Finance Bill

Caroline Lucas Excerpts

Tuesday 8th September 2015 Commons Chamber

[Damian Hinds]

Thank you, Mr Howarth.

Clause 45 ends the exemption from the climate change levy for renewably sourced electricity. The CCL renewables exemption was misaligned with today’s energy policy and represented an inefficient way of supporting renewable electricity generation. In the past 15 years the UK’s renewable energy policy has fundamentally changed. When the renewable electricity exemption was introduced in 2001, renewable generation made up just 2.5% of the UK’s electricity supply; it now makes up around 20%. Since the exemption was introduced, more effective policies have been put in place which support renewable electricity generation directly.

In contrast, the CCL exemption provided indirect support to renewable generators. Together, policies such as the renewables obligation and feed-in tariff will provide over £5 billion-worth of support to renewable generation in this financial year.

[Caroline Lucas (Brighton, Pavilion) (Green)]

How can the Minister possibly justify this measure when the Government’s own impact assessment says that as a result of this measure the UK will be producing over 1 million more tonnes of CO₂ every single year?

[Damian Hinds]

I can absolutely say how we justify this measure. As I have stated, there are now more effective and efficient direct methods of encouraging renewable generation than the CCL exemption. We have also seen a sharp decline in CCL revenue over the last Parliament. The forecasts from the independent Office for Budget Responsibility show that, without change, by 2020 virtually no CCL would have been paid on electricity at all. Removing the exemption helps maintain a price signal through the CCL for all business to use energy more efficiently. In addition, last year a third of its value went to renewable projects based overseas—projects which of course do not contribute to our climate change or international development commitments, making this a poor use of taxpayers’ money.

Clause 45 ends the existing exemption for renewable energy from the CCL. It applies to any renewable electricity generated after 31 July 2015, when it is supplied to businesses or the public sector under a renewable source contract. From 1 August we entered into a transitional period in which suppliers may claim a CCL exemption on any renewable electricity generated before that date. The Government are discussing the details of this transitional period with the affected suppliers, to determine an appropriate length for it. We intend to put the final transitional arrangements in place through legislation in the Finance Bill 2016.

[Caroline Lucas]

Will the Minister tell me what consultation he had with the solar industry in Britain before announcing the ongoing discussions that are now going to happen?

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[Damian Hinds]

It is a bigger rug than that. The climate change levy is only a relatively minor part of the support that was given to the industry, compared with the support given through the renewables obligation and through contracts for difference.

It is essential that we show that our measures to achieve climate change and renewables objectives provide good value for money, in order to retain long-term public support for them. I look forward to hearing hon. Members’ views and I urge them to give their support to the clause.

[Caroline Lucas]

I am grateful for this opportunity to contribute to the debate on this clause, which I believe should simply have been deleted. Ministers have failed to provide a robust or even remotely convincing justification for removing the renewables exemption to the climate change levy. This would be laughable if it were not so serious. The Chancellor has complained that this is all very fine because the UK now has

“a long-term framework for investment in renewable energy in place”.—[Official Report, 8 July 2015; Vol. 598, c. 331.]

If only that were the case! The reality is becoming increasingly distant from the rhetoric, especially now, after yet another wave of destruction has been unleashed by the Treasury on sensible and popular climate and clean energy policies.

The most outrageous of those policies is the proposal to cut support for rooftop solar by up to 87%. That risks making it impossible for my constituents and many others to afford solar panels for their homes, schools or community centres. Solar power can become subsidy-free, but not if Government cuts to support are wildly disproportionate to the admittedly impressive cost reductions that the industry has managed to achieve. And then there are the 35,000 people who work in the solar industry and who are facing a very uncertain future.

Clause 45 of the Finance Bill is one of several such senseless attacks on sustainable energy and climate policies. It will have negative impacts on existing and potential renewable energy developments, some of which are already being reported to have become unfeasible and which have now been cancelled. It will also have negative impacts on the overall investment climate for everyone from small community groups to multinational businesses, all of which are looking to put their money into clean power. This is the very last thing we need, for our economy, for our jobs and for tackling climate change, and it flies in the face of public opinion. New polling this month found, yet again, overwhelming support for renewables, including onshore wind and solar, with even greater levels of support for community energy generation. Some 78% would support local projects, even within 2 miles of their home. For all those reasons and more it seems intelligent to have an incentive, so that when a business or public sector organisation purchases clean renewable power, rather than dirty polluting power, it pays less tax.

Ministers claim that the change is intended to prevent taxpayers’ money from supporting renewable electricity generated overseas, but in reality ditching the renewable energy exemption is a completely disproportionate measure, which turns a policy designed to encourage low-carbon electricity into little more than an electricity tax for businesses. If a third of benefits do go overseas, that should surely still mean that two thirds support home-grown renewable power generation and jobs here in the UK. If Ministers really want to cut out overseas generators, they should therefore modify the policy to fix the anomaly at that rate. Did anyone ever even consult industry about what level of cut to make? We have already seen by the Minister’s inability to answer my question a few moments ago that there simply was no consultation with the industry in advance. Ditching this exemption completely is, as Friends of the Earth has said, like making people pay an alcohol tax on apple juice. It harms British renewable energy businesses and undermines efforts to tackle climate change. No wonder it has received widespread condemnation, on both environmental and economic grounds.

This is all happening less than three months before the crucial climate talks in Paris. Yet at that time we will hear the spin machine in the Department of Energy and Climate Change going into overdrive, coming out with all kinds of lovely rhetoric which is completely at odds with what the Government are doing on the ground with this measure. It is yet another example of the huge gulf between the rhetoric and the reality of the policy. When it comes to avoiding dangerous climate change, the shift to clean renewable energy is key. Phasing out fossil fuels and phasing in a 100%-clean agenda has to be at the top of the agenda. Yet, once again, the UK is going in the wrong direction, with generous tax breaks and taxpayer-funded propaganda propping up the fossil fuel companies, while the knife is being stuck into our own home-grown renewable energy sector.

[Stewart Hosie (Dundee East) (SNP)]

Does the hon. Lady not agree that this is only part of an ongoing series of issues: a lower strike price for nuclear than for renewables; the continuing unfairness with the connectivity charges, where the bulk of the renewable potential is; the pulling of support for onshore wind; the threats potentially even to the green investment bank; and the threatening of funding for future projects? This is all part of the same anti-environmental agenda.

[Caroline Lucas]

I am grateful to the hon. Gentleman for his intervention, and of course he is absolutely right; long gone are the days of hugging huskies and we are now in the days of “green crap”—even, ridiculously, when there are strong economic arguments for pursuing green policies. The idea that that is somehow against the interests of business is completely belied by the fact that so many businesses are crying out for a change in direction on the part of this Government.

[Mr Stewart Jackson (Peterborough) (Con)]

I am listening to the hon. Lady’s comments, which are always passionate, well made and eloquent. Does she not agree that the industry is complicit in the problems she alludes to because it has gone for the easy win of developing on agricultural and green-belt land, rather than doing the more difficult thing, which is developing on previously developed land? That is why people have been resistant in communities to solar energy projects such as those in my constituency.

[Caroline Lucas]

I do not agree with the hon. Gentleman’s comments. There are some cases where renewables are being sited in areas where there is opposition, but those are a minority. I assure him that if he thinks there is going to be much popular objection to renewables, he should just wait until his constituents and others see the impact of fracking. That is when he is going to see an awful lot more opposition to the energy choices that this Government are making.

The fact is that the renewable energy industry is a fantastic advantage to our economy. It does some brilliant things, and it does so despite Government policy, not because of it. It is now absolutely at risk of not being able to get away from the subsidies. It does not need subsidies for much longer and has always understood that there will be digression. [Interruption.] From a sedentary position, the hon. Member for Daventry (Chris Heaton-Harris) is suggesting that this industry is surviving only because of subsidies. Nothing could be further from the truth. The subsidies are coming down. There is digression, but it has to happen in a planned way. It is not justifiable, or even reasonable, to expect an industry to not know what kind of economic situation it is working in from one year to the next. This Government keep changing the goalposts on an almost monthly basis. The renewable energy industry and the solar industry know that digression will happen and that subsidies will be withdrawn, but it must be to a predetermined timetable. When that timetable keeps changing, it is incredibly difficult for business to adapt.

Compare that with what is happening to the nuclear industry. The nuclear industry will have subsidies for decades to come. It is already 50 years old, and yet Hinkley Point C could not even begin to be built were it not for the fact that it has massive subsidies, which are hugely bigger than anything that the renewable energy industry could ever dream of. I will not hear suggestions that the renewable energy industry is somehow greedy when it comes to subsidies; absolutely nothing could be further from the truth.

[Sammy Wilson (East Antrim) (DUP)]

I thank the hon. Lady for giving way. I am sorry for stopping her in mid-stream, especially as she was getting so passionate about the subject. She cannot have it both ways. She cannot say that renewable electricity and power are coming down in cost because the industry is becoming more efficient, and at the same time wish to have tax breaks and subsidies maintained. Either the industry is becoming more efficient, its costs are converging and the tax breaks are not needed or, as many of us suspect, it will always be a lame duck and will always impose higher costs on electricity consumers.

[Caroline Lucas]

I wish that the hon. Gentleman had done a little bit more homework before making that point, because it is simply not the case. The point about the subsidies to the solar industry is that it has always been deemed that they would come down over time. The objection here is that they are suddenly being forced to reduce overnight at a time when the industry had been told that there was going to be a very different economic situation. Of course the costs of solar are coming down; they have been coming down in a remarkable way, and all credit to the solar industry for achieving that. But they are coming down in spite of the Government—in spite of their chopping and changing, their uncertainty and their lack of vision—and not as a result of something that they have done.

In conclusion, if the Government go ahead with applying this climate change levy to the renewable energy industry, they will strangle an industry that has so much potential for getting climate emissions down, creating jobs and bringing on a stronger and more resilient economy.

[Nigel Adams (Selby and Ainsty) (Con)]

I am grateful to be able to contribute to this debate. Members on both sides of the Committee will agree that keeping the lights on is one of the primary duties of any Government. Some of the more senior Members in this Chamber will recall the three-day week in the 1970s—I apologise for glancing over my shoulder to my right hon. and learned Friend the Member for Rushcliffe (Mr Clarke)—when British businesses were forced to conserve their electricity at great commercial cost and television companies could not broadcast beyond 10.30 in the evening. We have come a long way since those bad old days and we cannot and should not allow this nation to find itself in a similar situation ever again.

With that in mind, we also need to recognise that the energy industry in modern Britain cannot be taken for granted. Like any other business, energy companies make difficult decisions every day. They decide what projects to invest in, using reasonable commercial principles. It has not been fashionable in recent years to praise energy companies, but we should not forget the significant number of jobs that rely either directly or indirectly on energy companies in this country. Many Members present will be aware that in my own constituency in North Yorkshire, energy companies have played an important role in the community over many decades, employing thousands of local people and generating millions of pounds in business for local companies.

Recent events in my constituency have prompted me to participate in today’s debate. Sadly, last week the Czech owners of Eggborough power station announced that the station was set to close, shedding 240 jobs in the process. That is not only a great personal loss to my constituents but a great loss to the nation, given that Eggborough provides roughly 4% of the UK’s electricity. I remind the Committee that National Grid recently announced that the capacity margin this winter is only 1.5%, and many analysts predict it could be much lower next winter.

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[John Redwood]

I have made very clear the priorities for myself and my electors. In the situation in which the country finds itself, guaranteeing keeping the lights on and having the power for industry and commerce is a fundamental objective that I take very seriously. I also take seriously the need to ease what Labour used to call “the cost-of-living crisis” to ensure that people have more money to spend for a better lifestyle, so affordable energy is crucial. Those are the priorities I set out for these policies. I think they can be achieved while ensuring that we reduce pollution, which I am very much in favour of. I wish to have sensible environmental policies, but my priorities are security of supply and powering better-paid jobs and more activity, which requires lower energy prices.

[Caroline Lucas]

rose—

[John Redwood]

I willingly give way to the hon. Lady, who always wants to price people out of energy.

[Caroline Lucas]

I think I am grateful to the right hon. Gentleman for giving way. He, like me, would like to see affordable energy, but given that nuclear power is one of the most unaffordable energies and that we are going to lock ourselves into extremely high prices for nuclear into times to come, will he be consistent in his position? If he does not want unaffordable energy, will he also oppose nuclear energy fees?

[John Redwood]

I have not seen all the figures on what the contract prices might entail, but I entirely agree that I want affordable energy. The advantage of nuclear energy is that it is reliable energy, and the problem with too much wind energy in the system is that it is very unreliable energy. It is therefore very expensive energy because a full range of back-up power is necessary for when the wind is not blowing. That means investing at twice the cost—investing in the wind energy and then in the back-up energy. With nuclear, only one investment needs to be made. The hon. Lady is quite right that it is crucial to get value for money if it is decided to lock into a nuclear contract.

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[Damian Hinds]

We are not in a position to be able to change the approach. My hon. Friend asks about the timing. The exemption would have cost around £40 million a month to maintain. Without our change, more than £150 million of support would have gone to overseas renewable generation in 2015-16, and that figure would have risen to £300 million by 2020-21. My hon. Friend asked why not follow the same timings as the exemptions for combined heat and power, but those are on a very different scale and the timing was in the context of the coming of the carbon price floor, which would support CHPs. As I said earlier, more efficient and effective schemes have come about to support renewables through the renewables obligation and contracts for difference.

The hon. Member for Kirkcaldy and Cowdenbeath (Roger Mullin) spoke about the particular impact of the measure in Scotland, but I can confirm that Scotland receives a high level of renewables support from the UK Government. In the first contracts for difference auctions, 11 out of the 25 contracts were awarded to Scottish projects, and 30% of the support provided by the renewables obligation is for schemes in Scotland. That support, as I have said, is much more significant than that offered by the CCL renewables exemption.

The hon. Member for Brighton, Pavilion asked about the Government’s green credentials, a point that came up again in an intervention. I repeat that the Government take our environmental responsibilities extremely seriously and we are absolutely committed to meeting our climate change commitments, but as cost-effectively as possible. We are making good progress, with emissions down 30% since 1990, and we are on track for 30% of electricity supply to be from renewables by 2020. At the same time, we want to help consumers, keep energy bills down and keep British business competitive. It is vital that we take careful account of the costs of our policies so that we are not imposing unnecessary burdens on households and businesses, making household bills unaffordable or putting the UK at a competitive disadvantage.

[Caroline Lucas]

The Minister has made the case that he wants to be able to reduce householders’ bills, so will he ring-fence the extra revenue generated by applying the climate change levy to renewables and put it into energy efficiency for some of the poorest households in this country?

[Damian Hinds]

I wish we were living in a world where money that was saved was suddenly free and available to be used to do things. As the hon. Lady knows, the Government have a whole range of programmes to support our objectives to tackle climate change and we will continue to do that.

I stress again that new clause 2 is not necessary. The impact of ending the exemption from the climate change levy for renewable electricity has been published by the Government. Clause 45 will not impact the UK’s ability to meet its climate change goals, will not affect renewable generators’ long-term investment plans and will not increase household energy bills, but it will provide better value for money for UK taxpayers. I commend the clause to the House and urge the Opposition not to press new clause 2.

Question put, That the clause stand part of the Bill.