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Fossil Fuel Levy Bill Lords

Volume 300: debated on Wednesday 5 November 1997

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Order for Second Reading read.

5.4 pm

I beg to move, That the Bill be now read a Second time.

The Bill consists of only two clauses and is concerned entirely with the fossil fuel levy. It deals with the types of electricity on which the levy can be charged. It is important because the levy has an influence on electricity prices to consumers, a matter about which hon. Members on both sides of the House are doubtless concerned. It is also important because the levy is the main means of raising the funds used to support renewables technologies for the generation of electricity, a subject which is very important for the environment, for the tackling of our targets relating to global warming and for our future energy needs.

A soundly based levy is important if we are to drive forward those vital renewables technologies and provide a support system for them. The arrangements for supporting renewables in Northern Ireland are different from those in the rest of the United Kingdom, and the Bill will not extend there. The Bill will ensure that there is a level playing field in the generation of electricity, maintain the existing levy on nuclear electricity generated in England and Wales and bring under the levy for the first time imports of nuclear electricity from France. Making all electricity from nuclear sources—including electricity from abroad—subject to the levy, thus removing a market distortion, will produce savings of around £70 million for electricity consumers. Nuclear electricity will not have an unfair advantage over other sources of electricity, such as coal. Furthermore, the Bill will enhance support for renewable energy sources and ensure that the financing of the levy is put on a sound basis.

The purpose of the fossil fuel levy is to provide funds to support the development of technologies for electricity generation from renewable sources. The stimulation of generation from renewables is an important part of the Government's policy to achieve diverse, secure and sustainable supplies of electricity. Renewables generation also has an important part to play in securing our proposed target for the reduction of carbon dioxide emissions by 20 per cent. by 2010.

Support for renewables generation has not always been the main purpose of the levy. In the past, the greater part of the levy in England and Wales has been used to provide support for the nuclear electricity generating industry. That is no longer the case. The nuclear generation industry received more than £7 billion of support from the levy before the newer parts of it were privatised last year. Apart from some money still collected for Magnox plc and British Nuclear Fuels plc to repay them for undercollections in previous years, the proceeds of the levy are now used to support renewables, and, from next year, all the levy income will be used for that purpose. In the current year, the levy is expected to raise approximately £266 million, about 60 per cent. of which will be paid in support of renewables technologies.

Under the present arrangements, two types of electricity supplied by electricity suppliers licensed under the Electricity Act 1989 are subject to the fossil fuel levy: electricity from fossil fuel sources and electricity produced under the terms of the non-fossil fuel obligation or the Scottish renewables obligation arrangements. That means that, currently, electricity generated in England and Wales from nuclear sources under NFFO arrangements also attracts the levy.

All the output of nuclear generating stations in England and Wales is contracted under the primary nuclear contract, which is itself an NFFO arrangement. Consequently, that nuclear electricity is subject to the fossil fuel levy. The primary nuclear contract is due to expire on 31 March 1998 and, if no action is taken now, the nuclear electricity currently generated under that contract will no longer be subject to the levy. That would create slight upward pressure on the electricity price in England and Wales. It is that small upward movement in electricity price that the Bill will avert. I think that hon. Members will therefore welcome it.

The upward pressure on prices would happen because of the way in which the fossil fuel levy and the electricity market in England and Wales operate. Licensed electricity suppliers have a commercial incentive to minimise the cost of the electricity they purchase. When they buy electricity that is subject to the levy, they must also pay the levy on that electricity. In that way, the levy raises the costs of licensed electricity suppliers. In effect, the price of electricity to the supplier includes the cost of the levy. As a result, suppliers are willing to pay generators a higher price for levy-free electricity, provided the price does not exceed the total cost, including the levy, of leviable electricity.

As generators of electricity that does not attract the levy can command higher prices, the market is distorted in their favour. Without the Bill, nuclear electricity would be levy free from 1 April 1998 and benefit from precisely the market distortion that I have described. Although the amount raised by the levy is fixed, the cost of the market distortion would have to be met by electricity consumers in England and Wales. The effect that I have described is well known to companies in the electricity industry as the green ticket.

The Bill would prevent the distortion in favour of nuclear generators. It amends section 33 of the Electricity Act 1989 so that all electricity from nuclear sources supplied by licensed electricity suppliers will be subject to the fossil fuel levy. That will result in nuclear generators competing on equal terms with fossil fuel generators. That goes some way towards ensuring a level playing field.

In Scotland, the situation is different. Nuclear-sourced electricity is not subject to the Scottish renewables obligation or to the NFFO arrangements, so it is not subject to the levy. Instead, Scottish Nuclear has a contract, called the nuclear energy agreement, with Scottish Power and Scottish Hydro-Electric, under which it is required to provide all the electricity that it generates to Scottish Power and Scottish Hydro-Electric. That contract expires in 2005 and I am advised that the likely effect of the Bill in Scotland is that Scottish consumers can expect a small downward pressure on prices.

Is my hon. Friend aware of the pressure that the coal industry is under and of the anxieties of miners, whom I represent, in Kellingley and Prince of Wales collieries for their future? What are the Government doing to ensure that coal gets a fair deal in energy markets and can compete fairly on a level playing field?

I thank my hon. Friend for her questions. I am aware of her representations and those of many of my hon. Friends. We are concerned, not least because the main company is—how should I put it?—negotiating contracts, I hope, with the generators to ensure that there is a market for that coal. I understand that those conversations are going on—I should have hoped that they had gone on earlier—and I hope that they can be brought to a successful conclusion to ensure a future for Britain's coal industry.

We are taking action to do what we can to ensure that there are diverse and secure supplies of energy, including coal. I shall give some examples. Six things come immediately to mind. First, the Government are taking strong action to block subsidies to German and Spanish coal. Secondly, we have recently set up a review of the electricity pool—the buying mechanism through which electricity is sold—to ensure that there is a level playing field. Thirdly, we are ensuring that generators have to offer their unwanted coal-powered stations to RJB Mining.

Fourthly, we are encouraging the regulator to prevent generators from passing on excessive costs under the early take-or-pay gas contracts to ensure that there is no uneven playing field. Fifthly, my hon. Friend may appreciate that the Bill removes the advantage that nuclear and imported electricity from France enjoys—it will no longer be able to receive a subsidy, as it were, and distort the playing field. Sixthly, we are working hard to find ways in which to support clean-coal technology. Coal presents environmental challenges and we have to consider technological ways of addressing them to ensure that coal has a long-term future.

I am much encouraged by some of the Minister's remarks, but are the Government prepared to amend and investigate the treaty that regulates imported electricity? That serious question goes back to a previous Labour Government. I do not want to make just a party political point, but that question requires some analysis.

On the questions of the hon. Member for Pontefract and Castleford (Yvette Cooper) about coal, following my Adjournment debate last week, I understood that there was to be a meeting on Monday or Tuesday between the Minister and representatives of the coal mining industry, but I understand that it has been delayed for weeks. Will the Minister explain why? Exactly how does he propose to handle the important questions of hon. Members on both sides of the House?

On the European rules, the Bill is well within the guidelines, as it were, and practice. We see no problems. The lines have been cleared so that we can ensure that the levy is applied and removes any inconsistencies. It is accepted in the energy market as a whole that the distortion is there; we are removing it. The aim is not to penalise French electricity, but it is unfair that it receives an extra that sources here do not.

My hon. Friend the Member for Rother Valley (Mr. Barron) asked for and arranged a meeting, and he wanted me and the Minister for the Environment to be present to ensure that energy, opencast mining and environmental questions were considered together. My hon. Friend the Minister had to go to America for a meeting on carbon dioxide emissions, so he said that he would not be available for the meeting. I was prepared to go ahead with it, but my hon. Friend the Member for Rother Valley thought that it would be better for the three of us to meet so that energy policy and the environment were considered together. We acceded to that wish and that is why the meeting has been postponed.

I am available to meet hon. Members individually or together at any time to discuss these important and serious matters. If the hon. Gentleman wants to make representations personally, I shall be happy to meet him.

We appreciate the way in which my hon. Friend is collecting knowledge on the coal mining industry and we welcome some of his suggestions to address some of the imbalances in it. May I take up one of the six examples that he raised—generating electricity from gas? We are given to understand that, apart from perhaps the Drax power station, the majority of base load electricity is generated from gas even though in many instances its unit cost is higher than electricity generated from coal. Will he consider that customers of electricity-generating industries are not receiving the best possible value? In addition to making representations on that issue, will he check that matter and whether customers are getting the best value from the way in which the generating industry operates?

Order. I know that the Minister is trying to be as helpful as possible, but I must point out to hon. Members that interventions must be brief if we are to have a proper debate. Some hon. Members have said that they want to catch my eye later, so we want the debate to flow.

I appreciate that hon. Members want to raise the wider issues and I will respond in that spirit within your guidance, Mr. Deputy Speaker.

My understanding is that the power stations that go straight into base load are nuclear. The levy will even the playing field because they will no longer be in a position to do that. The real base loaders have been the nuclear generators.

I accept that there is concern about gas. There is an argument about the unit cost of gas versus the unit cost of coal. Some say that the unit cost of coal is lower; others that that of gas is lower. I cannot go into the details now. Last month, the electricity regulator capped the generation costs that can he passed on to the electricity supplier. We must not forget that there are a number of players: the people who dig the coal in the mines, the power stations, the transmission system and the regional electricity supply companies. Those companies will not now be able to pass on to their customers the costs of the so-called sweetheart deals for high-priced, gas-fired power that they signed under the previous Administration. That move was made in response to requests by my hon. Friend the Member for Normanton (Mr. O'Brien) and others.

The six key actions that I have described—I shall now add a seventh, on gas—are not just ideas thought up tonight, but actions that have already been taken. We came into office six months ago last Saturday and we have had to deal with the problems that we inherited. We have taken careful and patient steps to ensure that there is a genuine level playing field. We must ensure that other sources of fuel, including coal, are not treated unfairly and priced out of the market. It is in that spirit that this Bill should help in the short-term, as well as in the medium and longer term.

The Minister referred to clean-coal technology. Is it his intention to extend the levy to embrace research and development into that technology? He referred to supporting the technology, but he did not say how that would happen.

We have seriously considered that matter. Indeed, when the Bill was in the other place Lord Ezra tried to move a related amendment, but it was ruled out of order by the Clerks and the lawyers who advise us on our proceedings. Lord Ezra's proposal did not fit into the scope of the Bill because it dealt with raising the levy, not with spending it.

One purpose of our review of the non-fossil fuel obligation is to determine what we can do to support clean-coal technology. That means not only connecting what has been happening in the energy directorate, but linking that to what has been happening in science, engineering and technology under the Office of Science and Technology. Research has been and is being funded, but we need to move forward and get that to the market.

It is not generally understood that it will not be the Government who build the first clean coal-powered station, any more than the Government build a particular laboratory. It will be done by a company, and there are some who are already coming forward with practical proposals to use that technology to provide a cleaner way to burn coal. We welcome that and want to respond as positively as we can. Unfortunately, this Bill is not an appropriate vehicle for doing that because it deals with revenue raising, not revenue spending.

On a point of order, Mr. Deputy Speaker. The Minister is referring to the Bill and its long title. As it is a Government Bill, it would have been perfectly possible for the Government to have adjusted the long title in the light of the difficulties experienced in the House of Lords. I do not know whether there would have been merit in doing so, but I find the hon. Gentleman's argument difficult to follow.

Order. The long title of the Bill is a matter for the Government. It was established at the point of the Bill's inception. I am allowing a wide debate on the subject. If the hon. Gentleman and others have points that are germane to the Bill and its effects, I am sure that they will have the opportunity to put them.

It may seem that our intention is to deal with the fact that the nuclear industry does not have to pay the levy. The Bill was conceived, and the long title written out, very early on in this Parliament. It has been discussed in the other place and it is only since then that, in the light of the questions being asked in the coal industry—because one of the players in that industry was not negotiating the contracts—there has been pressure to extend the long title of this single-purpose Bill.

We were ahead of the game in tackling the uneven playing field on the import of French nuclear energy. We cannot now change this Bill to deal with the questions that have arisen. I can only tell hon. Members that we will do our utmost to back clean-coal technology as a way of guaranteeing a future for coal burning.

Although the Bill provides a welcome downward pressure on electricity prices in Great Britain, we need to be concerned about the effect on the nuclear generators that will forgo the opportunity to benefit from the market distortions I have described. Nuclear-generated electricity accounts for some 25 per cent.—that is the annual average—of total supplies in Great Britain. As long ago as 1995, the previous Government flagged up the need to review the issue. That was reported in Hansard on 27 July 1995. The question mark over the future of the non-leviable status was raised by Labour when we were in opposition, when we debated the privatisation of the nuclear industry and British Energy. That question mark was confirmed at the time of the privatisation of British Energy, so the markers have been down since then. The industry is well aware of that and, with proper prudence, will have taken account of the possibility of this Bill in their planning process.

Hon. Members will be concerned about the Bill's effect on imports of electricity from France. I must make it clear that we are not in the business of discriminating against French electricity. We will fully abide by our European Union obligations. As soon as the proposals in the Bill enter into effect, all French imports will be subject to the fossil fuel levy. The market will not then be distorted in a way which encourages people to buy French nuclear electricity instead of domestic supplies. It is right that British generators should be able to compete on equal terms with the French. I am determined that British electricity should not be disadvantaged any longer.

My right hon. Friend the Prime Minister, speaking at the Earth summit in New York, underlined the Government's determination to put environmental concerns at the heart of the decision-making process. We have set ourselves challenging targets on cutting carbon dioxide emissions. While we must be practical about what we can achieve in the short term, new and renewable energy sources, including wind, hydro, wave, waste, biomass and solar, can and will make a significant contribution to achieving those targets and to longer-term sustainable energy use both in this country and internationally as we move into the 21st century.

Last year, renewables generators, including large-scale hydro-electric plants, supplied a mere 2 per cent. of the United Kingdom's total demand for electricity. The majority of renewable electricity is supplied by hydro generation, mostly based in Scotland. Generation from renewable sources other than large-scale hydro plants increased by 7 per cent. in 1996. In England, Wales and Scotland, there are currently 195 renewables generation projects generating electricity under the NFFO arrangements. Further projects are planned.

We want to ensure that there is continued growth in generation from renewables. As a first step, I have already announced that I intend to make a further NFFO order, which will encourage a range of renewables technologies in the current framework of support. I hope to make an announcement about that later this year.

On 6 June 1997—to meet our aims and to determine how we will provide targeted and effective support for renewables technologies—the Government announced a review of new and renewables energy policy. The review will include an examination of what is necessary and practical to provide 10 per cent. of the United Kingdom's electricity from renewable energy sources by 2010. We do not intend that productive avenues of support should be rejected or that sensible reforms should be ignored. As soon as I am able to do so, we will present the results of the review to the House.

For those sound reasons, the Bill empowers the Secretary of State to make all electricity supplied by licensed electricity suppliers subject to the levy. The power will enable the levy's scope to be extended to include renewables electricity that is produced outside the NFFO and the Scottish renewables obligation arrangements, such as large-scale hydro plants.

It may be that—as I should like to happen—as renewables technology progresses and is able to compete directly with other types of plant, renewables plants no longer need the benefit of levy-free status. They should therefore be drawn into the levy so that they can support other sources of renewables that require development. If we reach that point, we will have to think carefully about whether resources can be better targeted on newer emerging renewables technologies.

The Bill has only two clauses and I did not expect it to prove so controversial. Nevertheless, I hope that the House will not divide on it but will welcome it. It creates a level playing field and takes practical action—even in the short time that the Government have had in which to do so.

5.31 pm

I reassure the Minister, and the nervous Government Whip, that the Opposition will not seek to divide the House on the Bill. I can only say, however, that it is an orphan of a Bill. In the other place, Lord Haskel attacked the Bill's title, saying he believed that it was inadequate. Now the Minister for Science, Energy and Industry, who is in charge of the Bill in the House, has admitted to us that the Bill is inadequate and out of time and that it does not cover half the issues that he wished it could cover. In this debate and in Committee, we shall certainly be probing those points and ways in which the Bill can be improved.

The Bill is the second one in a week from the Department of Trade and Industry, and it is yet another Bill about tax. Last week, the House considered a Bill to tax the airwaves—which would be the 18th tax increase since the Government came to power. This week, we are debating a Bill to tax the real waves—wave power and wind power—which would be the Government's 19th tax increase. The Minister was a little bashful about that aspect of the Bill. He did not reveal to us that the Bill will not only extend the levy to the nuclear industry, for entirely understandable reasons, but that it proposes to allow the Government to take power to extend the levy to all types of renewable energy.

In another place, it was explained that the Minister for Science, Energy and Industry has not yet decided whether to exercise that power. He does not yet have a programme to exercise that power, but he wants the House to give him such power. Hon. Members are entitled at least to ask him why he is taking under the Bill the rather bizarre power to tax renewable energy to support renewable energy. It is a rather curious concept, particularly now. Just as successive non-fossil fuel obligations are working to achieve price convergence, the Department of Trade and Industry proposes a levy or fresh tax on precisely the energy resources that we originally attempted to encourage in the levy itself. I really wonder what type of incentive is being provided to producers of wind power and of hydro-electric power.

The hon. Gentleman said that it is a tax-raising Bill, but it is a tax-reducing Bill. Its net effect will be to reduce the levy by 0.5 per cent.—which is not a major reduction but is heading in the right direction.

The Minister knows very well that a levy is a tax. His somewhat excitable June press release claiming that the Bill would somehow save £70 million cannot be justified. Everyone knows that the nuclear industry would have been brought within the levy's scope and that the savings that he suggested are purely hypothetical. If he believes that what he has just said is accurate, perhaps he will tell the House—given that so much hydro-electric power is produced in Scotland—what the likely price increase will be for Scottish electricity consumers because of the Bill.

The levy is reasonably well established by now, although, with its different bands and orders, it has become relatively bureaucratic. Opposition Members believe that, if the levy is to be continued and applied as the Minister would like it to be—to all non-fossil fuel sources—we will have to be much clearer about the levy's aims and about how it will he spent.

We have to admire the Minister's candour. He said that it is simply a Bill about raising the levy, and that we cannot talk about how the levy will be spent. He even suggested that that matter might be dealt with most appropriately by another Bill or on some other day. That is a curious concept for a measure that raises revenue designed for a specific purpose. Nevertheless, the Minister cannot bring himself to widen the Bill's scope to include clearer objectives, so that Parliament and electricity consumers can see what they are getting for the extra cost involved in raising the levy.

Opposition Members should like the levy to be justified—as it must always be justified to Parliament—against the background of a much clearer energy policy. The Government justify it based simply on a Government review. By my calculation, six different reviews are in progress, making it impossible for hon. Members to reach a firm view on the levy level or the types of programme on which it should be spent.

First, there is the Minister's own review of renewables. What has happened to that review since he announced it? Why is he proceeding with the Bill before we have the result of that review, and therefore before we can discern a little more clearly exactly which forms of renewable energy are worth supporting and before we can thereby justify the levy?

Secondly, a separate review of clean-coal technology is in progress, which, in another place, Lord Haskel confirmed is a fully fledged review. I think that many Labour Members would like to have a clearer idea of the results of the review on clean-coal technology before we attempt to justify this levy.

Thirdly, the Minister's Department is conducting a more general review of the utilities, of the electricity regulator and of his power to impose controls and tax on the electricity industry. We do not have the results of that review either.

Fourthly and—bizarrely again—outside the Minister's own Department, the Department of the Environment, Transport and the Regions is conducting a review of combined heat and power. The results of that review, too, should be important to anyone considering the fossil fuel industry, its future and the type of levy that we impose on it.

The hon. Gentleman is using various arguments to request justification of the fossil fuel levy. Can he tell the House what justification was given when the levy was first introduced, in 1990? If he can, he is certainly a better man than the previous President of the Board of Trade, the right hon. Member for Henley (Mr. Heseltine).

The hon. Gentleman will recall that the levy was originally introduced at the time of electricity privatisation. Indeed, it was introduced in the statute that gave effect to the original White Paper on electricity. It was felt that it was worth continuing to support non-fossil fuel sources of energy, including the nuclear and renewables options. That was the purpose of the levy, and successive orders have slowly developed and encouraged different forms of renewable energy in particular and have ensured that they play their part in providing the electricity available to generators. That is why we are a little surprised that the Minister is taking a power—he is being fair to the House and is not, I presume, proposing to exercise it immediately—to tax the very renewables that we have encouraged through the levy. We are hoping for an explanation of that.

I was concluding the list of reviews whose results we need to see before we proceed with the levy. The fifth is the Minister's own review, which is a welcome review of the electricity pool arrangements. The Minister will admit that one of the objectives of that review almost certainly is to see whether the price of the base load effected through the electricity pool needs to be changed and whether it can be made more transparent and competitive by reducing the dominance of the base load by only a handful of generators. Again, we should have the results of that review before we go any further with the business of extending the levy.

The final and sixth relevant review is the Finance Act review, a duty imposed by the House through the Finance Act on the Chancellor of the Exchequer to review the consequences of reducing value added tax on all energy-saving materials. The Chancellor promised us the results of that review by 31 October. That is important because it is only through the results of that review that we shall be able to see how the Government reconcile their target, which is a welcome target, of reducing CO2 emissions by 20 per cent. by 2025–25 per cent. of those emissions come from residential homes—with their decision to cut VAT to 5 per cent., a decision which will increase residential emissions by some 250,000 tonnes of carbon every year. That decision will cost the Government some £485 million in the forthcoming financial year, a sum equal to nearly twice the amount that will be raised by the levy under discussion. We need to be told how the Minister is going to reconcile those two policies.

Unless the Minister can give us an explanation, we will be bound to say that the Government are confused. On the one hand, they want to encourage the greater use of energy by cutting VAT on energy; on the other, they are committed to reducing it. The Government are now proposing to tax non-nuclear sources. If I was feeling uncharitable, I could describe the Bill as a pretty anti-green Bill. I wonder how the Minister's greener friends would welcome a Bill which, for the first time, gives him the power to tax the very sources of renewable energy that we have been trying to encourage for so long.

We might be more charitable towards the Minister and the Bill if he were doing something about the fossil fuel industry. I suspect that the very good attendance for this debate, especially by Labour Members, reflects a widespread concern about what the Minister is doing about our coal industry. While he tinkers with the levy, as Members with closer connections to mining constituencies than I know better than I, some 50,000 jobs are at stake—20,000 in the coal industry and 30,000 in related services.

When the hon. Gentleman was previously a Member of Parliament representing, I think, Darlington, he was the parliamentary private secretary to the Secretary of State for Energy. Later, in 1993, he appeared on a programme called "The Power Game" on Tyne Tees Television and said:

"With hindsight, we privatised things in the wrong order. Perhaps we ought to have privatised the coal industry first.
It should be run like a business and I wish we had handed it over to the great mining companies in this country. like RTZ.
It is all about going out and finding the cheapest source of power, not about employing people in mines."
Now let the hon. Gentleman read out his list of the unemployed to me.

Let me make it clear to the Minister that I do not withdraw one of those remarks. Had we introduced private finance into the coal industry earlier, the industry would certainly be in better health than it is now. I remind the Minister what happened the last time British Coal came to a Government with a list of proposed closures. The Conservative Government did not wash their hands of the industry. On the contrary, they imposed a moratorium on pit closures, as those in the House at the time will remember. They encouraged negotiations with the generators on new coal contracts. We did not simply say, as the Minister is now saying, that we hoped that the contracts would be concluded; we encouraged the generators to reach a successful conclusion of those contracts. Indeed, that was the purpose of the moratorium that we imposed on pit closures. We also introduced private finance into the coal industry, something which I wish we had done earlier, to give pits a better chance of being saved.

The hon. Gentleman refers to colliery closures. Is he aware that in 1993, the Select Committee on Trade and Industry reported to the then President of the Board of Trade and made 39 recommendations which would have created a market for 65 million tonnes of coal and ensured the industry's future? However, the President of the Board of Trade threw out all the recommendations and caused the crisis that we now face.

No, I do not accept that. In fact, it was the President of the Board of Trade who imposed the original moratorium on the list of pit closures presented to the House.

I ask hon. Members to choose whose words they support. Last Wednesday, there was a rather truncated Adjournment debate on the coal industry secured by my hon. Friend the Member for Stone (Mr. Cash). The Minister replied to that debate. Hon. Members would have had a better chance to contribute had it not been for the extraordinary scenes that we witnessed during the debate on the Wireless Telegraphy Bill, which involved Labour Members reading out telephone directories.

In The Times of 24 October, Rev. John Roden, the industrial chaplain for the coal areas of Selby, is reported as describing the Government's position on energy policy as pathetic. He said:
"There is widespread disillusionment–95 per cent. of miners voted for a Labour Government. I doubt if they will again."

I challenge the hon. Gentleman to come to the coalfield areas in and around Nottingham that I represent and to those represented by other Labour Members and to ask people there whom they choose to run the coal industry—the Tories or a Labour Government who are trying to deal with the mess left by the previous Government.

I am happy to accept that challenge. I hope that the miners whom the hon. Gentleman represents are happy with the Minister's intervention and with what is allegedly being done, or not done, to save the collieries now at risk. It is getting very late in the day to save some of those collieries, and I should like the Minister to be a little more active in that respect. Indeed, if the Minister has a fossil fuel policy, let us not have it in dribs and drabs—a few words in last Wednesday's Adjournment debate and some words of comfort tucked away in his speech today. Instead, let him publish his policy and then organise a debate on it so that the hon. Member for Selby (Mr. Grogan) and other Labour Members who have a genuine and long-standing interest in the coal industry can consider what can be done to help the coalfields. I accept that those hon. Members might want to criticise our performance in government—that is fair enough—but the Labour party is in government now.

I have made it clear that we shall not oppose the Bill tonight, but we shall continue to seek useful opportunities to let the House speak for our coalfields. We shall seek clarification in Committee on the muddle that is the Government's energy policy. We shall also seek to ensure that the new, wider levy powers are properly accountable to Parliament and are used for clearly defined objectives.

5.50 pm

The fossil fuel levy should have been called the nuclear subsidy, because it is clearly a subsidy to the nuclear industry. Between 1990 and 31 March 1998, when the levy comes to an end, it will have raised more than £9 billion to subsidise the nuclear industry. In other words, we have all had a levy on our electricity bills so that the nuclear industry can remain viable.

I asked the Conservative spokesman why the fossil fuel levy had been introduced, because when the Select Committee on Trade and Industry considered the issue for its report, "British Energy Policy and the Market for Coal", published in January 1993, we asked the then President of the Board of Trade and the chairman of Nuclear Electric the same question. There was a great deal of confusion in the comments made then and people appeared to be unaware of the purpose of the levy. The report says, on page 62, paragraph 121:
"The President told us that it is 'a charge on the consumer in order to enable the nuclear industry both to clean up and to provide for cleaning up the old nuclear plants."'
When the same question was put to the chairman of Nuclear Electric, he said:
"The purpose of the Levy is really two-fold: to comply with the Secretary of State's 9 November 1989 statement that Nuclear Electric should be cash positive and, secondly, to help fund pre-existing liabilities."
That was added to by the finance director of Nuclear Electric, who said that
"the Levy was never attached to any particular cash flow that Nuclear Electric has to pay. It was specifically described to ensure that Nuclear Electric remained cash-positive."
In other words, nobody knew what the purpose of the levy was.

When the Select Committee started to look at Nuclear Electric's balance sheet, we saw that £3 billion of the levy income available to it from 1990 to 1998 was used for other purposes. It is, in fact, being used to fund an investment programme. We know that a huge capital investment programme was launched from the levy. Sizewell B was built with money raised on the levy. The levy has enabled Nuclear Electric to fund its large capital programme without incurring debt. It was clearly a subsidy to provide the nuclear industry with cash for investment and to ensure a positive cash flow.

The Select Committee was concerned about the huge amounts of money being raised and used in that way and recommended that there should be other uses for the levy. Paragraph 127, on page 64 of the report, says:
"Our recommendation would make it possible either to reduce the Levy or to use an average of £380 million a year during the remaining five years of the Levy for other purposes".
Those "other purposes" were clean-coal technology. When the report was debated in the House, the President of the Board of Trade rejected all 39 recommendations. We are facing the current dilemma because the money that could have been made available for investment in clean-coal technology was never realised.

I am sure that my hon. Friend will include the Grimethorpe scheme, which made extensive research into clean-coal technology. If the Conservative Government had not withdrawn funding, we would have had clean-coal technology by now. What is my hon. Friend's view on that?

I thank my hon. Friend for that prompting. The endeavour at Grimethorpe colliery was supported by 20 other countries. It would have provided the opportunity to deal with our problems on the burning of fossil fuels, as well as enormous opportunities for British exports. Unfortunately, following the closure of Grimethorpe, the experimental plant was quickly demolished.

The fossil fuel levy, or nuclear subsidy, has contributed to keeping United Kingdom electricity costly for United Kingdom consumers. The Select Committee was so concerned that it recommended that a large part of the levy should be used for other purposes. That did not happen because the President of the Board of Trade did not accept the recommendations, which has left us with the dilemma that we are facing.

At Kyoto in December, the Government will take the lead to reduce emissions of greenhouse gases world wide. Some commentators have suggested that the Government face a difficult choice between the environment and maintaining a United Kingdom deep coal mining industry. I do not believe that to be the case. It is possible for the Government to take a clear lead on environmental issues, while providing a framework for a stable coal industry.

I came into the Chamber a little late. I heard my hon. Friend the Minister referring to several initiatives, but I may have missed some. If I refer to issues that he has already covered, I apologise.

The United Kingdom has already made significant reductions in CO2 emissions. The advances that have been made in the UK are not always appreciated. Since 1970, emissions have fallen by 20 per cent. Emissions from coal burning have fallen by 52 per cent. during that period, although emissions from transport have almost doubled. Between 1990 and 1995, emissions from power stations fell by 18.5 per cent. Clean-coal technology, together with combined heat and power, can cut CO2 emissions by up to 50 per cent. compared with conventional coal plant. That takes CO2 emissions down to the same level as that of a gas-fired power station. I hope that my hon. Friend the Minister is prepared to consider coal-burning heat and power units.

CO2 emissions from developing countries are rising at an alarming rate. It is estimated that they represent 35 per cent. of total emissions and predicted that they will rise to 50 per cent. by 2020. The main two sources of those emissions are China and India. To give the House an idea of the expansion of coal burning using conventional plant in China, let me point out that China is adding 15 GW of coal-fired generating capacity every year. That is an enormous amount, equivalent to half the total UK electricity capacity being added every year. Earlier, I mentioned export opportunities. The worldwide implementation of clean-coal technology is essential if we are to tackle the problem of global warming in the long term. Simply closing coal mines in the United Kingdom will have little effect.

As the Minister knows, the problem has been made worse because the electricity market is not cost reflective. The pool system is price reflective. When he reviews the pool system, I hope that he concentrates on making the pool reflect costs rather than price. If that happened, coal-fired power stations, which are the cheapest on the grid, would be available for base load use, rather than being pushed out of the market.

Having heard what the Minister said, I believe that he is looking at a framework in the short and medium term to give UK coal mining a stable future. Such a policy will allow the Government to preserve employment, contribute to energy diversity and take a lead on the environment. Those objectives are mutually compatible. We can have a diversified energy policy in which coal makes its contribution and, using clean-coal technology, we can meet the environmental targets that we have set ourselves. As my hon. Friend the Minister already knows, miners at some collieries fear that they face redundancy by Christmas. There is not much time. I urge him to take the necessary decisions over the next few months to ensure that coal survives as part of electricity production in Britain and that miners' jobs are preserved.

6.2 pm

The Bill's stated intention to remove a potential anomaly in the market when the nuclear contracts change next year is in itself uncontroversial, but it is wrapped in a permissive form that endows the Minister with additional powers. To introduce it when reviews are still under way and before we know their conclusions raises broader issues.

The fossil fuel levy, and the non-fossil fuel obligation that it finances, was a successful policy introduced by the previous Government. It was intended to support renewable technologies as they moved towards convergence with market pricing. After seven years of the NFFO regime, more than 200 projects are in operation and nearly 500 MW of renewable power is being generated. In the last NFFO round, the average bid price was more than 1p per kWh lower than in the previous one. The regime has fostered the development of renewable technologies and has been a success.

The Minister now asks the House to approve a broadening of the base of the levy and to give him greater discretion in applying it, without giving us any information about spending plans. I understood his point on that and I, too, have read the debates in another place. I understand that the Bill is strictly related to the revenue-raising side of the equation, but the spending side is also important if we are to understand what sort of scale of levy we might be letting ourselves in for. This is essentially an hypothecated tax that falls on electricity consumers, and its level will be determined entirely by the Government's spending intentions.

The hon. Gentleman is a little confused. The amount of the levy now and in future is entirely dependent on the cost of support for renewables that come in on a bidding round each year. It is not a tax-raising measure in the way that he suggests. That has always been the case and will remain so. He cannot make such an analogy and say, "This is a tax, tell us how much will be spent." We wait for people to bid for different projects. His Government set that up; I thought that it was heading in the direction of being helpful, and we want to continue that. He cannot have it both ways.

I understood the Minister perfectly. I think that I was heading in the right direction. I am seeking to establish whether the Minister's review, and the other Government reviews, could lead to a broadening of the scope of the NFFO obligation, which would be financed from the fossil fuel levy. At present, the levy is low and the marketplace distortion that we are talking about avoiding would be relatively small. Are we being asked to avoid a market-distorting anomaly to deal with the much more serious situation that would arise if, after the conclusions of the Government reviews, the levy were to be raised as a result of the broadening of the NFFO commitments to take in other areas?

We have heard already about clean-coal technology. Is it possible that support for clean-coal technologies might be included within the remit of the NFFO arrangements and thus fall on the fossil fuel levy? Might additional energy-saving insulation measures be included? Might the promotion of other technologies not currently within the very narrow remit of the NFFO regime fall there as a result of the reviews? I merely seek reassurance that we are not paving the way for a potentially open-ended tax on electricity consumers to finance Government projects that may in their own right be laudable, such as the greenhouse gas reduction targets and the increased renewable energy targets. If the levy is allowed to become an open-ended tax on energy consumers, it will seriously affect consumers and the competitiveness of British business.

My hon. Friend rightly mentions concerns about the extent of the levy and its impact on electricity consumers. Is he aware of Eastern Electricity's proposal to invite electricity consumers voluntarily to pay a tariff to go towards the support of renewable technologies? Is not that a preferable way in which to move?

My hon. Friend anticipates my next point. The non-fossil fuel obligation has undoubtedly been a success, but we must ask ourselves where we should go in future. There is evidence that many consumers are willing to pay a premium for renewable, or green, energy. Studies in the United States, Australia and New Zealand, and even limited market experience, have already shown that there is a potential market for green electricity. That offers us the prospect of less need for taxation through the levy and the subsidy of renewable energy, and a greater choice for consumers, who can make the decision for themselves to pay for green power.

I should be grateful if the Minister confirmed how broad the review is which is currently under way and to what extent it interfaces with the other reviews in his Department and elsewhere in Government on energy-related issues. Can he assure us that there is no danger that, in future, the fossil fuel levy will be used to finance a broader range of initiatives other than the renewable energy initiative that it currently supports? It is important for us to understand the scale of the levy that we are being asked to pave the way for.

The Minister is taking general powers to subject to the levy renewables outside the NFFO. He may have in mind large-scale hydro projects. Can he assure us that the Bill will not be used at some future stage to move the goalposts for renewable energy technologies that are moving towards convergence and which see on the horizon the possibility of operating unsupported and unsubsidised in the market? The levy may be a small element, but it would be sending the wrong signals, for example, to those considering large-scale wind projects to move the goalposts now and to suggest that, as they moved outside the NFFO framework, they would be subjected to the levy.

Can the Minister also assure us that when he considers the imposition of the levy on hydro projects at some future date, he will take special care when dealing with the pumped storage facilities that exist in north Wales? I say that for two reasons. First, it seems iniquitous that electricity that is generated from potential energy that has been created in the first place by the use of leviable electricity should be subjected to a levy again. That is equivalent to an element of double taxation. Secondly, and perhaps more important, I share the aspirations of my hon. Friend the Member for South Cambridgeshire (Mr. Lansley) on the growth and creation of a green power market in the United Kingdom at the level of the consumer. The ability to store green power—as far as I am aware, the only effective way in which to do that with present technology is through pumped storage—is critical to allowing that market to develop. I hope that the Minister will not do anything to discourage that development.

Can the Minister assure us that there will be no temptation to impose other than a uniform rate of levy through the Bill? In other words, can he assure me that he will not seek to micro-manage the energy equation, by applying different rates of levy to different sectors of the industry? Can he give us an idea of the specific time scale of the reviews that he mentioned? How will they relate to the NFFO 5 announcement, which I believe will be made later this year?

6.13 pm

I support the comments of the hon. Member for Runnymede and Weybridge (Mr. Hammond) about some of the issues that he raised. We should use the fossil fuel levy to introduce a comprehensive energy policy, which I hope would include clean-coal technology. It is important that we have a comprehensive energy policy that includes coal, gas, nuclear power and the renewables that have been referred to in the debate.

I cannot support the hon. Gentleman's demand for an explanation from my hon. Friend the Minister about where the money gained from the fossil fuel levy will be spent. As my hon. Friend has already made clear, he is open to bids for the most efficient and cost-effective use of that money. That is the right approach. Before my hon. Friend makes any final declaration, I hope that he will take into consideration the request made by hon. Members, the electricity generating industry and the coal industry to pump-prime clean-coal technology.

When we consider the development of the energy industry in the near future and in the long term, coal should be given its rightful place as a provider of a resource for the generation of electricity. There is an abundance of it and it is now produced so efficiently that, in the past six years, production per man shift has increased enormously, while costs have fallen by nearly 50 per cent. Not all of that cost reduction has, however, been passed on to the consumers of electricity.

When we consider the use of the money gained from the levy, it is important that we think about the future of the entire generating industry. I plead for the retention of the mining industry, at least at its present capacity. With regard to the future of the fossil fuel levy and the possibility of using other sources to generate electricity, the contracts between the coal industry and the electricity generating industries should be extended for a further period until those industries have settled down to a stable future. That cannot be achieved until we have addressed the problem of imports.

I was pleased to note that the Minister said that the Government are doing everything they can to tackle the problem of subsidies on imported coal, because they put our miners at a disadvantage. We are asking not for favours, but for fairness. We should not be importing coal that is subsidised when our people have to produce it at unit cost. I am pleased that the Minister has made it clear that he will take that factor into account.

We should extend the contracts between the coal industry and the electricity generating industries until we have a level playing field—it is more like a battlefield at the moment. It is important that that problem is resolved, because it is not just miners and mining communities that have suffered, but the engineering and manufacturing industries. If one visits West Yorkshire, one can see the factories where thousands used to be employed in the manufacture of equipment for the mining industry. They, too, have lost out. That is why it is important that we have a proper policy on the generation of electricity.

I accept that the terms of the Bill are narrow, and I appreciate the opportunity to discuss the future of the coal industry. I want to make it clear to the Minister that because of the problems facing our constituents, and our comrades and colleagues in industry—mining, manufacturing and engineering—my hon. Friends and I are speaking not from the head, but from the heart. What we are looking for is a comprehensive energy policy. With the support of my hon. Friend the Minister, and by following up some of the points that he made tonight, we can reach that goal in the near future.

I accept that the question of emissions is still outstanding, but it is more important to address the problem of sulphur dioxide than that of carbon dioxide. Carbon dioxide makes up about 2 per cent. of total pollution, so we should be paying greater attention to the other 98 per cent. Although a view has to be taken on the environment, we can achieve our aims in that respect through clean-coal technology.

In considering the fossil fuel levy and how the revenue is to be distributed, I ask my hon. Friend the Minister to take account of the plea made here tonight. I would ask him, if he can, to influence the extension of the contracts, to allow the coal industry and the electricity generators to get their act together. They must deal with the problem of subsidised and therefore cheap imported coal. There is also the question of the level playing field in electricity generation involving nuclear power and the fact that electricity imported from France will no longer be subsidised. The latter problem has been a crime within the industry for some time, but is now to be resolved via the Bill.

Finally, when my hon. Friend the Minister is taking applications on where to spend the money, will he consider making a contribution to the national coal mining museum in West Yorkshire? I doubt whether any hon. Member would object, and the museum is in need of some assistance.

6.21 pm

The Liberal Democrats have no objection to the Bill, so we will not divide the House either. I thank the Minister for his positive and helpful presentation of the case, but I want to register some concerns and I hope that he will feel able to respond when winding up the debate.

We are concerned, first, about what the fossil fuel levy does not cover and, secondly, about what it apparently does cover. There is also the overriding issue of how it fits into a strategy to cut carbon dioxide emissions by 20 per cent. by 2010. We are a third of the way through the two decades between 1990 and 2010, so we need to hear how the Government expect to reach that minus 20 per cent. figure.

I am pleased to see that the hon. Member for Sevenoaks (Mr. Fallon) is back with us. The Conservatives seemed to find themselves caught betwixt and between various policies. I was interested in their contention that they had clean hands—the debate so far has been about clean coal, not clean hands—but we should remember that the changes in carbon dioxide emissions seen so far have largely been the accidental by-product of decisions on the coal industry taken by the previous Conservative Government.

First, I shall look at some of the things that the fossil fuel levy does not cover. In another place, Lord Ezra pointed out that it does not cover solar heating, anaerobic digestion or solar-voltaics. Some of those are remote and esoteric topics; solar heating is often seen as somewhat impracticable in this country, yet most Members of Parliament have solar-heated homes, which is why we do not have our central heating on in July and August.

I want the Minister to give an assurance that, in parallel with this legislation and fully recognising that the Bill is limited in its intention, he will widen the scope for those forms of renewable energy technology that will be eligible to make bids. The Minister was rather obscure when he said that the bid system would dictate the level of the levy. In fact, there is a framework within which those bids can be made and it would be good to hear that it will be as wide as possible, so as to include the topics raised by other hon. Members and by Lord Ezra.

I am also concerned about what it seems the levy might include. I was going to quote from Utility Week, but I do not need to, because the Minister made my point. The point is that there are circumstances in which the levy would be imposed on renewable energy source producers. That is entirely self defeating and quite wrong, and the Liberal Democrats will certainly oppose any such move. It cannot be right to use the levy to worsen the economics of renewable energy production and then to take the money and invest it in improving the economics of renewable energy production. When talking about the nuclear industry and the need to ensure that the levy covered it, the Minister mentioned removing the market distortion. It would be perverse to remove the market distortion in one sector and impose it in another. I hope that the Minister will feel able, on mature reflection, to give assurances about the scope of, and the intention behind, his remarks.

I want to raise two other matters: first, the level of the levy and, secondly, clean-coal technology, which has been the topic of much of the debate so far. Both are linked to the answer to the question: how does the Bill fit into the overall Government target of reducing carbon dioxide emissions?

The levy has been reduced significantly since it was first introduced, which has—at least notionally—cut the amount available for the development of renewable and sustainable energy production. When the levy was reduced along with support for renewable energy, it was opposed by Liberal Democrat Members. I believe that the Minister said that, from next year, 100 per cent. of the levy would go towards renewable energy production. That would seem likely to raise the total amount invested from about £160 million to about £260 million. If I have interpreted the Minister's remarks correctly, that is very welcome, but it will be interesting to hear from the hon. Gentleman whether we are in fact back to neutral yet, or whether, next year, we will still be investing less than we were at the beginning.

Lord Ezra, the Trades Union Congress and many Labour Members have made the point that the fossil fuel levy ought to be available for so-called clean-coal technology. I do not want to endorse those sentiments entirely. We must recognise that the cleanest conceivable coal-burning technology is still dirtier than any form of renewable energy generation and almost certainly dirtier than gas.

However, it is significant that, whatever cleaner sources of energy generation are used in the United Kingdom until 2010 and beyond, much of the developing world will be increasingly heavily dependent on coal for its energy needs. The hon. Member for Barnsley, West and Penistone (Mr. Clapham) mentioned China and India, which cannot realistically expand their energy use without expanding their use of coal. Both, incidentally, are also investing heavily in renewable energy.

Whatever one's view of how coal production should develop in this country, there is a healthy and expanding export market for clean coal technology, and it would be good to hear from the Minister that he intends to foster a climate in which British expertise can be profitably exported.

The Liberal Democrats welcome the Bill and will support it, but we want to hear from the Government that it forms part of a coherent strategy to achieve the reduction in carbon dioxide emissions that the Government have set themselves. Failure to put the Bill in that wider context, for reasons of short-term political expediency, would be a great shame and a great hindrance to the achievement of targets that will prove to be vital to this country and the whole world.

6.30 pm

The Minister's speech was most welcome and he is to be congratulated on it. He has offered hope to many of the miners who live in and around my constituency and in Nottinghamshire, and to miners' families and communities throughout the country. It is all very well for the hon. Member for Sevenoaks (Mr. Fallon) to cast aspersions, but the Minister has had to deal in the past few months with the appalling situation that he inherited. In meetings with miners and others in the industry, the Minister has tried to deal with the practical problems that he inherited.

Some of the points that the Minister made deserve to be widely disseminated throughout the country. He promised a review of pool prices. Many people in the coal industry feel that prices are rigged against the coal generators. My hon. Friend has delivered the review that many in the industry have long been asking for. Miners have also been demanding a challenge to the subsidies given by Germany to its coal industry. My hon. Friend has today told the House that he will challenge those subsidies to ensure that they are removed, as far as possible.

People in the coal industry and the coal communities have been asking the Government to invest in clean-coal technology; now my hon. Friend has stated that that is to be the policy of the Government. During the campaigns against the pit closures that were announced by the previous Government, and the campaigns to defend coal communities, people always mentioned the unfairness of coal having to compete with nuclear-generated electricity—they demanded action on that. Today, the Minister has told us that he will get rid of that anomaly. He said that nuclear-generated electricity will have to compete on equal terms with coal. As my hon. Friend the Member for Normanton (Mr. O'Brien) said, we are not asking for favours for coal or for exemption from competition. Our miners and their industry and communities are merely asking to be allowed to compete on equal terms.

The Minister is to be commended for dealing promptly with the difficult legacy that he inherited and for coming up with practical policies and positive solutions.

There is a great deal of anger and frustration in the coalfields, where people feel let down. After today's statement by the Minister, many of those people will feel that, although they have not got everything they want, at least the Government are listening to them and allowing them to compete on equal terms, thereby protecting their jobs and communities.

6.33 pm

I thank all hon. Members who have joined in the debate. Although it is only a small, two-clause Bill, it concerns highly technical matters and our debate has been wide ranging. 1 do not use that term disparagingly; these are indeed complex matters. As someone told me recently, the energy questions that we face today will bring together the key questions of the 21st century. Hon. Members have tried to discuss them in all seriousness; over the short, the medium and the long term, we shall have to face these questions together.

The whole point of the Bill is to get ahead of the problem. On 31 March 1998, at the beginning of the next financial year, French nuclear power will lose the levy, as will the nuclear industry in England and Wales. That is why we needed to legislate in this Session. Once the other reviews are complete, we may need other legislative changes; they can be achieved in other Sessions.

The Government's energy policy is to provide a secure, sustainable and diverse supply of energy; that includes renewables and coal, combined heat and power, solar power and other forms of energy to which hon. Members have referred. We must also face up to the challenge of reducing carbon dioxide emissions.

The purpose of the Bill is to sort out the way in which the levy is raised and who should pay it. Contrary to the suggestions of Conservative Members, the Bill is not a tax-raising measure. Indeed, it will stop electricity prices rising because it will ensure that the nuclear energy business continues to contribute to the levy. The Bill will actually force a minor reduction in prices. We want the inclusion of renewables; they need support, as fledgling industries and technologies, to be able to compete in the energy markets of the future.

My hon. Friend the Member for Barnsley, West and Penistone (Mr. Clapham) said that the fossil fuel levy was doing more to help the nuclear industry than renewables under the former Administration. The Bill will reverse that. He and others referred to clean-coal technology at Grimethorpe. The real tragedy is that the research was done there, but the technology was patented by the Swedish-Swiss company ABB; so we now have to buy back from abroad clean-coal technology that we invented in this country.

We need a levy on nuclear imports from France, because of the need for fair competition. We will also ensure that the levy on nuclear-generated electricity in Britain remains. The Bill will ensure that nuclear does not have an unfair advantage over other fuel sources, including coal.

The hon. Member for Runnymede and Weybridge (Mr. Hammond) asked whether the scope of the levy will be broadened as a result of the reviews. I can only say that it is not the purpose of the Bill to do that, precisely because broadening the scope of the NFFO would need new legislation. The hon. Member for Hazel Grove (Mr. Stunell) mentioned that aspect, too.

Lord Ezra wanted the Bill to be expanded to include all combined heat and power schemes; others have entered bids for the inclusion of solar, photo-voltaics, hydrogen fuel cells and so on. We are looking into all those, but we had to conclude that it would be wrong to include them in the Bill. The House will in due course have an opportunity to discuss any proposals to widen the scope of the NFFO.

The hon. Member for Runnymede and Weybridge also asked about a levy on pump storage. I acknowledge his point about double taxation, and we will certainly look into it.

I hope to have the findings of the renewables review in the coming two or three months. The utilities Green Paper is expected early in the new year. The review of electricity trading arrangements will be set up by Christmas under the Director General of Electricity Supply, and its conclusions will come in the first half of next year. These reviews are not in never-never land; they have definite timetables. We shall ensure that those timetables are stuck to.

The hon. Member for Runnymede and Weybridge suggested that he was against the NFFO altogether. I had the impression that he was saying that we did not need it and should leave it to private companies. While we welcome Eastern's initiative in encouraging green electricity, we need to give the whole thing a boost, which was the whole point of the NFFO including at least an element of renewables. We are happy to take that up and push it much further.

There is some concern about extending the levy to include renewable sources of electricity outside the NFFO and Scottish renewables obligation arrangements. The arguments are balanced. Levy-free status for renewable electricity would give those generators an advantage, enabling them to charge higher prices, but some of those receiving the benefits may, in time, not need the special support and may be well able to compete by themselves. It may be better to target support raised through the levy on promising renewable projects, using technologies that are only just emerging and would repay such encouragement. If some of the renewables take off and become perfectly able to survive in the marketplace, why not use them to support the other sources?

Will the Minister outline the criteria that he will use? When it comes to putting a levy on renewables, the crucial point is whether they can stand it and whether it affects their competitiveness and ability to expand.

That is the whole point. The purpose is to support and encourage renewables, which is why we are supporting the structure and have put forward the NFFO proposals. We intend simply to say that, at some time in the future, instead of coming back here to legislate, we may be able to do even more to support fledgling renewable technologies, some of which the hon. Gentleman mentioned in his speech.

In response to many of the points made by my hon. Friends tonight, the Government will continue, patiently and systematically, to attempt to clear up the mess left by the previous Government in the energy market. The previous Government decimated the coal industry. It is all right for the hon. Member for Sevenoaks (Mr. Fallon) to say that the Conservative party wants a moratorium. The previous Government imposed a moratorium and then flogged off the whole industry—the electricity supply system and the generation and transmission system—leaving no levers behind for us to intervene as he now suggests.

Faced with that problem, we have taken strong action. We have blocked German coal subsidies within Europe; reviewed the electricity pool; ensured that generators offer any unwanted power stations to mining companies; and encouraged the regulator to prevent generators from passing on excessive costs on the early take-or-pay gas contracts. Tonight, we are removing any advantage that the nuclear industry and imported electricity would have had, and thus creating a level playing field.

I hope that this small but necessary Bill will be another step towards achieving our energy policy of secure, diverse and sustainable energy supplies. The levy is the main source of support for renewables generation, and the Bill will continue to ensure that the levy is soundly based. I commend it to the House.

Question put and agreed to.

Bill accordingly read a Second time, and committed to a Standing Committee, pursuant to Standing Order No. 63 (Committal of Bills).