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Taxation: Green Taxes

Volume 688: debated on Wednesday 10 January 2007

asked Her Majesty’s Government:

What is their assessment of the impact of current green taxes on climate change.

My Lords, the climate change levy plays a crucial role in enabling the UK to meet its Kyoto Protocol target. An independent evaluation by Cambridge Econometrics, commissioned by HM Revenue and Customs and published alongside the 2005 Budget, has examined the effect of the levy since its announcement in the 1999 Budget and its introduction in April 2001. The study concluded that the levy could deliver cumulative savings to 2005 of 16.5 million tonnes of carbon and by 2010 annual carbon savings of over 3.5 million tonnes a year, well above the 2MtC estimated at the time of its introduction.

My Lords, I think that I have to thank my noble friend for his Answer. I welcome him to Treasury matters. With his vast experience in that field, he will know that he can throw away his brief and give me the real answer, which should be: none or, at best, very little. Is he also aware that his predecessor, the noble Lord, Lord McKenzie, told me during the pre-Budget debate that there are a range of taxes which are seeking to change behaviour? Would the noble Lord care to tell us the range, or at least list a few of the taxes, to give us a better idea of how that answers my Question?

My Lords, I am sorry that I have not wholly satisfied my noble friend on this occasion. The climate change levy includes an aggregates levy and a landfill tax. We also have a number of environmental taxes, which are there to condition behaviour. We seek to shift economic activity from polluting activities to employment activities and those that do not contribute to carbon emissions. We take pride in the fact that we are making great progress on the Kyoto Protocol, but we recognise that the Stern report indicates just how much will need to be done to change our economy and economic operations to safeguard the planet.

My Lords, does the Minister agree with Mr Ian Pearson, who, I gather, rejoices in the title of Minister for climate change—an awesome responsibility, I must say—that Ryanair represents the irresponsible face of capitalism? If so, what do the Government propose to do about it?

My Lords, my honourable friend in the other place was seeking to emphasise that there would be considerable obligations on airline services in the face of the growing potential of airlines to contribute to pollution and the problems in the atmosphere. Consequently, we are expecting the airlines—British Airways is a constructive example—to recognise their responsibilities as we seek to bring air travel within the European Emissions Trading Scheme. What we regret at this stage is that the response of Ryanair did not look particularly constructive.

My Lords, does my noble friend agree that if we were to accept the premise of the Question—that, in summary, our little bit on Kyoto contributes next to nothing—and if all the countries of the world were to adopt that philosophy, we would not beat this dangerous development? Does he further agree that ever since the Rio Earth Summit in 1992, where I happened to be a member of the British delegation, it has been obvious that the countries which are polluting the most really ought to take the lead and countries such as the United States—with India, China and so on in due course—must be brought within the system? It has always been understood that that is the only way to build up the credibility of this system.

My Lords, I am grateful to my noble friends. Of course, the United Kingdom is responsible for only about 2 per cent of the pollution problem. However, the United States, a significant player in these terms whose federal Government have shown a clear reluctance to engage with this issue, is seeing some of its major cities and a considerable number of its states taking action to deal with the matter within their limited jurisdiction. If the state of California and others believe that they can make a contribution to this situation when their federal Government are not responding, we in Britain certainly have an obligation.

My Lords, will the Minister accept a cautious welcome on these Benches for his statement that the Government are seeking to shift activity from polluting to employment? But would he accept that our welcome would be even greater if we felt that the Government really had their heart in it and that the measures taken so far have been feeble? Would he urge on his right honourable friend the Chancellor that action could be taken early and easily by introducing a more steeply differentiated vehicle excise duty which hits harder on big, gas-guzzling cars?

My Lords, there has of course been an increase in vehicle excise duty and that is a contributing factor in our battle against pollution. But the noble Lord will recognise that we would have to increase vehicle excise duty by astronomical levels before it made a really major impact on the sale of certain cars because it is a small fraction of total costs of those large, polluting cars. I hear what the noble Lord has said, and he will recognise that we have already taken steps in that direction.