Why Labour is right to oppose Britain’s new carbon tax

By 2015, the coalition's carbon price floor will be inextricably linked with rising energy prices.

Just after 7pm on 5 July last year a significant but largely unnoticed piece of political positioning took place that will increasingly take centre stage at Westminster.  As MPs debated the Finance Bill, line by line, Labour’s Shadow Economic Secretary, Kerry McCarthy, announced that the party would oppose the coalition’s plans to impose a carbon price floor on electricity generators and industry from April 2013. 

The then Economic Secretary, Justine Greening, sought common ground in the debate but Labour stood firm and refused to withdraw its amendment. The House divided and the legislation passed with a majority of 59. Some nervous Tory MPs decided to raise their valid concerns over the impact of a new high carbon tax and three voted against the coalition's clause with many abstentions, but this was well before coalition policy U-turns had become an established fact of Westminster proceedings.

So why was this significant, and why could this play well for Labour in the run up to the next election? Ironically, one has to look at Australia where the incumbent Labor government has just introduced its own carbon price floor (known commonly as the carbon tax) and is now trailing the Liberal/Conservative opposition by up to 20 per cent.

So what is the problem? The price of carbon, traditionally set in the market through the European Union Emissions Trading Scheme (EU ETS), is arguably far too low at around £5/6 per tonne, and therefore, it is argued, too uncertain for the long-term low carbon investment decisions that need to be made. In response, the coalition has decided to impose a unilateral UK carbon price floor to set a guaranteed minimum price for carbon. It has turned its back on the EU scheme, which has kept carbon prices in the UK level with those across Europe.

In effect, the new policy will introduce a UK floor on the price of carbon emissions facing power generators and industry in the UK. If the ETS price is ever above the floor, the tax would be zero; if the EUA price is below the floor, the new tax would make up the difference.

The 2011 Budget confirmed the introduction of this tax from 1 April 2013. The floor will start at £16 per tonne of carbon dioxide (tCO2) and follow a linear path to target £30/tCO2 in 2020 (both in 2009 prices), rising to £70/tCO2 in 2030. According to Treasury, the new tax would raise £3.22bn in tax revenues by 2015-16, which is (unsurprisingly enough) roughly about the amount HM Treasury offered in giveaways at the 2011 Budget. But Britain’s policy to now go it alone with its own carbon price floor from next April risks, undermining any effective and consolidated move to deliver a similar minimum price for carbon in other countries, especially across our main economic competitors in the EU.

So Britain will abandon the EU Emissions Trading Scheme where its absence will allow the price of carbon on the continent to fall to new lows. Today, the price of carbon in recession-hit Europe is only around £5/6 per tonne. It is highly likely that from April next year, when British generators and industry are paying £16 per tonne for carbon, our European competitors could be paying a third of the price. 

Also, given that over 70 per cent of UK electricity is generated from coal and gas plants, this is likely to help electricity bills to spike from 2013 further boosting fuel poverty.  By leaving the EU ETS the government has abrogated its right to lead the fight for a pan EU carbon price floor which would have allowed the UK to operate on a level playing field with the rest of Europe.

The ongoing political debate has confirmed what investors have known ever since the policy was introduced - that the "floor" is nothing more than another fuel duty escalator that can't possibly be banked on, that it won't actually reduce net emissions in the EU; that the best way of introducing a carbon price floor is at a European level and this has been largely been ignored; and that it is a policy that will do nothing for investor confidence, except for providing a windfall to existing low carbon generation, particularly existing nuclear power stations.

So Labour goes to the general election opposing the coalition’s new carbon tax, which by 2015 will inevitably have its fingerprints all over rising energy prices and will have caused some sections of energy intensive industry to scale back plans and cut jobs. Whilst Ed Miliband might not sound or look like Australia’s Tony Abbott, his opposition to Britain’s new carbon tax could prove just as effective as Abbott’s, but with Britain’s voters.

Tony Lodge is a Research Fellow at the Centre for Policy Studies.  His new pamphlet, The Atomic Clock – How the Coalition is Gambling with Britain’s Energy Policy, is published by the CPS.

 

Electricity pylons crossing the Essex countryside. Photograph: Getty Images
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Who "speaks for England" - and for that matter, what is "England"?

The Hollywood producer Sam Gold­wyn once demanded, “Let’s have some new clichés.” The Daily Mail, however, is always happiest with the old ones.

The Hollywood producer Sam Gold­wyn once demanded, “Let’s have some new clichés.” The Daily Mail, however, is always happiest with the old ones. It trotted out Leo Amery’s House of Commons call from September 1939, “Speak for England”, for the headline on a deranged leader that filled a picture-free front page on David Cameron’s “deal” to keep Britain in the EU.

Demands that somebody or other speak for England have followed thick and fast ever since Amery addressed his call to Labour’s Arthur Greenwood when Neville Chamberlain was still dithering over war with Hitler. Tory MPs shouted, “Speak for England!” when Michael Foot, the then Labour leader, rose in the Commons in 1982 after Argentina’s invasion of the Falklands. The Mail columnist Andrew Alexander called on Clare Short to “speak for England” over the Iraq War in 2003. “Can [Ed] Miliband speak for England?” Anthony Barnett asked in this very magazine in 2013. (Judging by the 2015 election result, one would say not.) “I speak for England,” claimed John Redwood last year. “Labour must speak for England,” countered Frank Field soon afterwards.

The Mail’s invocation of Amery was misconceived for two reasons. First, Amery wanted us to wage war in Europe in support of Hitler’s victims in Poland and elsewhere and in alliance with France, not to isolate ourselves from the continent. Second, “speak for England” in recent years has been used in support of “English votes for English laws”, following proposals for further devolution to Scotland. As the Mail was among the most adamant in demanding that Scots keep their noses out of English affairs, it’s a bit rich of it now to state “of course, by ‘England’. . . we mean the whole of the United Kingdom”.

 

EU immemorial

The Mail is also wrong in arguing that “we are at a crossroads in our island history”. The suggestion that the choice is between “submitting to a statist, unelected bureaucracy in Brussels” and reclaiming our ancient island liberties is pure nonsense. In the long run, withdrawing from the EU will make little difference. Levels of immigration will be determined, as they always have been, mainly by employers’ demands for labour and the difficulties of policing the borders of a country that has become a leading international transport hub. The terms on which we continue to trade with EU members will be determined largely by unelected bureaucrats in Brussels after discussions with unelected bureaucrats in London.

The British are bored by the EU and the interminable Westminster arguments. If voters support Brexit, it will probably be because they then expect to hear no more on the subject. They will be sadly mistaken. The withdrawal negotiations will take years, with the Farages and Duncan Smiths still foaming at the mouth, Cameron still claiming phoney victories and Angela Merkel, François Hollande and the dreaded Jean-Claude Juncker playing a bigger part in our lives than ever.

 

An empty cabinet

Meanwhile, one wonders what has become of Jeremy Corbyn or, indeed, the rest of the shadow cabinet. The Mail’s “speak for England” leader excoriated him for not mentioning “the Number One subject of the hour” at PM’s Questions but instead asking about a shortage of therapeutic radiographers in the NHS. In fact, the NHS’s problems – almost wholly caused by Tory “reforms” and spending cuts – would concern more people than does our future in the EU. But radiographers are hardly headline news, and Corbyn and his team seem unable to get anything into the nation’s “any other business”, never mind to the top of its agenda.

Public services deteriorate by the day, George Osborne’s fiscal plans look increasingly awry, and attempts to wring tax receipts out of big corporations appear hopelessly inadequate. Yet since Christmas I have hardly seen a shadow minister featured in the papers or spotted one on TV, except to say something about Trident, another subject that most voters don’t care about.

 

Incurable prose

According to the Guardian’s admirable but (let’s be honest) rather tedious series celeb­rating the NHS, a US health-care firm has advised investors that “privatisation of the UK marketplace . . . should create organic and de novo opportunities”. I have no idea what this means, though it sounds ominous. But I am quite certain I don’t want my local hospital or GP practice run by people who write prose like that.

 

Fashionable Foxes

My home-town football team, Leicester City, are normally so unfashionable that they’re not even fashionable in Leicester, where the smart set mostly watch the rugby union team Leicester Tigers. Even when they installed themselves near the top of the Premier League before Christmas, newspapers scarcely noticed them.

Now, with the Foxes five points clear at the top and 7-4 favourites for their first title, that mistake is corrected and the sports pages are running out of superlatives, a comparison with Barcelona being the most improbable. Even I, not a football enthusiast, have watched a few matches. If more football were played as Leicester play it – moving at speed towards their opponents’ goal rather than aimlessly weaving pretty patterns in midfield – I would watch the game more.

Nevertheless, I recall 1963, when Leicester headed the old First Division with five games to play. They picked up only one more point and finished fourth, nine points adrift of the league winners, Everton.

 

Gum unstuck

No, I don’t chew toothpaste to stop me smoking, as the last week’s column strangely suggested. I chew Nicorette gum, a reference written at some stage but somehow lost (probably by me) before it reached print.

Editor: The chief sub apologises for this mistake, which was hers

Peter Wilby was editor of the Independent on Sunday from 1995 to 1996 and of the New Statesman from 1998 to 2005. He writes the weekly First Thoughts column for the NS.

This article first appeared in the 11 February 2016 issue of the New Statesman, The legacy of Europe's worst battle