13:20 The Financial Secretary to the Treasury (Mr David Gauke)

Britain’s insurance premium tax is also well below rates in many other countries, such as Germany, so this Bill proposes an increase to 9.5%. but that applies to only one fifth of all premiums. The Government are also committed to meeting their climate change objectives in a cost-effective way. Over the next five years, the climate change levy exemption for renewable energy is due to cost £4 billion, one third of which would subsidise overseas projects that bring no benefit to the UK. This Finance Bill therefore takes urgent action to stabilise CCL revenue.

The hon. Gentleman made a point a moment ago about the removal of the climate change levy for green energy. Does he recognise that that measure, by being retrospective and incredibly disproportionate to the ends he is trying to achieve, will seriously disrupt the green energy sector? The sector is already massively concerned about that. He talks about the importance of cost-effective measures to reaching green energy outcomes. Onshore wind is one of the most cost-effective energies out there, but his measures are undermining it.

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13:49 Shabana Mahmood (Labour)

A modern economy needs a modern infrastructure, but the Government have pulled the plug on electrification of the railways. They have pulled the rug out from under investment in renewable energy and flunked the decision on airports. I was interested to see that the Home Secretary was very willing to take on the hon. Member for Uxbridge and South Ruislip (Boris Johnson) when it came to water cannons. The least the Chancellor could have done was to take on the hon. Member for Uxbridge and South Ruislip when it came to the decision on airports. It would have been good to see this Finance Bill at least start that process.

The Budget and the Finance Bill have not lived up to some of the most pressing needs in our economy, and instead have actively imposed a work penalty and what can only be described as a living wage con. We will abstain on Second Reading. This is a relatively short Finance Bill, and we support a number of its measures, including raising the personal tax allowance threshold and the increase in business investment, particularly in respect of the annual investment allowance. We will want to scrutinise some of the other measures in much greater detail. We are concerned about the impact of some of the Government’s decisions, so we will return, especially in Committee of the Whole House, to issues on bank taxation, the climate change levy and the insurance premium tax.

I say to the hon. Member for Bedford (Richard Fuller) and others that abstaining on Second Reading, as he well knows because he is a veteran of debates on Finance Bills, both in Committee and in the Chamber, does not mean that we will not press matters to a vote later in the Bill’s passage. Indeed, on the second sitting day in September we will be considering the Bill in Committee of the Whole House, where we will have tabled amendments, on which we will be voting, on other important measures including bank taxation, the climate change levy and the insurance premium tax. We can all have a lot of fun then when it comes to voting on amendments and debating them at great length.

The next key issue that we will return to in Committee relates to the climate change levy. Clause 45 removes the climate change levy exemption for renewable source electricity generated on or after 1 August 2015. I am afraid that this is another example of the Government undermining investor confidence in renewable energy. They have already tried to halt the development of the cheapest form of clean energy by pulling the plug on onshore wind, and this continues that trend. It would be fair to say that since taking office they have put placating their Back Benchers’ more strident views about renewable energy generation above the jobs and investment that would be created across our economy if we were genuinely able to move towards a low-carbon economy.

We will particularly seek to push the Government on a suggestion by the Chartered Institute of Taxation that they produce a road map, as they have done previously on aspects of taxation policy—in particular, corporation tax policy—setting out their plans for the future of environmental taxes to help the renewable energy industry, and business more generally, to take long-term investment decisions. That could be an important way for the Government to set out their intentions for the life of this Parliament and for us to test whether they mean it with regard to charting a course towards a low-carbon economy for our country.

In short—sorry, I mean “in conclusion”, as I have been on my feet for a while—many of the most contentious elements of the Budget are not in the Finance Bill. It contains a mixture of measures that we support and measures that we will return to in great detail when we get to Committee of the whole House. I look forward to debating with Ministers as the Bill progresses through the House. I hope that in winding up, the Minister will deal with some of the questions that I have raised in respect of bank taxation, the climate change levy and insurance premium tax.

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14:30 Edward Argar (Conservative)

The hon. Gentleman talks about logic, but one aspect of the Bill is the removal of the climate change levy exemption for green energy. Applying the climate change levy to green energy production is just about as illogical as one can get. Would the hon. Gentleman care to comment on that?

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14:37 Roger Mullin (Kirkcaldy and Cowdenbeath) (SNP)

“this House declines to give a Second Reading to the Finance Bill because it fails to address the real economic needs of the country, continues to deepen the social divide between those who have and those who have not, restricts the financial discretion of the Scottish Government over its resources, fails to tackle the iniquity of the Scottish Police and Fire and Rescue Services being unable to reclaim VAT, creates unintended consequences for small challenger banks and building societies whose capital comes from retained profits, removes the exemption from the climate change levy of renewable energy resources and, in combination with welfare changes announced in the Summer Budget 2015 and inheritance tax changes, takes from people on low and middle incomes and gives to the very richest.”

Of huge concern to Scotland, and to anyone with a concern for the future of our planet, is the continuing attack by the Government on the renewable energy sector. It would appear that the Chancellor has a bad addiction to carbon. He cannot get enough of it. How else can we explain the fact that the Finance Bill will remove the exemption for electricity from renewable sources? Combined with the Government’s insane attack on wind generation, we can see an attack on renewable energy, an attack on Scotland's economy, and an attack on all those working to take better care of our environment.

Climate change is largely man-made and carbon is no friend to the environment in that regard. I am sorry to disagree with the hon. Gentleman. I would add, as the owner of a hybrid car, that it seems perverse to add an estimated £1,000 to the cost of buying a greener car—more confirmation of the Chancellor’s addiction to carbon.

I gently point out to the hon. Gentleman that the area of the United Kingdom that has made most progress in wind generation is Scotland. The Government’s attack pays no regard to the interests of Scotland or the policies of the Scottish Government. We are keen to develop renewable energy, not see it set aside.

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15:09 Sammy Wilson (DUP)

The other thing I wish to raise is the whole issue of taxes on energy. The reasoned amendment talks about the removal of the exemption from the climate change levy on the onshore wind. I accept the argument that the Government have given. Given that many of the companies involved are owned abroad, the tax concession given to them was not benefitting people here in the United Kingdom. We also need to bear in mind not only that there is huge opposition to many of the renewable sources, on the grounds of aesthetics and environmental impact, but that people are becoming increasingly aware of the cost of switching from cheap fossil fuels to expensive renewable energy, in terms of fuel poverty and the impact on industry.

The renewables obligation is an obligation because the energy is more expensive. Indeed, the Department of Energy and Climate Change’s own estimation is that, by 2020, the cost of paying for expensive renewable energy, more and more of which is coming on to the grid, will be about £190 per household. At the same time, we in this House complain about fuel poverty, when one of the contributors to fuel poverty is the fact that we are orientating ourselves towards more expensive electricity generation. Only last week there were complaints about Tata Steel closing down its plant.

Of course, the hon. Gentleman is absolutely wrong when he talks about there being no price on carbon. We are talking about the climate change levy. That is one of the costs of carbon. There is also the cost of the European trading scheme, in which carbon is traded and carbon allowances are given, so of course there is already a cost.

Perhaps the hon. Lady takes a different view of what is small and what is large from what I do, but the £13.6 billion of subsidies that go to renewables do not simply come from the Government. They come from households, who pay for it in their electricity bills. That is why I support the Government’s attempts to remove some of the subsidies that consumers have to pay; £13.6 billion, or £190 per household, is hardly to be regarded as a small sum. My only worry is that environmental levies such as the climate change levy and the EU carbon trading scheme will rise from £5.6 billion this year to £16.1 billion by the end of this Parliament, which will add to energy costs and have an impact on industry and on household bills.

The right hon. Gentleman compares nuclear energy with renewable energy, but of course we have the option of gas, oil and coal. Before the hon. Member from the Green party becomes apoplectic about the impact of those energy sources, let me point out that some of the drivers in Europe who want to push us towards renewables, especially the Germans, are building coal-fired power stations because they are concerned about their industry and their economy. I welcome those aspects of the Finance Bill, and that is one reason why I will not support the reasoned amendment. I think that the Government are right and we have to redress the balance. We have to ask what is important for the UK economy and for UK consumers.

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15:42 Catherine West (Labour)

Clause 45, on the climate change levy, removes the levy exemption for renewable source electricity generated on or after 1 August 2015. Unhappily, that is an example of the Tories undermining investor confidence in renewable energy. They have already tried to halt the development of the cheapest form of clean energy, by pulling the plug on onshore wind, and that comes hot on the heels of the rather flat green deal. I am not sure whether any Members know about the green deal. It was introduced back in 2010, it was heralded and much money was spent on it. The promotion money probably helped a few public relations companies to keep going, but the number of households that took up the deal was very low.

I wonder whether, as we move towards the Paris summit, we will see any improvement and any genuine debate, because this Budget fails to give any hope on the green agenda. I am pleased that Opposition colleagues have chosen the climate change levy as one of three topics to be debated in Committee in September. That is when we will all have more of a chance to debate this important deal—or lack of—and when we will table amendments.

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16:08 Caroline Lucas (Brighton, Pavilion) (Green)

Thank you, Mr Deputy Speaker, for the opportunity to contribute to this debate. I have two fundamental objections to the Bill. First, it continues the Government’s cruel and counterproductive austerity agenda, which is both socially destructive and economically illiterate. Secondly, it flies in the face of the Government’s own rhetoric about the threat of climate change to our economy, society, security and wellbeing. Not only does it ignore the public interest in mitigating climate risk, but it fails to realise the economic benefits to the UK of being at the forefront of the global transition to a zero-carbon, resource-efficient, sustainable economy.

Over the past few months, hundreds of leading UK businesses—not just environmentalists—have repeatedly called on the Chancellor to prioritise green investment and climate action, warning that the UK’s green economy is at a crossroads without clear policy direction. It is astonishing that, this year of all years, when the Government say that we need a bold agreement at the climate summit in Paris, the Treasury is undermining both the UK’s reputation and, more importantly, the chances of meeting our own emission targets. It is hard to see how the Government really do think that “Do as I say, not as I do” demonstrates any real leadership.

Yet once again there is a gaping chasm between the spin and the substance, because while zero-emission vehicles still pay nothing—so no change there—high-polluting cars will pay far less tax than at present. Again, it is not only those concerned with air pollution and climate change who are pointing out the idiocy of this measure. Once more the Chancellor has managed to unite industry and environmentalists, with the Society of Motor Manufacturers and Traders saying that

Then we have the senseless proposal to tax renewable energy as if it were a fossil fuel by removing the climate change levy exemption for renewables.

As campaigners have pointed out, the policy on the climate change levy exemption for renewables is like making people pay an alcohol tax on apple juice. The Government claim that it is intended to prevent taxpayers’ money from benefiting renewable electricity generated overseas. In fact, it is a completely disproportionate measure that turns a policy that was designed to encourage low-carbon electricity into just an electricity tax for businesses. It is interesting that Ministers remain suspiciously silent on the shocking revelation earlier this year that the Government spend 300 times more on backing fossil fuel projects abroad than on clean energy via the export credit agency. If they are that worried about the issue, one would have expected a little more consistency from them. The scandalous public spending on fossil fuel subsidies should be cut, not support for clean, green, home-grown renewable energy.

I agree with the shadow Energy and Climate Change Secretary, the right hon. Member for Don Valley (Caroline Flint), that removing the renewables exemption from the climate change levy will undermine investor confidence in renewable energy, and that we should instead be seizing the massive opportunities for jobs and investment that moving to a low-carbon economy would provide for this country. I hope that we can work together across all parties to remove this stupendously senseless provision from the Bill altogether.

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17:11 Barbara Keeley (Worsley and Eccles South) (Lab)

The IFS has described the removal of the climate change levy exemption on renewables as a measure that makes “no economic sense”. Friends of the Earth has said that the change shifts the climate change levy from a carbon tax to just a tax on all electricity consumed. A number of interventions and speeches touched on that.

Of course, we should not be surprised about the changes to the climate change levy, given that the Government have already signalled their direction of travel through their proposed changes to onshore wind. Does my hon. Friend agree that that is a retrograde step, given that the United Kingdom is such a leader in renewable energy?

The removal of that exemption will come at a cost to companies and to the environment. It makes little sense to remove the exemption for renewable energy generators in the UK. It will not only increase tax on business consumption of energy, but reduce the relationship between the tax paid and the carbon content of the energy, as a number of Members have noted. The Opposition believe that the Government should be encouraging the renewables sector to develop and grow. Cutting green subsidies risks being a false economy and may cost the UK economy more in the long term.

We will return to the issues of bank taxation, the insurance premium tax and the climate change levy in our debates in Committee in September, and I hope Ministers will have time in between for more reflection on their priorities.

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