Spring Statement

Justine Greening Excerpts

Tuesday 13th March 2018 Commons Chamber

[Mr Hammond]

The hon. Lady is right to raise this issue. It is something we keep under constant review, and I talk regularly with the Governor of the Bank of England about personal debt. She will probably know that personal household debt rose in all but one of the 13 years of the Labour Government, and it is now lower than it was before the financial crisis. The judgment of the authorities at the moment is that household debt levels are sustainable, but she is right to draw attention to it. It is something we keep under close review.

[Justine Greening (Putney) (Con)]

Can the Chancellor give more detail on the announcement that the Office for National Statistics will work with the Treasury on a more sophisticated measure of human capital? In a knowledge-based economy, that becomes more crucial than ever for driving our economic productivity. Can he give us more detail on the timelines and the nature of that work?

[Mr Hammond]

I am glad that my right hon. Friend has asked this question, because it gives me an opportunity to thank her for sparking this line of inquiry in a letter she wrote to me. I did challenge the Treasury with the idea that it is more focused on the returns to infrastructure investment than on skills investment. When we looked at it in detail, we discovered that the metrics for measuring the returns to investment in human capital are not as well developed as they should be. That is something the ONS has to take forward, but it is important, as we move increasingly into a knowledge-based economy, with a huge set of technological changes ahead of us, that we can compare appropriately and objectively investment in physical infrastructure with investment in human capital, and that is what we will be able to do if we get the new metrics right.

Budget Resolutions and Economic Situation

Justine Greening Excerpts

Friday 23rd March 2012 Commons Chamber

[Owen Smith]

It is interesting that the hon. Gentleman says that; I am going to explain why it is not wrong and why we are right. At first glance, it looks very simple. Page 51 of the HMRC report shows the cost of cutting the 50p rate—the money that will be forgone by the Exchequer—as £3 billion, not £100 million. The next line covers the behavioural impact to which the hon. Gentleman has referred—the one based on the Laffer curve and a bit of undergraduate economic text in the previous 50 pages—and says that the Exchequer will get back £2.9 billion rising to £3.9 billion over the spending period. The key point is that all that is entirely based on a taxable income elasticity measure of 0.45. If we plug that into the equation we get this £100 million gap. Of course, the previous Treasury figures were predicated on a 0.35 number—a more conservative estimate— and that would have given £2.7 billion in revenues each year.

[Justine Greening]

That was wrong.

[Owen Smith]

I would be intrigued to get the Secretary of State to explain why it was wrong. If she looks at page 50 of the document she will see that it says simply that the Government decided that 0.45 was a better estimate. That was predicated on a single academic study produced in the Mirrlees report and there is no other evidence for drawing that conclusion. That is why the Government are guessing at the £100 million. Sensible economists would think a different sort of sensitivity range would have given them a far better estimate.

[Justine Greening]

The OBR is very clear that the £100 million represents a reasonable and central estimate. In fact, I would suggest that the previous Government’s assessment of elasticity in one of their final Budgets was designed entirely to manufacture tax receipts that were never going to materialise. If it was such a good idea, why did it take them 13 years to think of it?

[Owen Smith]

The principal reason why we did not introduce it was because the economy was growing through most of our period in government, unlike the economy under her Government.

Let us return to the taxable income elasticity measure. The OBR says that it might be reasonable, but it also says on no fewer than seven occasions throughout the document that there is “huge uncertainty” around the assumptions—not small uncertainty, but huge uncertainty. The Treasury itself, in its document—albeit buried on page 68 of 69—says:

“The results of this evaluation are highly uncertain.”

The reality is that, based on the Laffer curve, the Government have made up that £100 million number, but over the last year we got £1 billion from the 50p rate.

Road Fuel Duties

Justine Greening Excerpts

Tuesday 13th September 2011 Westminster Hall

[The Economic Secretary to the Treasury (Justine Greening)]

It is a pleasure to see you in the Chair, Mr Dobbin, into which you seamlessly moved during the course of the debate. First, let me congratulate the hon. Member for Central Ayrshire (Mr Donohoe) on securing the debate. As the shadow Minister, the hon. Member for Bristol East (Kerry McCarthy) said, the House has had a number of opportunities to debate the pressures that the high cost of petrol puts on individuals, families and businesses. The Government continue to view the issue as incredibly important, and the hon. Member for Central Ayrshire was right to raise it. In the time that remains, I will do my best to respond to the points that he raised, and those raised by my hon. Friends. I also hope to provide an update on some of the questions raised about the rural fuel duty discount.

Even though average pump prices fell slightly over the summer, there is little doubt that the cost of fuel remains a difficult issue and concerns many families and businesses across the country. The Government have recognised that for some time, and as hon. Members will know, in the Budget we announced a second rise in the personal tax allowance that aimed to take more people out of income tax altogether. In total, that benefited about 23 million or 24 million people who pay the lower rate of tax on their household income. The Government have worked hard to recognise and tackle the cost of living.

There were extensive debates in the House and the Finance Bill Committee about the cost of fuel and the Government’s plans to support motorists. I welcome the opportunity to revisit those issues, but before I address some of the points raised today I want to explain why the Government acted as they did in the Budget, and set out why the approach proposed by the Labour party is not only illegal but unworkable. Perhaps if I explain to the Chamber why I believe that to be the case, we can put the issue and the alternative proposals to bed once and for all, and perhaps I can save Labour Members from continuing with the hole they are digging in pressing for them, although that is obviously up to them.

The coalition Government recognise that motoring is an essential part of everyday life for many households and businesses. The cost of fuel affects us all and the Government recognise that the rising price of petrol has become an increasingly significant part of day-to-day spending. We know that high oil prices are causing real difficulties in trying to ensure that motoring remains affordable, and it is important that when shocks such as the steep rise in the price of oil occur, a responsible Government are able to listen, consider and respond.

The hon. Member for Bristol East mentioned the fuel duty escalator. That was introduced in the 2009 Budget by the previous Government and involved seven increases in fuel duty. The previous Government had planned for an above-inflation increase at the start of April—that was the position we inherited, and we had to make a decision about whether to go ahead with the pre-planned rises left by the previous Government. Had we gone ahead with those rises, pump prices would, on average, have been 6p per litre higher than they are currently. I take on board many of the points raised by the hon. Member for Central Ayrshire about the impact of high petrol prices, but he must recognise that had we done nothing, that extra 6p would only have created more pain for motorists and businesses. On top of that—let us be clear—the plans that we inherited would have introduced further above-inflation increases in duty in 2012, 2013 and 2014. On taking office, we had to come up with a plan to support motorists, because the previous Government did not have one—it was the exact opposite.

From the start, the coalition Government have been actively looking at how we can ease the burden on motorists, although that is incredibly challenging given the constrained and difficult fiscal situation that we inherited. One of the first things we did, as the hon. Member for Coventry South (Mr Cunningham) mentioned, was ask the Office for Budget Responsibility to look at how high oil prices flow through to impact on the economy and try to understand that. As the hon. Gentleman pointed out, we were concerned to understand the impact on businesses and jobs. That was part of our work in looking at how we could construct a fair fuel stabiliser, which I will come to in a moment.

As part of the Budget, we finally announced our plan to ease the burden on motorists with a £1.9 billion package. The Government listened to hard-pressed motorists and businesses and acted. What did we do? We acted by cutting fuel duty. The hon. Member for Central Ayrshire clearly wants us to go further in cutting fuel duty, but he should at least be able to welcome the fact that we have already cut fuel duty by 1p a litre from 6 pm on Budget day. We acted by cancelling the previous Government’s plan for a fuel duty escalator for the rest of the Parliament. We acted by introducing a fair fuel stabiliser that will better share the burden of high oil prices between motorists and oil companies, so fuel duty will increase by inflation only when oil prices are high.

[Mr Donohoe]

Does the Minister accept that there is a correlation between the duty and the increase in VAT? Indeed, the cost of the VAT increase to the motorist was 2.8p a litre. If the Government are to do anything to redress the imbalance, it is that amount, not the 1p that she talks of, that should be taken from the price, because the consequence of increasing VAT to 20% has been an increase in the price to the motorist of 2.8p.

[Justine Greening]

I take the hon. Gentleman’s point. The issue was raised of VAT being applied to the total price of fuel, including fuel duty. For clarification, that is in line with EU rules. That is the reason why that approach is taken. However, I will say two things to the hon. Gentleman. First, we have introduced a £1.9 billion package to support motorists. Secondly, I have heard a number of Opposition Members bemoan the increase in VAT, but they have had several chances in the Division Lobby to vote against that VAT rise and they have not taken them. I would be happy for any hon. Member who voted against the VAT rise to intervene on me now, but having checked Hansard—[Interruption.] Let me be clear that I am not referring to the Scottish National party contribution to this debate, because of course it called the vote. I think that both I and the hon. Member for Na h-Eileanan an Iar (Mr MacNeil), who represents the SNP, would recognise that the Labour party abstained in that vote and did nothing, despite its words. It never followed them up with action. Those Members owe it to their communities to be a little more frank about the fact that they waved through the VAT increase themselves.

[Graeme Morrice]

Who put VAT up to 20% in the first place?

[Justine Greening]

I did not hear the whole of that intervention. I am sure that if the hon. Gentleman repeats it, I can respond.

[Graeme Morrice]

Who put VAT up to 20% in the first place?

[Justine Greening]

Well, of course, that is one of the key measures that we had to put in place—[Interruption.] The hon. Gentleman laughs, but he is—

[Graeme Morrice]

You did it.

[Justine Greening]

I would rather be in my position, voting for things that I believe in, being clear to my constituents and accountable and being part of a Government who are tackling a huge fiscal deficit. I think it is the worst fiscal deficit handed to any incoming Government. It is one of the deepest seen in a developed country.

[Graeme Morrice]

Caused by the banks.

[Justine Greening]

It was not caused by the banks, actually. Let me explain to the hon. Gentleman what a structural deficit is. Even in the good times, the previous Government were spending more money than they were taking in taxation. That did not have to do with the banks. The banks simply dramatically exacerbated that problem. That was what we were talking about when we said that the previous Government did not fix the roof when the sun was shining. My point is that there is no point in Opposition Members complaining about the VAT rise when they have not taken the opportunity to vote against it. I think that most people in Britain would think that that was slightly disingenuous.

[Graeme Morrice]

rose—

[Justine Greening]

I will give way again if the hon. Gentleman wants to keep digging his hole.

[Graeme Morrice]

But we are not in government. When the sun was shining, we built schools and hospitals and improved public services. We spent the money on the people’s priorities. The current Government are now cutting that.

[Justine Greening]

There are many people with schools in their constituencies—I can certainly think of one in mine—that saw none of that investment. Frankly, it is easy to spend, spend, spend. That is the Labour party’s legacy to Britain—a debt that is so high that it is costing taxpayers £120 million of interest every day. It is always the same. Let us not forget that the other legacy was unemployment that was 400,000 higher.

[Anas Sarwar]

rose—

[Kerry McCarthy]

rose—

[Justine Greening]

I will give way to the hon. Gentleman, but then I would like to make some progress and talk about fuel, because that is clearly the point of the debate. However, I am happy to have a debate on the economy, because many people in Britain recognise exactly whose fault it is that the economy is in the state that it is in today—it is the fault of the Labour party.

[Anas Sarwar]

I give the Minister some credit for being able to rewrite history in the way that she has. Can she tell me why the Conservative party supported Labour’s spending plans before the financial crisis?

[Justine Greening]

You always know that you are making progress in an argument, Mr Dobbin, when people have to turn back to things that happened decades—[Interruption.] Opposition Members can make this into a political issue. I would like to make it into an issue that involves people outside this place. Frankly, if those in the Labour party had spent less time arguing among themselves, as we now know they were doing, and a little more time moving away from political stunts to manage the economy responsibly, perhaps the public finances in this country would not have been in the mess that they were in when they were handed over to us at the last election. [Interruption.] An Opposition Member says, “You are in government.” Yes, there’s a good reason for that—because the British people had just about had enough of the Labour party being in control of the purse strings. I think we all hope that it will be an awfully long time before it is given control of the purse strings again. [Interruption.] I now want to make some progress on fuel duty and I particularly want to —[Interruption.]

[Jim Dobbin (in the Chair)]

Order. Could I ask hon. Members to behave themselves?

[Justine Greening]

Thank you, Mr Dobbin. I want to make some progress on fuel duty, because that is the key concern in our minds today. The issue of hauliers was raised. The package that we introduced has meant that hauliers have been able to benefit on average by about £1,700 a year.

[Mr MacNeil]

I know that time is getting on—we meandered down a funny road there. I want to pull the Minister back to two important points. First, when are we likely to see the rural fuel derogation in place? That is very important. Secondly, does the Minister have any sympathy with my point of view that I am tired of the red and the blue sheriff and I would like to see some of this controlled in Scotland?

[Justine Greening]

We will update the House very shortly on what is happening with the rural fuel duty discount. We have made progress with the European Union. That will be good news for the hon. Gentleman. It will mean that we can get on with our pilot. I am sure that he very much welcomes that. In terms of other issues raised by the hon. Member for Argyll and Bute (Mr Reid), he will be aware that of course his islands will be part of that pilot. As he pointed out, we have within the Treasury met stakeholders—petrol retail associations and of course regional owners and operators—to talk about how we can ensure that any rural fuel duty discount scheme works effectively. I think that we are making good progress with that. Clearly, whenever we bring in such a scheme, we must ensure that we understand that it will do what we want it to do and that it will work in the way that we want it to work. We want it to be of help. We were therefore keen to sit down and work through some of the issues that came up, for example, in relation to cash flow. It is also important to ensure that the scheme is not administratively over-burdensome. We are making good progress with those discussions. We have made good progress with the EU. Perhaps we will be able to give further details of that in coming days.

Finally, I want to point out once and for all why it is simply not possible to go down the route of creating a separate VAT rate for petrol. I am surprised that I still hear the Labour party talking about that. We rejected that proposal for a number of reasons. One was that it would take six years—possibly more—to come into effect. The other was that it is illegal, because fuel is standard-rated in terms of VAT, as part of EU rules. If we want to reduce the rate of VAT on fuel, we need a revision of the VAT directive. In fact, we would have to have unanimous agreement from all member states, and the European Commission would have to approve. As I said, it could take six years or more. I say that because that is what the French found when they sought a reduced VAT rate. Just in case that is not enough of a problem, the EU has also agreed a moratorium on revising the VAT directive. That was agreed under the previous Chancellor of the Exchequer. That route is not the route to help motorists, whereas the route that we took of a £1.9 billion package to support motorists was.

Capital Allowances Anti-avoidance

Justine Greening Excerpts

Tuesday 6th September 2011 Written Statements

[The Economic Secretary to the Treasury (Justine Greening)]

On 12 August 2011 the Government announced a change in legislation to prevent tax avoidance. The Government have set out a clear strategy on preventing tax avoidance and will not hesitate to take action to stop those who seek to obtain an unfair advantage by exploiting unintended tax loopholes. This measure demonstrates the Government’s commitment to act quickly to close loopholes when this happens.

The Government became aware that an avoidance scheme was being promoted that sought to take advantage of an exception from certain capital allowances anti-avoidance rules provided by section 230 of the Capital Allowances Act 2001 (CAA). The scale of the tax potentially put at risk by the scheme was such that the Government decided to announce that section 230 CAA will be repealed by legislation introduced in Finance Bill 2012 in relation to expenditure incurred on or after the beginning of 12 August 2011, to the extent that section 230 provided an exception from section 217.

HMRC published a statement on their website (www.hmrc.gov.uk/budget-updates/hmrcstatement-12Aug.pdf) on 12 August explaining the change, together with a technical document containing draft legislation which the Government intend to include in the next Finance Bill.

Oral Answers to Questions

Justine Greening Excerpts

Tuesday 6th September 2011 Commons Chamber

[Vernon Coaker (Gedling) (Lab)]

2. What assessment he has made of the effects on the economy of recent trends in domestic energy prices.

[The Economic Secretary to the Treasury (Justine Greening)]

The Office for Budget Responsibility is now responsible for independent economic and fiscal forecasts for the Government, and that includes taking account of trends in energy prices and their impact on the economy, including on inflation. The OBR will publish a fully updated forecast in the autumn.

[Vernon Coaker]

Thousands of people in my constituency of Gedling and millions across the country will be disappointed by that response from the Minister. Consumer Focus has said that, on average, energy bills will go up by £200 a year, which means that this winter many people —pensioners and families—will be worried about switching on gas and electricity. Has the Minister met the energy companies to discuss that, and will she specifically outline some measures that she and her Government intend to take so that people are not afraid to switch on the heating this winter?

[Justine Greening]

The hon. Gentleman is right to raise the issue because it is important. The challenge that we all face is to make sure that energy bills are affordable not just this winter—the point that he makes—but in winters in 10 and 20 years’ time. The problem that we have as a country is our dependency on fossil fuels. In the long term, we need to get ourselves off that dependency so that we are not so blown about by the international winds that see commodity prices go up and down. In the short term, we are taking steps to support the most vulnerable through the Warm Homes discount. Next year, we will introduce the green deal to help energy efficiency. The hon. Gentleman asks whether we have meetings with energy companies, and of course we do every day. I am sure that he will also—

[Mr Speaker]

Order. Progress is very slow, and it needs to get faster.

[Mr Mark Spencer (Sherwood) (Con)]

The Minister will be aware of how rapidly fuel and energy prices have increased. Am I right in thinking, however, that if the Chancellor had not taken action in the Budget, fuel prices would be 6p a litre higher today?

[Justine Greening]

My hon. Friend is absolutely right. The action that we took, which was part of a £1.9 billion package to support motorists, means that fuel duty was 6p lower than it otherwise would have been under the previous Government’s proposals.

[Mr David Hanson (Delyn) (Lab)]

The Minister will know that the rise of several hundred pounds in energy costs will hit businesses hard, and that on top of VAT and price and pay freezes it will particularly hit consumers and pensioners. What is her assessment of the level of that price rise? How many meetings has she had with energy companies about the price of energy? What does she intend to do about the price of energy other than freezing the level of winter fuel payments for pensioners?

[Justine Greening]

I think I have answered those questions already; and perhaps the right hon. Gentleman should speak to his Back Benchers about their asking his question before he does. I know that it is his wedding anniversary today, and I hope that I do not upset him too much before he has dinner with his wife tonight. I can again assure him that we are absolutely committed to making sure that the Warm Homes discount scheme will support the most vulnerable people in our country so that they can afford to heat their homes.

--- Later in debate ---

[Rushanara Ali (Bethnal Green and Bow) (Lab)]

14. What recent assessment he has made of the potential effects on the rate of inflation of recent trends in domestic energy prices.

[The Economic Secretary to the Treasury (Justine Greening)]

The Office for Budget Responsibility assesses the prospects for inflation, which of course factors in any changes in prices from Budget 2011. It will update its forecast this autumn.

[Rushanara Ali]

I thank the Minister for her answer, but with rising energy prices, stagnating real-terms income and rising unemployment, I ask her again what specific actions will be taken to help the more than 4 million households in England and one in seven households in my constituency that will face fuel poverty this year?

[Justine Greening]

We have already taken action in previous Budgets, not least by taking people out of paying income tax altogether by raising the personal allowance. As we have heard, we reduced fuel duty, in contrast to the previous Government’s plans to increase it. More than that, we are making sure that we target help at vulnerable people through the Warm Homes discount and next year, of course, we will introduce the green deal to help everybody to make their homes more energy-efficient.

[Richard Graham (Gloucester) (Con)]

Does the Minister agree that although policies to help people out of income tax at the bottom level will show positive results, it is important to maintain the pressure to provide new apprenticeships so that high-value exporting manufacturers, such as Severn Glocon in my constituency, can continue to generate significant foreign exchange benefits.

[Justine Greening]

rose—

[Mr Speaker]

Order. The Minister will want to relate her answer to domestic energy prices. I feel sure that that is what she will do.

[Justine Greening]

I shall try. I am sure that many of those apprenticeships will be in green industry, which is part of how we hope to get this economy back on its feet.

[Mr Speaker]

We are grateful.

Private Finance Initiative Contracts

Justine Greening Excerpts

Tuesday 19th July 2011 Written Statements

[The Economic Secretary to the Treasury (Justine Greening)]

This Government have previously voiced their concerns about the value for money in private finance initiative (PFI) contracts. Today, as part of ongoing plans to reform PFI, Government are announcing their plan to deliver £1.5 billion savings from the existing stock of PFI projects. These savings will be retained by the contracting authorities and put towards front-line public services.

The Government are committed to ensuring taxpayers get value for money from PFI contracts. And we have already taken a series of steps to improve the cost effectiveness and transparency of PFI contracts.

At the spending review 2010 the Government abolished PFI credits to create a level playing field for all forms of public procurement.

In January this year the Government issued draft guidance to support the public sector in making savings from operational PFI projects. Since then Cabinet Office and Treasury have tested the guidance on a pilot project at the Queen’s hospital in Romford, Essex and the Ministry of Defence (MOD) has conducted savings pilots on its PFI projects. And today, on the Treasury website, the Government publish the updated savings guidance that reflects the lessons learned from these pilots.

In April this year the Government introduced new guidance to Departments to strengthen the approvals process of all projects. All major projects outside of a Department’s delegated authority now need to go through three approval points.

And earlier this month the Government published for the first time an unaudited summary of the whole Government accounts (WGA), a new level of financial transparency which revealed the scale of PFI project liabilities. The Treasury is also engaging with the National Audit Office on a new study of the balance of risk and return of private investor equity in PFI projects, and to consider how financial transparency in this area could be improved.

In making this announcement today. Government recognise the role played by the strong parliamentary campaign to reduce PFI costs and secure better value for money for the taxpayer.

PFI saving pilots

Annual savings of around 5% have been confirmed for each of the Romford PFI savings pilot and two MOD pilots. Savings have been identified in three main areas: effective contract management, making better use of PFI assets, and ensuring the public sector only pays for what it needs.

The level of savings achievable at other PFI projects will vary, reflecting the bespoke, complex nature of assets and services delivered under these long-term contracts. But the pilots have shown that valuable efficiency savings can be achieved when private sector suppliers work together with the public sector to reduce PFI costs.

Applying the lessons of the pilot projects across the PFI portfolio

The Government want to apply the lessons from these pilots to PFI projects across the public sector.

The Cabinet Office, supported by Treasury and by local partnerships, will now lead a central programme that brings together ongoing major Government supplier renegotiations with project level savings initiatives being delivered by local contract management teams across the country, for services including defence, hospitals, schools, street lighting and waste. All operational savings that are made will remain with the institutions concerned, to be reinvested in the areas of highest priority, to support investment in our hospitals, schools and other front-line services.

This new savings programme will drive the sharing of best practice across public sector authorities, recognising that improving local delivery skills is essential to ensure better value from the use of private finance in public infrastructure in the future.

In addition, the Treasury will be taking forward engagement with the PFI industry to secure agreement to a code of conduct for industry and public sector co-operation on operational savings initiatives, and to improve transparency. The Government will continue to look at what more can be done to get better value for money from existing and future PFI projects.

It is important that the lessons demonstrated from these savings pilots are factored into future procurements from the very beginning. The first example for this will be the new programme of privately financed schools that was announced today. The new schools programme provides an opportunity to test an improved approach to working with the private sector to deliver essential public assets. This Government are committed to ensuring that the lessons learned from the PFI savings pilots are applied in the future pipeline of privately financed projects.

Remote Gambling

Justine Greening Excerpts

Monday 18th July 2011 Written Statements

[The Economic Secretary to the Treasury (Justine Greening)]

On Thursday 14 July, the Under-Secretary of State for Culture, Olympics, Media and Sport, my hon. Friend the Member for Weston-super-Mare (John Penrose), who is responsible for tourism and heritage, announced that he proposes that the Gambling Act should be amended so that remote gambling is regulated on a point of consumption basis. Under this proposal all operators, whether from here or abroad, will be required to hold a Gambling Commission licence to enable them to transact with British consumers. I will review the case for changing the taxation regime in line with my hon. Friend’s proposal and taxing operators on the basis of customer location.

Separately, other countries are also changing both their regulatory and taxation regimes for remote gambling. I will consider the tax implications of these developments. In particular, I will consider ways to prevent operators in the UK being subject to double taxation on remote gambling in the shorter-term.

Early Intervention

Justine Greening Excerpts

Thursday 14th July 2011 Commons Chamber

[The Economic Secretary to the Treasury (Justine Greening)]

There are a number of Adjournment debates that I might have a chance to respond to as a Treasury Minister, but of all of them, this is probably the one in which I would be most keen to participate. The hon. Member for Nottingham North (Mr Allen) has done a great deal of work in an area that for many years was debated on moral grounds—“What’s the right thing to do?” That was absolutely right, but his contribution has been to say why it is in everybody’s interest to address these issues and, in particular, to focus on early intervention. That work will have longevity in this place and beyond. Indeed, I think that I speak for Members across the House when I pay tribute to the work that he has done, not just in contributing to this Government’s policy, but in the years prior to that.

The hon. Gentleman talked about some of the recommendations in the recent, second—and final—report on his review of early intervention. As he knows, we are still looking at those recommendations. I shall not pre-empt the conclusion, but I want to emphasise one thing. He said that he hoped that Ministers would take those recommendations seriously, and I can absolutely assure him that we do. In the time left, I shall try to respond to as many of his points as possible, but I have no doubt that in the weeks, months and perhaps even years to come, we will continue to debate these issues both inside this Chamber and outside it.

I agree that the case for investment in preventive services is clear. As the hon. Gentleman set out in his speech and in his review of early intervention, there is a clear argument. That argument shows that the more that we can do in government and the more that those working with children can do to intervene earlier, the more likely children are both to reach their full potential, as he said, and to develop well both socially and emotionally. Not only are the costs of not doing so significant for them as developing people, but there are financial costs for the rest of society, as he pointed out, including in local communities. So the costs of not tackling these issues are significant and they do contribute to an ongoing negative cycle.

The hon. Gentleman discussed just some of the examples in this area. Let us consider that of children on the edge of care. A three-year study of multi-systemic therapy at the Brandon centre in Camden, which he is probably aware of, has shown that cost savings ranged between £1,200 and £8,900 per family intervention, in addition to there being a reduced risk of offending and family conflict. Data from 10 of those multi-systemic therapy pilots for children on the edge of care or custody indicate that, by the end of the intervention, custody or care was avoided for 90% of children who had been at risk of those outcomes. Of course, children who avoid care are more likely to succeed academically, and are therefore more likely to earn more and lead more fulfilling lives. That is just one example of how powerful early intervention approaches can be.

I want to discuss public spending, because the hon. Gentleman talked about the next spending review being based on the theme of early intervention and said that, in preparation for this, the balance of central Government spending should be shifted by 1% per year from late to early intervention. One of the things that I want to say to him is that in the year and a bit that I have spent as a Treasury Minister I have found that the key to this is something that may seem boring but actually becomes incredibly important. He talked about the need for an evidence base, and I think that he has created that with the work that he has done, as has some of the work carried out in other countries. One of the challenges for the Government is to ensure that we have a good internal evidence base on where our money is being spent.

The hon. Gentleman will be aware of the children and families taskforce that was set up by the Prime Minister, which informed some of our spending review. One of the exercises involved looking at where the portfolio mix of spend currently is, for example, on early years provision. That was not perhaps as easy a task for us as it ought to have been. One of the key things that the Treasury is now doing is progressing what seemed like mundane “accountantesque” projects, such as putting in place a chart of accounts and upgrading the Combined Online Information System—COINS—database so that it is actually one that we can use to analyse data. The “themes” that the hon. Gentleman describes are part of a broader challenge the Government face in understanding where the money is going; we need to understand our normal items of spend and the aim of them. That will give us a chance better to join up the oversight across spending as it happens in different Departments.

I talked about the Prime Minister’s children and families taskforce and in the 2010 spending review we did allocate significant resources to support early intervention. The hon. Gentleman talked about the value of the family nurse partnership programme. We are recruiting 4,200 health visitors and expanding that programme. Of course we have also established the early intervention grant. In doing so, we intend to signal the importance of this agenda that we all care about so much. We have committed to maintain a network of Sure Start children’s centres and, as he knows, to expand the free early education entitlement to disadvantaged two-year-olds. We are also putting in place other measures such as the fairness premium. I hope that we will be able, perhaps in a more sophisticated way, to understand where Government spending is going in relation to early intervention and some of the complex aspects of early intervention. I hope that the projects that we now have running across government should give us a much better chance of doing that as we approach the next spending review. As the hon. Gentleman proposes, we will continue to push on that within the Treasury and across government to make sure that we do understand the costs and benefits of different policies and programmes, both individually and collectively.

One thing that he referred to less in his speech, but which is important, is coming out of the work on early years and that is the need to continue investment. Once initial investments are made, they should be followed up with the individual.

I know that I am going to run out of time, but I want to mention community budgeting and the need to consider budgets from the perspective of the individual who receives the services rather than constantly considering them in silos. We want to address that.

The hon. Gentleman talked briefly about tax measures and he is right to flag up that we should not lose sight of the fact that much of the early intervention agenda has involved money transfers. For us, one challenge is considering how that money is invested, whether we have alternatives and how some of the services and programmes he talks about stack up in terms of value for money for the public and those who receive them when set against some of the more traditional methods we have used, such as income transfers between families, the Government and individuals.

The agenda is very exciting and I know that the Government will have the chance to respond to the hon. Gentleman’s second report. I look forward to taking forward some of his suggestions and developing them.

[Mr Allen]

Does the hon. Lady realise that she might have three more minutes and that the debate does not need to stop at 6.30pm? I know she has further notes prepared.

[Justine Greening]

I did not realise that. I am delighted because it means I will be able to get through a few more of the comments I wanted to make.

As I mentioned briefly, the agenda is not just about money but about the quality of public services delivered on the ground. The hon. Gentleman talked about joined-up government and we must focus more on that. Community budgeting will help as will stopping ring-fencing at local authority level, but there are broader challenges in how we knit together national and local government policy at that local level. The work he is doing could feed into some of those thoughts.

Just the other week, on 11 July, we published our “Open Public Services” White Paper, which set out the Government’s vision for excellent services. The principles that we have set out of choice, decentralisation, diversity, fair access and accountability will start to open up local authorities’ ability to deliver services more innovatively. The contribution to this agenda made by the charities and organisations we all come across—perhaps the hon. Gentleman more than other Members—will be better able to be made with a more open approach to public service delivery than we have perhaps had in the past.

I also want to talk briefly about a couple of other aspects. The hon. Gentleman talked about the independent foundation he wants to set up and we very much welcome that as it can play an important role in this whole process. He also mentioned the use of innovative financing mechanisms and he was absolutely right. Again, that is one of those boring but important aspects of the agenda. We need to unlock Government financing so that it does not hinder the right projects. He also mentioned payment by results, which is one thing on which we are keen to push ahead across government.

I can see that I have now run out of time—

Public Spending (Coventry)

Justine Greening Excerpts

Tuesday 12th July 2011 Westminster Hall

[The Economic Secretary to the Treasury (Justine Greening)]

It is a pleasure to serve under your chairmanship, Mrs Riordan, in what we would all agree is an important debate in relation to the difficult challenges that we face. I congratulate the hon. Member for Coventry North West (Mr Robinson) on securing the debate, and I understand why he has raised the issues. In the time available, I shall do my best to respond. If I feel that I have not done so, and if there are specific points on which he would like further clarification, I may well also drop him a line.

We all understand that the backdrop to the debate is the need to get the economy and public finances back on to a sustainable footing over time. As a country, we were always going to have to do that. The hon. Gentleman, for whom I have a lot of respect, talked about the deficit being caused by the private sector. We would all accept that there has been a banking crisis, but many people also recognise that something more fundamental was going wrong with the working of our economy and public finances, and that was due to the fact that we had a structural deficit. Even in the boom times—the good times—when tax revenues were rolling into the Treasury as fast as they were ever going to, that money was still not enough to cover the country’s outgoings.

The Treasury Ministers dealing with public finances in the present Government are therefore in a position in which I assure the hon. Gentleman that we never wanted to be. We had to take the decision that it was in everyone’s interest to get the problem sorted out during the course of this Parliament. When we look at the problems in countries in the rest of Europe—we need only look at Greece—we see that there is still an economic crisis, and our country needs to stay out of it. Our deficit reduction plan is critical in enabling us to do that.

The hon. Gentleman raised the question of what is the fairest way to approach the situation. How can we achieve a balance between getting our public books back into order and making sure that the process is fair—that is one of the key points of the spending review and the Budget—while stimulating growth at the same time? The hon. Gentleman will be aware that one thing that we chose to do in the emergency Budget was to reduce corporation tax, and we built on that with a further cut in the most recent Budget. We tried to strike a balance between cash-flow issues—the money side—and putting ourselves in a position to ensure growth in the economy, particularly in parts of the country such as Coventry and the midlands that suffered in the recession.

Some research now shows that the west midlands in particular suffered disproportionately, and that gives us a double challenge. When I was an Opposition MP, I would have argued that, during the boom years preceding the recession, parts of the country outside the south-east did not do well enough. According to statistics, between 2002 and 2006, for every 10 jobs created in the south-east and London, just one in the private sector was created outside.

[Mr Robinson]

rose—

[Justine Greening]

I will give way in a second.

What I have described was a big problem. In addition, because of the continued hollowing-out of manufacturing in the previous decade, the west midlands suffered particularly, and I recognise that women also suffered as part of that.

I shall now give way to the hon. Gentleman, but I assure him that once he has intervened, I shall speak about some of the matters that he raised, particularly in respect of women.

[Mr Robinson]

I am sorry to interrupt the Minister. On this occasion, I am not going to disagree terribly about whether things are regressive, not fair or not sufficient, nor about whether they are too fast. The point here is to have a close look at the effect on women, as my right hon. Friend the Member for Normanton, Pontefract and Castleford (Yvette Cooper) has stressed—the Minister herself has a keen interest in the matter. If we could consider the impact on women, I would be very grateful.

[Justine Greening]

We were careful in the spending review not only to consider its impact on women, but to understand its impact across the deciles. The hon. Gentleman asserts that the spending review and the Budget were regressive. However, research shows that it is the very richest people in our country who are bearing the brunt—they bear the biggest load—of tackling the deficit.

We have tried to ensure that we provide support for women through tax measures and several of our public spending measures. The hon. Gentleman spoke about the difficult decisions that Coventry city council is having to make. He has doubtless raised the matter with local councillors and the council leader, and discussed especially whether the deficit reduction piece that has fallen on Coventry is being carried out locally in the right way to deal with the local people’s priorities.

I take seriously what the hon. Gentleman said about particular issues, such as rape and support for women. As a local constituency MP, I have taken a particular interest in ensuring that refuge and support are in place for women. Many of these women who need such support are not from my community, but come to it because they must get away from difficult situations. The hon. Gentleman was absolutely right to raise the matter.

The Government have allowed councils more freedom in how they spend their money. A lot of ring-fencing has been removed precisely to enable councils to take more locally focused decisions in these difficult times about where money goes.

The hon. Gentleman also spoke about voluntary organisations. I assure him that we are committed to supporting them—not because of the difficult spending review settlement and the difficult situation with public finances in which we find ourselves, but because it is the right thing to do. One of the less publicised parts of this year’s Budget was the big package on philanthropy and there was also a package in support of gift aid. We need to consider what can be done to help voluntary organisations. We also changed AMAPs—approved mileage allowance payments—to help voluntary organisations in terms of volunteers and passengers.

We have taken further equally important steps. For the first time, we published an overview of the impact of the spending review on groups protected by equalities legislation, including women. The increase in personal allowance will help 880,000 of the lowest-paid workers—they will stop paying tax altogether—and we know that the majority of those at the bottom end of the low-income scale are women. We are also pushing the personal allowance higher. One thing that we have in the back of our minds is the fact that many of those workers were hit by the withdrawal of the 10p tax rate. In a sense, my challenge to the hon. Gentleman is whether he was making such points when the Labour Government were withdrawing that rate, as that change affected a number of women.

We have also tried to support families. The hon. Gentleman mentioned the House of Commons Library research, and if I have time—no, I shall make time—I shall say why we do not agree with its analysis, although it clearly made an important contribution to the debate. We increased child tax credits because we were particularly concerned to ensure that we did not go backwards on child poverty, even in these challenging times. As he pointed out, the change will be important for the many women in single-family households.

As for pensioners, we have re-established the earnings link and put back the triple guarantee. We know that women are far more likely to rely on a state pension than men, and of course they are also likely to live longer, so that will help them, too. Those are the sorts of things that were missed in the research carried out by the right hon. Member for Normanton, Pontefract and Castleford (Yvette Cooper).

[Mr Ainsworth]

The Minister talks about the impact on women of the pension changes, but does she not feel that the speeding up of the equalisation will be disproportionately onerous on those women in their mid to late 50s who will have no chance of making up for the now increased burden of providing for their own pensions? Put simply, they do not have the time to improve their pension pots.

[Justine Greening]

I recognise the debate that is taking place about that, but I also recognise that we have to be fair to everybody, and that means ensuring not only that our state pension system is fair to women today, particularly those nearing pensionable age, but that it will be fair to women of my age and to younger generations. They deserve to know that they can rely on state pension into which they pay through national insurance and any occupational pension that they might set up. For the women of the future who are now in our primary schools, the huge problem of our deficit and the public debt needs to be sorted out so that it does not fall on their shoulders later.

I now turn to the important point of what the hon. Member for Coventry North West said about the Library analysis. As a Government, we disagree particularly with its assumptions about where benefits go and who actually benefits from them, which were understandable but not necessarily accurate. For example, the research made the broad assumption that only the person who received a welfare payment would benefit from it. The hon. Gentleman mentioned housing benefit, but that is meant to help the whole household, not just the person who receives it.

On child benefit, the research apparently showed that the spending review and the Budget hit women particularly hard. Child benefit and child tax credit—the latter went up this year and will increase again next year—are designed principally to help the child, and the child can be of either gender, so it is not particularly accurate to say that our approach would necessarily hit women.

I recognise the hon. Gentleman’s statistic on the proportion of lone parents who are women. However, the analysis missed out the fact that in some of the areas that we have protected, such as health, women particularly benefit. We are taking steps to improve the amount of breast screening for cancer. At the moment, the breast screening programme offers screening every three years for all women in England aged 50 and over. Women aged between 50 and 70 are invited for screening routinely, while women over the age of 70 can request free three-year screening, but we are extending that programme to include women aged 47 to 49.

[Mr Robinson]

We have reached the interesting part of the debate—I wish we could have got on to it earlier. The debate is obviously about Coventry, but the points being raised are of general significance—they are major policy matters throughout the country. Will the Minister tell us on which particular points the research is weak, because I do not agree that it is? Lone parents is an obvious area to consider, because they are mainly women, and the disproportionate impact on women is precisely what we are discussing. We will not have time for that today, but will the Minister reply to the point about the research?

[Justine Greening]

I shall write to the hon. Gentleman to elaborate on those points that I cannot answer now.

We cannot consider only one aspect of the decisions taken in the spending review and ignore the weight of the rest of those decisions. They affect not only women, but everyone. I assure the hon. Gentleman that we are committed to ensuring that the difficult decisions that we have to take—they will be difficult—are fair. We have produced more analysis with the emergency Budget, the spending review and this year’s Budget to help people to understand how those decisions fall across our communities, and I hope that that is helpful to the hon. Gentleman.

Finance (No. 3) Bill

Justine Greening Excerpts

Tuesday 5th July 2011 Commons Chamber

[Kerry McCarthy]

Let me start by confirming that Labour Members support the principle of a carbon floor price. We believe that carbon price support could be an excellent opportunity for the UK in providing a high and stable price for carbon. It could encourage investment in low-carbon power and green technologies, create a new generation of green high-skilled jobs which the UK sorely needs, enable the UK to make radical reductions in its carbon emissions, and contribute to meeting our carbon budgets. Unfortunately, however, we cannot support the way in which the Government have implemented this measure. It will hit those who can least afford it, damage the prospects of developing a UK green industry, and fail to reduce carbon emissions. We have to question whether we can call the carbon price support rate a green tax at all.

First, I shall deal with the impact on consumers. We know that people are struggling to pay their fuel bills. The OECD estimates that, on May’s figures, energy prices are nearly 10% higher than they were a year ago. Scottish Power recently announced electricity bill rises of 10% and gas bill rises of 10%, and other companies are expected to follow suit. The Government are not helping. Rising energy bills and fuel bills are coming on top of higher taxes, cuts to tax credits and cuts to public services. This year the Government have cut the winter fuel payment by £50 for people over 60 and £100 for people over 80, with no mention of that in the Budget statement or the pre-Budget report. That comes after their promise in last year’s Budget to protect key benefits, including winter fuel payments, for older people. They may claim that they inherited this from the previous Government, but we could and would have looked again at that decision in the light of rising energy prices, and so could they; that is the point of having an annual Budget statement.

These are the circumstances in which the Government have proposed a carbon floor price designed in such a way that it will cost working families by raising their energy bills. We understand that in the long term, if the policy is designed in a way that encourages a switch to low-carbon energy production, there should be no significant effect on consumer bills—that is why we support the principle of the carbon floor price—but right now, in the short term, there will be price rises for consumers at a time when they are already finding their fuel bills unmanageable. The Government have not included any counterbalancing measures to help working families to deal with those price rises. If the measure goes ahead in the form that the Government propose, between 30,000 and 60,000 more households will fall into fuel poverty in 2013, rising to between 50,000 and 90,000 more households by 2020. Those are the Government’s own estimates. Earlier this year, Consumer Focus said:

“In its current form there is a real risk that this policy may simply displace detriment.”

In other words, even if it did have a positive impact on green investment, that would be at the cost of more people falling into fuel poverty.

There have recently been somewhat hysterical reports about green taxes, alleging that they are the biggest factor in causing consumer bills to rise. That is not true. Ofgem figures from March show that environmental and social costs make up just 8% of the typical dual fuel consumer bill, and that has risen by just one percentage point since 2008. Climate change deniers cite figures suggesting that hidden green taxes add some £200 to energy bills, but those figures do not stack up. That does not mean, however, that now is the time to add to those costs. The Government have got it wrong. Ordinary working families were clearly the last thing on their mind when they designed this policy. That is why the amendment calls for them to look again at the effect that it will have on people in fuel poverty.

I turn to manufacturing, which several of my colleagues will wish to discuss too. Rising energy prices will affect not only consumers but firms that employ thousands of people across the country. In particular, they will hit energy-intensive industries such as steel, aluminium and chemicals. There is a danger, particularly in the absence of a credible Government plan for growth, that growth and jobs will be exported to other countries. According to a report by Thomson Reuters Carbon Point earlier this year, the carbon floor price will impose additional costs on businesses amounting to £9.3 billion. We understand that that effect might be mitigated in the long term if there is a switch to greener sources of energy, although that is not certain given the problems that I will come to in a moment. In the medium term, however, UK industry will be at a disadvantage, and jobs and growth will be put at risk. That is why the director general of the CBI and industry bodies such as the Chemical Industries Association have called for an exemption from these extra costs for high energy-using industries.

Concerns have been expressed by firms such as Tata Steel, which employs 1,000 people in Teesside. Its chief executive officer said:

“The introduction of the carbon floor price represents a potentially severe blow to the sustainability of UK steelmaking.”

Rio Tinto Alcan, an aluminium producer in the north-east, may close, shedding 600 jobs, and 1,800 jobs are at risk at INEOS ChlorVinyls in Runcorn. Some of the industries threatened by this measure are not only major employers but among the UK’s biggest export sectors. For example, the chemical industry, which accounts for 12% of total UK manufacturing, exports the bulk of its production, with a trade balance in 2008 of nearly £6 billion.

There is also the danger that we will harm our own prospects of building a UK green industry. This sector represents huge opportunities for the UK. For example, the wind energy sector provides over 10,000 jobs, and it expanded by 91% in just two years from 2007 to 2009. The solar energy industry in the UK provides over 10,000 jobs. There is a danger that we may not be able to sustain these sectors in the UK, despite any efforts from the Government, if the necessary materials are not available here. This would be yet another own goal for the “greenest Government ever” after their ill-thought-out change of policy earlier this year on feed-in tariffs, which has put thousands of green jobs at risk. The solar sector is a vital, nascent green industry in the UK. Until the Government’s announcement, the 10,000 jobs that it currently supports was expected to rise to 17,000 this year. The Government’s promised green investment bank was supposed to boost investment in new green industries, but it has been watered down: it will be a fund, and not a real bank, until 2015. That makes a mockery of the Government’s green credentials. Our amendment calls on the Government to look again at the carbon floor price and its effect on high energy-using industries. This is the wrong time to put jobs and green investment at risk without a plan to protect them.

I now move on to the impact on green investment. We accept that a well-designed carbon floor price can deliver reduced emissions and higher green investment, which is why we support the idea in principle. However, we doubt whether the Government’s proposal will deliver those goals. The UK is part of the EU emissions trading scheme, so any carbon permits that are not sold in the UK will simply be sold elsewhere in Europe. The Department of Energy and Climate Change commissioned Redpoint Energy, a consultancy, to examine the options for a carbon floor price. It said in a footnote to its report:

“Under the EU ETS, it would be expected that lower emissions from the GB electricity sector in a given year would be offset by higher emissions elsewhere within the trading scheme.”

A recent report by the Institute for Public Policy Research agreed that

“this policy would have no direct effect on emissions reaching the atmosphere.”

It went on to say that

“it is important to be clear that the UK would be meeting climate change targets in a way that has zero direct effect on emissions.”

The Treasury’s own consultation document admitted that for power stations covered by the ETS, the carbon price floor will not directly impact on the Government’s ability to meet their carbon budgets.

Consumers and companies facing higher energy bills because of this policy would be right to question whether this is a worthwhile use of their money. Will the Government’s policy encourage more investment in renewable power? The Energy and Climate Change Committee expressed doubt:

“when it comes to low-carbon investment, the effect of the Carbon Price Support will depend on the confidence of investors in the long-term reliability of the Carbon Price Support.”

[The Economic Secretary to the Treasury (Justine Greening)]

Perhaps I can just tell the hon. Lady that the Institution of Civil Engineers said that the policy will create a “more conducive environment” for investment. Does that allay her fears? If she has concerns about the structure of the policy, it would be helpful for Members to hear the Opposition’s alternatives.

[Kerry McCarthy]

As I will go on to explain, there are concerns about future stability, as we have seen with the North sea oil tax, which we discussed yesterday. Investors need stability to plan for the long term, particularly in solar and wind power, which need long-term investment. People need to know what to expect and what impact proposals will have.

As for what the Opposition are saying, I refer the Minister to our amendment, which calls for a review of three main points, which I am discussing in my speech. Those are the impact on fuel poverty, the impact on energy-intensive industries and the fact that this is, in effect, a subsidy for nuclear power, which I will discuss later. It is important for us to look at the consequences of this policy because, as with so many things, the Government have introduced it in haste and without thinking through the consequences. It is not until we look at the impact on these sectors that we will see what the ideal solution might be. It is premature of the hon. Lady to ask us to come up with an alternative before we have done that analysis and reached a consensus with the industry on what the impact will be. As I have said, we agree in principle with the carbon price support, but because of the way it is being implemented, it will not achieve any of the objectives that she presumably wants it to achieve.

--- Later in debate ---

[Justine Greening]

As we will no doubt debate later, we carried out an extensive impact assessment on this policy. Indeed, the hon. Lady has quoted a couple of figures from it. I reiterate what I said earlier. If she agrees in principle with the policy, which I very much welcome, it would be helpful to hear how she thinks the delivery of it ought to differ from what the Government are doing.

[Kerry McCarthy]

As I said, we are calling for a full-scale review. I am not convinced that the Government’s impact assessment examined in sufficient detail the impact on fuel bills, for example. As the Economic Secretary is intervening on me, it is obviously not the time for me to pose questions to her. When she speaks later, perhaps she can enlighten us as to what it was judged that the impact would be on consumers in meeting their fuel bills, on fuel poverty and on energy-intensive industries. What impact does she think that will have on jobs and growth in the areas where energy-intensive industries are based? Perhaps she could also respond to the questions that I will soon pose about whether it is wise to, in effect, create a subsidy for the nuclear industry when there are other competing priorities, on which some people would argue the money would be better spent.

--- Later in debate ---

[Kerry McCarthy]

I am not sure where to start in responding to the hon. Gentleman. My opening line was that we support the idea of a carbon floor price in principle. Everything that I have said since has outlined why we have reservations about the way in which it is being implemented. I simply refer him to the speech that I am making.

I appreciate that there are difficulties in getting this policy implemented at an EU level. It would be easier if we could look at the EU emissions trading scheme in the round. Experts have said that measures on carbon pricing should first be considered at EU level, and that a UK-only solution is a second best option. Lord Turner, the Chair of the Committee on Climate Change, has said that, and it was echoed in the Institute for Public Policy Research report. The Government appear to have done nothing to explore the EU option. The coalition agreement says that the Government will

“make efforts to persuade the EU to move towards full auctioning of ETS permits.”

However, it does not mention any intention to talk to our EU partners about a carbon price floor. Perhaps that is unsurprising, given the Government’s record on dealing with the EU. For example, the Government’s MEPs tabled no proposals to reduce the EU budget, whereas Labour MEPs tabled amendments that could have cut more than €1 billion of waste from EU spending.

[Justine Greening]

Is the hon. Lady aware that one of the main reasons why the UK’s contribution to the EU budget is going up is that the former Labour Prime Minister, Tony Blair, gave away part of the rebate?

[Lyn Brown (West Ham) (Lab)]

Enough now.

--- Later in debate ---

[Tristram Hunt (Stoke-on-Trent Central) (Lab)]

I wish to speak to amendment 12, and I shall do so both as chair of the all-party group on energy-intensive industries, which the hon. Member for Redcar (Ian Swales) so kindly mentioned, and as the Member of Parliament for Stoke-on-Trent Central—the potteries. I wish to draw the Minister’s attention to the impact of the carbon price on the ceramics industry, because that poses a real danger to the future of the industry which really began the industrial revolution, at Etruria, under the great influence of Josiah Wedgwood.

You will know, Mr Deputy Speaker, that the potteries came to north Staffordshire not because of the north Staffordshire clay, although that helped, but because of the coal—because of the energy—as Edwin Clayhanger told young George in the great “Clayhanger” novel by Arnold Bennett. The firing of the kilns and the making of the pottery demand intensive energy use, as temperatures of up to 1,200° C are involved, although we are hoping to bring that down with new technology. The cumulative impact of some of the carbon price legislation is therefore dangerously undermining the ability of these industries to survive.

The point about the effect of this legislation is that these industries will provide a classic example of carbon leakage. Over the past 20 years we have seen jobs disappear to Indonesia, Vietnam and China, and we face the threat of jobs leaving for Poland and Bulgaria. We do not cut global carbon emissions through this process. Instead, we export jobs and reimport the carbon. Britain loses economic competitiveness and the world gains nothing in terms of cutting carbon emissions. Ministers need to understand that many of the companies involved are international conglomerates, as many of my hon. Friends have pointed out. Such companies have the ability to move their businesses offshore, and they will do so if we become more and more uncompetitive.

Many in the ceramics industry are in favour of energy-saving measures, and I am not averse to those. We have seen, in different industries across the sector, the ability of energy-saving measures to improve performance. Let us consider what happened to the German car industry in the 1980s. When the Greens began to turn their attention towards the inefficiencies of that industry and its overuse of energy, that industry began to be transformed. Today the German car industry is among the most successful and competitive in the world.

The problem that we face in Stoke-on-Trent is that many of our industries and many of our pottery firms have already cut their energy usage by 80% or 90%, yet they still face new hikes and new measures. It will be very difficult for them to make further cuts. We need a more sophisticated way of measuring carbon, which is what our amendment suggests. We need a more sophisticated way of understanding carbon usage, and we need to understand its use over a lifetime.

We have already heard references to the chemical industry. In my constituency I am blessed with the Michelin tyre production company, and when the energy used in production is set against the lifetime use of those tyres, energy is actually saved. My hon. Friend the Member for Penistone and Stocksbridge (Angela Smith) mentioned using clay pipes rather than plastic pipes, and again, over the lifetime of the products, energy is saved. In Newcastle-under-Lyme, next door to my constituency, one can also see some very good clay pipe production.

The point is that high-quality products made with high energy intensity often, in the long run, save carbon. The Government need to get their thinking straight. When considering the competitiveness of such industries, Ministers often point to cuts in corporation tax as saving businesses. If no profits can be made—if they are wiped out by the carbon costs—the cuts to corporation tax will make no difference. There is a failure to appreciate the cumulative impact and the international market.

I hope that we have begun to see the beginnings of a shift in thinking. We look forward to the outcome of the DECC-BIS-Treasury working party, which will reach its conclusions towards the end of the year. Ministers should regard our amendment as an attempt to help them and to encourage a degree of clarity in the dealings between their civil servants over the coming months. What is frustrating about this process is the fact that the ceramics sector in Stoke-on-Trent is enjoying a resurgence. Jobs are coming back from China because of rising energy and labour costs in both porcelain and bone china. We are seeing a resurgence in the kingdom of Spode, Wedgwood, Churchill and Dudson, and of new companies, such as Emma Bridgewater. It would be typical of British legalistic short-sightedness and the myopia of the Treasury world view if, faced with a rising and successful industry, we were to undermine it. If we are interested in rebalancing the British economy we should support the ceramics, chemical, steel, glass, aluminium and other energy-intensive sectors on their journey towards a green economy. The amendment seeks to do just that.

[Justine Greening]

Clause 78 and schedule 20 amend the climate change levy to introduce a carbon price floor for electricity generation. We have had a helpful and interesting debate on the two amendments and I shall do my best in the time available to try to address as many of the points that were raised as possible. Before I do that, it is probably worth returning to the question of why this measure is necessary in the first place. Indeed, the hon. Member for Brighton, Pavilion (Caroline Lucas) spent some time setting that out in her speech.

We all recognise that the UK needs significant new investment in low-carbon electricity generation over the coming decades. As the debate has shown, we do not want that to be the only thing that we encourage over the coming years. We also want to encourage a broader transition to a low-carbon economy. As the hon. Member for Penistone and Stocksbridge (Angela Smith) pointed out, many industries that have been mentioned today in the context of the challenges they face have the chance to benefit from their role in the low-carbon economy of the future.

We need significant new investment in low-carbon electricity generation. As well as preparing for an increase in demand for electricity over the following decades, the UK must meet its legally binding CO₂ emissions reduction targets, which require an 80% reduction from 1990 levels by 2050. That is why in the Budget, following consultation, we announced that the UK would introduce a minimum carbon price. As the hon. Member for Southampton, Test (Dr Whitehead) pointed out, we included a number of different scenarios in that consultation so that we could understand and get feedback from stakeholders on the impact of the different scenarios. In fact the carbon price floor will provide a strong incentive for billions of pounds of new low-carbon investment.

[Dr Whitehead]

Does the hon. Lady agree that none of the scenarios in the consultation document included the idea that there should be a £5 premium on the emissions trading scheme as a result of the introduction of a carbon floor price?

[Justine Greening]

The scenarios we looked at as part of the consultation asked stakeholders what carbon price they felt we should start at, and where they felt it should finish—the trajectory from the first to the last point. As suggested by respondents, we used the market price of carbon, which is low, although we used DECC’s central carbon price as an illustration in the consultation. The hon. Gentleman referred both in his intervention and in his contribution to the balance we have to strike in setting a carbon price floor that will actually make a difference while putting in place one that does not in the meantime make the energy-intensive industries in our country uncompetitive, as we heard in powerful contributions from my hon. Friends the Members for Redcar (Ian Swales) and for Brigg and Goole (Andrew Percy) and, in an intervention, from the hon. Member for Scunthorpe (Nic Dakin). I want to provide the House with some reassurance about the steps we are taking to ensure that we manage to strike that balance. Despite the various contributions we have heard today, when we take the time to read Hansard tomorrow we shall probably see that there was more agreement in the approaches than may have come across from the tone of the debate. The challenge for us on both sides of the House is to strike the right balance, and I want to talk a little more about how we intend to try to do that.

We know that ultimately we have to make the transition to low-carbon electricity generation cost-effectively, and that will happen only if investors have greater long-term certainty about the cost of carbon emissions. The shadow Minister, the hon. Member for Bristol East (Kerry McCarthy) talked about uncertainty, but the measure is about introducing more certainty so that the extra investment we need can take place. The impact assessment that was part of the consultation showed that although the carbon price floor will increase electricity bills in the short to medium term, bills will be lower in the longer term than would have otherwise been the case, as more low-carbon capacity leads to cheaper electricity. I shall talk about how we want to see fuel poverty tackled over coming years, because that is obviously important.

[Andrew Percy]

I particularly welcome my hon. Friend’s comments about supporting industry as we move forward. I had to pop out of the Chamber after my speech to meet people from Drax. One of the things they told me was that at the moment the system is so structured that it discourages them from buying UK coal in favour of foreign coal. Will she take that into account when looking at the extra support that can be provided? If not, could she meet us to discuss this important issue in a bit more detail?

[Justine Greening]

My hon. Friend makes a helpful contribution. I am always happy to meet hon. Members. In fact, only last week I wrote back to the hon. Member for Stoke-on-Trent Central (Tristram Hunt) to say that I would be happy to meet representatives of his local industry. One of the reasons we are working across Government—not just the Treasury, but BIS and DECC—is to make sure that we consider all the different aspects of the support we want for the energy-intensive industries, and get it right.

I am conscious of the time, and the fact that Members want to debate the remaining amendments, so I now want to make progress. In Committee we discussed at length the issues raised in the amendments. Not all Members present in the Chamber today will have heard those debates, so I shall go through my response to both amendments, taking amendment 21 first, as it raises some important points. It would require the Government to lay, and Parliament to approve, an agreed package of mitigation measures for energy-intensive industries.

A number of Members from across the House made powerful cases on behalf of their local industry about why the issues are so important. The Government recognise the issues and want to take steps to address them. There is, as I said, clearly a balance to be struck: we need to meet our carbon reduction requirements, but to do so in a way that still enables the UK to continue to have competitive energy-intensive industries. That is why the Budget helped to offset the impacts of the price floor on energy-intensive industry and to show, as we have heard, that the UK is open for business, as it must be.

In March we announced an extension of climate change agreements to 2023, with an increase in the discount on electricity from 65% to 80% for participants in the scheme from April 2013. We plan to consult on how to simplify climate change agreements for the companies participating in them. Overall we intend to reduce tax levels to among the lowest in the EU.

We announced that we would not introduce the previous Government’s planned complex and costly carbon capture and storage levy, which would have increased electricity bills by 2% from 2015. In addition, we set out plans that will see a cap on the cost of policies funded through energy bills. To support industry more broadly, we introduced policies that will reduce corporation tax by a further 1%, which is part of an overall year-on-year set of reductions in corporation tax.

As I said, BIS, DECC and the Treasury are already in discussion with energy-intensive industries to identify those most affected by the carbon price floor and to pull together the best set of options to address some of those concerns. The package that we plan to announce by the end of the year will build on the measures, some of which I have set out, that we announced in the Budget. The Bill could also be a means of implementing part of the package. I should be clear that the options that we are considering do not relate only to tax. They look across the board at what we can do to support energy-intensive industries.

On Opposition amendment 12, the carbon price floor is designed to give UK electricity generators certainty about the carbon price. That will encourage more investment in low carbon. Although some Members expressed concerns about how the policy will work, it has been supported by a number of members of the investment community. A range of policy assessments have been carried out not just as part of the consultation document, but as part of the extensive impact assessment that was done alongside that, including the tax impact and information note that was published at the time of the Budget.

[Caroline Lucas]

Does the Minister agree that the carbon price floor effectively constitutes a subsidy for nuclear power? Does she therefore agree that unless it is clawed back through a windfall tax, it would contravene the terms of the coalition agreement on no subsidies for new nuclear?

[Justine Greening]

I am pleased that the hon. Lady has raised that point, because it gives me the opportunity to be crystal clear again—alongside the statements that I made in Committee, and those that she knows I have made to the Select Committee of which she is a member—that this policy is not a subsidy for the nuclear industry. As was pointed out in the previous debate by my hon. Friend the Member for Bristol West (Stephen Williams), who I am pleased to see in his place following his contribution to the Committee stage, this is a tax on carbon, not on nuclear fuel rods, as happened in Germany.

The reason nuclear is outside the scope of the tax is that uranium and wind, for example, are not in the carbon price floor because, of course, they do not contain carbon. I understand the arguments that have been made, but they are a little like saying that because we have a tax on alcohol, that is a subsidy for the soft drinks industry. There is also a contradiction between what Opposition Members have been saying. They complain that this is a tax-raising measure, yet they also say that it is a subsidy. Those arguments are contradictory.

Amendments 21 and 12 are unnecessary, and I hope that they will both be withdrawn.

Question put, That the amendment be made.