Finance Bill

Lord Dodds of Duncairn Excerpts

2nd reading & Committee negatived & 3rd reading
Tuesday 8th June 2021 Lords Chamber

[Lord Dodds of Duncairn (DUP)]

My Lords, we understand the difficult job the Chancellor has had of bringing forward this year’s Budget in the unprecedented circumstances in which this nation finds itself. The immediate priority, looking at the economy, must be ensuring that we come out of this pandemic with as many safeguarded jobs and livelihoods as possible. The economic packages, especially the furlough scheme and the help for the self-employed, have been incredible interventions, which have helped stave off the worst ravages of economic depression that may otherwise have occurred. I congratulate the Government, as we all do, on the incredible investment in the vaccine rollout, which has produced stupendous results.

Once again, the benefits of being part of one of the biggest economies in the world has been illustrated for all our citizens through all parts of the United Kingdom. I have to say that I have been reassured somewhat in recent weeks by the feedback from people normally critical of the United Kingdom—even of being part of the United Kingdom—about the way in which this country has responded, with the vaccine rollout in particular but also throughout this pandemic with the economic interventions.

The Chancellor is having to balance the need for immediate actions to counter imminent economic shocks against long-term economic recovery and mounting levels of eye-watering debt. So far, I believe that, generally speaking, the Government’s approach has been the correct one. Some of the measures, which normally no one would ever contemplate, have been necessary to avoid far worse problems. That is not to say that there are not issues that need to be addressed and addressed quickly, and I want to refer to a number of general points before making a specific reference to a particular, discrete issue affecting electricity generation in Northern Ireland.

The hospitality and tourism industries, which the Minister referred to in terms of the VAT relief, have been decimated by the pandemic and the lockdowns. I welcome what the Government have announced in relation to VAT for these sectors—the extension of rate cuts until September and tapering measures until March next year—but it is vital that these sectors are allowed to get back to full working capacity as quickly as possible. They can survive only by full reopening and full working, and I hope that that will happen as quickly as possible—if not on 21 June then as quickly as possible thereafter, conscious of the need to take all necessary health precautions.

I also want to mention the issue of air passenger duty. We have some of the highest rates anywhere in the world. Peripheral parts of the United Kingdom are very dependent on air connectivity. Rail options do not exist for places such as Northern Ireland to reach other places in the United Kingdom. I ask the Government to keep under review measures that will alleviate the burden on businesses and families of air passenger duty on internal United Kingdom flights.

It would be impossible to participate in a debate like this and not make reference to the burdens that are being placed on the Northern Ireland economy and Northern Ireland businesses, and our communities more generally, by the Northern Ireland protocol. I am disappointed that there is little, apart from provisions in relation to the steel industry, that will alleviate those burdens, particularly in relation to customs requirements.

However, I do look forward to the Government introducing two new measures—in the near future, I hope—that will address the underlying problems of the protocol and do away with the incredible situation whereby, if the grace periods that are currently in force are not extended or a permanent solution not found, as many if not more checks will be done on foodstuffs and other materials coming from Great Britain to Northern Ireland as are done on those entering the entirety of the European Union from the rest of the world. That is an amazing, incredible and scandalous situation which must be remedied by the Government. I hope that those measures will be comprehensive and far-reaching.

I want to turn to the aspect of the Bill I mentioned and explore it in more detail. I believe it is something that perhaps is an unintended consequence of what is otherwise a reasonable provision: it is do with the prohibition on power plants putting rebated fuel—red diesel—through electricity generators after 1 April 2022. I fully understand, and electricity generators also appreciate, the policy objective of helping meet climate change and air quality targets by removing the tax advantage of red diesel, thus encouraging end-users to use more expensive white diesel, which is taxed at a rate that reflects the impact of the emissions that they produce.

However, the Bill will have a particular, unique and unintended detrimental consequence for electricity generators in Northern Ireland. Kilroot and Ballylumford power stations in Northern Ireland have a historical licence obligation to maintain stocks of red diesel as part of the Northern Ireland Fuel Security Code obligations. The licensing obligation for Northern Ireland electricity generators requires back-up fuel—red diesel—to be held for security of power supply purposes in the event of gas supply interruption. The Bill requires the disposal of all existing red diesel stocks before 1 April 2022. There is in fact major uncertainty about whether that timetable could be met. There will be significant additional costs of doing this to both Ballylumford and Kilroot, estimated at £14 million for one and £1.6 million for the other. That includes all the logistical problems as well as the replacement of the fuel itself.

There is, however, a major competitive commercial disadvantage for Northern Ireland power generators vis-à-vis others within the competitive integrated single market and vis-à-vis the Great Britain market. There is no equivalent requirement to hold reserves of what the Irish equivalent of red diesel is in the Irish Republic, and the requirement to hold back-up fuel is applicable only to Northern Ireland power generators and does not apply to gas-fired power generators in Great Britain. One of the perverse impacts of the requirement of the provision in the legislation, if it is not remedied, is that it will lead to additional and higher CO₂ emissions in Northern Ireland that would otherwise be avoided: having to use up the fuel in generating electricity will cause much greater emissions. It will be costly for the consumer; the extra cost is estimated at £60 million based on commodity prices, as of 1 May 2021. Then there is the risk of security of supply for Northern Ireland in the period between getting rid of one fuel and replacing it.

I welcome discussions which have taken place between power generators, Ministers and officials in Her Majesty’s Treasury. It is vital that the Bill’s unintended consequences are addressed. I understand that progress has been made, but I would like the Minister, in responding to the debate, to put on the record how he understands the way forward. Will he confirm that HM Treasury is looking at fixing this problem, that guidance will be issued relating to the Bill or that there will be secondary legislation to address the issue? Could he confirm that there will not be a requirement placed on Northern Ireland power generators to rid themselves of existing stocks of reserved fuels by the prescribed date, with all the detrimental impacts that I have outlined? I hope the Minister will be in a position to respond positively, because this would be good news for the plants themselves, for consumers and for the environment.