearly a balance to be struck: we need to meet our carbon reduction requirements, but to do so in a way that still enables the UK to continue to have competitive energy-intensive industries. That is why the Budget helped to offset the impacts of the price floor on energy-intensive industry and to show, as we have heard, that the UK is open for business, as it must be.

In March we announced an extension of climate change agreements to 2023, with an increase in the discount on electricity from 65% to 80% for participants in the scheme from April 2013. We plan to consult on how to simplify climate change agreements for the companies participating in them. Overall we intend to reduce tax levels to among the lowest in the EU.

We announced that we would not introduce the previous Government’s planned complex and costly carbon capture and storage levy, which would have increased electricity bills by 2% from 2015. In addition, we set out plans that will see a cap on the cost of policies funded through energy bills. To support industry more broadly, we introduced policies that will reduce corporation tax by a further 1%, which is part of an overall year-on-year set of reductions in corporation tax.

As I said, BIS, DECC and the Treasury are already in discussion with energy-intensive industries to identify those most affected by the carbon price floor and to pull together the best set of options to address some of those concerns. The package that we plan to announce by the end of the year will build on the measures, some of which I have set out, that we announced in the Budget. The Bill could also be a means of implementing part of the package. I should be clear that the options that we are considering do not relate only to tax. They look across the board at what we can do to support energy-intensive industries.

On Opposition amendment 12, the carbon price floor is designed to give UK electricity generators certainty about the carbon price. That will encourage more investment in low carbon. Although some Members expressed concerns about how the policy will work, it has been supported by a number of members of the investment community. A range of policy assessments have been carried out not just as part of the consultation document, but as part of the extensive impact assessment that was done alongside that, including the tax impact and information note that was published at the time of the Budget.