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Mr. John Gummer (Suffolk, Coastal): Does my hon. Friend agree that both events should remind the United States of the fact that it is impossible for any nation to act in isolation, that all of us depend on global solutions to global problems and that none of us ought to opt out?

Mr. Horam: I profoundly agree with my right hon. Friend. Just because the United States is so powerful, it should not forget that we live in an interdependent world. I hope therefore that the Financial Secretary will convey to the Prime Minister my desire that he persuade George Bush to go to Johannesburg, just as Mrs. Thatcher persuaded his father to go to Rio. If that were to happen,

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it would send a positive signal about US intentions, which would help to repair the damage caused by its initial reaction to the Kyoto protocol, which we discussed earlier today. I hope that the Government will take that on board.

Our verdict on the Chancellor's November statement was that it was a serious disappointment. In the last Parliament—indeed, in his first Budget—the Chancellor issued a statement of intent on environmental taxation. It was an admirable statement and many people hoped that, at the beginning of the second Parliament of the Labour Government, he would take the opportunity to reaffirm those objectives and re-commit himself to those goals.

Unfortunately, the Chancellor did nothing of the kind. The pre-Budget statement contained only one paragraph on environmental issues, the substance of which was that the Government were consulting from today—the day of the pre-Budget statement—on a total of 10 new environmental measures.

On page 11 of our report, hon. Members will see that we have analysed those 10 measures one by one, which is precisely the careful scrutiny that a Committee of our kind should undertake. We discovered that only one of the 10 measures could be characterised as new. In only three of the 10 was consultation beginning on that day. If one defines "today" so as to include "tomorrow", it becomes four but, none the less, it is clearly not 10. Wherever this comes in the hierarchy of spin, I suggest that it is a considerable exaggeration of what the Government are doing in this area.

I am not accusing the Government of doing nothing at all. Indeed the Committee rightly praised many of the measures in the last Parliament that were taken with the considerable support of the Treasury; I am glad to see the Financial Secretary to the Treasury in his place. We should say also that the Government have succeeded in setting up the right kind of machinery inside government for developing policies on sustainable development in a coherent way. However, at some stage, process must produce delivery and that is where the Government have been so disappointing.

I contrast the situation in the UK with what we found in Germany last week. In Germany, there is a strong energy policy, with substantial environmental investment by the Government who were already having the spin-off of creating a large number of new jobs, as well as important export opportunities for German business. Here we have simply the performance and innovation unit report; a worthy document, but one which comes to no clear conclusions. We are just talking; in Germany, they are acting.

Mr. Simon Thomas (Ceredigion): Does the hon. Gentleman agree that we could compare and contrast the problems with the new electricity trading arrangements that we have in this country, and the combined heat and power access within that, with the decision of the German Government to change their electricity metering law to allow ordinary household users to use photovoltaic cells and import directly into the grid? That cannot be done here.

Mr. Horam: The hon. Gentleman was present in Germany and is right. Another advantage of Select

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Committee-type scrutiny is that we can analyse Government figures carefully. I noted that the Secretary of State for Environment, Food and Rural Affairs said in her statement on Kyoto that the Government were putting £250 million behind renewable energy. We have analysed the figures carefully in the document. If the Financial Secretary to the Treasury looks at it, he will find that, in cash terms, the figure is much smaller if one takes out the double counting. Indeed, it will fall to £135 million next year.

As the hon. Member for Ceredigion (Mr. Thomas) has just said, there are considerable problems as a consequence of the measure in the renewable energies industry. CHP companies are packing up the investment that they had taken previously. The Government's rhetoric, in terms of the Prime Minister's statement before the last election, was admirable. Their delivery has been extremely poor.

It does seem that we are over-cautious in our approach and, perhaps because of the power of the Treasury, too finance-oriented. The German approach seems to be a matter of trying to devise a strategy and then worrying about the necessary finance later. Our approach seems to be exactly the contrary; to worry about the money and then to come up with a rather limited approach, which simply does not do the business.

Mr. Colin Challen (Morley and Rothwell): Does the hon. Gentleman agree that the attitude of the German economic ministry is to subsidise and support a nascent environmental industry, so that it can stand on its own two legs and compete in the wider world, having created a new technology? Does he agree that to support such an industry is the right approach?

Mr. Horam: I agree emphatically with the hon. Gentleman and that is why I said that this is a debate about investment—and precautionary investment of the kind that he is talking about—just as much as it is about moving taxation from "goods" to "bads". There will be all-party support for a coherent approach.

Finally, I shall mention three specific areas where I think that the Government should take action as a result of the report. The first is to reform VAT to remove the present tax disincentive that works in favour of greenfield development and against brownfield development. In the present circumstances, that is an anachronism.

Secondly, on waste disposal, there is now consensus across political parties and among the various interests that the landfill tax should be substantially increased. I have never heard of a situation before in which a Chancellor is being urged to increase tax by almost everybody and yet does not do it. Something must have happened to the normal Treasury reactions.

Finally, the Government must sort out their energy policy. We have commented on this previously and I feel that here is an opportunity that this country should not miss. The report is vigorous and critical, but, I believe, fair. I believe that the Government should act upon it.

2.36 pm

Jane Griffiths (Reading, East): It is always a pleasure to follow the hon. Member for Orpington (Mr. Horam), who has a long and distinguished record on all environmental matters. I am grateful for the opportunity to make a couple of points on environmental taxation.

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The Government's policy of shifting taxation from environmental "goods" to environmental "bads" is working. The reduced burden of taxation on road fuel gases has been put in place in recognition of their excellent emissions profile. When liquefied petroleum gas burns, virtually all that is produced is carbon dioxide and water, and even the carbon dioxide that is emitted is significantly less than that emitted by conventionally fuelled cars.

The result of this "greening" taxation has been to stimulate and grow a market of 50,000 vehicles to date running on LPG. That is a growth from virtually nil only a few years ago. It is certainly going in the right direction. The London congestion charge will also, I suspect, be a stimulus because most LPG cars will be exempt.

The potential market for LPG vehicles is far from being reached. In Japan, which has specific congestion and pollution problems, virtually all the taxis run on LPG and the country is one of the highest users of LPG in the world. Italy has the highest number of vehicles running on the fuel, with around 1.2 million, followed by South Korea and Australia.

Her Majesty's Treasury, I have noted, takes a rather cautious approach to shifting the burden of taxation, probably rightly. It has a natural horror of deadweight expenditure. The result is that environmental benefits—many of them now quantifiable in cash terms and lives saved—are sometimes slower to be delivered than they might otherwise be.

A good example of that is the company car tax regime, which is being gradually reshaped to bear down on the gas-guzzlers and the heavy carbon emitters. It is an area that could do with some joined-up policy thinking. It reflects a current separation between the climate change anti-carbon policy and the air quality anti-pollution policy. Company car taxation addresses carbon but does not yet adequately address pollutants. The importance of this is that it is among company fleets that the most dramatic gain can be produced, by choosing LPG over traditional fuels. A greater recognition of the desirability of LPG over petrol and diesel should be built into the car tax regime.

For instance, the fuel scale charges and VAT charges are at present not only heavy on the use of LPG, but unfair, since consumption of LPG is taxed as if it cost the same as petrol or diesel, despite the fact that it is only half the price.

Environmental taxation has not been deployed to refrigerants. Most fridges and cooling systems in the United Kingdom run on hydroflurocarbons, which are recognised as highly damaging by contributing to global warming. The trouble is that HFCs leak at a rate of 30 per cent. a year on distributed systems. The UK has to an extent relied on voluntary actions to improve the leakage, and that approach is given solemn lip service. Far be it from me to suggest that manufacturers have a vested interest in selling as much top-up HFC as they can.

The UK policy is delineated in the climate change UK programme, which states:

So we rely on exhortation to produce change in the private sector. When we examine the pattern of procurement in the public sector, we find that the record is—if I am to

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be generous—patchy. If ever there was a case for a new economic instrument, this is it. I plead with my right hon. Friend the Financial Secretary to consider that.

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