With permission, Mr. Speaker, I would like to make a statement about the European Council held in Brussels, which I attended with the Foreign Secretary on 13 and 14 March.

I begin with the most important concern that the Council addressed: the need to ensure that, faced with global financial turbulence and what the Council identified as a deteriorating global economic outlook, high global oil and commodity prices and volatility in exchange rates, we continue to do all we can, with co-ordinated action at European and global level, to maintain stability and growth.

All European member states agreed to measures for greater financial market transparency: first, prompt and full disclosure of exposures to structured products and off balance sheet activities; secondly, more rigour in credit ratings; thirdly, improvements in valuation standards, particularly for illiquid assets; and fourthly, a strengthening of risk management under the capital requirements directive.

Given the globally transmitted nature of the risks, it is clear that many of those recommendations—the changes to credit rating agency operations and assessments; risk management and disclosure by global financial institutions; changes to capital adequacy rules; and arrangements for valuing financial instruments—which have also been proposed as measures for change by the American Administration, can best be implemented at a global level.

In welcoming that international dialogue as the first step in reform, I can tell the House that the Chancellor of the Exchequer is today writing to the G7, the International Monetary Fund and the Financial Stability Forum to call for co-ordinated international action on transparency and disclosure, better risk management and action on credit rating agencies to be agreed when the G7 and the IMF meet from 10 to 12 April.

In line with the approach of other major central banks, the Bank of England has this morning announced a further £5 billion liquidity support to financial institutions, and a new group has been set up to improve liquidity in the mortgage market.

At the European Council I made it clear that, while our economy is resilient and fundamentally strong, we will at all times remain vigilant and, especially at this time of global uncertainty, continue to take whatever action is necessary to maintain economic stability and growth.

The Council also discussed a new approach to the rising number and economic power of sovereign wealth funds. I strongly welcome the conclusions. Sovereign wealth funds are now worth $2 trillion, but may soon potentially be worth $10 trillion. Our new approach—calling for a voluntary code of conduct based on best practice, openness, transparency and corporate governance—is one that will enable funds to show that they are commercial in their operations.

The Council also discussed food and energy price inflation, and agreed further steps to monitor worldwide inflationary pressures. We agreed that the current global financial turbulence was not a reason to postpone fundamental economic reforms that are essential to building a more competitive European economy. We agreed that we should now press ahead with the liberalisation of markets and with new investment in knowledge and innovation. That includes further liberalisation in the energy, post and telecoms markets, which could generate up to 360,000 new jobs.

We discussed the need also for an economic reform strategy that looks beyond Lisbon—a comprehensive strategy to improve the business environment, strengthen relations with China and India, put our creative and knowledge industries at the forefront of the world economy, and make European universities leading global players, in particular through increasing their contacts with business. So the next stage of the Lisbon agenda will include a review of human capital and skills in Europe, and a renewed focus on competition policy in the single market.

The second major issue discussed by the Council was climate change, and it is essential that we achieve our ambitions of a comprehensive post-2012 agreement to reduce greenhouse gas emissions and of Europe leading the world in a low-carbon economy.

In December, the united European front at the climate change negotiations in Bali played an important part in the historic breakthrough that agreed the need to make large cuts in emissions and achieve a new climate deal within two years. Only a common European approach—a Europe with Britain not at the margins but at the centre, leading the world—can ensure a global low-carbon economy founded on our proposal of a global carbon market.

Building on this commitment, the Council agreed an ambitious schedule for adopting a package of measures to cut emissions by 20 per cent. by 2020 or by 30 per cent. as part of an international agreement. The Council also agreed with the UK on the need for an effective EU emissions trading scheme to provide the incentives to drive carbon reductions in the most cost-effective way and for a cap on emissions set centrally, with a clear emissions reductions trajectory to give investors the predictability that they now need.

The Council also considered a report from the EU high representative on the security implications of climate change and, at our request, agreed to submit recommendations on follow-up action—including intensifying co-operation with countries outside Europe—by the end of the year.

Meeting the EU’s climate change targets requires not just action to reduce carbon emissions from energy suppliers and industry, but incentives to change individual behaviour. The Council will now invite the Commission, in bringing forward its legislative proposals on VAT rates, due in the summer, and working with member states, to examine areas where economic instruments, including VAT rates, can play a role in increasing the use of energy-efficient goods and energy-saving materials, from, as the UK has proposed, insulation and household materials to energy-efficient electrical goods, where VAT is cut.

The Council also agreed on the importance of achieving a fully functioning and joined-up internal energy market, as an essential condition for the secure, sustainable and competitive supply of energy across Europe. We also committed to an energy agreement by June this year. It is clear that energy security is strengthened by a policy that takes a collective approach to third-country producers, notably Russia.

Europe can also play a part in ensuring stability beyond its borders. The Council agreed to build on existing co-operation to establish a “Union for the Mediterranean”, to promote security and stability in the wider region and to provide a framework for co-operation between the EU27 and other Mediterranean coastal states on political and security issues, as well as economic, social and cultural affairs. That new union will be launched during the French presidency in July this year.

We also agreed that international development issues and the achievement of the millennium development goals, as well as Europe’s continuing leadership as the biggest contributor of aid in the world, will be the subject of a major discussion at the European Council in June.

The outcome of the Council and the preparations that are being made for June affirm the conclusions of the debate that we have had in the House over the past nine weeks: they demonstrate that, with the completion of the Lisbon treaty, we now have an opportunity to move beyond institutional issues to create a more outward-looking, flexible and global Europe, and to address the challenges that matter most to the citizens of Europe.

With three quarters of a million businesses, 3.5 million jobs and 60 per cent. of British trade dependent on our relationship with Europe, we should do nothing to put the stability of that relationship at risk. It is only by working constructively and remaining fully engaged with our European partners that we properly address the challenges ahead.

As we prepare for the European Council in June and the French presidency later this year, our aim is that European countries working together can lead the way on climate change, on security, on international development and on the response to global financial turbulence. I will be discussing with President Sarkozy when he visits Britain next week how we can take all these challenges forward during the French presidency. I commend this statement to the House.

I welcome the focus of this Council: global competitiveness, global poverty and global climate change. This is the right agenda. On climate change, the first thing that Governments should do is get their own house in order. The draft communiqué included specific targets to reduce energy use in Government buildings, offices and cars. Will the Prime Minister explain why those specific targets were removed from the final text agreed at the weekend? Looking at our own record here in the UK, does the Prime Minister accept that 14 Government Departments are less energy-efficient than they were eight years ago, and that 15 Government Departments have actually increased their carbon emissions during that time—[Interruption.] He asks what this has got to do with Europe. I think we should be leading by example. In a similar context, will he confirm that, despite the fine words in the Budget about plastic bags, the Government have bought 1.2 million Whitehall-branded single-use plastic bags in the past two years?

The Prime Minister is right to say that the success of the emissions trading scheme is vital. Will he acknowledge, however, that the Lisbon treaty is completely irrelevant to making that happen? There are six words on climate change in the treaty and, as the House of Lords Committee pointed out last week, they have no legal significance. Is it not the case that we do not need a new constitution or a new treaty to deal with climate change at EU level?

Everyone will welcome the Prime Minister’s intention to use indirect taxes, including VAT, as incentives for green behaviour. That is something that we have put forward in our own quality of life policy group report. The Commission said that it had doubts about whether the proposal was workable. One EU diplomat said that the agreed wording was

“a polite way of saying no”,

and

“a way of saving face”.

In regard to the outcome that we all want, is the Prime Minister sure that he is right and that that EU diplomat was wrong?

On the economy, Ministers discussed the recent turbulence in the financial markets. Clearly, proper co-ordination by central banks is going to be essential. Will the Prime Minister guarantee that his approach of putting the Financial Services Authority, rather than the Bank of England, in the lead to rescue British banks in distress will not make the process more difficult?

The final communiqué from Brussels warns Governments across Europe about the dangers of high deficits. Will the Prime Minister confirm that Spain’s budget is in balance, and that Germany, the Netherlands, Denmark and Sweden all have budget surpluses, while Britain has the largest budget deficit in western Europe? Does he now regret the fact that we are the one country that failed to prepare for the downturn by putting money aside in the good years?

The other main issue for Europe to focus on is global poverty and the urgent need to make rapid progress on the Doha round. Will the Prime Minister tell us why the EU seems to be showing so little urgency in getting the deal moving again? The commissioner in charge of those negotiations is Peter Mandelson. Whatever any of us may think of him, I have always had very helpful briefing from him on trade and, I have to say, on other issues, too—[Laughter.] The Leader of the House should not laugh; she might put herself in jeopardy. What matters is that there should be a clear decision on whether he is going to serve another term. It cannot be in anyone’s interests for the commissioner’s future to be the subject of endless speculation. Will the Prime Minister tell us today whether Peter Mandelson is going to go on doing his job, or whether that decision is to be the subject of further dithering?

While Ministers were in Brussels, there was violence—[Interruption.] Look, I thought the boot boy had been told to calm down. I read in a Sunday newspaper that he was actually the soon-to-get-the-boot boy. Soon, he might have to go and sit in another part of the House. I see that the Prime Minister is laughing. I think your career—you will be on the same conveyor belt as the Leader of the House.

While Ministers were meeting in Brussels, there was violence on the streets of Tibet. An EU statement on Tibet has been issued today, which I am sure the whole House will welcome. Britain rightly works closely with China and we very much welcome the way it has opened up its economy, but is it not vital that the Chinese Government understand that with the greater role they play in the world comes greater responsibility? Does the Prime Minister agree that the strong relationship we all want with China requires us to be candid and frank, even on issues where we disagree?

I will deal with each point, but is it not remarkable when 3.5 million jobs are dependent on our membership of the European Union and when European co-operation on the environment was crucial to what happened at Bali that the right hon. Gentleman can say so little about the advantages of co-operation in Europe, and that he should spend his time attacking the European Union rather than seeing the benefits in it?

The right hon. Gentleman says that the environment is nothing to do with the European reform treaty, but it is the first time we have set down as a strategic objective that the environment is an important issue and it is there in the treaty. All the other parties in Europe believe it is important that the environment be at the centre of Europe’s work and if I may say so, if we are to lead the world on the environment, we will need to co-operate with our European partners.

The right hon. Gentleman also raised the question of how we as a country are cutting emissions. We are one of the few countries meeting our Kyoto targets and we will continue to do so. One of the reasons why we are meeting them is that we implemented early on in our Government the climate change levy, which the Conservatives continue to oppose.

I find it very strange for the right hon. Gentleman to be raising issues that compare us with the rest of Europe in terms of economic progress. We have lower inflation than the rest of Europe and we have a history of stability and growth. He will find, during the course of this year, that the American deficit will be higher than the British one because people are taking the right action to deal with the global financial turbulence. I am sorry that the right hon. Gentleman has so little to say in support of the action that the European Union and, indeed, all international authorities are taking on the economic issues confronting them. If the Conservatives want to be a serious party, perhaps they could actually address the serious issues of economic progress.

As far as the issues about Tibet are concerned, the right hon. Gentleman is absolutely right that, although it was not discussed at the European Council, all of us are concerned about what is happening there. We have made our views known to the Chinese authority: we believe that there should be restraint and an end to violence; and we believe that there should be a dialogue between the different authorities, which should happen soon. It is very important to recognise that at this time the whole world is looking to China to see what the reaction will be.

The right hon. Gentleman also raised the issue of trade and may I say that we, too, have been pushing the rest of the world because we believe it important to use this window of opportunity to get a trade deal? That is why we are working as we are with the European Trade Commissioner and why it is essential to move other countries forward to see if we can get a deal.

One of the people who was at the European Council during the course of the weekend was the Czech Prime Minister. Until recently, he was the Conservative party’s only supporter in Europe. What he is saying now, however, is that failure to support the reform treaty will leave the Czechoslovakian people isolated in Europe. That is exactly what would happen to this country if we ever listened to Conservative advice.

I am grateful to the Prime Minister for his statement. As European summits go, the conclusions were workmanlike; largely welcome, but fairly unremarkable. I wonder whether that is in part because of the issues that were omitted. Notwithstanding the Prime Minister’s words about Tibet today, will he explain why there was no discussion among EU Heads of State last week on Tibet? Does he not think that it is precisely the actions of the Chinese authorities in Tibet that should be the subject of discussion between European leaders?

I know that the Prime Minister is extraordinarily reluctant to do anything, it seems, to annoy the authorities in Beijing, but will he none the less confirm today that he will follow the lead of President George Bush and of Chancellor Angela Merkel and meet the Dalai Lama on his forthcoming visit to London to express solidarity with the Tibetan people? [Interruption.] As the Prime Minister knows, I have written to him about that on two occasions and still not had a clear answer—[Interruption.]

Order. Allow the right hon. Gentleman to address the House. Not to do so is unfair.

I congratulate the Prime Minister on inserting, at the last minute, a reference in the conclusions to his laudable aim of reducing VAT rates on environmentally friendly goods, but why did he apparently go about that in such a bizarre fashion? Why did he spring it on his colleagues—if reports are to be believed—at the last minute through a letter with President Sarkozy? Is that really the best way to show leadership and do business in the EU? My worry is that the manner in which the proposal was spun in the press had as much to do with obscuring the Government’s woeful record on the environment, compared with that of other EU countries.

We are now 25th—25th—out of the 27 EU member states on the use of renewables, and more than 25 per cent. of our carbon emissions come from our housing stock, compared with 5 per cent. in Sweden, which is a much colder country. We have a recycling rate well behind that of France, Germany, Spain and other countries. The go-ahead is being given to Kingsnorth power station—the first in a new generation of coal-fired power stations—without any effort being made to use carbon capture technology, and the go-ahead is being given to a third runway at Heathrow. The list goes on.

Does the Prime Minister not accept that he can make all the noise he wants about his VAT proposal, but our green credentials in the EU will never be strong unless real action is taken across a much broader range of issues? For instance, will he commit today to giving support to a new draft directive on the geological storage of carbon, which is being drafted in the European Parliament and which would oblige all member states to accelerate the use of carbon capture technology at all the coal-burning power stations?

I strongly agree with the Prime Minister that there is a pressing need to move towards a fully integrated and competitive energy market in the single market. In particular, the EU needs the powers to take action against monopoly energy providers in markets such as France and Germany. Does he agree that the new Lisbon treaty would give the EU precisely those powers further to liberalise the EU energy market, and that that is just another example of the benefits that the treaty would bring the British economy, which the Conservative party is so keen to deny the British people?

I warmly welcome the Prime Minister’s remarks about co-ordinated action at European level to ensure stability and greater transparency in the financial markets. The reverberations around the global markets today, caused by the news that the US investment bank Bear Stearns is to be taken over at just 2 per cent. of its share value compared with 12 months ago, show how timely the EU’s Council statements are.

It is critical, at a time when liquidity remains so tight for the world’s banks, that steps are now taken to ensure that this does not create an environment where credit is being withdrawn for millions of ordinary people. That is why we must also now pioneer reforms to the system of lending to ensure that we do not find ourselves in a similar position in years to come.

Does the Prime Minister agree that while it is critical that the capital requirements directive be reviewed if we are to prevent a further boom-and-bust cycle in the credit markets, we must be prepared to use levers to control supply as well as demand for credit?

I am grateful to the right hon. Gentleman. First, may I correct him on VAT? I first raised the issue months ago with our European colleagues; I have been following it up ever since. I am grateful that we now have an agreement to look in detail at whether VAT reductions on matters such as household materials and electrical goods can be beneficial both in encouraging people to use energy-efficient products and in stimulating a market where Europe can benefit in the future. So, he is wrong to say that this was raised only on the day of the Council. We have been pressing our European colleagues on the matter for some time.

I agree with the right hon. Gentleman on the importance that we attach to environmental issues. Again, I have to correct him. Carbon capture and storage is something that we have been pushing right across the EU. There will be 12 demonstration plants, and one of them, we believe, will be in the UK, but we want the European Commission to make it possible for there to be greater incentives so that people will develop carbon capture and storage at a quicker rate.

The right hon. Gentleman is right about energy liberalisation and the importance that we attach to it in the EU. That is one of the reasons why qualified majority voting in energy matters will be beneficial, opening up markets and the creating of jobs, although it was opposed by the Conservative party.

I disagree with the right hon. Gentleman about Britain’s record in relation to other countries. I repeat that we are one of the few countries in the world that is meeting its Kyoto targets, and we will continue to do so.

On the economy, I hope that the right hon. Gentleman will agree that Europe is leading the way on calling for a proper international response. We had a meeting with Chancellor Merkel, President Sarkozy, Mr. Prodi and the President of the European Commission a few weeks ago. We have now put forward proposals in detail. The Chancellor is writing to all members of the IMF, the G7 and the Financial Stability Forum to push these forward. Our proposals are in harmony with those that have just been put forward by the US Treasury Secretary. To ensure confidence in financial markets, we believe that it is important that those proposals are adopted.

Finally, I agree with the right hon. Gentleman when he says that action to express our views on Tibet is important. People around the world are expressing concern. We have made our views known, and there will be an EU statement later today. There is a demand for restraint on the part of the Chinese authorities. These are the most important matters now. We will make other announcements and decisions in due course.

The Prime Minister has stressed the importance of ensuring stability beyond the borders of Europe. Were there any discussions about Burma because, obviously, the UN envoy, Mr. Gambari, has failed in his mission to bring about stability and progress there? If the Prime Minister had no opportunity for discussions on this occasion, will he use the meeting with Mr. Sarkozy later in the week to discuss that matter?

My right hon. Friend is right that Burma is an issue on which we have common cause with many people in the rest of Europe and, indeed, in the rest of the world. Mr. Gambari has just finished his visits to Burma. It is important that we recognise that the Burmese regime’s proposals for a referendum and elections that would exclude Aung San Suu Kyi are totally unacceptable. She should be released from house arrest immediately. Democratic elections should happen, and there should be reconciliation to bring the forces in the country together. I will continue to press that cause with my European colleagues.

Why did the Prime Minister not answer the question about the future of Peter Mandelson as our European Commissioner? Surely he should be putting his right hon. Friend the Member for Leicester, West (Ms Hewitt) out of her misery.

Because it was not discussed at the European Council.

Does my right hon. Friend accept that it was important that he achieved success on getting the Council to consider a reduction in VAT on insulation materials? Will he go further and press the Heads of Government in Europe not only to achieve the target of a 60 per cent. reduction in CO₂ emissions by 2050, but to go beyond that towards 80 per cent.?

My hon. Friend is absolutely right that the whole of Europe should consider whether a more ambitious target than a 60 per cent. reduction by 2050 is not only necessary, but desirable and something that we should work for as part of the Bali negotiations that will be held in Copenhagen a year from now. I agree that it is important that we look at that, which is why we are asking our own Committee on Climate Change to report on it. I believe that other countries are ready to follow suit and that a common European policy is possible on this, as on other matters. May I say that it is no good for Conservative Members to call for environmental co-operation in Europe if they are about to renegotiate the whole of the treaty in Europe?

While we are on the subject of European co-operation, did the Prime Minister ask the other 26 Heads of Government at the European Council why none of them is prepared to send fighting troops to support our Army in the Helmand province of Afghanistan?

There are 43 countries involved in Afghanistan. Different countries are making different contributions in different ways. This will be a matter for discussion at the NATO summit in Bucharest, where other countries will be asked to share the burden in Afghanistan in terms of both equipment and troops. The specific location of troops will be a matter for discussion among the different partners in the coalition and we will reach agreement in due course. People ought to remember that, contrary to what was said at the time, 40 countries and more have joined the coalition on Afghanistan because they know that Afghanistan is the front line against the Taliban.

I welcome the Prime Minister’s statement and refer him to paragraph 5 of the conclusions, in which member states are invited to strengthen the involvement of stakeholders in the Lisbon process. Will he tell the House how he intends to make sure that that happens, and that we will stick to the benchmarks that were originally suggested by the Lisbon process?

A range of discussions is taking place with all the social partners on all the issues related to Lisbon, and I know that industrialists and business groups have been called in to consider what the next stage of the Lisbon process might involve. I believe that we should now also consider the post-Lisbon process, so that we can think about how universities and skills can be part of the agenda for the future. A better competition policy may be part of the agenda as well. On all those matters, we will consult and work with not only all 26 of our colleagues in Europe but the various stakeholders who are concerned about the way in which the European economy develops.

I agree with the Prime Minister that it makes absolute sense for this country to be fully involved with Europe on environmental policy, and for Europe to be the most important mediator in the presentation of a greener agenda. The EU can achieve much more than any nation state can achieve on its own. Will the Prime Minister emphasise that such an approach would be gravely undermined if this country were to adopt the sheer folly of a process leading to a policy of effective disengagement at European level?

May I draw attention particularly to the Prime Minister’s comment about the strengthening of energy security through a policy that takes a collective approach to third-country producers, notably Russia? Will he flesh out the discussions that took place a few days ago on that specific issue, which is a cause of growing concern throughout Europe?

There was a discussion about energy security and relationships with Russia, which is indeed a serious matter. Although it should not prevent us from trying to secure a partnership agreement with Russia, we should be absolutely clear about where our strategic interests lie, and there is merit in Europe coming together to present a united front in this regard.

The right hon. Gentleman is also right to say that we would be in danger of not being able to make progress on the environment or on other issues if we were again to become isolated in Europe. I repeat that not one other country proposes a referendum on the European Union treaty—[Hon. Members: “Ireland!”]—apart from Ireland, and not one Government of the 27 opposes the treaty, while this Conservative party in this House opposes it. I understand that the only parties that support the Conservative position on the referendum are the Dutch Party for the Animals, the French Hunting, Fishing, Nature, Tradition party, Sinn Fein, and a variety of Trotskyists. Moreover, the Prime Minister of the Czech Republic—I repeat, the Czech Republic—made it absolutely clear not only that he would be isolated in Europe if he opposed the treaty, but that he was totally against the Conservative position on a referendum. In other words, the Conservatives have no allies in Europe.

The Prime Minister rightly referred to the need to co-ordinate energy security across Europe, but, if the climate change scientists are right, it seems likely that in the next few years lack of access to drinking water in north Africa will lead to dramatic changes in patterns of migration into Europe. In the past, that danger has tended to interest only the Mediterranean members of the European Union. Does the Prime Minister agree that it is now vital that the whole European Union take it seriously?

It is true that problems in Africa, whether they involve water shortages, lack of economic development, poverty, disease or migration, can directly affect the whole of Europe. That is why it is important that we have strong relationships with the African Union, and why the proposed union of the Mediterranean—which will involve 27 countries in Europe as well as Mediterranean countries bordering Europe—is such an important development. One of the issues that will be discussed is what help we can give African countries to develop not just their water supply but their infrastructure, so that they can trade with the rest of Europe.

The whole House will welcome the target of a 20 per cent. reduction in emissions by 2020, but which figure will the Prime Minister use in referring to the United Kingdom’s contribution? Will he use the figure that is often quoted to the United Nations, or the figure in the report published today by the National Audit Office, which is some 12 per cent. higher?

It is predicted that greenhouse gas emissions in 2010 will be 23.6 per cent. lower than they were in 1990. The goal is to reduce carbon dioxide emissions to 20 per cent. below 1990 levels as well, and that is obviously part of the Government’s objective. We are now considering the targets for 2020 and 2050.

One of the great advantages of our membership of the European Union is the opportunity it provides to young people to work, study and travel freely across the EU. In the context of the post-Lisbon agenda, the review of human capital and skills and the role of universities, will my right hon. Friend look particularly carefully at the difficulties that we have in encouraging our young people to take advantage of the financial assistance schemes that are available to enable them to study abroad? British young people seem more reluctant to study abroad than young people in similar EU countries. Will he look at that carefully?

The Minister for Europe is here, and he draws my attention to the Erasmus scheme and other schemes that make it possible for people to study in the rest of Europe. We will certainly look at that matter. Co-operation between universities—and, indeed, between all institutions of education—will be very important. We must do everything in our power to deepen those collaborations.

When he was Chancellor of the Exchequer, the Prime Minister was critical of EU structural funding and the waste of that funding and of industrial expenditure. He said that

“there is no better place to start than by bringing regional policy back to Britain”.

If that is still his view, what progress has he made in persuading other member states of that?

I am grateful to the right hon. Gentleman for raising that matter, because we have made reforms in European Union expenditure. That means that more of the resources are going to the poorest countries, which was the objective of the proposals that I put forward. I wanted more resources to go to the poorest countries in the rest of Europe and I wanted member states such as us to be able to carry out our own regional policy. That is why we have advocated changes in the state aid rules, and why, for example, on venture capital, we have made progress exactly in that area.

I welcome the decisions in the European Council about financial market transparency and today’s boost to the liquidity of financial institutions by the Bank of England, but given that irresponsible lending by those institutions has created real risks for home owners, will the Prime Minister initiate discussions about how to keep people on the home ownership ladder? We have many excellent schemes to get people on the first rung, but existing home owners are at risk of losing their homes because of bad lending. What can he do to help them?

One of the announcements that I made during the statement was that the Government are creating a new group to look at mortgage markets, and that will cover some of the questions that my hon. Friend raises. I agree that it is important at these times that we do everything we can to help those who are finding it difficult to pay their mortgages. However, she will note that the rate of people losing their homes and the rate of people who are in arrears on their mortgages are substantially lower than they were in the last world downturn in the early 1990s, when we had more home repossessions than at any time in our history.

As a director of the Great Britain-China Centre, a body partly funded by the Foreign Office, I was pleased to note in the Prime Minister's statement that he discussed a comprehensive strategy to strengthen the EU’s economic relations with China, but I found his response to my right hon. Friend the Member for Witney (Mr. Cameron) about the influence that the EU should have on China in relation to Tibet somewhat thin. Will the Prime Minister provide us with some practical examples of what his Government will do in the next few days in that regard?

We have made our views known. While there was a discussion among Foreign Ministers about Tibet, it was not at the full European Council. Information was very sketchy on Thursday and Friday about what was happening in Tibet. It is only recently that we have become more aware of the problems that have arisen there. We have made our views known to the Chinese authorities. The Foreign Secretary is in touch with the Foreign Minister of China. We are calling for restraint and we believe that the way forward is a dialogue between the different parties. The hon. and learned Gentleman may know that we have been part of a human rights dialogue with China whereby there were visits to Tibet recently to look at conditions there, so we keep everything in that area under review and we are calling for restraint, for an end to violence and for dialogue between the parties involved.

May I ask the Prime Minister what was agreed at the Council to get better control of EU spending and budgets, so that we do not see a 14th successive failure to get the accounts signed off by the auditors because of major problems in each of the key spending areas?

The hon. Gentleman is right in that we have been pressing for better accountancy procedures in relation to that, but he should betray to us the true nature of his inquiry: he wants Britain out of the European Union altogether.

The very first line of the presidency conclusions from the summit are:

“The fundamentals of the European Union economy remain sound: public deficits have been more than halved since 2005 and public debt has also declined”.

As by 2005 the Prime Minister had been in charge of the economy for eight years, will he explain why in the ensuing period the United Kingdom made such a significant negative contribution to the wider EU position?

When we came to power, debt was 44 per cent. of GDP, but it is now 38 per cent.; it is billions of pounds less than it was. We should not take any lectures from the party that caused the recession of the early ’90s.

Will the Prime Minister meet the Dalai Lama? A simple yes or no will do.

As I have said, the priority at present is to deal with the issues in Tibet and to make our representations to the Chinese Government. We will make any further announcements later.

While the Prime Minister was chatting—convivially, I am sure—with his fellow European leaders in Brussels, did any of them congratulate him on pushing the Lisbon treaty through this House, even though that did, of course, involve his breaking his solemn promise on a referendum, contrary to the wishes of the British people?

When it was a constitutional treaty, nine Governments in Europe said there should be a referendum. As it is no longer a constitutional treaty, only one Government—the Irish, who are legally obliged to do so—are having a referendum. This has been through constitutional courts in Denmark and Holland, which agreed that this is not a constitutional treaty. In fact, the first words of the Brussels declaration are that the constitutional concept has been abandoned. The Conservative party would do better to follow us in negotiating better living standards and better deals for the British people than to try to renegotiate past treaties, which is clearly what it will spend all its time doing.

Does the Prime Minister recall that when the Lisbon agenda 2000 was first launched, it promised 3 per cent. annual growth in the European Union until 2010 and that red tape would be cut? The then Prime Minister said that it

“marks a sea change in European economic thinking…away from heavy-handed intervention and regulation”.—[Official Report, 27 March 2000; Vol. 347, c. 21.]

However, the European Commission itself now accepts that even though the single market increases European GDP by €225 billion, the burden of European regulation is €600 billion. Is that why the Lisbon agenda has to be relaunched time and again with the words:

“Launching the new cycle of the renewed Lisbon strategy”?

l We have been making proposals to cut red tape in Europe during our presidency and in recent presidencies. The hon. Gentleman misunderstands the success of the Lisbon process: 10 million new jobs have been created in the EU as a result of it. He should tell us the true nature of his inquiry about Europe. He wants a referendum to oppose the amending treaty. He wants that even if it is ratified. He would force renegotiation of our membership of the EU. No country in Europe supports that, and he would be totally isolated.

The promise of a discussion of the millennium development goals at the June Council sounds somewhat weak. Will the Prime Minister undertake that between now and June, UKREP—the United Kingdom Representative Office—and No. 10 will work with colleagues elsewhere in the EU to try to ensure that at the June Council meeting a process is put in place to implement the MDGs by 2015 and that there is not just further discussion, but that some decisions are made about a process to implement them by then?

I am grateful for that question from the hon. Gentleman, who used to be the Chairman of the International Development Committee. We have called a conference with business leaders and others in May to look at how we can make progress on the MDGs and get a wider coalition of business, voluntary groups, foundations, charities and faith groups, as well as Governments, to pursue them. In June, this matter will be discussed in detail at the European Council as a report is being prepared already by Mr. Barroso, President of the Commission, about the progress that has been made and the progress that has still to be made. That will lead through to September, when there will be a special session of the UN—called by the Secretary-General—to look at what we must do next to achieve the MDGs. All Members should recognise that Europe leads the world: it is the biggest contributor to aid. It has done more than any other continent, but we want to do still more in the future. It is only possible for us to work successfully if we continue to work together. That demands a high level of co-operation in Europe, which I hope all Members will support.

The Prime Minister spoke about Russia’s important role in energy security and made particular reference to Ukraine. Russia also has a very important role to play with its allies in Serbia in connection with the future security and stability of Kosovo. Has the Prime Minister yet managed to speak to President-elect Medvedev, and when does he expect to meet him face to face to discuss the important role that Russia has to play in the future of Europe?

As far as Kosovo is concerned, the violence that is happening now is most regrettable. I hope that the withdrawal of some of the UN forces can be avoided. It is very important to recognise that the policy of supervised independence in Kosovo means that there is a role for all minorities in that country. I am pleased that a large number of countries have now recognised the new Kosovo. Serbia is guaranteed a European future if, of course, it continues to observe democratic rights, which it is doing. I understand its frustrations about what has happened in Kosovo, but it is important that it recognises its responsibilities to the rest of Europe.

The hon. Gentleman knows perfectly well the difficulties in our relationship with Russia that have arisen from what happened in London, where we had an assassination, and, at the same time, as a result of the treatment of the British Council, but we want good relations with Russia. We support a partnership agreement between the European Union and Russia, and we will continue to pursue these objectives.

Following the question from my hon. Friend the Member for Wellingborough (Mr. Bone), does the Prime Minister have any plans, separate from those of the EU, to meet the Dalai Lama?

I have made it clear that we are concerned about recent events in Tibet; we have made our view known. We have called for restraint. We believe that there should be a dialogue between the parties. That is the most important thing at the moment, and any further announcements or any further decisions can come later.

Given that the Prime Minister seems reluctant to meet the Dalai Lama, will he confirm that he will at least have the courtesy to have a conversation on the telephone with him?

I have made my views known. I repeat: this was not discussed at the European Council. A statement is being made by European Union Foreign Ministers this afternoon, and I believe that that will show the unity of Europe in expressing concern about the situation.

Following the Prime Minister’s reference to Czechoslovakia—that far-away place of which he obviously knows little—do we now have evidence that he has been receiving foreign affairs briefing from the President of the United States?

I talk regularly to all my colleagues in Europe, and I made it absolutely clear when I was talking about the Czech Forum that I was talking about the Czech Republic.

I beg to move,

That leave be given to bring in a Bill to make provision for the licensing of nail bars and premises where tattooing, cosmetic piercing and other prescribed treatments are carried out; and for connected purposes.

A constituent of mine first drew my attention to nail bars and the potential problems posed by what one might describe as the bargain-basement end of the market. My constituent, who runs a reputable nail bar in central Milton Keynes, became very concerned by the damage that had been done to the nails of some of her customers by other, less reputable establishments. Since I first raised this issue in the House on 15 November 2007, I have received feedback from across the UK showing that this is a widespread problem—a point reflected in the wide geographical spread of the sponsors of this Bill.

It might help Members who are not familiar with the nail bar business if I briefly describe what nail bars are and the procedures they use. Nail bars are a relatively recent import from the US. They are a part of the beauty industry, and offer artificial nail extensions that can then be painted or decorated. In reputable nail bars with properly qualified nail technicians, nail extensions are created from mixing a polymer powder with a polymerising agent called ethyl methacrylate, or EMA. The resulting nail extension is flexible and easily attached to the natural nail. Unfortunately, the expansion of nail bars has led to a rise in the number using unqualified technicians and using an alternative polymerising agent called methyl methacrylate, or MMA. The agent is banned in nail bars in the United States, Australia and New Zealand, but there is no such ban in this country. The attractions of MMA to the operative is that it is much cheaper than EMA, at between a third and a sixth of the price, and that it forms the extensions more quickly, enabling non-standard nail bars to undercut the prices of the more reputable businesses.

The customer might not be aware until it is too late that MMA has serious disadvantages, however. The nail extension is much more rigid and does not adhere well to the natural nail, so the natural nail has to be drilled or etched with an electric file to help adhesion. Unlike EMA, MMA polymers continue to polymerise once attached, and the MMA penetrates and damages the nail bed. Long-term use of MMA is associated with respiratory problems and serious allergic skin reactions, and the staff using it usually protect themselves, including from the dust generated by the electric filing, by wearing gloves and masks. That ought to suggest to the customer that the use of MMA is not risk free.

The other consequence for the customer of using MMA is that the extensions are so rigid and so tightly stuck to the nail that if they get caught or jammed the natural nail can be ripped off. Pain is caused by the drilling, and the permanent ridging and damage to the natural nail and nail bed can take a long time to grow out. To compound matters, MMA extensions are much more difficult to remove than those formed with EMA. [Interruption.] I can see that I am catching the attention of the hon. Member for Putney (Justine Greening). Several of the nail bar technicians who have contacted me have shown me graphic pictures of the damage that MMA has caused to the nails of patrons of sub-standard nail bars.

One way to deal with the problem is to improve awareness among the public, particularly young girls and women, of the damage caused by MMA and the importance of ensuring that, before anyone tampers with their nails, they check that the person is properly qualified. I know of one scheme that is to be launched shortly, which will allow potential customers to check a website for reputable nail bars in their area. I very much welcome that, but simply improving public awareness will not stop the continued spread of non-standard nail bars. Such bars not only risk affecting their customers but undercut the credibility of the whole sector and those who try to provide a high-quality service.

London councils within the M25 already have the power under part II of the London Local Authorities Act 1991—“Special treatment premises”—to license nail bars, and thus in principle to impose standards, including the appropriate level of qualification for staff and restrictions on the chemicals that can be used. However, the contacts that I have had suggest that even in London, where licensing powers exist, council licensing officers may be focusing on hygiene—that is important, because hepatitis C can be spread through the use of electric drills on nails—and may not be aware of the specific risks of MMA or of the need to check the qualifications of staff.

Outside London, the situation is even more confused. Nail bars do not come within the scope of the Local Government (Miscellaneous Provisions) Act 1982, and therefore cannot be subject to licensing. Environmental health staff can give advice on the use of chemicals, but their only enforcement powers come through the Health and Safety at Work etc. Act 1974, which is relevant to employees, not to customers. Trading standards can respond to customer complaints, but most customers do not realise that the pain and damage that they experience because of MMA are not just a normal part of the process.

Although the problem of MMA seems well known in the industry, it seems to be below the radar of public authorities. In response to earlier comments that I have made in the House, the Department of Health has told me that it has made no assessment of the public health risk of MMA in nail bars, and the Health Protection Agency has no record of ill effects to customers or employees in the last three years. The HSE’s health and safety laboratory is apparently reviewing health issues for technicians in nail bars, but it seems that, once again, the effect on the customer is being ignored—perhaps because damaged nail beds are not regarded as a terribly serious public health issue.

That is not satisfactory. Most of the customers of non-standard nail bars are likely to be young women and girls on low incomes, for whom the low prices that those businesses can charge make nail extensions seem much more accessible. Customers need to be protected from unscrupulous operators, which is why I propose that the powers already enjoyed by London councils to license nail bars and a number of other similar businesses should be extended to all local authorities across England.

The chief environmental health officer at my local council in Milton Keynes tells me that following an inspection, tattooists, for example, like to have a document from the local authority as it drives the cowboy operators out of business. It helps to bring in customers if businesses can advertise that they are registered with the local authority. Among qualified nail technicians, there is also strong support for regulation. At present, an astonishing 85 per cent. of nail technicians do not have NVQ level 3 qualifications, and have no incentive to invest in the training as it gives them no competitive advantage.

A proper licensing regime across England would protect customers, drive up standards and reward those businesses investing in training. It would mean that girls and young women could use nail bars and be confident that they would suffer no ill-effects.

Question put and agreed to.

Bill ordered to be brought in by Dr. Phyllis Starkey, Ms Celia Barlow, Mr. Clive Betts, Dr. Roberta Blackman-Woods, Richard Burden, Ms Sally Keeble, Fiona Mactaggart, Chris McCafferty, Kerry McCarthy, Martin Salter, Anne Snelgrove and Margaret Moran.

Nail Bars and Special Treatment Premises (regulation)

Dr. Phyllis Starkey accordingly presented a Bill to make provision for the licensing of nail bars and premises where tattooing, cosmetic piercing and other prescribed treatments are carried out; and for connected purposes: And the same was read the First time; and ordered to be read a Second time on Friday 25 April, and to be printed [Bill 87].

I welcome the opportunity afforded by the Budget debate to discuss the challenge that we face as a country and as a world to move from our historical reliance on a carbon-intensive way of living towards a sustainable, low-carbon economy. Wherever we look, whatever goods and services we buy, whatever things we do, all of them have a carbon footprint. Carbon is currently central to our way of life, but we need that to change if emissions are to decline in the way that is necessary.

The UK has made progress. We have broken the link between economic growth and growth in carbon emissions. The economy has grown by about a quarter in real terms in the last 10 years, whereas greenhouse gas emissions have fallen by 7.6 per cent. But for the action that has been taken, greenhouse gas emissions would now be about 15 per cent. higher than they were in 1990; instead, we will more than meet our Kyoto target. However, as the facts of climate change become more stark, we will need to be even more radical, and the Climate Change Bill will enable us to do just that. For the first time anywhere in the world, a legal requirement will be placed on the Government of the day to ensure that the country’s carbon account does not exceed its carbon budgets. Budgets will be set in legislation.

I am extremely grateful to the Secretary of State for giving way so early in his speech. He has just mentioned the carbon budgets, but what about the Budget? Can he give us some idea of the total amount of carbon reduction that he expects as a result of the measures announced in the Chancellor’s recent Budget?

If the hon. Gentleman will bear with me, I shall give some of those figures in the course of my speech. The facts, however, are that the independent climate change committee, the shadow version of which met for the first time last week, will of course propose the first of the three carbon budgets at the end of this year. At the same time, it will advise the Government, as my right hon. Friend the Chancellor outlined last week, on whether we should go further than the 60 per cent. reduction by 2050 and strengthen it to an 80 per cent. reduction.

Our task now is to ensure that the UK meets those budgets. That will require a contribution from every business and every household in the land as well as co-ordinated efforts across government. That is why the Chancellor announced last week that the first three carbon budgets will be set alongside the Budget next year. That is a sign of the Government’s determination to put reducing carbon dioxide emissions at the centre of policy making and of the economy.

The Secretary of State will be well aware that measuring the right thing is critical. He will know that the narrow measure used for Kyoto tells one story while the broader measure in the nation’s environment accounts, produced by the Office for National Statistics, tells a different story. Does he accept that on that basis, according to a comprehensive measure, CO₂ emissions have not fallen at all since 1990 and have increased since 1997? Is that not a cause for grave concern?

According to the measure that we use to report to the United Nations, because that is the way it asks for the figures to be submitted, it is clear that UK emissions of greenhouse gases have fallen by 15.4 per cent. and emissions of CO₂ by 6.4 per cent. We also report to the UN figures on emissions from aviation and shipping, which are included in a footnote when they are published. As the hon. Gentleman will be aware, the ONS does its own estimate in the environmental accounts. That calculates emissions from flights in a different way and also includes estimates resulting from UK citizens who live and work in other countries. It clearly would not make sense for those figures to be included in the UK totals that are reported to the UN framework convention on climate change. The way in which we report fulfils the requirement that the UN places on us, and we are making the progress that has been set out. Aviation and shipping are issues that we need to deal with internationally.

The changes that we are putting in place mean that 12 months from now—only a short time—meeting our carbon budgets will be on an equal footing with meeting our financial budgets. The House will, I am sure, appreciate that that is a profound change in the way in which we do things. As the first of its kind in the world, the Climate Change Bill is also a sign of the UK’s international commitment. As the House will be aware, the world agreed in Bali just before Christmas to start negotiations on a new global climate deal to take us beyond 2012.

Getting the United States of America, Australia, China and India into formal negotiations on a new deal is a huge step forward, but the hard part starts now. We have to get every country in the world to play its part. That is why leadership in Europe is so important. As we have just heard from my right hon. Friend the Prime Minister, the European Council has reaffirmed its commitment to cut greenhouse gas emissions in Europe by 20 per cent. by 2020, with legislation next year. Part of the agreement is that Europe will go further, with a 30 per cent. reduction by 2020, if an international agreement is reached.

I am sure that the House will recognise that international leadership by any country is not enough. We can bring to the negotiating table only that which we can contribute at home. That means that the UK must take bold action both to make possible progress in the negotiations and to reduce our carbon footprint.

Our approach to reducing emissions across the economy—in our homes, our businesses, the public sector, transport and energy supply—is based on three principles. The first is pricing carbon, through a trading tax or through regulation, to get the most cost-effective reduction. The second is encouraging innovation in low-carbon technologies, and the third is removing barriers to action, including encouraging long-term behavioural change. The Budget does those things by setting out the steps that we intend to take in each of those areas. Each of us as individuals has a role to play in tackling climate change.

Before the Secretary of State gets to the meat of the three principles, may I point out that both he and the Chancellor in his Budget have been entirely silent about using taxpayers’ money to buy carbon credits in overseas markets to allow us to fulfil our ambitious carbon targets? The National Audit Office estimates that the cost to British taxpayers will be about £5 billion by 2020; what is the Government’s estimate?

It will depend on the decision that the Government take about the use of international credits. As the hon. Gentleman will be aware, the Bill provides for the Committee on Climate Change to give us advice on the use of international credits. The Government will have to look at that advice in due course, when we receive it. In another place, there was a lively debate about the use of international credits, and we will no doubt have such a debate in the House when the Bill comes before us. As I am sure the hon. Gentleman accepts, it is entirely legitimate to make progress partly by using international credits because in the end, from the world’s point of view, it does not matter where emissions are saved, as long as they are saved. That is why the Government’s view is that carbon trading and the purchase of credit have an important role to play.

Some 40 per cent. of emissions are the result of choices that we make as individuals, so the Government want to help people to make low-carbon choices, and to ensure that our homes and products are working towards low-carbon living. That is why we launched a big public awareness campaign last year to encourage people to act on CO₂. I saw that campaign working for myself in Leeds last Friday. The online carbon calculator has already been visited by about 800,000 people. It is practical and simple; it helps us as individuals to understand what our own carbon emissions are, and gives practical ideas on how to reduce our carbon footprint.

Through the carbon emissions reduction target we have obliged energy companies to double the amount of energy-saving measures that they install in people’s homes from this April, which means that they will reach up to 8 million households. That will help to save 4 million tonnes of CO₂ a year by 2011, and deliver a typical saving of £90 on fuel bills. The green homes service, which is to be launched next month, will provide people with comprehensive advice on how they can reduce their carbon footprint, and will connect people with the offers that are available from energy companies and with other support. We will put £26 million into that service.

We will become the first country in Europe to phase out high-energy light bulbs. That is to be completed by 2011 and will save up to 5 million tonnes of CO₂ a year that would otherwise be produced through UK electricity generation. We have introduced regulations to improve the energy efficiency of new homes. Today’s buildings are 40 per cent. more energy efficient than those built before 2002, and 70 per cent. more efficient than those built before 1990. In under a decade, all new homes will be zero-carbon. We will set out the definition of a zero-carbon home for the purposes of the 2016 target by the end of 2008, following a consultation in the summer. The Government are determined to enable business and the public sector to play their part in a low-carbon Britain.

Has the Secretary of State looked any further into giving householders an incentive, such as a reduction in council tax, for embarking on microgeneration—for example, for installing a small windmill, a ground source heat pump or solar panels?

As the hon. Gentleman will no doubt be aware, we are considering the role that feed-in tariffs could play in ensuring that people do the things that he sets out. It is clear that we need to find more ways to incentivise and encourage that kind of investment. The experience of other European countries that have adopted feed-in tariffs for microgeneration is that it brings forward investment: the renewables obligation certificates work better for large-scale generation.

I wish to mention the climate change levy, as it was opposed by the Opposition. It is forecast to reduce emissions by 12.8 million tonnes a year by 2010, and the climate change agreement is forecast to reduce emissions by 7 million tonnes a year by 2010. The carbon reduction commitment will cover the non-intensive business sector. Up to 5,000 large public sector organisations and businesses, such as banks and supermarkets, will participate in the scheme. It will save at least 4 million tonnes of CO₂ per year by 2020 and will save the organisations involved some £755 million through lower energy bills.

I believe in the importance of Government leadership, and because of that all Government Departments will participate in the scheme. However, we need to go further.

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rose—

I give way to my hon. Friend.

My right hon. Friend referred to feed-in tariffs, which we welcome—they cover revenue costs and help with day-to-day costs. However, the capital cost of installing solar panels, for example, is very high. There was a Government scheme for 50 per cent. grants; if that were available generally, I am sure that solar panels would rapidly be installed across the whole country.

Following the consultation that the Government are going to undertake on them, feed-in tariffs would encourage people to invest and encourage others to lend money for people to invest, by providing the income stream for the years ahead. As I have said before, I think that way of doing things is better than the Government giving out grants to achieve the same effect. The tariffs would incentivise the system; that is why the Secretary of State for Business, Enterprise and Regulatory Reform has announced that we will consider them.

However, we need to go further still. That is why the Chancellor announced in the Budget our aim that all new non-domestic buildings be zero-carbon from 2019, with the public sector leading the way. It is already the Government’s aim for all new schools to be zero-carbon from 2016; we want all new public sector buildings to be zero-carbon from 2018 and we will establish a taskforce to advise on the timetable and on how to reduce carbon emissions in the intervening period. To help public sector bodies in England, including local authorities and hospitals, I have already announced an extra £30 million over three years in interest-free loans for energy-efficiency projects through the Salix scheme.

Cars and lorries are the second largest source of CO₂ emissions in the UK. Changing the transport sector to meet the demands of business and personal travel while reducing carbon emissions is clearly important. That is why the Government have provided sustained year-on-year investment in public transport. One consequence has been that passenger numbers on our railways are up—from 735 million passengers in 1994-95 to 1.16 billion in 2006-07. That figure is as high as it has been since the late 1950s to early 1960s.

We are investing in and promoting new clean technologies for transport, including a £20 million fund to help public sector organisations to buy environmentally friendly vehicles. The House will have seen the King review, published at the same time as the Budget. It considers even more radical steps to decarbonise transport, especially cars, in the next 25 years. In response, the Government have made clear their support for an EU-wide target for vehicle manufacturers to reduce average CO₂ from new cars to 100 g per kilometre by 2020. That would be on top of the provision for 130 g of CO₂ per kilometre currently being discussed in Europe. Furthermore, the Budget outlined a restructuring of vehicle excise duty to encourage motorists to purchase fuel-efficient vehicles.

Can the Secretary of State suggest how a rural farmer or country dweller will be able to do without his Land Rover or other 4x4 vehicle and escape the penalty that the Government are imposing on him by way of increased vehicle excise duty?

From memory, I think that the best-in-class 4x4 has an emissions figure of 151 g of CO₂ per kilometre. If the hon. and learned Gentleman looks at the new table for vehicle excise duty, he will see that that figure is well below some of the others. The aim of the change to vehicle excise duty is to encourage people purchasing new vehicles to choose the most fuel-efficient and least polluting in class. That is why individuals who buy the most polluting, fuel-hungry vehicles will have to pay £950 in the first year, 2010-11, which is more than double the current rate, while those who buy the cleanest—those emitting 130 g of CO₂ or less per kilometre—will pay nothing.

Recognising that there is a genuine debate about the sustainability of biofuels, we announced in the Budget a switch in support from the existing biofuels subsidy towards the renewable transport fuels obligation, which contains sustainability criteria. That is why my right hon. Friend the Secretary of State for Transport and I have asked Ed Gallagher, who chairs the Renewable Fuels Agency, to lead a study of the wider economic and environmental impacts of biofuel production, including the impact on fuel prices. Together with the changes to company car taxation, all these steps are sending a clear signal that choosing the cleanest and most fuel-efficient vehicle is, in every sense, the sensible thing to do.

How many family vehicles has the Secretary of State been advised that the car companies are intending to produce that will fit within the low-carbon bands?

I will be happy to write to the hon. Gentleman with a list of the best in class for all the different categories showing what vehicle can be purchased and what are the CO₂ emissions in grams per kilometre for those vehicles. The change is intended, first, to incentivise the purchase of low-emission vehicles and, secondly, to incentivise the manufacturers to invest more effort in producing more vehicles that have lower emissions. That is one of the changes that must be made if we are to make progress in meeting the aims of the Budget. Although I understand the Opposition’s wish to raise these points, in the end this is about making choices. It is all very well to talk about the need for green taxation, but when measures come along to create an incentive structure for vehicles in order to lead to a change, the House should support that.

I am sorry to return to the same point, but if the Secretary of State cannot give us a figure for the overall carbon reduction impacts of the Budget, can he give us just the figure for the changes to car taxation? If we are to be invited to support these measures, it is important to know what the impact is going to be.

The reduction relating to the change in car taxation is some 500,000 tonnes of CO₂ a year; that is the figure that I have before me. Of course, what it is going to mean in reality will depend very much on the choices that individuals make. Road transport is only part of the picture. In the 2007 pre-Budget report, the Government announced that air passenger duty would be replaced with a per-plane rather than a per-passenger tax better to reflect the environmental costs of aviation, and we said that in order to strengthen the environmental signal through taxation we would increase the tax by 10 per cent. from 1 November 2010.

I may be able to help the Secretary of State out at this point. I think that he may have inadvertently misled the House. The figure of 500,000 tonnes of carbon reduction arises from the deferred increase in fuel duty, not from the changes to car taxation. I would be grateful if he could give us the figures for the latter.

The hon. Gentleman is absolutely right. I apologise for that mistake. The answer on vehicle excise duty will depend on the decisions that individuals take in making their purchases. It is therefore quite difficult to forecast what the changes will be, but the reduction as a result of fuel duty is indeed the figure that I gave the House a moment ago.

Let me turn my attention to the energy sector. The UK has signed up to an EU-wide target for 20 per cent.—

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If the hon. Gentleman will bear with me, I want to make a little progress, having been generous is giving way.

The UK has signed up to an EU-wide target for 20 per cent. of energy production to come from renewable sources by 2020. In the summer, the Government will launch a full consultation on proposals for meeting the UK’s share of the target. We will look at all options for doing so, from things such as the Severn barrage, which could meet 5 per cent. of the UK’s electricity supply needs, to offshore wind—the UK is now the No. 1 location for such investment in the world and is forecast to overtake Denmark as the country with the most offshore wind generation capacity—to microgeneration, which we have just discussed, along with our commitment to consider feed-in tariffs in that area.

The EU emissions trading scheme is at the heart of the plan of the UK and Europe to deal with climate change. It creates a price incentive for generators to reduce their emissions. To ensure that the EU ETS sends the strongest possible signal to the power sector, in phase 3 the UK will go to a system of 100 per cent. auctioning in the large electricity producers sector.

On the issue of offshore wind generation, will the Government finally address the unfairness and imbalance in connectivity charges to the grid—the subsidy received in the south versus the massive cost to connect in the north-west of Scotland? We cannot gain from offshore wind capacity if the unfairness in the connectivity charge is not removed.

The fact that we are now the No. 1 location for investment, and that we will overtake Denmark as the country with the largest installed offshore wind capacity, shows that, despite the issue the hon. Gentleman raises, we are making progress in putting more wind capacity in place to meet our need for renewable energy in the years to come. No doubt the debate will continue about the most effective way to allow more capacity to come on stream. When one talks to renewable energy companies, one finds that they are most concerned about planning. That is a special case as far as onshore wind is concerned, but as the hon. Gentleman will be aware, the Government are taking steps to address that.

We are introducing a wide range of low-carbon technologies as part of the £400 million domestic environmental transformation fund. The Carbon Trust technology programme will receive more than £90 million to introduce new energy technology, such as offshore wind, third-generation photovoltaic power, marine energy and biomass heating. During the next three years, the Government will provide about £10 million for a new anaerobic digestion demonstration programme.

Carbon capture and storage will be vital if we are to deal with the problems facing the world, and another example of the UK taking the lead in the demonstration of technology on a commercial scale is the launch of a competition to design and build the world’s first post-combustion CCS power station. We are currently the only European Union country committed to fund a commercial-scale CCS project, and we will shortly launch a consultation on what it would mean for a new coal-fired station to be capture-ready, and on whether all new fossil-fuel power stations should be required to demonstrate that they are capture-ready.

Is the Secretary of State not aware of the BP Abu Dhabi CCS project, which was announced at the world future energy summit in January? It will be up and running by 2012, when the Government’s competition will barely be over.

I am indeed aware of that. I was referring to European Union countries building demonstration projects in the EU, and I said that we are the only EU country doing that in the EU. As the hon. Gentleman knows, we are also funding, alongside other countries, the near zero-emissions coal demonstration project—NZEC—in China. We have to demonstrate that post-combustion CCS works because we have to fit it in all existing coal-fired power stations and in those built during the months and years ahead owing to the thirst for energy in developing countries.

I attach the same importance to clean coal technology as the right hon. Gentleman, but will he clarify whether the Government intend to attach any carbon capture and storage conditions at all to the proposed coal-fired power station at Kingsnorth, and if not, why not?

My right hon. Friend the Secretary of State for Business, Enterprise and Regulatory Reform will make that decision, which he will announce in due course.

Recycling saves the equivalent of approximately 18 million tonnes of CO₂ a year and our waste strategy, which was published last year, sets out how we can recycle or compost half of all household waste by 2020. As well as recycling, reducing our overall demand for scarce natural resources is essential if we are to meet the challenges that face the natural environment. A disposable society is not a sustainable society. That is why the 13 billion, free, single-use, plastic and other bags that are distributed in the UK each year are a symbol of a disposable society. There has been growing public concern about that symbol and the Government, using the Climate Change Bill, will legislate to require retailers to impose a charge if they do not take voluntary action.

The Secretary of State has been generous in giving way. He briefly mentioned business recycling and then got on to carrier bags. Is the Department not cutting money to support organisations such as the Waste and Resources Action Programme and the National Industrial Symbiosis Programme, which help businesses to recycle? Is there not a disjunction between the right hon. Gentleman’s rhetoric, with which we all agree, and the reality—the cuts that the Department is making?

No, there is no disjunction. We have put a considerable amount of money into several such organisations and we continue to fund them. However, we must deal with the issue of whether, when it is in the interests of business to reduce carbon emissions and improve recycling, it is right for the Government to continue to pay for free advice to be given to it. Is it not reasonable to ask business to begin to pay for some of that advice? I have made the decision that it is reasonable to ask business to contribute to the cost of getting advice. We have set our budget on the basis of that policy and I am clear in my mind that it is right.

In addition to our changes to deal with plastic bags, landfill tax will increase by £8 a tonne from 1 April and by that amount each year until at least 2010-11. The aggregates levy ensures that the external costs associated with the exploitation of aggregates are reflected in the price. It will increase to £2 a tonne to maintain its environmental impact.

I want to consider the impact of changes in fuel price on those who find it difficult to pay their bills. As the House knows, more than £20 billion has been spent on benefits and programmes since 2000 to help to remove people from fuel poverty. That has led to 4 million households being removed from fuel poverty since 1996—the figure is down from 6.5 million to around 2.5 million, although the rise in energy prices means that it is rising again. Further action to help to tackle fuel poverty and vulnerable groups is therefore needed.

Energy companies spend approximately £50 million a year on social programmes and the Government want that figure to increase to at least £150 million a year. We will work with companies to achieve that, and legislate if necessary.

Will my right hon. Friend go back to the figures that he used? Does he accept that the current figure for the number of households back in fuel poverty is estimated to be 4 million, and that the challenge that faces us is that the numbers that the Government’s Warm Front programme took out of fuel poverty are being overtaken by those thrown back into it, simply because of the scale and pace of rises in energy costs?

That is the case, as I just acknowledged, because of the substantial increase in the prices that energy companies charge and that consumers have to pay. That is why my right hon. Friend the Chancellor announced in the Budget his wish for energy companies’ expenditure on helping vulnerable customers through their social programmes to increase. It is also why he drew attention to the fact that customers who use prepayment meters typically pay around £55 more on their energy bills than those who use standard credit and £144 more than those who pay by direct debt.

My right hon. Friend has been generous in giving way. A wish is not the same as a requirement for energy companies to put in that money for vulnerable households. What will the Government do to monitor the position? Will they introduce a requirement? It has been reported that there was an argument in the Cabinet about whether there should be a requirement. I would be interested to know the Secretary of State’s position on that.

I will happily tell my hon. Friend what my view and the Government’s view is. We think it is now time to tackle the issue and we are looking to Ofgem and the suppliers to bring forward proposals for treating prepayment meter customers more fairly. However—this is the answer to his question—if sufficient progress is not made by next winter, the Government are prepared to use statutory powers to reduce the differential between prepayment and other forms of payment.

In the meantime, as my hon. Friend and the House will be aware, we are providing immediate help to pensioners who face pressures from higher energy bills this year, by raising the winter fuel payment for the over 60s from £200 to £250 and for the over 80s from £300 to £400. Some 9 million pensioner households will be better off as a result. I simply remind the House that before 1997 there was no winter fuel payment at all.

Will the Secretary of State give way?

I am going to bring my remarks to a conclusion, as I have been very generous in giving way.

One the reasons why today’s debate is welcome is that it gives us the chance to discuss the change that is to come. In the rest of this century, debating and deciding on our carbon budget will be as important as doing so on traditional financial budgets, and arguably even more so. The measures that I have set out in my speech have shown the practical steps that the Government are taking to enable the country to reduce its carbon emissions. It is for that reason that we have a strong record on the environment; but I recognise, as does the House, that we will all need to do more to help build a low-carbon Britain. The Budget shows exactly how and why we are determined to do that.