Treasury and Work and Pensions

The debate about annual targets has been fully aired and the argument against them is that there would be too many blips and ups and downs. The weather could have an impact. That is why I would like targets to be set on a three to four-year basis. Analysis of the impact on the exchange rate would also be helpful. When we got North sea oil, we thought that that was tremendous, but some problems were created because the exchange rate shot up. There is a risk that the exchange rate could also shoot up because this country is relatively carbon efficient. One interesting idea that is being floated in Europe relates to a proposal on how to deal with international free-riders. There must be real incentives at an international level for countries to co-operate. It is worth our while considering introducing, or threatening to introduce, penalties on those who refuse to join proper carbon trading schemes. In effect, the proposal is for an extension of the generalised system of preferences that ties trade preferences to standards for labour and human rights. We must face the fact that, whatever ideological or sentimental attachments people have to the current regimes, we have not so far been successful in getting all the large emitters to co-operate responsibly at the international level. Now we are on a much tighter timetable than we were previously. That also highlights the need for the international institutional machinery that tackles the environment to have the same status as the World Trade Organisation. The second policy instrument that is vital for heavy industry and our overall success in meeting our climate change objectives is a proper costing of transport—aviation, marine and freight. We must include the external costs of transport, and this is not just about kiwi fruit. Such a costing will also affect the relative competitiveness of heavy industry across the world and it will change the current bias against local production. The aspect of transport that is most discussed at the moment is aviation and the phenomenon of cheap flights. Those of us who argue that that should be tackled are often criticised as if we were saying that people on low incomes should not have proper summer holidays. Of course, that is not true at all. We need to knock that myth on the head now. Last year, 10 per cent. of flights were taken by people in the bottom 25 per cent. of the income distribution table, but the top 25 per cent. of the population took, on average, six return flights a year. That is completely unsustainable. We cannot carry on with a situation in which people begin to get the idea that it is their right to have six return flights a year. I want, however, to end on a more positive note. Putting a proper price on carbon will have similar effect on the economy to the significant oil price rises of the 1970s and 1980s.