Electricity supply levy

Question (this day) again proposed, That the clause stand part of the Bill.

I was in the middle of dealing with questions about EU emissions trading scheme receipts asked by the hon. Member for Wealden and had explained, somewhat to the dismay of certain members of the Committee, that the problem was that we did not yet have a decision from EUROSTAT—the EU statistical agency—on how EU ETS receipts should be classified in the public finances. For that entirely reasonable reason, we were not able to publish them in advance of such a decision, but we had tried to provide some information. That has been done—the hon. Gentleman is aware of this—by including the receipts in other taxes and royalties in that line in the relevant tables in Treasury publications. I understand why he considers that unsatisfactory, and we have gone further to indicate the sorts of moneys involved. Those moneys are put as public finances forecasts in the Budget and pre-Budget report and are based on the likely number of allowances and the secondary market price for carbon.

The hon. Gentleman may or may not be aware that the 2009 pre-Budget report noted that, to date, UK carbon auctions have raised more than £350 million and that future revenue was set to rise to about £2 billion in 2013-14. Those moneys are contained in the Consolidated Fund, and as with other moneys, which are raised in a variety of ways, they are, of course, used to fund the Government’s programmes. They therefore constitute public finance. If we took the money from those sources, we would essentially be using public money directly to fund the CCS projects, but our preference is to put the obligation on electricity suppliers, paid for by the suppliers in the form of a levy. I do not know whether the hon. Gentleman seeks further clarification, but I assure him that that is as much information as I can provide him with.

I am very grateful to the Minister; she has been genuinely seeking to be helpful. On the UK carbon auctions to which she refers and the figure of £2 billion for 2013-14, it would be helpful if she let us have—not necessarily immediately because she may not have it—the corresponding figure for each year from now for the whole Budget period. As a result of auctioning the EU ETS allowances, do the  Government expect to raise other amounts that would come to the UK on top of those figures or would that be the totality of them?

Unless I stand to be corrected, I imagine that that would be the totality of them. It is not obvious to me where else moneys would come from. The hon. Gentleman will be aware of the EU raising finance through allowances from the new entrants reserve, which will fund some EU projects, but that is a separate matter, although the UK will benefit because we will undoubtedly have EU-funded projects in the UK. That is our expectation.

I think that I have explained the situation and given as much information as possible, but it is important to distinguish, for the matters covered in the debate, the fact that the Government’s position is not to take public funds directly to fund projects 2 to 4—and, indeed, project 1 now—but to do that through the levy system. Of course, that is the matter that we have been debating.

I was asked about the contract for difference, and I said that I would attempt to answer that question before going on to the main stand part debate. The hon. Member for Wealden raised the matter and related it to the carbon price. He is right to point out the benefits of a contract for difference related to the carbon price. Clearly, over time, the amount of payment through the levy could therefore conceivably reduce, which would be an obvious advantage.

We have consulted on the matter and two proposals were put last year. One proposal was the contract for difference, linked to the quantity of CO2 abated, and the other was to make an additional payment linked to the amount of CCS electricity supplied. We need to do further analysis with the Treasury, and we will, of course, need to take a decision in time for the launch of the competition for further projects. So there is no final decision on that, but we share the hon. Gentleman’s view that there could be an advantage in the contract for difference linked to the carbon price.

I also want to raise a matter discussed this morning. Questions were asked about which suppliers would have to pay the levy. The debate was about large, small and local companies and so on, and in seeking to clarify, I indicated that the levy would be imposed only on licensed suppliers. That is indeed our preferred course.

But.

But we do, of course, have to consult. Therefore, it was premature of me to say definitively that we will do it that way. For the sake of accuracy and clarity, let me make it clear that that is our current intention, but it will be subject to consultation.

I thank the Minister for giving way, as I raised that point with her earlier in her speech this morning, when she said that perhaps very large suppliers would have a different tariff. Does she imagine a multi-tiered approach to levies, perhaps going from the largest to the smallest provider?

The hon. Lady is confusing suppliers and supplies. I think that she is referring to when I mentioned representations from intensive users. It is the  people receiving the largest amount of supplies who have made representations that, for example, there could be a ceiling on the amount of supplies that should suffer the levy. That goes back to the suppliers, but those who use the electricity have made those representations. This is not a distinction between large and small supply companies.

I am grateful to the Minister for that explanation. I asked about and relationship between suppliers and the levy on big users, because costs proportionately fall more heavily on the smaller than on the large business. I asked but did not get a clear enough answer. She has now clarified the situation to the extent that I need more clarification with regard to my question.

Everyone is suggesting that they are confused. Let me be clear: I am not saying anything absolute on this matter. I simply raised this issue—regrettably perhaps—and admitted to the fact that we have received representations from people who are heavy users and want some limit on how the levy paid by the supplier companies will impact them. I am not in a position to give the hon. Gentleman any further information. We have provisions in the Bill, and I have made it clear that we have no intention to exempt at the moment, despite representations from a variety of sources—including renewables, which we also discussed—with the sole exception of exported, not imported, electricity. We will not be looking to exempt. That is the position now, but things may change substantially; we are in a new field altogether, as regards the economics and the progress of the project. I am afraid that I cannot help the hon. Gentleman further, and I hope that I am not making things more complicated by what I have just said.

Will the Minister give way?

I will, but we are in danger of complicating things and not moving any further. There is a limit on what I can say at the moment, but I stress again that we will have to undertake further consultation, including on the regulations.

It is exactly a question about consultation that I want to ask. Who will conduct the consultation? Does the Minister envisage the new office of carbon capture and storage taking that on, or will the Department push it through?

Once we complete our debate here and the Bill, hopefully, becomes an Act, the details of the discussions will be lost until we get more direction from either the Minister through a statement or the new office. If a company that supplies electricity has a mix of one third-two thirds, where one third comes from a renewable source that produces no CO2 emissions, will that have any effect on the size of its levy?

I have made it clear that there is absolutely no intention at the moment to exempt the supply that is derived from renewable sources. I have made that absolutely clear throughout the debate; it is not an area of confusion.

On the other question that the hon. Gentleman posed, the consultation will be a formal Government one in the normal way. The Government will set out proposed plans for regulations, and they will be part of a formal Government consultation, which will take the normal 12 weeks. The Government will, of course, publish the results, as is normal, and respond. [Interruption.] Perhaps I am not the one to sit down. I think and hope that I have succeeded in answering the questions that were outstanding at the point at which we were interrupted.

May I remind the Minister of one? I asked her about the cost. What will be the total amount of the levy and the cost of the project? How much will people have to pay? I would be grateful for her answer.

I have answered the question, but the hon. Gentleman may not have found it sufficient, because all I provided him with was the total sum and the range, which we think, from memory, will be between £7.2 billion and £9.5 billion. That is the amount of money that would be raised by the proposed levy. How that will be disbursed and exactly where in that range we will end up depends on the actual projects and their nature. Until we know that, it is impossible to arrive at the final sums. So I say again that I am honestly giving the Committee as much information as possible at the moment.

That is the global cost, but the other question in which consumers will be interested is what it will add to the bill. Can the Minister give us parameters for that?

I think I can do that. We have suggested that we are probably looking at a 2 to 3 per cent. increase in bills, looking towards 2020—about £15 to £17 per annum per consumer. There will be no immediate effect on bills and, probably, no significant effect before 2015, which is quite far off. We are concerned about any addition to customers’ bills, but we have to see this in the round and see what we can provide for customers. Energy security is, very topically, what consumers will want and we believe that this is a substantial way of providing that energy security and appropriate energy mix.

The clause gives the Secretary of State the power to raise funds, based on the provision of financial assistance to CCS demonstration projects, which could include support for the retrofit of CCS to the full capacity of the power stations hosting the demonstration projects, should a decision be taken to do so in the future. Those funds will be raised through the charging of a levy on electricity supplies, with the levy to be paid by electricity suppliers.

I am grateful to the Minister for giving way and appreciate that I am testing her patience early in the proceedings. If we create a technology that is not only successful here but is exported to other parts of the world—which I think is what she implied earlier—is there any mechanism by which the taxpayer would benefit by getting some form of rebate? Is there any way—through patents or other methods and financial structures—in which this amount, which could be up to £9.5 billion, could be repaid to the taxpayer?

The taxpayer will get value for money, if this succeeds, in energy security. The taxpayer would get benefits from any form of exports; there are jobs in exports. I have no doubt that there are benefits for taxpayers. I do not envisage at the moment—though one can never say never—a means of clawing back money. If under the contract payments are made according to differences in the carbon price, that will properly reflect how well things are going in the market. We are going down the route of a levy only because we understand that these projects would not be commercially viable unless the payments were made. Therefore, we have to be prepared to commit that money and to bear the burden—I have indicated that it will not be huge, but there will be a small increase in consumer bills in due course—because of the benefits that will accrue overall. We would not envisage trying to claw back; we are trying to give people confidence in going ahead with these projects, with support. We want to do that as efficiently as possible and at the best cost. None the less, I do not anticipate what the hon. Gentleman suggests.

The clause sets out a non-exhaustive list of matters that may be covered by the regulations governing the levy mechanism. In particular, provisions allow the regulations to prescribe to what types of supplies the levy will apply and the suppliers who will be liable to pay the levy. Provisions under the clause will also allow for different rates of levy to be set in different cases. The clause allows for measures to apply relating to the enforcement of the levy, including the penalties for late or non-payment.

Before making regulations under the provision, the Secretary of State must consult the administrator and such other persons as he considers appropriate. Importantly, regulations must be laid in draft and approved by both Houses of Parliament before they can be made, ensuring that Parliament will have the opportunity to scrutinise the detailed provision made about the levy. The provisions in the clause are required to set the framework for the levy mechanism needed to support UK demonstration of CCS.

We have had a useful debate, and I am grateful to the Minister for the extra clarification. We will not seek to block the clause, but we would prefer funding for the developments to come through the EU ETS. I recognise that she has given further guidance, but we think that that is a new source of funding that does not add to consumers’ bills at this time. Consumers are already anxious about their bills, and an additional levy must inevitably cause some complications.

Does the hon. Gentleman not follow my argument that if he were to take money that has gone to the Consolidated Fund—receipts from auctions—he would deprive other areas of public finance, such as schools and hospitals, which are very much needed and will continue to be needed in the future? Whichever way he looks at it, the small amount that the levy would put on people’s bills would be completely offset by his proposals directly to take public funds, which would be much worse.

What has been clear in our discussion is that the funding is opaque. If we look at the budget book and the documentation, it is difficult to see exactly how much there is. Today, for the first time, after  months of asking for information, we have had some detail on how much money is assumed to come from the EU ETS. We need to look further at how that is allocated. We cannot do that at this stage, and we do not seek to do so. However, it is a means of avoiding a levy on consumers, which would have been nice.

The Government are determined to pursue the levy approach. We will not seek to block that, because, in the event that money is not available through the EU ETS, it provides certainty to industry that funding will be available.

Question put and agreed to.

Clause 4accordingly ordered to stand part of the Bill.