17:45 The Financial Secretary to the Treasury (Mr David Gauke)

Clause 11 retains the van benefit charge for zero-emission vans at 20% of the rate paid by conventionally fuelled vans for 2016-17 and 2017-18, rather than increasing it to 40% and 60% as currently planned. That means that a basic rate taxpayer who drives a zero-emission van will save £126 in 2016-17 and £258 in 2017-18. Together, clauses 8 to 11 will incentivise business and employees to take up the cleanest cars and vans. That will help to ensure that the market for those new technologies becomes established in the UK, and to support the UK’s carbon emission and air-quality targets.

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19:00 Rob Marris

The question put is, “Why are the Government increasing rates on conventionally fuelled cars by three percentage points after years of two-percentage-point increases?” People also ask about the impact on the type of cars purchased. These increases ensure that the taxation of company cars continues to reflect changes in emissions technology. The rate increase, together with the extra incentive of ultra-low-emission vehicles, promotes the continued move to the cleanest cars. In 2013, there were 1,900 company ultra-low-emission vehicles, which was about 0.1% of the company car fleet, whereas in 2015 there were more than 8,000. That supports the Government’s approach. Over the course of this Parliament, increases in company car tax rates have broadly maintained revenues in real terms, in the face of continued improvements in new car fuel efficiencies, and this will support the move to cleaner, zero-emission and ultra-low-emission cars.

On clause 11, the Government will review the van benefit charge support for zero-emission vans, again in the light of market developments, at Budget 2018. This clause is keeping the level at 20%—it is not increasing it as planned—and the review occurs before any further increase beyond 20%. I hope that reply is helpful to the hon. Gentleman. As for what the impact will be on the sales of zero-emission vans, extending the van benefit charge support for zero-emission vans will continue to reduce barriers to the uptake of new vehicle technologies. The Government’s enhanced capital allowances scheme for zero-emission vans and the plug-in van grant that helps with the up-front cost of buying a new ultra-low-emission van will also help to reduce barriers to the uptake of these new technologies. Together these incentives will help sales of zero-emission vans. This in turn will help the development and manufacture of clean vehicle technologies in the UK, consistent with the Government’s wider plans to promote economic growth. However, it is not possible to estimate precisely the impact on sales at this stage.

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19:15 Rob Marris (Sir Roger Gale)

Clauses 132 to 136 set out changes to the climate change levy, or CCL, which is a tax levied on the supply of energy to businesses and the public sector. It was introduced in 2001 to incentivise industrial and commercial energy efficiency. The Finance Act 2015 removed the climate change levy exemption for renewable electricity generated on or after 1 August 2015. A consultation was then held to seek views from industry on the appropriate length of time for the transitional period.

Clause 132 sets the length of the transitional period during which electricity suppliers can continue to exempt from the climate change levy renewably sourced energy generated before 1 August 2015. The clause provides for an end date for the transitional period of 31 March 2018. Setting a transitional period will minimise the administrative impact on electricity suppliers by giving them time to retain the benefit of renewably sourced electricity acquired before the date of the change.

Clause 135 will increase the climate change levy rates above RPI from 1 April 2019, to recover the revenue that will be lost from abolishing the CRC. Increasing climate change levy rates will strengthen the incentive for businesses with the greatest potential to save energy. At the same time, rebalancing the rates for different taxable commodities from 1 April 2019 will update an outdated ratio and more closely reflect the carbon content of the energy used. That will help to deliver on our commitment to achieve greater carbon savings.

Clause 136 will increase the levy discount for energy intensive sectors with climate change agreements. That will ensure that businesses in those sectors will pay no more in the climate change levy than the expected RPI increase in April 2019, thereby enabling them to maintain their international competitiveness. Those reforms will take place in 2019, providing a three-year lead-in time for businesses to adjust to the new business energy tax landscape.

Several hon. Members have in the past voiced concern over the impact of the clause to remove the climate change levy exemption from renewably sourced electricity, so allow me, if you will, Sir Roger, to repeat the reasoning for the removal of that exemption. There is no doubt that the exemption was increasingly providing poor value for money for British taxpayers. Without action, the exemption would have cost almost £4 billion over the course of this Parliament, providing only indirect support to renewable generators.

Other Government support for UK low-carbon generators demonstrates this Government’s commitment to renewable energy. Since 2010, nearly £52 billion has been invested in renewables, and that has led to a trebling of the UK’s renewable electricity capacity. There was another record year in 2015, with £13 billion invested in renewable electricity. Removing the exemption will provide better value for money for UK taxpayers, contribute to fiscal consolidation and maintain the climate change levy price signal necessary to incentivise business energy efficiency.

Amendment 183 stands in the name of the hon. Member for Salford and Eccles (Rebecca Long Bailey) on behalf of the Opposition. If I may pause for a moment, I want to take this opportunity to congratulate her on her elevation today. It is an extremely well-deserved promotion and we wish her all the best in her new role. On this occasion, however, I am afraid that her amendment has slightly less merit. It would require the Chancellor to publish a report detailing the impact of the climate change levy in reducing carbon emissions within 12 months from the passing of the Finance Bill, but such a review is unnecessary.

Following a hearing on the 2015 summer Budget, the Chancellor wrote to the Treasury Committee on the impact of the removal of the CCL exemption. He made it clear that the exemption would not directly affect our commitment to reduce carbon emissions. In addition, the Department of Energy and Climate Change already intends to publish a consultation on a simplified energy and carbon reporting framework later this year. That will be accompanied by an impact assessment, which will examine the removal of the carbon reduction commitment and propose adjustments to reporting requirements.

The impact of ending the exemption from the climate change levy for renewable electricity has been discussed at length over the course of debates. It has been confirmed to Parliament in writing by the Chancellor that removal of the exemption will not impact on the UK’s ability to meet its carbon budget targets. I therefore urge the hon. Lady to withdraw the amendment, but should she be minded not to do so, I urge the Committee to reject it.

I rise to speak to clauses 132 to 136, which make various changes to the climate change levy, and to amendment 183, which stands in my name and those of my hon. Friends the Members for Hayes and Harlington (John McDonnell), for Feltham and Heston (Seema Malhotra), for Wolverhampton South West (Rob Marris) and for Leeds East (Richard Burgon).

Clause 132 relates to the removal of the exemption for electricity from renewable sources. Since the climate change levy’s inception in 2001, electricity from renewable sources has been exempt when supplied under a renewable source contract agreed between an energy supplier and its customer. In Budget 2015, the Chancellor announced that that exemption for renewable electricity would be removed from 1 August 2015 and that there would be a

Clauses 133 and 134 will increase the main rates of the climate change levy in line with inflation in April 2017 and again in April 2018. It has been standard practice to increase the rates in line with inflation in each year’s Finance Bill since 2007 and, as the explanatory notes set out, wider changes to the CCL from 2019 are being legislated for in this Bill, so it makes sense to make provision for the next two years at the same time.

Those wider changes are the subject of clause 135, which significantly increases the main rates of the climate change levy to recover Exchequer revenue lost from the abolition of the carbon reduction commitment. In doing so, the ratio of electricity to gas is rebalanced somewhat to 2.5:1, and it is the Government’s intention to rebalance the ratio further to 1:1 by 2025, to reflect the fall in gas prices and the expected increase in consumption as a result.

The following clause increases the CCL discount available to energy intensive businesses subject to climate change agreements, to compensate equivalently for the increase to the main rates. The CCL discount for electricity will increase from 90% to 93%, and the discount for gas will increase from 65% to 78% from 1 April 2019. That provision mitigates a knock-on effect from clause 135.

Our amendment to clause 135 would require the Government to conduct a review of the impact of the climate change levy on carbon emissions. The review will have particular reference to the removal of the exemption for electricity generated from renewable sources, the abolition of the carbon reduction commitment and the reporting requirements for companies and public sector bodies.

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20:00 Kirsty Blackman (SNP)

I rise to support amendment 183 on the changes to the climate change levy. The UK Government’s idea to have a climate change levy was admirable. It was introduced in 2001, and it has been a positive step. It is completely reasonable that companies should be made to think about their energy usage, and the best way to do that is to tax them on it. The hon. Member for Salford and Eccles (Rebecca Long Bailey) made a wide-ranging speech on a series of matters, some of which I was going to speak about, so I will curtail my speech somewhat.

Although reducing companies’ energy consumption and usage is a great idea, it fails to take into account the fact that some methods of generating electricity are better than others, particularly in terms of climate change. We cannot tax energy usage across the board given that energy generated from, say, onshore wind is much cleaner and better than energy generated from, say, a coal-fired power station. Those two things are very different, and it is completely reasonable to have variable tax rates for those two things.

It was announced in June that the Scottish Government had managed to meet their target for reducing greenhouse gas emissions by 2014. The target was a reduction of 42%, and it happened six years early. That was an excellent achievement for the Scottish Government and for Scotland as a whole, with everyone working together to reach it. However, it will be very difficult for us to keep up that level of achievement with the UK Government’s current energy policy. For example, there is no clarity about when there will be a new pot 1 for contracts for difference. That pot is for onshore wind, which is very important. It is very clear that onshore wind is an established technology for generating electricity cleanly, and the UK Government need to provide greater clarity about when the next CFD round for it will be.

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20:15 Philip Boswell (Coatbridge, Chryston and Bellshill) (SNP)

I will focus on clauses 132 to 136, in part 9, and amendment 183, which pertain to the climate change levy. Both the hon. Member for Salford and Eccles (Rebecca Long Bailey) and my hon. Friend the Member for Aberdeen North (Kirsty Blackman) have spoken comprehensively on this subject, so I will keep my speech relatively short.

Scotland has 25% of the wind and tidal potential in all of Europe, and 10% of the wave potential in Europe. For a small country—in both landmass and population, although it none the less represents a third of the UK landmass—these figures represent enormous potential not just for leading the world in renewable energy production, but in creating tens of thousands of jobs and ushering in substantial economic growth.

However, this Conservative UK Government seem determined to tear down any progressive policies that are designed to encourage and incentivise the production of green energy. Just this year, the Government have begun the process of privatising the Green Investment Bank, as the hon. Lady said. In addition, this Government have cut subsidies for small-scale solar panels by 65%, which is a massively damaging blow to the industry that can save households a few pounds.

The climate change levy was a positive step in the right direction. It was a policy designed to provide a disincentive for polluting technologies. It is perverse that the climate change levy has been applied to green, clean energies. That is not what it was intended for. This change will have a disproportionate impact on Scotland, which despite having under 10% of the UK population, as my hon. Friend said, produces a third of the UK’s renewable energy.

Despite the austerity implemented by this UK Government, Scotland has continued to drive forward in reducing its carbon footprint and increasing the use of green electricity. As my hon. Friend also said, earlier this month it was announced that we in Scotland had reached our target of making a 42% reduction in carbon emissions by 2020, which is six years earlier than expected. The SNP Scottish Government have now set a more ambitious target of a 50% reduction in carbon emissions by 2020. However, I fear that despite our progress, unfortunate choices by the Conservative UK Government —both their ill-advised and counterproductive austerity obsession and the mishandling of the EU referendum, leading to a vote for Brexit—will mean regression, rather than progress on climate change and the promotion of renewable energy.

The climate change levy makes a significant contribution to the Exchequer’s revenues. It had been on a declining path, but with the changes that have come in, its path has been stabilised. It had been providing increasingly poor value for money, partly because a third of its value was going to generators overseas: that generation does not contribute to UK targets, and quite often benefits from subsidies and other benefits at home.

I turn to the abolition of the carbon reduction commitment and changes to the climate change levy main rates. Those are major simplifying moves. We had extensive consultations—both written consultations and meetings, a number of which I sat in on—and businesses said loud and clear that they wanted to simplify how it all worked. They valued the discussions that had taken place and the elevation of the role and salience of energy efficiency within their companies. But the CCL as a single tax will be a straightforward price signal. We will also be removing some of the additional administrative burden.

The Government will also consult on a simplified reporting framework this year, to encourage large businesses to identify energy efficiency savings. In addition to the tax changes, that will further enhance the UK’s ability to reduce its carbon emissions. The Department of Energy and Climate Change intends to publish an impact assessment of the changes later this year, alongside its consultation on a simplified reporting framework. That will include analysis of the impact on carbon emissions. Rebalancing CCL rates towards gas will better incentivise emissions reductions from that fossil fuel, as well.

I will finish by restating, lest there be any doubt, the very firm commitment and strong track record of this Government on reducing emissions. Since 2010 we have reduced the UK’s greenhouse gases by 14% and outperformed our closest European counterparts with the largest cuts in greenhouse gas emissions since 1990. As the hon. Member for Aberdeen North mentioned, we secured the first truly global, legally binding agreement, the Paris agreement, COP21, with our Secretary of State playing a key role. Annual support for renewables will more than double, to more than £10 billion in 2020-21. We are the first major developed economy in the world to commit to phasing out unabated coal, the dirtiest fossil fuel, by 2025. We are the world’s leading player in offshore wind, with just over 5 GW installed, a figure that is forecast to double by the end of the Parliament.

‘(3) The Chancellor of the Exchequer shall conduct a review of the impact of the Climate Change Levy in reducing carbon emissions within 12 months of the passing of this Act.

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20:45 Kirsty Blackman (SNP)

I want to make it clear that we are not against spending additional money on flood defences. Given the climate change issues that we face and the devastating impact of floods on communities, we think that is a good idea and we completely understand why the UK Government are choosing to spend money on it. My issue is that raising insurance premium tax might be the wrong way of doing so—I do not want people to be discouraged from taking out insurance. The Minister said that the clause might mean only a minor change in people’s bills, but I am concerned less about the 0.5% increase than about the precedent that has been set by what is happening this year and what happened last year. My main fear is that the UK Government will decide on a further increase.

This morning the Chancellor said that the UK economy was affected by the fact that the markets were currently volatile, and that that volatility would continue. In such circumstances, we do not want people to worry about their future finances, and not to take out insurance because the economy is uncertain and they do not know how the financial situation will develop. It is necessary to have home insurance, just as it is necessary to have motor insurance, but premiums have increased significantly, mostly because of problems caused by climate change. Although the average increase will be £1, people who have been hit by flooding are having to pay massive premiums, and the 0.5% increase is likely to have a disproportionate impact on them.

I will come to the issue of flood defences later, but the Chancellor stated in his Budget speech that this measure was also intended to help to fund the cost of flood defences. I want to raise the issue of flood insurance, including that provided through the Flood Re scheme, which is already increasing costs for customers. Of course we on these Benches support the introduction of Flood Re, but insurers are having to pay a total of £180 million to Flood Re, and that is being passed on. In a survey by the Financial Times , seven out of the 10 largest home insurers said they would pass all or some of the levy directly to customers. I understand that 350,000 properties are currently expected to benefit. We believe it is vital that those in flood-prone areas can access the insurance they need, particularly as the instances of flooding as a result of climate change appear to be on the increase.

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