Finance Bill

Debate between Caroline Flint and Nigel Adams

Tuesday 8th September 2015 Commons Chamber

[Nigel Adams]

I could not agree more with my hon. Friend and neighbour. Whoever is in charge of ensuring that we have security of supply must ensure that they have robust numbers, and I am sure that my hon. Friend and I will be asking serious questions of them over the forthcoming weeks.

It saddens me greatly that this is not an isolated event. Many Members have communities that have been affected in some way by similar announcements in recent months: Longannet in Scotland, Didcot in Oxfordshire, and Ferrybridge, right next to my constituency in west Yorkshire. The Chancellor is rightly keen to create a northern powerhouse, and so am I, but I would rather see a northern powerhouse with some power in it. I do not want to see a no-power house.

There are no easy answers left on energy policy. I urge those hon. Members in opposition and in government who believe otherwise to think again, or to visit areas such as mine and talk to the constituents whose livelihoods are being put at risk. This is a commercially challenging time for the energy sector. Wholesale electricity prices are at the lowest level in years, in no small part due to the crash and the glut of oil in the global marketplace. That makes the investment case for any energy project, be it biomass, nuclear, gas or wind, incredibly challenging.

It is at times like these that our constituents and the energy industry look to Government for genuine leadership, and it saddens me greatly to say that on this issue the Government led by my party appear to have fallen short. “Investor confidence” is a phrase that is readily thrown around in debates like this and is perhaps too easily taken for granted, but when an esteemed member of the investment community such as Neil Woodford is quoted in a national newspaper in the days following the Government’s announcement on this issue as saying:

“If Government cannot be trusted to fulfil its long-term commitments then it will have to accept that it cannot rely on support from institutional investors”,

it would be irresponsible of me and other hon. Members not to heed his words.

It seems sensible to me that at a time when the energy sector is in such a sensitive and precarious place, policy decisions should be taken in the round rather than in isolation. The Government have already made public the saving they believe they would accrue as a result of removing the CCL exemption, but what about the consequences, intended or otherwise?

Drax Group, an energy company of which Members will be aware and that is based in my constituency, has invested hundreds of millions of pounds in recent years to become the largest renewable generator in the UK. It lost £425 million of its value on Budget day—£425 million in one day, a third of its total value. To me, it is incredible that a Conservative Government have effectively done that to a company that has done all that has been asked of it. The superb management team at that station has delivered Europe’s largest decarbonisation project. It is producing the lowest-cost renewable power available when we take into consideration full system costs, and it has done so while providing 8% of the UK’s power day in, day out. Furthermore, that is money that could otherwise have been invested back in the company further to fund its biomass operations or to support White Rose, one of the country’s two flagship carbon capture and storage projects. That is not an isolated case. I understand that many other renewables companies saw huge falls in their value on the back of the decision.

Discontinuing the CCL exemption would also eliminate the only financial incentive for businesses in the UK to use renewable energy instead of fossil fuels, and it has been in place for over a decade. Hon. Members will know that it is a rare occurrence indeed when I agree with Friends of the Earth, but its observation that the situation is comparable to imposing an alcohol tax on apple juice seems spot on. It appears to me to be a retrograde step, and one that will put small business owners, for whom I have the greatest respect, given my background before entering the House, in a position of uncertainty. Furthermore, as a Conservative it pains me to say that, far from being the removal of an unnecessary burden on business, the removal of the CCL exemption is the extension of a tax. Every business in the UK, whether large or small, must now pay the CCL; they can no longer avoid it by using renewable power.

I understand that one of the Government’s principal objectives in removing the CCL exemption is to prevent taxpayers’ money benefiting renewable generation abroad. However, the reality is that more than 70% of the income generated by levy exemption certificates went to UK-based energy producers. Furthermore, generators supplying renewable energy to the UK through interconnectors are currently exempt from a range of transmission charges that British generators are required to pay. Surely it would be better for the Government to look carefully at that loophole, rather than at measures, such as those proposed in the Bill, that will make the economics of generating in the UK less appealing.

As hon. Friends will know, I am not given to highlighting problems without suggesting solutions. I believe that all that Drax and the renewals industry are asking for is to be treated the same as other industries. When exemptions were removed from the combined heat and power industry, it was given two years’ notice. That contrasts with the 28 days’ notice given this time.

[Caroline Flint (Don Valley) (Lab)]

I thank the hon. Gentleman for giving way—it is not easy to come to the House and take issue with one’s own party. Following his last point, does he agree that there were other ways to deal with any sense of unfairness about renewable energy coming through interconnectors, rather than taking a big hammer to smash a small problem in the system? We know how many jobs and how much future investment are based on business plans, whether at Drax, which I have had the pleasure of visiting, and at other renewables firms, small and large, across the country, which are doing their best to put some growth back into the British economy.

[Nigel Adams]

I agree with the right hon. Lady. Companies need certainty and time to plan, and 28 days’ notice is clearly ludicrous. A two-year notice period would allow companies to honour contracts they have signed, allow the industry to adapt and, above all, it would be fair.

I know that this is a topic of considerable interest and that other hon. Members wish to make their views known, so I will conclude my remarks by returning to my original point: nothing in life is guaranteed, including the availability of energy in our homes and businesses. I believe that we are entering a very precarious time for the UK, when our capacity margins are getting ever tighter and when plant closures continue to leave us reliant on gas imported from the middle east. Against that backdrop, we are in a global marketplace where investors are taking a sober, pragmatic approach to energy projects, and not just in the UK but elsewhere. We should be giving them greater certainty that the UK is a reliable environment to invest their money in, because that money is needed to deliver the energy projects that will power this nation in future. My concern is that the proposed revision to the climate change levy will do exactly the opposite. That is why, with great regret, I shall not be supporting the Government on this issue.