(9 years, 6 months ago)
Commons ChamberIt is interesting to take part in another Opposition day debate on this subject. The Opposition had 13 years to deliver their dream for the financial services and banking sector, but what they left us was, of course, a nightmare, and we have had to do a lot to tidy it up. Without wanting to threaten coalition entente cordiale, I should say that people who examine this subject trace some of the problems back to the deregulation that took place in 1986. It was so drastic that it has been called the big bang. It is certainly true that my coalition partners were still calling for lighter regulation as late as 2007.
However, between us, we recognised that there was a nightmare to sort out, and a great deal has happened, principally the Financial Services (Banking Reform) Act 2013. Let me pick out three items. First, there is a new criminal offence that covers those who run banks and building societies and have engaged in reckless misconduct. The penalty is a maximum sentence of seven years in prison, or an unlimited fine. Secondly, we have worked closely with other countries to tackle risk by introducing strict requirements in relation to the capital that banks must hold. Thirdly, we have prevented banks from engaging in or promoting tax avoidance by making the 15 biggest banks sign up to a code of practice. My party wants more to be done about that: we think that there is room for a new offence of corporate failure to prevent economic crime. We believe that not just those who evade taxes but those who advise or enable them should be prosecuted.
We are still seeing scandal after scandal, and it is notable that most of the scandals that are still hitting the news arose on the last Government’s watch—or the seeds were sown then—so we have had a great deal to do. We introduced the banking levy, and we have kept it going. My party wants it to continue, so that banks go on contributing to the process of rebalancing our budget and helping our economy.
As we have heard from several Members today, bankers are paid a lot. I think that there is a fundamental cultural problem. When an organisation has money to allocate, it has to think about its stakeholders. It has to think about its customers in terms of services and pricing, and it has to think about its shareholders in terms of the reward on the capital that they have invested. It also has to think about investing in its own business. About 10 years ago, my daughter worked in a branch of Barclays bank that was still using punch card machines that I thought had gone out in the late 1970s.
Staff are, of course, part of the balance, but I think most of us feel that the balance between the various stakeholders in some of the big banks has been tipped too far towards senior staff. However, bonuses are a great deal lower than they were. They have fallen from nearly £11 billion, or £33,000 a head, in 2007 to less than £2 billion, or £6,000 a head, in 2013. They are rising a little as banks are getting their act together, but they are nowhere near as high as they once were.
As so often happens with Labour motions, the Opposition have tried to connect two completely disconnected issues. We can have a debate about banking and we can have a debate about youth unemployment, but it is not logical or correct to suggest that the one either depends on the other or is solved by the other.
Of course I support moves to reduce youth unemployment. For me, however, unemployment is not about percentages but about people, and 830 fewer people in my constituency have been out of work in the last year. Unemployment remains far too high, and it is particularly high in the north-east, but it has fallen by an average of about 1,000 people per constituency in the north-east over the past year. In my constituency, youth unemployment has fallen by 43% since the 2010 election, when I inherited my legacy.
The motion asks us to consider the issue of youth unemployment, and also to consider the proposition that the bankers’ bonus tax will help to sort it out. The bonus tax has become the magic porridge pot of Labour policy making. I have a list of nine uses to which Labour Members have put it so far, and I think that my hon. Friends could raise the number to about 11. The last occasion on which we discussed the subject was quite remarkable. The shadow Minister who opened the debate referred to one use for the tax while the Minister who closed it referred to a different one, so they obviously had not shared notes. Perhaps, given that we are so near to a general election, they will finally settle on a use for it.
Let us now think about what will actually happen. If I understand the Opposition’s policy correctly, they want individuals to pay 50% tax on their bonuses, and they want banks to pay 50% tax on those bonuses. Of course, banks have other employment costs, particularly national insurance. Barclays has calculated that, when all that is added together, it will be paying 115% tax on its bonuses. Is it really likely that a bank will continue to declare £1 of bonuses to ensure that a Labour Government receive £1.15?
Matt, the famous cartoonist, must have been very prescient when he prepared his 2015 calendar. The cartoon for this very month shows a banker sitting behind a desk and someone else standing some distance away from him. The banker is saying “I cannot give you a bonus, but there is a £2 million reward for the person who finds my umbrella”—and there is an umbrella on the floor between them. In other words, banks will find ways around this.
It is not just Matt who has made the point. Referring to Labour’s bankers’ bonus tax, the right hon. Member for Edinburgh South West (Mr Darling) said:
“I think it will be a one-off thing because, frankly, the very people you are after here are very good at getting out of these things and...will find all sorts of imaginative ways of avoiding it in the future.”
The Opposition’s policy would result in avoidance of the tax through increased fixed-level pay and reduced variable-level pay. A much better way of taxing banks is to tax their balance sheets, which is what the Government have done, because taxation of that kind cannot be avoided in the same way.
My hon. Friend has made an extremely good point, and his words stand on the record. In fact, I was about to mention an aspect of what he has said. It is interesting to note that the motion itself refers to an avoidance method, and tries to close the loophole. As for the clawback proposal, the more we disincentivise banks from paying bonuses, the lower will be the amount that is available for clawback purposes. So, as my hon. Friend has just suggested, the policy is self-defeating.
The banks say that high pay and large bonuses are necessary for competition, but new competition is already emerging. I recommend all Members to visit their local branch of Handelsbanken, which has no targets and does not pay bonuses. It is an incredibly successful bank, and is growing very fast in this country. Competition has already started to undermine the business models of the large banks. My hon. Friend the Member for Hexham (Guy Opperman) mentioned Atom bank. I too have visited its offices, and I am trying to support it as much as I can. Banks of that kind will disrupt existing business models, because they have a much lower cost base than traditional banks. We will see movement: the banks that think life will continue unchanged will find themselves pursued by competition.
One aspect of new funding that needs to be examined is crowdfunding. I think that the next Government will find that they need to consider regulation in that area. We are just starting to hear about some of the scandals involving a practice that is, at present, largely unregulated.
In general, we need to encourage competition, we need disruptive business models, and we need to recognise that, in the private sector, competition should be allowed to beat down bad practice and encourage good practice. We need a successful financial services sector, and we need it to be well regulated. The sector has made it very clear that it does not want a Government who are either anti-Europe or anti-business.
My conclusion is this. If the question is “How do we make our economy stronger and society fairer?”, nothing that we have heard from the Opposition today makes me feel confident that they are the answer.
(9 years, 7 months ago)
Westminster HallWestminster Hall is an alternative Chamber for MPs to hold debates, named after the adjoining Westminster Hall.
Each debate is chaired by an MP from the Panel of Chairs, rather than the Speaker or Deputy Speaker. A Government Minister will give the final speech, and no votes may be called on the debate topic.
This information is provided by Parallel Parliament and does not comprise part of the offical record
It is a pleasure to serve under your chairmanship, Mr Turner. I, too, congratulate the hon. Member for Amber Valley (Nigel Mills) on securing the debate. His initiative is excellent, given the enormity of what is proposed.
There is something of a crisis in corporation tax: globalisation, the European Union and the internet have all given many more opportunities to move tax or profits around. In the days since I was a global finance director in 1996, we have seen a lot more predatory activity by advisers and companies. They seem to be far more shameless about carrying out transactions without a commercial basis. With my training, I would have said that that was already a problem, even without any new legislation, but companies seem quite happy to do such transactions, to the extent that a year or so ago the chief executive of WPP could describe the amount of tax paid as “a question of judgment”, which tells us a lot about the amount of flexibility that he could see in the system.
Moreover, the chief executive of Google famously boasted about avoiding £2 billion in tax in a single year. He seemed to have no concept that that meant £2 billion in cuts to public services in the all countries in which his company operates, or the same amount more in tax that other companies and individuals in those countries would have to pay. The climate seems to be changing, although the Prime Minister’s business advisory group still includes that chief executive. I wonder whether he had any input into the new policy and what he thinks of it.
After the measure was announced, Newsweek commented on 26 December:
“The British government, after a search, says it knows how to tax profits Google earns in the United Kingdom. Its solution is simple and elegant, and it probably won’t change a damn thing.”
That view is perhaps overly cynical, but it backs up a point made by several Members: the expectation is that companies will take other measures rather than lie down and pay the tax. That is a huge issue.
The hon. Member for Amber Valley was right to mention the question of how on earth the tax will be calculated. City experts are already saying that the calculations will lead to a “legal quagmire”—that is one expression I have seen used. In other words, when HMRC comes up with an assessment the lawyers will probably start work. I wonder whether HMRC has budgeted sufficiently for the resources that it will need to make the tax stick. It could be involved in lengthy legal cases with expensive lawyers paid by large companies.
That leads us to the main question concerning this tax. When I was trained as an accountant, we were told that the one principle a tax system needs is certainty. In other words, it should be clear what a company is doing and what the tax on that will be; the company can then pay that tax. Certainty is one of the functions of a good tax system, but with the diverted profits tax we are straying into an area of high uncertainty about how the tax will be assessed and paid. The hon. Gentleman made an excellent point about our ability to collect the money: by definition, it could be all over the place and not in the UK. That leads us to the question of the confidence the Minister has in our ability to collect the money—I am interested to hear her comments on that.
The hon. Gentleman has made an interesting point about certainty and also about the difficulties that globalisation and the internet have caused for gathering corporation tax. Is there a case for the international community to give up on corporation tax and instead have higher taxes on sales and, if necessary, dividends, so that the tax is still raised in the end but we do not have a continual process of chasing money across international boundaries, which, for the reasons he has given, is time consuming and perhaps counter-productive?
I take the hon. Gentleman’s point on board. I know that some commentators believe the right way to go is to scrap the incredibly complex system that we have. Although that might be where we end up, I would like to see country-by-country reporting introduced first, so that we know what activity companies are carrying out in each country, and where they are trading and are declaring their profits will be transparent to the world at large. That would help tax authorities; also, the problems companies would then have with reputation management would cause quite a shift. I would like to see that country-by-country reporting first, but perhaps we will end up in the position that he has suggested.
The estimate is that the tax will raise £1 billion over five years. That is a very small amount given the scale of the issue. One commentator has suggested that Google alone could be assessed as owing around half that figure. The Financial Times has found that in 2012 seven US technology companies paid only £54 million in tax on UK sales of $15 billion. I am aware that corporation tax is levied not on sales but on profits, but the companies we are talking about typically make 20% profit or more on sales, so we could quickly come up with a large number there. Will the Minister tell us how the assessment of the amount the tax will collect was made? What assumptions sit behind it? The figure seems small given all the relevant issues, which we are well aware of.
The hon. Member for Amber Valley rightly mentioned EU law. I will not repeat what he said but there is clearly the potential to challenge the tax through the EU. When one talks to global finance directors, there is no doubt that financing structures and interest payments are the tax avoidance measure of choice—they are how the largest diversion of profits occurs. Will the Minister explain why offshore finance centres and excessive foreign interest payments have been specifically excluded from the diverted profits tax? I welcome the moves that have been made, but a large area has not been addressed by the tax.
I will mention a few other aspects of profit diversion. The Minister may tell us that they are included, but my guess is that most are not. There are well documented loopholes used by banks for tax arbitrage between countries, particularly between the UK and the US, because different instruments are taxed differently in the two countries and by shuffling money backwards and forwards it is possible to create beneficial tax arrangements. Will the legislation address those loopholes? Does the legislation deal with hybrid entities, for which there are similar opportunities because of the different taxation of legal structures between different countries? They are another method that the financial services sector in particular uses to shift profits.
Some of the issues connected to Luxembourg have been mentioned already, but will the Minister address the issue of the wholesale tax avoidance and profit diversion that, for example, sees Vodafone holding five times as much capital in Luxembourg as the GDP of Luxembourg, although it does no trading there? That kind of thing enrages the public, and it is high time it was addressed. When will she get the EU to deal with the preposterous activity going on in Luxembourg behind its so-called headline corporation tax rate of 29%?
The Channel Islands have already been mentioned. The particular point I want to raise is that the majority of contracts for UK private finance initiatives are now financed from those islands. That makes a mockery of the Green Book assumptions about PFI tax recovery; it is assumed that a very high figure—I think it is 6%—will come back to the Treasury in tax receipts, but that assumption completely ignores the fact that PFI deals are routinely moved to the Channel Islands, including those for 50% of the schools in my constituency, which are apparently owned in Jersey.
Those are just a few of the arrangements that may or not be covered by the diverted profit tax legislation. I suspect most are not, but they illustrate the fact that there is a lot more yet to do.
Diverted profit arrangements do not simply cost tax or allow profit diversion; they incentivise offshore acquisition and ownership of UK businesses. These days, highly profitable UK businesses have to create some offshore financing or else somebody else will do it for them, as predatory takeover activity in the UK is often predicated on offshore finance structures designed to move taxable profits out of the country. A good example would be Betfair. Last year, a company was looking to take it over in an aggressive takeover. I wondered what the company was going to add in terms of betting technology or new IT, but the clue was the name: “So-and-so Partners, London and Luxembourg”. The factor the takeover was going to add was the shifting of Betfair’s profits away from the hands of the Treasury. In the end, that takeover did not go through, but the diversion of profits affects business ownership and competition in the UK.
I mentioned the amount that the tax is expected to raise. I think the figure is low because of what are traditionally called behavioural effects—in other words, what companies may do as a result of the tax—and so I am interested to hear more from the Minister on what the Treasury thinks will happen, as opposed to the idea that companies will simply sit there and pay the tax. What kind of measures does the Treasury consider companies might take?
How will the success of the tax ultimately be measured? As the hon. Member for Amber Valley rightly said, it could well be that the real success of the legislation will appear not in diverted profit tax receipts but as higher corporation tax receipts. Does the Treasury have any way of judging how the measures have played out?
I welcome what is happening and hope that the Government will do more. I have mentioned country by country reporting, and that has begun to happen in the financial services sector. It is driven partly by other countries’ legislation. I hope it will expand through the work of the OECD and pressure from our Government, and in the operation of companies around the world will become more transparent. We should push for that.
John Cridland, the head of the CBI, said about a year ago that he was confused and did not know what the Government wanted on tax. I do not think that it is confusing at all. We want companies to account for their UK activities in the UK and pay tax on the profits that they earn in the UK. It could not be any simpler. I addressed the CBI tax forum two or three months ago and made that point. I said bluntly that if its companies were doing otherwise, we would steadily be coming after them.
The Government have a record of at least moving in the right direction. I was a member of the Public Accounts Committee for more than four years and took part in scrutiny of large companies and tax advisors; judging by the culture and attitudes out there, we still have a long way to go. I vividly remember asking a tax advisor how many of the schemes that he had advised individuals and companies to adopt in the previous few years had been made illegal; he cheerfully said it was all of them. It is good news that HMRC keeps pinning those things down, but the fact is that there is an industry out there constantly looking for new ways to avoid the taxes that we try to levy. I hope that the Treasury will make its proposals work, and will continue to recognise that there is still much more to do.
(9 years, 11 months ago)
Commons ChamberI congratulate the hon. Member for Stockton North (Alex Cunningham) on securing the debate. On this issue, I regard him as an hon. Friend, and I was delighted to support his motion. Our constituencies are divided only by the River Tees, but they are joined by many pipelines.
I have taken a keen interest in these issues since I entered the House. I worked in the electricity industry for five years, and in an energy-intensive part of the chemical industry for more than 20 years, so I am very familiar with many of the issues.
As the hon. Gentleman said, the Tees valley is a “hotbed”—an interesting word to use—of such businesses. In fact, it has 18 of the 30 largest carbon emitters—energy-intensive industries—outside the energy sector in the UK. My constituency has the Sahaviriya Steel Industries steelworks, Tata Steel activities, Sabic petrochemicals and Lotte petrochemicals, which are some of the biggest businesses, as well as many others.
As the hon. Gentleman said, there is a proud history of such businesses in the north-east. On the wall of my office in Portcullis House is a picture of Lambeth bridge lying in pieces before it came down from Middlesbrough to be installed close to this place. When I took the Secretary of State for Business, Innovation and Skills around the Tata beam mill in my constituency, the work force were making beams for the new World Trade Centre. They told us proudly that their beams are in nine of the 10 tallest buildings in the world. That emphasises the point made by the hon. Member for Newcastle upon Tyne Central (Chi Onwurah), which is that steel cannot be melted without using a great deal of energy. Steel beams cannot be made without using a great deal of energy. There are physical and chemical limits to what companies can do.
When I first became an MP, one of the key requirements for me was to get the steel works in my constituency going again. It will be of no surprise to Members that I therefore had to meet Ministers at the Department of Energy and Climate Change. The new owners wanted reassurance about the UK’s energy policy and an assurance that they would get the emissions allowances that were required to restart the plant. The owners were probably slightly naive and did not ask enough questions about how many issues they would face on the energy front. They have been surprised by the depth and breadth of the various environmental obligations on them.
As Members have said, Governments in other parts of the world are nowhere near as aggressive towards energy-intensive industries as ours seem to be. The former Minister of State, Department of Energy and Climate Change, the right hon. Member for Bexhill and Battle (Gregory Barker), who was recently moved out of office, was told by his civil servants that energy costs in the UK were not out of line with those in other countries. That is the line that Ministers were being sold. He visited Germany because of the representations that he kept hearing from industry and was shocked by what he found. He had not realised that industry gets such a lot of support in Germany and that industrial energy costs can be as low as half the cost of domestic energy. The comparisons that the hon. Member for Stockton North has given became clear to him.
I was keen, along with other Members and particularly the hon. Member for Penistone and Stocksbridge (Angela Smith) in the early days, to form the Energy Intensive Users Group. The group was originally envisaged as an offshoot of the all-party parliamentary group for the steel and metal related industry, but we realised that it was a far bigger issue.
The hon. Gentleman made the important point that Germany’s electricity costs for energy-intensive industries are substantially lower than ours, even though its domestic energy costs are substantially higher, because it has a cross-subsidy. Does he know, or does anybody know, why that is not an issue in respect of state aid?
The hon. Gentleman makes an extremely good point, which I will return to later. When I see the UK’s attitude to these sorts of policies, I often feel like we are playing cricket, while other countries are playing rugby, boules or other sports that we do not recognise.
At the first meeting of the Energy Intensive Users Group, I was stunned not just by the number of outside attendees from industry, but by their seniority. We quickly realised that it was a huge issue that faced many industries, some of which have been mentioned. I do not think that paper has been mentioned. That is yet another industry that sent a representative from its trade body. As a result, there has been a great deal of representation to the Government. I am pleased to see at least some bending in response.
UK businesses that are involved in the generation and consumption of energy are saddled with up to seven different carbon taxes from the UK and Europe. Interestingly, even the senior executives of those businesses cannot always describe clearly what all the taxes are and what they do. Despite the action that the Government are taking, the trends are not great. It is estimated that political costs will increase the electricity bills of industry by a third by 2019-20. Policy makers do not seem to understand that if a company spends millions of pounds a year on energy, it already has quite an incentive to use less. It does not need to be beaten with a stick by the Government to persuade it to use less energy, let alone seven sticks. These companies know that they are spending a lot of money on energy, and are already doing a lot about it. They know that energy costs are a competitive issue, whether there are taxes or not. The irony of a heavy tax burden is that it removes cash from those companies that they could otherwise devote to energy-saving initiatives. Many companies work on thin margins or in commodity businesses that do not have high margins. The more taxes they pay, the less likely they are to be able to invest in reducing carbon consumption and generation.
A Minister from the Treasury rather than from the Department of Energy and Climate Change is responding to this debate, and I wish to ask about the attitude of the Treasury towards these taxes. Does it take the broad view about business competitiveness, look at the overall picture, and compare the taxes being rendered with those rendered from Europe, or is it just a way of raising money? These businesses are almost all competitive and traded internationally, so in this regard the UK is no more an island than the EU is. Our policy decisions affect these businesses on an international basis.
The hon. Member for Warrington South (David Mowat) mentioned the EU. The minute we want anything done, the standard response from civil servants is “State aid”. That is a perfect method of obfuscation and delay, which, in many areas, we as politicians are buying when we should instead be fighting a lot harder. I know there are specific issues with the steel industry and the EU, but many other industries are not as limited. Politicians should not allow state aid to be used as an excuse for delay or for no action, particularly given that some of the things we are talking about are, ironically, UK-only initiatives. I cannot see how the European Union can interfere with initiatives such as the carbon price floor, which are taken only in this country. I would like Ministers to be a lot more aggressive with civil servants, not just about whether state aid issues apply, but if they do, about how quickly they can be removed. Some of the issues I am thinking of have been washing around for most of the four years that I have been in this place.
Europe has the emissions trading scheme, which has not totally met its objectives, as the allowances originally given to companies were fairly generous but the tight market that was expected to lead to carbon trading has not occurred. Ironically, however, Sahaviriya Steel Industries in my constituency has a specific problem because it was virtually out of business during the reference period when the allowances were decided. It now pays $1 million a month in carbon cost to the EU, because it does not have enough allowances to operate. It is also expanding, so carbon costs are yet another handicap.
Businesses can do many things to reduce energy use, but as the hon. Member for Newcastle upon Tyne Central said, there are physical and chemical limits. I do not disagree with some of the EU moves on best available technology, or with new moves to look at what is technically feasible and ensure that companies in the EU move towards that best available technology. I hope that we do not get regulatory regimes that drive everybody else out of business if they are not the best, as that will not help anybody. However—I hope the Government will take notice of this—when the best available technology frameworks are established for different businesses, that will at least show what is possible with regard to reducing energy consumption and contribution to climate change. If a company is doing something in another country, we can do it here; if it is not being done anywhere, we must ask whether it is sensible to try to drive a company to use 50% less energy, for example. I would like to see constructive work with the EU on that, ensuring that we are as bold as we should be when dealing with its requirements.
Investment has been mentioned, and the manufacturing industry has been declining. During the previous Government, it went from being 19% of the economy to 10%, although some growth is occurring. I worry about these businesses because there is capital investment inertia. It is not about whether company A is operating today, tomorrow or next year; it is about what investment decisions are being taken. Are the plants being kept up to date and maintained? Above all, would the company concerned re-invest in such a business?
I remember my experience as a financial director in the chemical industry. We decided to get out of a business, but 24 years later that business is still running. It has never been renewed, but it has been patched up and sold three times since then. Those are the types of decisions taken. If we have an unattractive climate for investment in this country, things will close down not overnight but steadily, and we are seeing some of that.
The Engineering Employers Federation, which covers all the businesses we are talking about, says that energy costs are its No. 1 issue for growth and investment. Many of these companies are foreign owned. The biggest employers in my constituency are Singaporean, Thai, Indian, Saudi Arabian and Korean. Decisions are being taken not in the north of England or London, but in Seoul, Riyadh, Bangkok and so on. If our energy infrastructure costs do not look competitive and sensible, companies do not need to come here or re-invest.
Despite sounding somewhat critical, I welcome the Government initiatives. The mitigation moves that they have mentioned are helpful for big energy users in my constituency. I hope the initiatives will take place with due speed—that has been an issue—that there will be certainty and that they are not a one-off. We are talking about long-term businesses taking long-term decisions. If the Government believe that throwing a carrot towards a business for 12 months makes a difference—well, obviously it makes a difference to its cash flow in those months, but it will make no difference to its strategy. Uncertainty does make a difference in the wrong direction.
I welcome the fact that the UK Green Investment Bank is majoring in investing in industrial energy reduction, as well as renewable technology, and I welcome the renewable heat incentive, which should help. The regional growth fund has put money into such businesses—most recently, £9 million went into a huge project at Sabic in my constituency, which will result in the petrochemical cracker being able to crack gas. I am pleased about the Tees valley city deal, which I helped to push for and even construct. It will get carbon capture and storage around Teesside, which I still regard as the No. 1 location for investment in carbon capture and storage for industries outside the energy sector, although we have the energy sector as well.
I agree with the hon. Gentleman. Such a technology will create an infrastructure that will benefit all those sectors, and they do not compete that much with one another. The Tees valley can be a hotbed of competitive steelmakers, chemical producers and so on. Strategically, the country should get on with that.
All hon. Members have mentioned the importance of energy-intensive industries. They are important to the economy, to the development of green industries—let us think of the amount of steel involved in tidal power—and to the security of the country. We should not kid ourselves when we count carbon. In a debate a while ago, the hon. Member for Warrington South asked, “Is the carbon for my Volkswagen car mine or the Germans’?” We are kidding ourselves if we think we are doing the right thing by de-industrialising this country, exporting jobs and importing carbon. That is one point on which I depart from the hon. Member for Newcastle upon Tyne Central.
I agree with the sentiment the hon. Gentleman expresses, but I do not recall saying that. I have a Volvo, not a Volkswagen, so I might have talked about Swedish carbon.
I think he mentioned Volkswagen in the context of chiding the Germans for their carbon emissions. I made the point that a big manufacturing exporter such as Germany is probably bound to have higher carbon emissions on a production basis.
It looks as if I will be fighting the hon. Member for Newcastle upon Tyne Central for the first copy of Hansard tomorrow, because I, too, must leave the Chamber, to join the Government’s rail electrification taskforce. I apologise in advance to the Minister. I will look closely at her remarks tomorrow.
(10 years, 6 months ago)
Commons ChamberI would not necessarily want to support any particular commercial organisation, but I recognise the bid that the hon. Gentleman makes and I certainly support the idea of switching. He is absolutely right that anyone who wants to get the best deals these days has to have a bank account—and pay by direct debit—and has to be online to get the discounts and switch easily. They certainly do not want to have a prepayment meter. All that militates against the poorest part of our community.
I agree with my hon. Friend that the current practice militates against the poorest people. His example of the ECO is rather a good one, because it involves the Government putting the onus on companies to do something. The only thing that bothers me a little, however, is that what is being suggested might imply a levelling of the bill upwards, as it does with the ECO, although that might be a reasonable thing to happen.
What I am suggesting is really an averaging process. We expect better-off consumers effectively to pay for various measures nowadays, and I think we should ensure that they help the poorer members of the community in this instance by levelling the playing field between the different tariffs. I hope that the Minister will respond to that suggestion.
(10 years, 10 months ago)
Westminster HallWestminster Hall is an alternative Chamber for MPs to hold debates, named after the adjoining Westminster Hall.
Each debate is chaired by an MP from the Panel of Chairs, rather than the Speaker or Deputy Speaker. A Government Minister will give the final speech, and no votes may be called on the debate topic.
This information is provided by Parallel Parliament and does not comprise part of the offical record
I recognise that the Minister has a special expertise, but I know that there is demand in the marketplace for the feeds, which form only part of the overall mix. Having enjoyed the product of a ruminant in my cup of tea earlier this afternoon, I know that they have a place in the final food chain.
I am not totally certain that I understood the thrust of what was said about rainforests. Was the point being made that it is good to convert rainforest into soya for use in transport?
No, absolutely not. My point was that the high-grade, high-protein animal feed, which the by-product feed replaces, is typically grown in South America, so the by-product feed reduces the demand for soya-based proteins, mostly from South America. There is a green chain. The situation is not as simple as people say.
The Government have had a policy for putting biofuels into both diesel and petrol for years. Starting with diesel, they set the targets and people invested large amounts in chemical plant, but all the early investors went bust because the Government kept moving the goal posts—surprise, surprise, the same has happened with bioethanol. The £300 million that people invested in the plant in my constituency has largely gone and the plant recently changed hands for a lower price. Why? Because the Government have not delivered on the renewable transport fuel obligations they said they would when the investment case was originally made.
The hon. Member for Southport mentioned an important point: we need certainty for green technologies. If we are asking people to invest large amounts of capital, we cannot keep changing our minds. Changing one’s mind leads to an industry heavily dependent on imports of green products. Unless we give investors certainty about the goal posts and the environment into which they invest, they will not invest anymore. Most of the early investors in such technologies have done badly and that is mostly due to Government policy.
For the same reasons, we need to ensure at EU level that targets for the proportions of biofuel in diesel and petrol are separate. If we allow an overall target and let oil companies play games over how much biofuel they put into each one on any given day, the people who have invested heavily in capital plant will have years of feast and years of famine, as the oil companies play their games, and will eventually exit the market. Again, traders will be left to pick up the pieces.
(12 years, 7 months ago)
Westminster HallWestminster Hall is an alternative Chamber for MPs to hold debates, named after the adjoining Westminster Hall.
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Thank you for letting me speak, Sir Roger—I had not intended to do so. I want to make two points in relation to some of the comments I have heard: one in favour of CCS and one expressing some reservations. I will mention the latter one first, which relates to cost.
Many hon. Members have talked about the benefits of CCS technology. Of course, we live in a country where energy is still 90% fossil fuel generated, and anything that can enable us to make the transition from that in a carbon-free way, such as CCS, is attractive. Yet there seems to be something wrong. What the Government should be doing is setting a price for carbon and then letting the private sector do the work. We do not know the details about Longannet but, for whatever reason, that approach is not enough. People are saying that we have to invest a further £1 billion here and have a further pilot scheme there. What the Government’s role ought to be—this is the energy market reform—is, as it is with nuclear, to set a price for carbon, give industry that stability and let it make the investment. For example, let us consider Iberdrola.
The hon. Gentleman might be interested to know that the pressure I feel in my constituency is essentially coming from industry, not from power generators, because industry can very much see what is happening to it competitively and so on through carbon pricing. Does he agree that there may be a carbon pricing method that can incentivise the power sector to play its part in bringing this new technology on board faster?
I do not, no. If this technology is to work, it has to be done on the same playing field as everything else. I mentioned the price of carbon. The other thing about CCS technology that is not in doubt is that it requires an injection of power over and above what a power station is currently using—in the order of 25% for coal. That is an immediate increase in emissions and everything else just to make CCS work.
Just to be clear, I completely buy into the Climate Change Act 2008 and its requirements. However, the way that the Government have chosen to meet their environmental obligation is by setting a price to carbon. That is what makes CCS viable because, obviously, the companies will save the money from burning the carbon at whatever the rate is—£30 or £50 a tonne—and so on. That is my point. The level playing field that the Government are trying to obtain through the energy market reforms is being achieved over the medium term by the price of carbon.
Let me now make my point about CCS from a more positive point of view. What worries me a little about the Government’s position on CCS is a little similar to what worries me about the Government’s position on nuclear. Both CCS and nuclear have one thing in common: they are extremely good at reducing carbon, but they are not renewables. The Government have an issue to work through, and I have said this in other forums. The Climate Change Act 2008 requires us to reduce our carbon emissions by 80%—a huge and difficult target, but it is right that we are trying. My concern is that, in 2009, the EU 20-20-20 directive required us to increase our use of renewables by a factor of five over a decade or so. That objective is not necessarily consistent with the objective of reducing carbon.
It is possible that CCS may lose out, like nuclear, through a little bit more ambivalence on the part of Government. I looked at the Government’s carbon plan. It estimates how much of our electricity will be produced from CCS by 2030 and how much will be produced from renewables. I am not anti-renewable at all, if it can be made to work in a cost-effective way. The Government’s estimate for 2030 is a factor of five difference between renewables and CCS. I do not know whether CCS will be made to work or not. We should try, and it would be great if it did, but I am worried that the emphasis of policy is not on carbon reduction. The emphasis of policy is on renewables, and that might take us to, or down, a sub-optimal path.
Just one point of clarification: those two things are not necessarily entirely separate. A new 300 MW biomass power station has been announced for Teesport. A CCS network in the area could actually feed into that. As I said earlier, we could end up with carbon negative power as a result of doing that, so they are not entirely separate. While 300 MW is not a huge amount, it is worth noting that the Longannet project was only 400 MW.
I agree. I mentioned CCS and nuclear as opportunities. Biomass is also an opportunity. In common with the first two, it is also not a renewable. As I said, I am concerned that the emphasis of policy is in the wrong place. The 2008 Act was a hugely ambitious plan to try to achieve. We should not be diverted from doing so and we should look very hard at optimising that.
[Mr George Howarth in the Chair]
Finally, we have not really covered nuclear in any detail, other than an exchange at the start between two hon. Members from north of the border—the hon. Member for Dunfermline and West Fife (Thomas Docherty) and the hon. Member for Banff and Buchan (Dr Whiteford). People say to me that there is no cost-effective option. On the facts, it would appear that nuclear is cheaper than some of the other options, but of course the market needs to determine that. I agree with that. The carbon price will allow that to happen. That needs to be the case with CCS.