Conservatives for Britain continues the serialisation of its Brexit Manifesto by showing how a future Conservative government could use the £10bn we send to the EU which we don’t get back to end austerity.

The UK currently hands over £19 billion to the EU every year. We get £9 billion back in services and the rebate which means when we Vote Leave we will be able to guarantee all the funding to farmers, universities and regional grants that currently come from the EU and still have £10 billion more to spend on our priorities like the NHS.

The Conservatives for Britain spending suggestions for the first post-Brexit budget include:

£1.1 billion for disability benefits to avoid controversial cuts
£800 million to train an extra 60,000 nurses a year to deal with shortages and excess agency staff
£250 million a year to provide an additional 10,000 doctors a year to deal with doctor shortages and to staff the seven day NHS well
£750 million a year on social care to offering better support for people in their own homes, and for more care home and respite care places.
£200 million to cancel hospital car parking charges
£400 million for dearer medical treatments not currently licensed by NICE, for example cancer treatments such as Proton Beam therapy and Meningitis vaccines
£1.9 billion to abolish VAT on domestic energy, energy saving materials, on converting existing dwellings and on carry cots, children’s car seats and safety seats
£1.5 billion to keep Council Tax down by offering councils the money to pay for a discount on bills they issue
£900 million to remove Stamp Duty on the £125,000 to £250,000 band of home purchase
£500 million should be allocated to a local road fund to support local schemes to improve junction safety and flows, and to provide additional capacity and bypasses on busy roads in congested areas

Commenting, John Redwood said:

‘The UK currently hands over £19 billion to the EU every year. That’s £350 million a week. If we Vote Leave we will be able to spend our money on our priorities like the NHS. We would have an extra £10 billion to spend allowing us to recruit thousands of new nurses and doctors.

‘We would be able to provide the latest cancer treatments that the NHS currently can not afford and provide extra money for people who are frail and need long term care. We would no longer need to make controversial cuts to disability benefits and we could scrap the tampon tax and the EU’s VAT increases on green goods like solar panels.

‘Instead of sending billions abroad each year we should spend that money on improving our NHS and helping families by cutting unfair EU taxes. That’s why the safer choice in this referendum is to Vote Leave.’

Section-3-Budget

Yesterday I was told that VAT on energy saving materials is not going up in the budget. I found that surprising, as I believed the consultation document HMRC (part of the Treasury)  put out on 9 December 2015. It stated clearly

“In line with the CJEU’s judgement, the government intends to amend the relevant legislation in the Finance Bill 2016.” “The purpose of this consultation is to receive comments as to whether or not the proposed legislation achieves its objective…”

The Consultation document made clear that the lower 5% rate of VAT on solar panels, water turbines and wind turbines would be replaced with a 20% rate. It also showed that in certain cases installations will in future only attract the lower rate on all energy saving materials if they are to “people living in dwellings who have a social need (qualifying persons) “etc  Other installations in residential dwellings will depend on the cost of installation relative to the energy saving materials. The Treasury estimated this as being a £65 m tax hike in a full year.

The truth is the UK lost its case in the European Court last summer. The European Commission took the UK to court, demanding that we raise VAT on energy saving materials in various cases. The Court decided clearly in favour of the Commission.  The Court said

 

“the United Kingdom of GB and NI has failed to fulfil its obligations under Article 98 of the VAT Directive , read in conjunction with Annex III thereto”.

 

In view of the fact that VAT is an EU tax, all the time the UK is in the EU it has to comply with EU law. The ECJ decides this, not the UK, and has recently decided the UK has to raise VAT on energy saving materials. The HMRC consultation is quite clear about what has to be done. It is not a consultation on whether we should do it or not, just a technical consultation on whether their latest proposals will ensure the UK complies. So why are some now  told the Finance Bill will not contain a VAT rise on energy saving materials?

 

The government seems to think it will get some new flexibility over VAT. This would require a new VAT policy from the Commission and changes to EU law. In the meantime the UK has  broken the current EU law and has been ordered by the European Court to change our law instead. When is this legal tangle going to be sorted out? Is the EU really going to change its law In the way we want? If so, how and when? Are we going to be fined for non compliance? Will we see the new draft law before the referendum?

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Before the last election Mr Cameron was attentive and available to MPs who wanted a change of course. He was persuaded by some of us to veto the Fiscal treaty, to offer a referendum and to seek to cut the EU budget, for example. Although he did not have a fully representative number of Eurosceptic Ministers in the government, he did make up for that to some extent by meeting with us and seeking to understand our concerns. We were delighted with the offer of a referendum, and redoubled our efforts to achieve a Conservative government on the strength of it.

Since the election Mr Cameron has been  spending much more  time with other EU leaders than with Eurosceptic backbenchers. Maybe that goes with the job. Maybe it was necessary to undertake a renegotiation. In part it is because the EU has entered another one of its phases of permanent crisis, with the great migration testing the borderless empire to destruction of the policy whilst the financial tensions of the Euro continue to play in many parts of the currency zone. He was of course abroad when the IDS problem blew up, showing again the difficulty  of EU entanglements to domestic politics, taking a PM away from crucial domestic matters when it is important to be available in person.

Whilst this may all be an understandable use of Prime Ministerial time, the danger is he loses sufficient contact and understanding with his own party, the very force that keeps him in office. Ending up on the opposite side to a majority of his party members and to around half his Parliamentary party on the EU issue despite indicating clearly he would like them to side with him creates new issues in party management that need careful and urgent attention. If he retains his understanding  of the merits of the Eurosceptic case and can sympathise with what we are doing it can be handled. If he gets to the point where he has forgotten all the reservations he has expressed in the past about the EU, and the apparent narrow call he made to recommend staying in, then he will find it more difficult to put the party back as one after the result of the vote. Some of us were proud to help with the Bloomberg speech, and many were pleased with its clear message that democratic accountability had to rest in the UK from the people to their Parliament. That is what we are trying to restore by proposing we leave the EU.

So what needs the Prime Minister to do to unite his party? He needs first of all to demonstrate that Ministerial jobs are as open to pro Leave people as to Remain people – I speak for many talented colleagues who wish us to leave, not for myself. The replacement of Iain Duncan Smith with a Remain person is not a good first step. If Leave wins then of course all the crucial roles that are EU facing and are part of the negotiation for exit need to  be taken by people who believe in exit. That modest minority who wished to remain and have been long term believers in the project also deserve their share of positions, but those who have voted Remain with little conviction do not need a representative quota given the views of the party but should be judged solely on their Ministerial merits. Were Remain to win the half of the Parliamentary party that wants out will be  bitterly disappointed as they are believers and representatives of much of the party membership , so will need to be involved in the government that follows. Again some of them could  be useful in EU facing roles to try to prevent the EU using their win in our vote to brush the UK’s continuing legitimate concerns aside.

He also needs to nuance his comments in the referendum campaign. He speaks as if the only thing that matters to him is winning, turning a deaf ear to the legitimate  views of the other side. That is fine for a partisan fighting a  normal election, as such  partisans don’t win the right to stay in office if they lose. As he wishes to remain  Prime Minister, he has to remember that the Prime Minister has to speak as best he can for the whole nation. As party leader he has to speak for the majority of his party. If he spends the next few weeks denying, criticising and brushing aside everything we believe in about the fundamentals of our democracy and our nation, it will  be that much more difficult for him to put it all together again afterwards.

I respect those on the other side of the EU debate who genuinely want a United Europe, with full banking, monetary, economic and political union as the leaders of the EU want. I disagree with them, but understand their vision. I find it  very difficult to understand people who argue with us about how imperfect the EU is, and then insist we stay in it for fear of them trying to  be nasty to us if we leave. The UK has no tradition of giving in to bullies. It is  bizarre that the main view that many pro EU people have in the UK is that our partners are nasty. Fortunately they would not be powerful enough to hurt us.

I drew attention to the fact that the official minutes of the 7 March EU/Turkey Agreement made clear that all member states need to lift visa restrictions on Turkey by June this year. The UK government keeps saying this does not apply to the UK.  I suggested they have the minutes amended in that case.

 

Far from doing so, the minutes of the European Council held 17-18 March  reconfirmed the minutes of the 7 March “Following the decisions of the Heads of State of government of 7 March”  the European Council “calls for the full implementation of the EU-Turkey statement”.  So if we assume the UK is not actually going to lift visa restrictions we are left wondering why official statements of the Heads of State and government which we are asked to rely on in other contexts are wrong on this matter. We also need to remember how assurances that the UK would not have to bail out Euro countries were swept aside when it came to a new loan for Greece.

There can be no opt out for the UK when it comes to possible Turkish membership of the EU. There we are told clearly in the minutes of the Council meeting that ” the EU and Turkey reconfirmed their commitment to re energise the accession process” for Turkey to become a full member.

Visa liberalisation even if confined to the continent means many more people having easy access to the EU and possibly establishing citizenship and free movement rights to the UK  as well as the rest of the EU. Full membership of course brings complete freedom of movement. In view of the pressure on us already from the many people in the rest of the EU who want to work and live here, we do need to consider this Turkish issue more seriously. One of the failings of William Hague’s Referendum Act was it does not give the UK people a vote on new members joining the EU, though they can represent a big change to the EU and to our obligations as. Result.

Since 2010 the government has been keen to reduce inequality and to promote more work and better paid jobs for the unemployed and the lower paid. It has pursued a policy of taking more and more low earners out of income tax altogether. It has removed Stamp Duty for lower priced properties and cut the tax on anything under £1 million. It has provided savings schemes which offer incentive and top up to savers in modest financial circumstances. It has raised the Minimum Wage and provided pension saving plans for the lower paid.

The Equality Trust concludes that “Compared to other OECD countries the UK has a relatively equal distribution of wealth”. Whilst drawing attention to above average income inequality, the figures show that income inequality has fallen since 2010. The Gini coefficient of inequality has fallen from 36 to 34. The main purpose of the welfare reforms is to make working more worthwhile, and to help more people into employment. The economy has generated a large number of new jobs since 2010, and this has helped  bring down unemployment and tackle inequality. Tax on the richest has risen.

Concentrating on educational reform is the  best way of reducing inequality in the longer term. Freezing fuel duty has helped all those who need to travel to work by car, and all who need vehicles for their work.

John Redwood: I welcome the Bill because it attempts to deal with some of the damage that has accumulated in recent years as a result of the policies of the Labour Government, who neglected the need for more energy and security of supply, and some of the European Union’s interventions.

I welcome the cross-party attempts to breathe some life into the North sea industry, which has been crucial over many years. As many have pointed out, it is going through a troubled time and anything that can be done by the Oil and Gas Authority or directly by the Government is to be welcomed. For example, now is a good time to remove the petroleum revenue tax, which is a rather silly, unpleasant tax introduced by the Labour party for internal political reasons near the beginning of activities in the North sea. It yields no revenue at the moment, so it would be a good time to get rid of it to show that we want normal profit and revenue taxes, not super-taxes, on North sea activities when the good times return. I hope that the Chancellor will bear in mind the needs of the industry in his forthcoming Budget, because things could be done on tax to promote more investment against the background of a weak oil price, which is no great incentive for making new things happen.

I hope that the Bill will contribute towards taking security of supply seriously. The Government regularly tell us that they want our country to be secure—an aim that I hope is shared across the Chamber. An important way for a country to become more secure is through controlling its own energy resources. The United Kingdom is a relatively privileged country geographically, because it has substantial reserves of oil, gas and coal. We have recently discovered the likelihood of new gas reserves onshore, which should be available to exploit sensibly. We also have plenty of water around that allows us to have hydro-type renewables, which are genuinely renewable and continuously available, unlike the unreliable wind, about which we had a good debate earlier. As the Government go about implementing the Bill, I trust that they will have security of supply at the forefront of their mind.

George Kerevan (East Lothian) (SNP): Where does the security of supply lie in the Prime Minister flying to Paris to ask the French President to fund a nuclear power station that will supply 7% of our electricity, when France clearly will not do so?

John Redwood: That must be worked out between the contracting parties. I have not been urging them to do that, but I wish them well in whatever negotiations are under way. I accept that if they can find a way of producing relatively sensibly priced power on a continuous basis from a nuclear power station, that has all sorts of advantages for the security of supply. I assume that they will ensure that all the technology and the ability to control, repair and maintain the station will rest in the United Kingdom, because we can have true security only if we control the technology and have the industrial resources to be able to build and mend the facility being created. We must also bear that in mind for weapons procurement. If we want a secure country, we need an industry that can support it and is capable in adversity of seeing us through. We cannot rely on imports for everything, and we are already relying too much on imports in the crucial area of energy, so I hope the Bill will help us to stop thinking that we can automatically rely on French electricity and Russian gas indirectly through the European system.

George Kerevan: On that point, after France, the Chancellor of the Exchequer seems bent on handing over the entire British nuclear industry to China.

John Redwood: I trust not. I have not seen all the documents, but I am sure that we will see more of the detail in due course as and when more decisions are taken. If my right hon. Friend the Chancellor is negotiating such a deal, I urge him to ensure that we have control of and an understanding of the technology. I see from the nods from my Front-Bench team that that is exactly what they have in mind. A country does not have secure power if it is dependent on those abroad to maintain a power station and does not understand how to mend it, improve it or make it function at a crucial moment. Of course we need to probe to make sure that the Government are doing the right thing, but we get that security only if we control the technology.
Let me return to the point about security vis-à-vis imports and our own capability. We are becoming too dependent on imported power, and we have to remember that if our imports are to come from the European continent, that area is short of energy in general, and it has a policy to make energy scarce and very expensive. The west of the continent does not get on well with Mr Putin, yet indirectly it relies on his gas, and that is not a strong strategic position to be in. I want our country not to be in any way beholden indirectly to Putin’s gas or to the general network on the continent, which is clearly weakened by the necessity to have Russian supplies in the eastern part of the system. The UK, as an island nation, with access to such riches both onshore and offshore, and with the ability to generate more genuine renewables that are continuously available, should be able to have a secure supply and sufficient capacity in reserve when need arises.

We wish to be a greater industrial power than we are. We are the fifth largest economy in the world but we are very dependent on a very big service sector and our industrial sector has, under Governments of all persuasions in the past 30 years, shrunk as a proportion of it. We still have some great companies and some great technology but we need more of them and we need to broaden the industrial base. In order to have that capability in Britain, so that we can make our own power stations, generators and engines, we need to make sure that we have sufficient and cheap energy to fuel those factories, forges, facilities and blast furnaces.

We meet tonight against the backdrop of our steel industry gravely at risk. One of the main contributory factors to the risk to our steel industry is scarce and dear energy; there are also chronic problems with steel prices and Chinese competition now, but this began with an energy problem. We cannot hope to be one of the big world forces in energy-intensive industries if we do not have more plentiful energy at cheaper prices.

I wish the Bill and the Secretary of State well. The Government must have as their fundamental aim security of supply, because without secure energy a country is very limited in its foreign policy options and has to tailor its diplomacy accordingly. I see us becoming too dependent. We wish to correct our balance of payments, and getting into energy surplus would not only be a very good contribution to that aim, but would strengthen our diplomatic and political security. As we wish to reindustrialise, we need more and cheaper energy. We are not going to get that on a diet of wind farms and speculative renewable technologies that are not yet available, and are very expensive and difficult to scale up. We can get that affordable energy if we extract the oil, gas and coal, and process it in an environmentally friendly way to the extent that can be achieved, if we have more gas turbine power stations and more reliable baseload power stations. We are going to leave ourselves vulnerable and insecure if we depend on a combination of European imports and too many wind farms. I therefore say: may the OGA do well, may it find ways of bringing on stream the new reserves we are just discovering and may it find ways of extending the lives of the existing fields and of the pools of talent and expertise we have, particularly in Scotland, where we need them still.

I am glad the government is withdrawing its disability payment cuts. I lobbied against them as did other MPs.

I am sad Iain Duncan Smith has had to leave the government, as he is so committed to a better deal for those on benefits.

It also means the loss of one of the major Brexit figures from the government, which makes the Cabinet even less representative of the modern Conservative party

 

 

 

 

 

John Redwood (Wokingham) (Con):
I support the main measures in the Budget, and the thrust of the Budget statement. I strongly welcome the tax reductions. I am very pleased that the Chancellor is making progress in implementing our promises to take more people out of income tax altogether, and to take people out of 40% tax when they are on relatively modest incomes in comparison with the costs of housing and living in many parts of the country. The more progress we can make in that regard, the better.

I am delighted that I, and others, made representations on behalf of the North Sea oil industry, that those representations have been well heard, and that substantial changes have been made. It is important for us to do all that we can to give that industry, which has been hit by the very low oil price, some momentum and some hope for the future. I am also very pleased about the capital gains tax changes, because I have campaigned for them for some time. I think we will find that they bring in more revenue, not less.

It is interesting to read the forecast in the Red Book that, by 2019-20, there will be a substantial increase in revenues from CGT at the lower rate, but there will be a period of no increases for two or three years. I find that a surprising profile, and I think it draws attention to an underlying problem. I do not think that the economic models and the tax forecasting system used by the Office for Budget Responsibility are fit for purpose. The OBR was obviously very wrong about the impact of the reduction in the 50p rate to 45p: there was a big surge in revenues which was not in the original forecast figures.

This is the background against which we meet today. Many of the changes that the Chancellor has had to make are simply a result of the OBR changing its mind over the very short period between the autumn statement and today, and deciding that the economic outlook is not as good as it thought it was at the end of last year. We have to ask why it has reached that conclusion.

John Pugh (Southport) (LD): Does the right hon. Gentleman think that the OBR has been any better at predicting the economy than the Treasury was before?

John Redwood: I do not think that there is very much difference. All economic forecasters experience difficulties in getting their forecasts right, but some of us are more humble about our expectations than these official forecasters. I think that the danger of having an official forecast is that too much credibility is given to it, and big decisions are then made on the back of it. When official forecasters are zinging the forecasts around every three or four months, it becomes difficult for any Chancellor to run a stable medium-term policy involving, for example, important spending items that matter a great deal to our constituents.
I urge the Chancellor to be a little more sceptical about the wisdom and virtue of the OBR forecasts. The one thing of which we can be sure is that, over the period during which we have had the OBR, it has always been wrong, but what is stunning is the degree of the error. The OBR itself kindly points that out to us on page 234 of its very readable book, saying that, on average, it has revised the underlying borrowing forecast by £46 billion for the review period in question on each occasion. Given that the figure is an average, it is clear that the forecast revision has been considerably higher. The OBR tends to make its biggest revisions in autumn statements, but it has given us quite a whopper on this occasion. When a Chancellor must face a £46 billion revision every time he has to do the sums, it makes the task of stable economic management much more difficult. This is one of those instances in which an idea that was intended to produce more stability has proved to be destabilising.

The same can be said, I am afraid, of the current Governor of the Bank of England. The Governor of the Bank of England is meant to provide stability and wisdom, but we have now heard four different mantras from this Governor about when interest rates are going to rise. That is a very important statistic, which informs the forecasts of the OBR.

First of all, the Governor said that interest rates would probably go up when unemployment fell below 7%. When it tumbled rapidly below 7%, the Governor changed his mind. I am glad that he did, but the fact remains that he changed his mind. He then said that when real wages started to go up, interest rates would probably go up as well, and I am pleased to say that almost as soon as he had said it, they started to go up. Then he changed his mind, in that he had apparently not meant what he said.

The Governor then said that the turn of the year, 2015-16, would be a witching hour, when interest rates might have to go up. Well, we roared through the end of the year and the beginning of the new year, and they did not go up. Again, I was pleased about that, because I think it might have been unhelpful if they had. However, that shows that people and institutions who should be good at providing stability can be very destabilising and very misleading, and it is all noise that the Chancellor has to deal with.

The one good thing about all this is that when these ridiculous forecasts are made by the OBR and the Governor of the Bank of England that we would be worse off if we left the European Union, we can completely ignore them. We know that those people are always wrong about the things in which they are meant to specialise, so why should we believe what they say about something that is more important?

Graham Jones (Hyndburn) (Lab): Will the right hon. Gentleman illuminate us on the section of the Chancellor’s speech that dealt with the European Union? Will he share his thoughts with us?

John Redwood: I think that I am doing that now. The Chancellor quoted the OBR, and the one thing that I disagreed with profoundly in a very good Budget was the OBR’s forecast on what would happen with Brexit. [Laughter.] It is not funny. Labour Members might learn something if they listened. They have obviously closed their ears to any idea that an independent Britain could be rich, prosperous and free, but many of us think that we will be more rich, prosperous and free if we leave the EU.

Sammy Wilson (East Antrim) (DUP): Will the right hon. Gentleman give way?

John Redwood: I want to develop the argument a little more. As has already been pointed out, the forecast contains very worrying figures about the balance of payments deficit. And of course, were we to leave the EU, we would immediately have £10 billion at our disposal that we would no longer have to send abroad to be spent in rich countries on the continent. That is the net amount that goes to the continent. So our balance of payments would immediately improve by £10 billion a year if we did not have to make those contributions.

To cheer up Opposition Members even more, and to get them to change their vote, I can tell them that we and they would have the pleasure of spending £10 billion a year more in our own country—[Laughter.] Why is that funny? Why should not British taxpayers who have to pay £10 billion not have the advantage of spending it on things that they want instead of it being spent on new roads in France or Spain? I think my taxpayers want it to be spent here. That £10 billion a year could more than banish the austerity that Opposition Members claim has done some damage to our country. Looking at the figures, we can see that real public spending has gone up all the time under the coalition and the Conservative Government, but not by as much as it went up under previous Governments. If we had that £10 billion back to spend in the United Kingdom, we would have a better profile on public spending and on tax reductions.

Neil Carmichael (Stroud) (Con): Can my right hon. Friend be sure that any figure he quotes is accurate, given that he has just rubbished the OBR and the Bank of England? Presumably he has a list of other British institutions to which he would give the same treatment.

John Redwood: But of course. I have checked the Government’s very own net contribution figures, and it is very likely that they have got those figures right, because even the Government can count how much they have spent and how much they have had to give away to the rest of the European Union. That is the damage that is being done.

On the balance of payments, I would urge my right hon. Friends on the Front Bench to do more work on getting the balance of payments deficit down. Obviously, they will not all agree with me about taking the quick easy hit of getting our £10 billion back to make a big reduction in the deficit, but we need to understand that that deficit is entirely the result of an adverse goods trade with the rest of the European Union. We are in profit with the rest of the world and we are in profit in services, but we have a colossal manufacturing deficit with the rest of the EU. Some of that relates to the way in which France and Germany get round the EU rules to make sure that they can buy French or German product, whereas we in Britain apply the EU rules extremely fairly and end up buying a lot of foreign product from the continent.

It is also the case that the very dear energy that European policies require and enforce is doing a lot of damage to our steel industry, our ceramics industry and other high energy-using industries. It is a great tragedy that, despite higher domestic demand for steel, we are still unable always to use British steel in British public sector contracts. Surely we ought to have a fix to create more demand for our own domestic industries.

We also import massive amounts of timber, despite having a big state sector involvement in the timber industry in this country. Why cannot more be done to cut more of the timber we already have as a state resource to meet our domestic demand, along with replanting and extending the planting, given that many people would like more forests? Why cannot we have more managed timber, with the state having an influence over it? We could also do more with the tax system to encourage more private forestry. We have rather good growing conditions here, compared with some of the colder Nordic climates from which we import timber at the moment.

We also import energy, but we have no need to do so. We are an island of coal, oil and gas set in a sea of coal, oil and gas. We also have lots of natural renewables, particularly lots of potential water power. Why cannot we create an energy policy in which we do not need to rely on importing timber from Canada, electricity from France and energy from Norway?

I am pleased that the Budget is starting to tackle the issue of the oil industry offshore through tax changes. We need to do other work on that, and we also need to get on with gas extraction onshore. We will probably find further oil resources when we are prospecting for shale gas in the shale sands. We need to start bridging the gap on energy before it becomes even more damaging to our balance of payments.

Mark Prisk (Hertford and Stortford) (Con): On encouraging greater exports, would my right hon. Friend acknowledge that one of the challenges that small and medium-sized firms face is the availability and pricing of mid-sized capital to enable them to pursue longer-term export plans?

John Redwood: I am not sure that the cost of capital is a problem. The Government have already done certain things to try to deal with that through the investment bank and so forth. It is often the case that medium-sized companies probably need equity investment but are reluctant to give away control. That is a cultural issue that we have to deal with. Certainly for bigger companies there is nothing wrong with the long-term cost of borrowing if they have access to the bond market, because we have exceptionally low interest rates at the moment.

I am all in favour of the Government pressing on with large infrastructure projects if they make economic sense. The main ones that we need to reinforce are broadband and extra energy capacity. We are short not only of affordable energy but of energy of any kind. We do not want our economic recovery—which we have rightly been told is the fastest in the advanced world, on the historical and prospective figures—suddenly to come up against the constraint that there is not enough energy available to fuel the recovery.

John Redwood (Con) (Wokingham): I rise to support the Government and to urge the rejection of amendments that would delay getting rid of the subsidies for wind power. Our country desperately needs more electrical power to be available, and I am pleased that the Government are now taking action, with capacity auctions, to try to get some more power available. We need more affordable power. We need to tackle fuel poverty and have power at prices where households can afford to purchase. We also need to have affordable power for extra industry, which is one of the Chancellor’s aims. We need reliable power; we want to know that the power is there whether the wind is blowing or not, and whether the sun is shining or not. People expect continuous power, in order to light and power their homes, and industry needs continuous power for its processes. On all those grounds, wind does not cut the mustard, and I am glad that we now have a Government who recognise that.

When the history of the past 15 or 20 years comes to be written, what the European Union is doing and what the previous Labour Government did on energy policy will go down as one of their catastrophic failures. It will be at least as big as the exchange rate mechanism, which destroyed so much activity, jobs and prosperity in our country. It may not be as big as the disaster of the euro, but it will be one of the big, classic disasters of the European Union that Europe as a whole is becoming an area of too-little energy and very high-cost energy, driving industry out of the European Union area and into Asia and America, where more plentiful and affordable energy is available. Far from sparing the planet extra carbon dioxide, all this mad policy is doing is making sure that the carbon dioxide is produced somewhere else, rather than within the European Union itself.

Germany has much more wind power than we do and many Opposition Members admire it in this respect, but what happens when the wind does not blow? I will tell them what happens: Germany relies on a large number of extremely dirty coal power stations to churn out the electricity, producing more carbon dioxide than it would if it had opted for a fleet of modern gas stations in the first place. On average, that would have been better than this strange mixture of intermittent wind, which is very good on carbon dioxide when the wind blows, and back-up power, which in Germany and elsewhere in Europe is often generated from coal, and is extremely bad on carbon dioxide when the wind does not blow.

David Mowat (Con) (Warrington South): Germany uses coal all the time and the wind power is the intermittent stuff. Germany’s carbon emissions are 30% higher than the UK’s per unit of GDP and per capita just because it uses so much coal and fossil fuels, even though its renewables level is quite high as well.

John Redwood: Yes, but, as my hon. Friend will agree, when the wind does not blow, Germany has to use more coal. When there is no wind energy, the replacement must come from fossil fuel. A wind system with fossil fuel back-up does not even work on its own terms, and he is right that the German merit order is somewhat different.

I was going on to point out that from an economic point of view, we in this country have managed to damage every kind of power generation. If we insist on giving priority to dear, interruptible, intermittent sources such as wind, the more reliable, cheaper sources such as gas become intermittent, as they are switched off every time the wind blows and switched back on every time the wind is not blowing, which in itself is difficult and expensive. That undermines the economics of what would otherwise be good-value power. It means that we cannot run the plants flat out. We have higher operating costs because of the complications of switching on and off and managing the furnaces accordingly, with much less revenue coming in because less power is generated and power cannot continuously be sold to the market.

The ham-fisted interventions—[Interruption.] The hon. Member for Southampton, Test (Dr Whitehead) does not seem to understand the policy that his party put in place and that the European Union supports. The ham-fisted interventions in our energy market mean that we have less reliable energy, because we deliberately subsidise a lot of intermittent and unreliable energy; that we have dearer energy, because, as is commonly accounted, renewables are considerably dearer; and that we have much dearer energy overall, because of the extra cost, which is not included in the way that the cost of renewables is accounted for, which means that non-renewable power becomes a lot dearer per unit as well.

Jonathan Edwards (PC) (Carmarthen East and Dinefwr): Has the right hon. Gentleman had an opportunity to reflect on the complete U-turn by Energy UK, which now says that the Government need to promote renewables instead of fossil fuels? Indeed, it says that an energy policy based on fossil fuels is a smartphone equivalent of placing all our bets on Nokia as opposed to Apple and Samsung.

John Redwood: No, I have not had the chance to reflect on that, but it does not seem to be a very interesting observation given the fundamental truth that I have just given him, on which the hon. Gentleman has not reflected at all. The truth of our current energy policy—

Dr Alan Whitehead (Lab) (Southampton Test) rose—

John Redwood: Let me just deal with the hon. Gentleman, and then I will happily deal with the shadow Minister. The truth about our energy policy is that the various interventions have conspired to make less power available at a much higher price and that, unless we start to reverse some of those interventions, we will get those pernicious effects. If he is saying that, yes, the price of energy from fossil fuels is variable, depending on the world market price, that is self-evidently true, but it does not mean that it is a good idea to put in something that is very unreliable and intermittent and is dearer than fossil fuel at more or less any realistic market price that might be commanded in the market by fossil fuel.

Dr Whitehead: Has the right hon. Gentleman had the opportunity to go to the national balancing services centre, which is in his constituency, as it undertakes a great deal of work balancing the system? There are substantial constraints on non-fossil fuel as well as fossil fuel inputs to the system, which cause shortages in power delivery at various stages, whether non-fossil fuel or fossil fuel delivery. Perhaps he could reflect on that in his comments.

John Redwood: Of course, as Member of Parliament for Wokingham, I have visited the centre on several occasions, and met the dedicated group of people there. The last time I visited was quite recently, and they were saying to me how much more difficult it is to manage a system that relies on wind, which is becoming more and more intermittent. That is self-evidently true. I am grateful to the hon. Gentleman for reinforcing my point, although I am not sure whether that was what he was trying to do.

It used to be much easier when we had baseload power that could be relied upon and that was not interrupted by changes in the weather or the wind, and where the swing factor could be accounted for primarily by the pumped storage systems at Dinorwig. A command could be sent from Wokingham to Dinorwig. The water would come down the hill very quickly, and the kettles could boil in the interval of the big movie or whatever it was that was causing the surge in power demand. It is much more difficult now to call up power if, at the same time, the wind suddenly drops.

That is leading to our having to put in more and more interconnectors with other countries, so we become a net importer of power on a more regular basis, which is not something I value. I want us to have security of energy supply in our own country. We are, after all, an island of coal in a sea of oil and gas, and one would think we could find environmentally acceptable ways of exploiting that and burning it to produce the power we need. As I want an industrial revival in this country, that could well start with us importing less electricity.

Matthew Pennycook (Greenwich and Woolwich) (Lab): The right hon. Gentleman talks about security. Does he share the concerns that I have and that have been expressed by my hon. Friend the Member for Southampton, Test (Dr Whitehead) about the operation of the capacity market? That is costing us a great deal of money and it is manifestly failing to bring on new gas, which is its central aim.

John Redwood: As I have been trying to explain, the reason we end up with dear gas is all the other subsidised interventions we have been making. We cannot run gas flat out and get the benefits of running it in the most economical way possible. Yes, I would rather have a much simpler market. The market worked a lot better in the 1980s and 1990s when we first set up a pretty open competitive market and power prices came down a lot. We had roughly a 25% margin of extra supply so that we were secure and we never had to worry that, if there was a cold day with the wind not blowing when industry was doing quite well, we would have to tell industry to switch its machines off. We did not get to such a position under that regime.

Now that we have a grossly intervened regime with all sorts of subsidies and priorities that do not reflect the economics of power production, we get to exactly the point that the hon. Gentleman rightly identifies, when we have to bid quite high to get people to provide gas-based power because we cannot guarantee full access to the market on a continuous basis. Of course, the more interventions there have been over the years of Labour and coalition and now the Conservatives, the more changes are needed in that intervention regime as the Government tinker or try to change it to make it work better, and the higher the prices tend to have to be because people become more suspicious if Government have so much power and if Government keep changing their mind.

So it is quite easy to get from a relatively free, successful market to a badly damaged, rigged, subsidised market. It is quite difficult getting from a badly damaged, subsidised market where the interventions are not very helpful to one that works better, because there is suspicion in the minds of investors, and they need longer contracts, bigger guarantees and higher prices to give them some kind of offset as they fear the Government may tinker unnecessarily.

This debate is about the amendment. I support the Government in their view. I want the Government to get on with removing the subsidies to onshore wind, as we said we would do. I hope the Opposition and the other place will not delay that further. We gave plenty of notice of this, and the sooner we do it the sooner we will get a bit closer to having a less damaged energy market.

We were always told by Labour when signing away our powers of self government in successive treaties that taxation was a red line issue. It would remain a matter for national determination. Recently the UK Parliament was united in wanting to scrap the tax on feminine hygiene products, only to be told under EU law we were not allowed to.

On 4 June last year the European Court of Justice upheld a complaint against UK tax policy brought by the EU Commission. They argued successfully that the UK is not allowed to tax “energy saving materials” at just 5% but has to impose a full 20% VAT on them. A long list of green or energy saving products, including insulation, draught strip, central heating controls, hot water system controls, solar panels, wind and water turbines, ground and air source heat pumps, micro combined heat and power units and biomass boilers are all subject to our reduced rate and were all adjudged illegal.

The government has decided it therefore needs to impose extra VAT on all these goods, bringing in an additional £65 million a year from next year. I for one will be opposing this measure, as I do not wish to see energy conservation taxed in this way and object strongly to the erosion of our taxation powers by the European Court. It will be interesting to see who will vote with us in opposing this needless and undesirable tax increase.