Climate Change Bill [HL]

moved Amendment No. 203: 203: After Clause 49, insert the following new Clause— ““The Carbon Tax Industrial and Consumer Impact Forum (1) There shall be a body to be known as the Carbon Tax Industrial and Consumer Impact Forum (““the forum””). (2) The forum shall include representatives from Her Majesty’s Government, employer groups, trade unions and consumer organisations. (3) It is the duty of the forum to produce a report advising the Secretary of State, in relation to each budgetary period, on the impact of each sector of the economy, including transport, manufacturing and services, of meeting the carbon budget for that period. (4) The forum must also propose to the Secretary of State measures to ameliorate the impacts identified in its report. (5) The forum must give due regard to— (a) increases in the taxation of carbon, (b) changes in relative costs and prices between different sectors of the economy, and (c) the role of the European Globalisation Adjustment Fund. (6) For each budgetary period, the forum must produce its report not later than six months after the carbon budget for that period has been set.”” The noble Lord said: My Lords, this Bill, for reasons that I will adduce, is like Hamlet without the Prince of Denmark. Filling the gap, which I believe is well within the Bill’s scope, would link the carbon budget to budgets in the more usual sense of that word. My amendment concerns the price tag and the means of delivery of these carbon targets. Ministers have two options. One is to deploy whatever arguments are necessary to prove to their satisfaction that it is the wrong amendment, on the wrong Bill, at the wrong time. But as events unfold, I am more and more certain that it is only a matter of time before the principle is accepted as an essential, umbilically linked part of the carbon budgeting at the heart of this Bill. The second alternative, which I would prefer, is to accept it as an idea whose time has come. This leads to my second main point, which follows inexorably from the first. It is the case for a degree of hypothecation. In other words, a system whereby people can see how carbon taxation money—when I say carbon taxation money, I am referring here and throughout my speech to taxation and related instruments—is being spent successfully, passing carbon reduction milestones on the road map at the right time. Politically, in my opinion, this is a no-brainer—but there has been some temporary switching off of brains in HMG on this so far. However, it is only a matter of time before it is brought forward and I would rather a Labour Government did it properly than someone else tried to do it after acrimonious discussion. Hypothecation can also be useful in revealing the degree to which the programme can be budget-neutral overall. In other words, taxes in area A could be offset by taxes in area B. This is subject to the qualification that the overseas account, which is the net balance of receipts or payments on overseas credits from the EU Emissions Trading Scheme and so on, will need to be slotted into the UK budget, where the ultimate incidence will lie. Of course there will be the question of what will be in and what will be out of this financial carbon accounting. One or two examples are very familiar to us. Money from the London congestion charge is going into improvements in public transport. Earlier, the Labour Party objected to it: was it okay for the driver of a Rolls Royce to scatter £50 notes along Piccadilly, pricing the Ford Escort full of lesser breeds off the road? On due reflection, it started to appreciate that, with hypothecation, all those £50 notes would be pushed into public transport. That was the argument of John Prescott and Ken Livingstone—bless them both—among others. It therefore had a socially progressive, redistributive element to it. We are now seeing the increased use of differential taxation rates for motor cars being adopted more widely, not necessarily via congestion charging but, as in last week’s Budget, nationwide, with road tax biting differentially on different sizes of engine. In transport more generally, we have the taxation of road versus rail freight. Such a non-transparent set of taxation arrangements needs to be set out in a proper accounting system. I welcome the consultation exercise on this at the present time, and I think the results will be conducive to a further step forward in the share of rail freight in our freight transport system. One could go from home heating to aviation, shipping and so on, not to mention plastic bags, but the central point about the consolidation and transparency of carbon tax accounting as a whole is that now is the time for government to step up to the plate before others do. If we are to treat the public as adults, we need an adult transparent accounting system for the income and expenditure on the carbon account. That and the straightforward questions and answers that will flow from it will go part of the way to winning hearts and minds. Otherwise, we will not have a cat in hell’s chance of achieving this vast shift from a positive growth coefficient of carbon as the economy goes forward to a negative one. The first thing to avoid, therefore, is being accused of selling a pig in a poke. Ministers may be nervous about a full-frontal approach to presenting this, but let me distinguish first the technical level and secondly the level of the man and the woman in the pub in Burton-on-Trent. This sort of two-legged approach to looking at public policy was a very useful idea that we always bore in mind when we wrote policy papers at the TUC—of course, the TUC was and remains a paragon of all administrative virtues. At the first level, I assume that Ministers are paying a lot of regard to the Stern report’s implied hypothesis—it might have been helpful if the Minister had been a little more explicit, but it is there in all the research papers—that choking off demand is largely to do with price, which in turn can be effected in a number of ways through taxes and subsidies, which are on the same Treasury balance sheet. I was interested in the remarks of the noble Lord, Lord Turnbull, on the amendment tabled by the noble Lord, Lord Woolmer, in that the examples that he immediately touched on related to taxation. There can be no doubt that taxation will be at the centre of the stage and that the statistical conventions will be hard to determine. Taxation will not do the whole job, but will do a large part of it—I would say more than 50 per cent of it—but I will be interested to hear whether the Minister thinks that I am in the wrong ball park. The carbon tax forum would be able to commission studies about the price elasticities in different markets. The price elasticity for domestic heating may well be different from the price elasticity of carbon for air travel. I am still a bit of a sceptic about this, until more evidence is available to compare apples with apples. The example of doubling of demand for air travel after halving an air fare can be the same elasticity as putting up petrol by 10p a litre and seeing a slight reduction in growth. The scale of the price is different, and that is all. I should like to see that examined. At the second level, the forum would perhaps need to have something like a road show visiting Burton-on-Trent. I remember doing that in 1965 on the retrospectively, much-derided national plan, but it was a highly productive exercise. I need to say something about how my amendment fits into the Bill as far as Whitehall is concerned. A few days ago, I rang the Treasury to find out whether it would be briefing a Minister to reply to my amendment. But it said that all these matters were with Defra. I pressed the point and said, ““Do you mean that all these taxation and subsidy questions are being decided by Defra?””. The man concerned obviously wanted to get me off the phone and said, ““All these matters are being dealt with by Defra””, and that was the end of the conversation. No one believes that, and I sympathise with the Minister, for whom I have the very highest regard, as he knows, and who has been in the wars recently on so many fronts. Having to respect this line is another cross that he has to bear, but it is one which all of us would have to take up if we were Ministers. In that connection, I know that some noble Lords have thought that the answer to all this is for the Prime Minister or the Chancellor to chair the Committee on Climate Change. I think that that is the wrong question and certainly is not the rationale of my amendment. The climate change committee has a big job on its hands and I largely agree with the Government’s line about not overloading it. But there is another big job to do on what might be called the executive action side, which is for the Government. If our discussions are to be successful, we must turn to taxation, which raises its ugly head at every turn. No one will want to pay these taxes with great enthusiasm and there will be all sorts of stealth taxes. But that is precisely why we should take the initiative to demonstrate that these are not stealth taxes. They are open taxes, which are openly arrived at after very clear discussion, including with those who will be affected; that is, business and workers’ representatives, as well as consumers and so on. That is where the Prime Minister and the Chancellor indubitably have a great responsibility. As we saw last week—this also concerns the Prime Minister—there will be the European dimension: hence, my inclusion in the amendment a reference to the European Globalisation Adjustment Fund. It is in everyone’s interests to work closely with colleagues in the EU on this. But there is the bigger picture of the European dimension in trading and taxation. In 1999, my maiden speech was on the need for a common approach to European energy taxation. Only this past week, as confirmed by the Prime Minister’s Statement to Parliament, yesterday, we have seen in effect the beginnings of a British Government shift towards the acceptance that, "““economic instruments, including VAT rates””,—[Official Report, 17/3/08; col. 21.]" should be used on a common basis and be deployed as one of the weapons in our armoury. This will fit into a wider jigsaw and I look forward to the analysis of the famous Brussels bureaucrats recognising, as they do, that there is competition between European industries, and competition between European industries and the industries of the rest of the world. On competition between European industries, a level playing field is very desirable and will enable us all to look the rest of the world in the face on a united basis. We have to put the VAT arithmetic into the whole carbon tax jigsaw puzzle with the emissions trading scheme and the estimate by the European Commission on 23 January that €50 billion a year will be transferred through the scheme to the developing countries by 2020. That is not in 50 years’ time but in 12 years, which means starting now, to quote the Chinese proverb. I assume that we in Britain will be paying the best part of €7 billion or €8 billion of that €50 billion, which also needs to be budgeted for. In that connection, the remit that President Barroso has been given by the Council of Ministers is side by side with the review of the energy taxation directive to bring it more into line with climate change objectives, as concluded by the Council yesterday. It will look into the question of a common European approach entailed in VAT discounts for certain sorts of carbon-reducing products. This is clearly part of a complex exercise of how member states do their carbon budgeting—in the proper use of that term—and it would be useful if President Barroso, in carrying out that remit, were to collect information on how 27 member states are carrying out their carbon budgeting, and how in the financial sense they will present their accounts. The European statistical services will have to raise their game professionally as time goes by on the rather difficult statistical rules on how this should proceed. There is a paradox in that at the global level the idea of carbon credits is based on the implicit precept in Stern that everyone in the world is entitled to a notional ration card of 1 tonne per annum of carbon. That does not mean that every Nigerian has a ration book, any more than it means that everyone in Burton-on-Trent has one. On a global basis, undoubtedly heavy users will buy the units that the lighter users do not need, which is some sort of redistribution from the rich to the poor. It would be entirely contradictory if the poor were redistributing to the rich in the United Kingdom through regressive taxation. It is rapidly becoming less unfashionable—certainly in the Labour Party—to discuss income inequality in this country. I cannot see how it can be a function of the Committee on Climate Change to take this matter very far. I am not of course averse to it discussing the issue, but it could become a dog’s breakfast if everything was piled on to its agenda. We need to find a mechanism, which I believe my amendment to be, for making sure that there is a clear road map for achieving social equity. Treasury instinct, of course, is to guard every item of information as if it were the secret of how to make an atom bomb. Yet, in adopting that line now it is rapidly becoming its own worst enemy. This hugely ambitious exercise will be largely down to it in an operational sense. As it will take the flak, it had better learn how to win hearts and minds, which means going up and down the country—even north of Watford. I will listen carefully to what my noble friend has to say and then decide how to pursue the matter this evening and at Third Reading. I gratefully acknowledge the assistance and arguments put forward on parallel lines, publicly and at other levels, by my noble friends Lord Puttnam, who I am glad to see in his place this afternoon, and Lord Whitty, who is unable to be here but who wished me well with the amendment. I know—or at least hope and believe—that such support has been a factor in persuading the Government to pay attention to this analysis and its conclusions. I know that Rome was not built in a day, but I trust that my noble friend will be able to analyse my points. Even if he cannot say yes today, and accept the amendment at the second time of asking, he might indicate where he has found some constructive points that members of the Cabinet can take on board before the Bill gets to the Commons in a month’s time. I beg to move.