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Climate Change (Taxation)

Volume 447: debated on Thursday 15 June 2006

11. What his policy is on using taxation to tackle climate change; and if he will make a statement. (77552)

The climate change levy is playing a crucial role in enabling the UK to meet its Kyoto targets. An independent valuation conducted recently by Cambridge Econometrics has examined the levy. It concluded that the levy would, by 2010, deliver annual carbon savings of 3.5 million tonnes. That is far in advance of the forecast of 2 million tonnes of carbon when we introduced the levy.

This is an issue of great concern to growing numbers of my constituents, who are concerned that their children and grandchildren’s futures will be marred by global warming. Given that the climate change levy package has reduced emissions of carbon by 16.5 million tonnes and is a vital part of meeting our Kyoto commitments, how does the UK’s progress on meeting these commitments compare with our international colleagues?

My hon. Friend is right. The UK led the way with introducing the climate change levy, and now it is the sort of measure that is required throughout the European Union. We led the way in introducing an emissions trading scheme, and we led the way also in setting up and strengthening the European Commission’s scheme. We are leading as well with our commitment to Kyoto. Along with the Netherlands and Sweden, we are one of only three EU member states, of 15 countries, in being on track to meet our Kyoto targets.

On climate change, the test for all parties is whether they will back the domestic action that is needed in Britain. In addition, can they wield the international influence that is required to secure the international action that is needed even more badly?

I am sure that every Government Member accepts that the levy plays a significant role in reducing carbon emissions. Does my hon. Friend agree that it is an industry-friendly measure, given the incentives that it provides to improve energy efficiency and thus the cost-effectiveness of British business?

My hon. Friend will remember that when we introduced the climate change levy, we also introduced a 0.3 per cent. cut in employers’ national insurance contributions. She will be aware of the launch of a new campaign by the Carbon Trust, which is linked to the climate change levy. British businesses will waste more than £500 million over the summer if they fail to adopt energy efficiency failures, and the campaign demonstrates that the trust can help them by delivering an average 15 per cent. saving in energy efficiency and business costs. Clearly, the climate change levy package can help business and the environment, so I hope that it receives support from Members on both sides of the House.

How can we better use the tax system to promote microgeneration in residential properties? The technology is expensive to install initially, and the payback period is very long, so can we incentivise home owners to invest in microgeneration technology at the front end to avoid that long payback period?

My hon. Friend will be aware that we reduced VAT rates on all significant microgeneration technologies that are installed professionally in domestic or charitable buildings. That is the extent of the action that we can take under existing VAT rules, but he will know that my right hon. Friend the Chancellor announced in the Budget extra support to try to boost microgeneration technologies and build the market in Britain. Demand is still too low for the technology to take off, but we want that to change. As a Government, we are prepared to try to help, as we want the technology to spread much more widely across Britain.

The Chancellor recently claimed that one of his favourite memories is Paul Gascoigne’s goal against Scotland in 1996, but Whelan claims that, after the goal, the Chancellor was so upset that he would not speak to him for weeks. Which of the Chancellor’s claims is more credible—his claim that people support his climate change levy, rather than a proper tax or levy on carbon, or his claim that he will support England tonight?

There are several questions at the heart of the challenge of climate change. Does the hon. Gentleman accept that the climate change levy has delivered greater reductions in carbon emissions than forecast and that almost a fifth of carbon savings in our Kyoto commitment have been delivered by the climate change levy package? Does he therefore accept that his right hon. Friend the Member for West Dorset (Mr. Letwin) was wrong when he said in the House:

“We regard the climate change levy as an aberration that should never have been brought before Parliament”?—[Official Report, 18 July 2000; Vol. 354, c. 322.]

Does the Minister consider it appropriate that revenues from green taxes as a proportion of the total tax take have fallen while emissions continue to rise?

The hon. Lady, typically for a Liberal, takes a simplistic view. I have two things to say to her. First, the point of environmental taxation is not, contrary to the Liberals’ view, taxation for taxation’s sake: it is about the change in behaviour and opinion that those taxes can achieve. It is wrong to look at taxation simply in terms of the total tax receipts, because environmental taxes can influence behaviour and lead to a reduction in receipts. Environmental taxes can be used, as can discounts for biofuels and climate change agreements, to achieve significant environmental ends without raising the environmental tax take. Secondly, as the hon. Lady looks at the big black hole in her spending and tax plans and the £8 billion of environmental taxes that she would impose on people, I urge her to take a more sophisticated view, and we look forward to her plans in future.