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AMENDMENT OF THE LAW

I congratulate the hon. Gentleman on his detailed scrutiny of the figures. He will certainly agree with me that the substance of the issue is more than worthy of comment. We have a positive balance in respect of services, but the position is different for goods. Even faster than the rise in the positive balance has been the increase in the negative balance of trade in goods, which reached £87 billion last year. In 1998, our overall total goods and services trade deficit was £7 billion. In the past five years, that deficit has increased from more than £30 billion in 2002 to more than £50 billion last year. I see the Exchequer Secretary on the Treasury Bench; I hope that at some point a Treasury Minister will say a few words about the significance of the trade balance in the modern world. I invite her, or any other Minister with the opportunity, to do so—the issue is clearly of considerable interest. To varying degrees, any one tax has two outcomes: it raises revenue and it influences behaviour. To their credit, in 1997 the Government declared a commitment to shift the burden of taxation away from activities that we want to encourage, such as the creation of employment, to activities that we want to discourage. That is clearly right in principle, and important steps have already been taken in that direction. One of the most significant measures for lifting taxation away from desirable activity was the introduction of the tax credit system in 1999. Through that, the tax system is used to help ensure that work pays and removes disincentives against people entering employment. The tax credit system has been a factor in raising employment throughout the country. However, I particularly want to focus on the environment, to which a number of hon. Members, including my right hon. Friend the Member for West Dunbartonshire (John McFall), have referred. I am thinking in particular of the need to put in place measures to reduce greenhouse gas emissions. Some years ago, the Government made a start on using the tax system to make our behaviour on these islands more environmentally friendly. The climate change levy was introduced in 2001 and the aggregates levy was introduced in 2002. Vehicle excise duty was restructured to reflect, for the first time, the environmental damage done by different makes of car. Alongside other environmental actions by the Government, those changes made for a promising start. Office for National Statistics figures show that the proportion of tax revenues raised from environmental taxes saw a modest rise—from 9.4 per cent. in 1997 to 9.7 per cent. in 1999. However, as the Environmental Audit Committee brought out in its recent report, that was followed by a series of cuts and freezes in key environmental taxes. As a consequence, green taxes as a proportion of all tax revenue fell below 1997 levels—to 7.3 per cent. in 2006. The Government should take credit for our being on track to meet the Kyoto targets, but we must also look at current trends and where they will take us. The Exchequer Secretary will be aware that the trajectory of UK greenhouse gas emissions is not as it should be. Our emissions have been on a plateau, with only the faintest trace of a decline between 2002 and 2006, the latest year for which figures are available. If the UK is going to do its bit to prevent catastrophic climate change, we will have to take far stronger action than we are taking now. The taxation system has an important part to play. I welcome some of the things that the Chancellor announced in that context, but I suspect that we will have to go further still.