Finance (No. 2) Bill (Fifth sitting)

John Cooper Excerpts

Committee stage
Tuesday 3rd February 2026 Public Bill Committees

[Dan Tomlinson]

I thank the shadow Minister for his questions and engagement. This is one of the largest parts of the Bill, and sets out a significant change to taxation and the treatment of imports in order, as he says, to support domestic businesses that may face higher prices than companies seeking to export to the UK that have cheaper prices and higher emissions.

To go through some of the questions that were asked, the criteria that were looked at internally—over many years and starting under the previous Government; it has taken five years of work to determine which sectors will be in scope—were whether sectors were already in scope of the UK emissions trading scheme, because it is important that those are aligned; whether there was real risk of carbon leakage; and whether it was feasible to implement in 2027. That is why these five sectors were chosen, after significant engagement across Government and with stakeholders. The sectoral scope will be kept under review, and there are some sectors that the Government will continue to have conversations with in the coming weeks to understand their concerns and the benefits that there may be to widening the scope in future. We will keep it under review because, at the moment, the focus is on making sure that we can implement this significant change. It is a long piece of legislation and there are lots of good questions, but we want to get this in as drafted first.

The shadow Minister made several points regarding the sectors that are already in and the extent to which, in his words, they might be made “worse off”. It is important to note that they will be better off than without a CBAM in terms of competition and fairness in imports. At the moment, there is no CBAM, so the imports that come to the UK in these five sectors are, in a sense, undercutting domestic production if we have higher costs. With the introduction of CBAM, that undercutting will be significantly reduced. The prices faced by importers will be brought into line with those faced by those companies in the UK. There is a valid point to make about the detail and specificity with which the carbon prices that are used within CBAM are set, and that is something that I certainly want to keep under review, but it is good and it is right that we make progress with CBAM as set out in the legislation.

[John Cooper (Dumfries and Galloway) (Con)]

The Minister talks about people being better off, but my farmers are very concerned about the fertiliser impact. Four or five years ago, fertiliser was around £180 a tonne; today it is about £400 a tonne, and the introduction of CBAM might put another £100 on top of that. Farmers’ margins are so narrow that they simply have to pass that on, which will have a direct effect on food prices in this country. The Minister says that there will be talks about that. Farmers should be front and centre of those talks, because this is really worrying.

[Dan Tomlinson]

We will engage, and have engaged, with the industries that are directly affected by this change, including the fertiliser industry, and those for whom there will be knock-on effects from higher import prices. With fertiliser in particular, it is worth noting that UK-based fertiliser manufacturers have received more free allowances in recent years than they needed to surrender to be able to cover their emissions. As such, they are not, in practice, paying a carbon price at the moment. The CBAM rate will therefore be set at a low level to reflect that. It is something that I have been looking at as Minster because of these issues, and we expect the initial impact of CBAM on the fertiliser sector to be very modest. None the less I take the point that the hon. Member raises, and the Government will continue to look at it.

On the point around groupings and EORI numbers, that is not a phrase that I have come across before, but I am glad that I have heard it. I will make sure to remind myself of the torturous Brexit process and will, I am sure, understand the context there in more detail. We engaged with businesses in advance of making the proposal and feedback indicated that group treatment would confer relatively minimal benefits, so we chose not to implement it at this time. We will, of course, keep that under review though.

CBAM is a significant change that has been welcomed by many of the industries in the UK and should go a long way to levelling the playing field for those firms that are producing in these five sectors.