Finance (No. 3) Bill

Baroness Primarolo Excerpts

Tuesday 5th July 2011 Commons Chamber

[Chris Williamson]

I certainly do not support the Budget. Although I acknowledge that Rolls-Royce does some excellent work—we are fortunate, in that it is the largest employer in my constituency and provides huge opportunities for young people—the hon. Gentleman would do well to remember the support given by the previous Government to the aerospace industry. He would also do well to remember that one of this Government’s first decisions was to scrap the loan to Sheffield Forgemasters. I can see that he is screwing up his face and rolling his eyes—

[Madam Deputy Speaker (Dawn Primarolo)]

Order. I know that the hon. Gentleman was tempted down this line of argument by the intervention, but we are discussing the bank levy.

[Chris Williamson]

Thank you for your guidance, Madam Deputy Speaker. The point I am trying to make is that the resources realised as a consequence of supporting the amendment and introducing such a tax within the bank levy—or at least exploring the possibility and reporting back on how it might be used—could be used to support opportunities to create new employment for people in Sheffield through Sheffield Forgemasters and to generate more apprenticeships and opportunities for young people. I hope that the hon. Member for Wyre and Preston North (Mr Wallace) will reflect on those comments and join us in supporting the proposal made by my hon. Friends on the Front Bench about considering a tax on bankers’ bonuses.

I was going to talk about the fact that we know that the Government’s economic policies are failing and that the economy is flatlining. Opportunities are not being realised because of the Government’s blinkered approach, if I may put it that way. I ask Ministers to consider this proposal as an additional opportunity to support business and young people and to create opportunities in our country. Realising such aims has been made very difficult for Ministers because of the policies they have pursued.

We hear all the time from Government Members, particularly the Chancellor of the Exchequer, that we are living in austere times, that we all must tighten our belts and that we are all in it together. As I have said, the amendment provides an ideal opportunity for the Minister and for Government Members to demonstrate that they mean what they say when they make comments about all being in it together.

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[Kerry McCarthy (Bristol East) (Lab)]

I beg to move amendment 12, page 45, line 5, at end insert—

‘(2) The Schedule shall not come into force except as specified in subsection (3) below.

(3) The Chancellor of the Exchequer shall bring the Schedule into force by order within six months of the passing of this Act.

(4) A statutory instrument containing an order under subsection (3) shall be accompanied by a report which details—

(a) any effective subsidy provided to, or additional profits accruing to, operators of existing and new nuclear power stations as a result of the provisions in the Schedule;

(b) the immediate impact of the provisions in the Schedule on consumers and on fuel poverty;

(c) the immediate impact of the provisions in the Schedule on energy-using manufacturing industries and on employment in those industries;

(d) the expected effect of the provisions in the Schedule on investment in new renewable power generation and on investment in new nuclear power generation;

(e) the measures that the Chancellor intends to adopt in a future Finance Bill in order to recoup any effective subsidy to or additional profits accruing to the nuclear industry as a result of the Schedule; and

(f) how the monies raised by those measures will be used to mitigate the immediate impact of the Schedule on consumers and on manufacturing industries and to encourage green investment.’.

[Madam Deputy Speaker (Dawn Primarolo)]

With this it will be convenient to discuss amendment 21, page 45, line 5, at end insert—

‘The Schedule shall come into force on a date specified by the Treasury by an order made by Statutory Instrument, which may not be made until an agreed packaged of mitigation measures for energy-intensive industries has been laid before the House of Commons and approved by a resolution of the House of Commons. The dates specified in paragraphs 8(3) and 9(5) of the Schedule shall be replaced by the date specified in the order under this section if it is later.’.

[Kerry McCarthy]

Let me start by confirming that Labour Members support the principle of a carbon floor price. We believe that carbon price support could be an excellent opportunity for the UK in providing a high and stable price for carbon. It could encourage investment in low-carbon power and green technologies, create a new generation of green high-skilled jobs which the UK sorely needs, enable the UK to make radical reductions in its carbon emissions, and contribute to meeting our carbon budgets. Unfortunately, however, we cannot support the way in which the Government have implemented this measure. It will hit those who can least afford it, damage the prospects of developing a UK green industry, and fail to reduce carbon emissions. We have to question whether we can call the carbon price support rate a green tax at all.

First, I shall deal with the impact on consumers. We know that people are struggling to pay their fuel bills. The OECD estimates that, on May’s figures, energy prices are nearly 10% higher than they were a year ago. Scottish Power recently announced electricity bill rises of 10% and gas bill rises of 10%, and other companies are expected to follow suit. The Government are not helping. Rising energy bills and fuel bills are coming on top of higher taxes, cuts to tax credits and cuts to public services. This year the Government have cut the winter fuel payment by £50 for people over 60 and £100 for people over 80, with no mention of that in the Budget statement or the pre-Budget report. That comes after their promise in last year’s Budget to protect key benefits, including winter fuel payments, for older people. They may claim that they inherited this from the previous Government, but we could and would have looked again at that decision in the light of rising energy prices, and so could they; that is the point of having an annual Budget statement.

These are the circumstances in which the Government have proposed a carbon floor price designed in such a way that it will cost working families by raising their energy bills. We understand that in the long term, if the policy is designed in a way that encourages a switch to low-carbon energy production, there should be no significant effect on consumer bills—that is why we support the principle of the carbon floor price—but right now, in the short term, there will be price rises for consumers at a time when they are already finding their fuel bills unmanageable. The Government have not included any counterbalancing measures to help working families to deal with those price rises. If the measure goes ahead in the form that the Government propose, between 30,000 and 60,000 more households will fall into fuel poverty in 2013, rising to between 50,000 and 90,000 more households by 2020. Those are the Government’s own estimates. Earlier this year, Consumer Focus said:

“In its current form there is a real risk that this policy may simply displace detriment.”

In other words, even if it did have a positive impact on green investment, that would be at the cost of more people falling into fuel poverty.

There have recently been somewhat hysterical reports about green taxes, alleging that they are the biggest factor in causing consumer bills to rise. That is not true. Ofgem figures from March show that environmental and social costs make up just 8% of the typical dual fuel consumer bill, and that has risen by just one percentage point since 2008. Climate change deniers cite figures suggesting that hidden green taxes add some £200 to energy bills, but those figures do not stack up. That does not mean, however, that now is the time to add to those costs. The Government have got it wrong. Ordinary working families were clearly the last thing on their mind when they designed this policy. That is why the amendment calls for them to look again at the effect that it will have on people in fuel poverty.

I turn to manufacturing, which several of my colleagues will wish to discuss too. Rising energy prices will affect not only consumers but firms that employ thousands of people across the country. In particular, they will hit energy-intensive industries such as steel, aluminium and chemicals. There is a danger, particularly in the absence of a credible Government plan for growth, that growth and jobs will be exported to other countries. According to a report by Thomson Reuters Carbon Point earlier this year, the carbon floor price will impose additional costs on businesses amounting to £9.3 billion. We understand that that effect might be mitigated in the long term if there is a switch to greener sources of energy, although that is not certain given the problems that I will come to in a moment. In the medium term, however, UK industry will be at a disadvantage, and jobs and growth will be put at risk. That is why the director general of the CBI and industry bodies such as the Chemical Industries Association have called for an exemption from these extra costs for high energy-using industries.

Concerns have been expressed by firms such as Tata Steel, which employs 1,000 people in Teesside. Its chief executive officer said:

“The introduction of the carbon floor price represents a potentially severe blow to the sustainability of UK steelmaking.”

Rio Tinto Alcan, an aluminium producer in the north-east, may close, shedding 600 jobs, and 1,800 jobs are at risk at INEOS ChlorVinyls in Runcorn. Some of the industries threatened by this measure are not only major employers but among the UK’s biggest export sectors. For example, the chemical industry, which accounts for 12% of total UK manufacturing, exports the bulk of its production, with a trade balance in 2008 of nearly £6 billion.

There is also the danger that we will harm our own prospects of building a UK green industry. This sector represents huge opportunities for the UK. For example, the wind energy sector provides over 10,000 jobs, and it expanded by 91% in just two years from 2007 to 2009. The solar energy industry in the UK provides over 10,000 jobs. There is a danger that we may not be able to sustain these sectors in the UK, despite any efforts from the Government, if the necessary materials are not available here. This would be yet another own goal for the “greenest Government ever” after their ill-thought-out change of policy earlier this year on feed-in tariffs, which has put thousands of green jobs at risk. The solar sector is a vital, nascent green industry in the UK. Until the Government’s announcement, the 10,000 jobs that it currently supports was expected to rise to 17,000 this year. The Government’s promised green investment bank was supposed to boost investment in new green industries, but it has been watered down: it will be a fund, and not a real bank, until 2015. That makes a mockery of the Government’s green credentials. Our amendment calls on the Government to look again at the carbon floor price and its effect on high energy-using industries. This is the wrong time to put jobs and green investment at risk without a plan to protect them.

I now move on to the impact on green investment. We accept that a well-designed carbon floor price can deliver reduced emissions and higher green investment, which is why we support the idea in principle. However, we doubt whether the Government’s proposal will deliver those goals. The UK is part of the EU emissions trading scheme, so any carbon permits that are not sold in the UK will simply be sold elsewhere in Europe. The Department of Energy and Climate Change commissioned Redpoint Energy, a consultancy, to examine the options for a carbon floor price. It said in a footnote to its report:

“Under the EU ETS, it would be expected that lower emissions from the GB electricity sector in a given year would be offset by higher emissions elsewhere within the trading scheme.”

A recent report by the Institute for Public Policy Research agreed that

“this policy would have no direct effect on emissions reaching the atmosphere.”

It went on to say that

“it is important to be clear that the UK would be meeting climate change targets in a way that has zero direct effect on emissions.”

The Treasury’s own consultation document admitted that for power stations covered by the ETS, the carbon price floor will not directly impact on the Government’s ability to meet their carbon budgets.

Consumers and companies facing higher energy bills because of this policy would be right to question whether this is a worthwhile use of their money. Will the Government’s policy encourage more investment in renewable power? The Energy and Climate Change Committee expressed doubt:

“when it comes to low-carbon investment, the effect of the Carbon Price Support will depend on the confidence of investors in the long-term reliability of the Carbon Price Support.”

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[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.

[Kerry McCarthy]

I have touched on the fact that there needs to be greater Government engagement in Europe to try to deal with the matter at a pan-European level.

I turn to the nuclear subsidy. As I have said, the carbon price support rate will hurt families and industry in the immediate future, yet it seems likely to fail to reduce carbon emissions. We have to wonder why the Government decided to implement it. The obvious explanation is that they got it wrong, again. It would not be the only tax that they have bungled in this Finance Bill. I have already mentioned the difficulties over the fuel duty stabiliser and the North sea oil tax, which was—[Interruption.] Sorry, I have been thrown off slightly by a sedentary heckle from the Economic Secretary. As I was saying, the Government introduced a last-minute supplementary charge on North sea oil in response to growing public protest about prices at the petrol pump. We have subsequently seen how ill thought out that was, and it has led to the Government having to perform U-turns at a fairly rapid pace.

One explanation of why the Government want to introduce the carbon price support rate is the money that it will raise. Is it perhaps a revenue-raising measure in disguise? The 2011 Budget report reveals that it will raise £740 million in 2013-14, more than £1 billion in 2014-15 and £1.4 billion in 2015-16. If it fails to encourage faster green investment, as some predict, the tax could go on to raise much more as the carbon price approaches £70 a tonne. In fact, the Budget report states explicitly:

“The decisions the Government is taking to strengthen the tax system—including…the introduction of the carbon price floor announced at this Budget—will also help to support the long-term sustainability of the public finances.”