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Scottish Environment Protection Agency
1 pm
Ms Roseanna Cunningham (Perth): I am grateful for this opportunity to raise the financial crisis facing the Scottish Environment Protection Agency. The Government are fully aware of the matter, and I seek more than just kind words and platitudes in the Minister's reply.
SEPA needs a commitment of more money or, alternatively, a decision to allow it to reclaim VAT in the same way as its sister body in England and Wales. Scotland will regard anything less as the Government undermining environmental protection. It will show that the Prime Minister's words in the United States on the environmental crisis facing the planet were nothing more than empty rhetoric and an attempt to spin a feel-good story for the UK press.
Many hon. Members will remember the debate surrounding the creation of SEPA and the broad welcome that the body received from a variety of organisations and interest groups in Scotland. A powerful environment agency has long been the policy of the Scottish National party. We want the existing powers strengthened and the agency's resources increased.
In the first year of its operation, SEPA earned positive comment from key environmental groups in Scotland. The head of research at Friends of the Earth Scotland said:
However, SEPA's initial success in getting its work up and running, and in building a fully integrated agency, is threatened by a funding crisis that will prevent any truly proactive work. Resolving the problem lies fairly and squarely in the Government's hands. I wish briefly to explain the basis of the financial crisis, before highlighting in detail the impact of the resulting cuts.
A number of observers estimate that SEPA faces a potential £5 million shortfall in its budget this year. That is due partly to past underfunding by the Scottish Office, but also largely to a tax anomaly, which allows the agency's English and Welsh counterpart, the Environment Agency, to reclaim VAT from Customs and Excise but prevents SEPA from doing the same. The ability to reclaim VAT under section 33 of the Value Added Tax Act 1994 is worth some £50 million to the English and Welsh agency, and could be worth £2.7 million to SEPA. That is a significant sum--some 10 per cent. of SEPA's overall budget.
Bodies whose responsibilities SEPA inherited, such as the Scottish River Purification Board, could reclaim VAT, and SEPA rightly set its budget projections assuming that it would enjoy the same rights as its predecessors and the Environment Agency. The Scottish Office settlement for SEPA for this financial year was based on the assumption
that VAT would be recoverable, which has been the assumption since 1 April 1996. Indeed, it was reiterated as recently as 9 May 1997 at a meeting between Scottish Office officials and SEPA.
The Scottish Office seems to have been every bit as certain as SEPA, as recently as last month, that VAT would be recoverable. From the outset, plans have been made on that basis, and on the Scottish Office's reassurance that negotiations between it and Customs and Excise were continuing to resolve the problem.
The Minister can miss out the section of his speech where I anticipate he will offer various legal excuses for not granting SEPA the same reclaim status as the Environment Agency. I understand that the Environment Agency receives its section 33 refund because it receives funding from local authorities, whereas SEPA, as a quango, does not. The current feeling is that to allow a quango to reclaim would open up a precedent for other quangos to demand precisely the same.
I would argue that that is a technical excuse, and one which the Minister has already used in his replies to my recent questions on that issue. I do not want to hear excuses; I want the Government to come forward with solutions; otherwise, the crisis facing SEPA will have extremely damaging consequences for Scotland's environment.
The chair of SEPA's main board, Professor Turmeau, said that the current situation is "daft". Expanding on that, Beth Corcoran, SEPA's head of finance, summed up the problem in the New Statesman, when she said:
In recent months, the impact of the budget crises on SEPA has become clearer. John Beveridge, director of SEPA's western region, summed up the broader impact of the threatened shortfall in the New Scientist in April, when he said:
My hon. Friend the Member for Angus (Mr. Welsh) has had constituency experience of the impact of those cuts. A number of his constituents have had great difficulty even contacting SEPA, never mind getting it to act on the pollution incident that was the focus of their concern.
Mr. Andrew Welsh (Angus):
My hon. Friend is aware of the atrocious and long-standing environmental
Ms Cunningham:
Indeed. Such sentiments are echoed by others.
Judith Nicol, clerk to the River Tweed commissioners, highlighted the risks surrounding the removal of out-of-hours water pollution cover for a river renowned for its salmon runs, and for which water quality is key to a multi-million pound salmon industry. She said:
In SEPA's western region, plans to clean streams and introduce flood warning systems have been abandoned. In the northern region, laboratory maintenance has ceased. I do not know whether the Government think that some cuts are justifiable, but what has been cut and what is threatened by SEPA's budget crisis include key areas of environmental monitoring, the maintenance of which is essential. For example, does the Minister believe that monitoring radiation levels in the Holy loch should be cut? Well, they have been.
As a result of the costs of monitoring for radioactive particles at Sandside bay, near Dounreay, investigations and monitoring for radiation at other sites will have to be curtailed. Is it acceptable to the Government that SEPA may no longer be in a position effectively to regulate the nuclear industry, or is that part of the plan, with the Environment Agency in England and Wales increasingly encroaching on SEPA's nuclear monitoring responsibilities, especially in the UK Radioactive Incident Monitoring Network?
In addition to SEPA's current duties, which it is struggling to meet, a range of new statutory responsibilities are to fall on the agency. Those include consultation on the national waste strategy and the national air quality strategy, ensuring compliance with waste packaging regulations, and overseeing the extension of pollution controls to small businesses.
On 26 April, The Scotsman quoted an unidentified board member as saying:
Professor Colin Reid, professor of environmental law at the university of Dundee, is similarly succinct in his proposed solution. I hope that the Government will respond positively to at least part of his suggested strategy for removing the current burden from SEPA. In a letter to my hon. Friend the Member for Angus on 7 May, he stated:
If necessary, the issue must be pursued vigorously with the Treasury. In particular, I hope that the Minister will not allow the Treasury to get away with the sort of nonsense contained in its answer to the hon. Member for Greenock and Inverclyde (Dr. Godman) on 19 June 1997, which stated:
The Scottish Office has been guilty of a similar contempt in its reply to my own questions on SEPA. The Minister tells me rather uninformatively in a written answer that the Secretary of State for Scotland "regularly discusses various issues" with the Chancellor of the Exchequer. It is clear from the Minister's reply that he has not discussed SEPA's VAT reclaim. That is a failure on the part of the Scottish Office to defend Scotland's interests and its environment. I hope that the current Secretary of State will not, like his predecessor, be more the Cabinet's man in Scotland than Scotland's man in the Cabinet.
If the Government fail to take either of the suggested routes to a solution, they will be sending a clear signal that, despite the green commitments from the Prime Minister's spin doctors this week, the Government's environment strategy will be no more than hot air, adding to the global warming crisis. We need more than words; we need urgent action.
I shall end with two thoughts from the period when SEPA was created. As I said, SEPA was widely welcomed by, among others, the editorial pages of Scotland's newspapers. The Herald editorial on 2 April 1996 warned that, if SEPA was to be effective, it
When the Minister's predecessor, the Earl of Lindsay, officially launched SEPA, he boasted:
"Our view is that SEPA has now found its feet and shown itself to be competent and even-handed . . . The Agency has shown itself to be fairly open, not afraid of tackling big issues and reasonably forward thinking."
The head of policy at the Royal Society for the Protection of Birds in Scotland, Mr. Steve Sankey, pointed out that SEPA made an impressive start in its first year of operation. However, it now needs to move on to much more proactive work, where it could have a significant input. A sustainability concept is built into its remit and it needs to be able to argue that, in Scotland and for Scotland.
"It is an anomalous situation that does not make logical sense."
The Government must act now to resolve that anomalous, illogical problem, not run away from it or hide behind civil service excuses.
"A lot of what we have achieved in the past 12 months is now in jeopardy. Just when we were getting into our stride, we have been stopped in our tracks."
Nationally, SEPA has frozen all job vacancies, halted all capital expenditure and slashed environmental monitoring around factories, sewage works, nuclear plants and fish farms. SEPA's eastern region has suspended monitoring of pollution incidents outside office hours, halved the number of inspections of waste tips and scrapped air sampling around large industrial sites. The impact of such cuts should not be underestimated. The Prime Minister has made much of a claim that the UK will further cut carbon dioxide emissions, but in Scotland essential monitoring of industrial sites' emissions simply will not be done.
"The emergency cover is something that should be removed as a last resort, not first; whoever is responsible should sort this out as soon as possible because these are fundamental services that need to be maintained."
Thus far, the Government have failed miserably to "sort this out". They must be aware of the consequences of their failure.
"There is no way these new responsibilities can be met, it is as simple as that--the Scottish Office needs to give up more money or they can forget it."
That quote identifies the problem and points to the solution.
"A remedy is required, whether short-term support to 'fill the gap' until future budgeting is done on the new basis, or through amendments to the law to relieve SEPA of this burden in the future."
25 Jun 1997 : Column 813
That is the choice facing the Government. They can either make good SEPA's shortfall, or they can pursue a legal solution which would alter SEPA's status to allow the agency to reclaim VAT, or provide a specific exemption that would allow SEPA access to a section 33 payback.
"Tax liabilities of publicly funded bodies are taken into account when setting levels of public expenditure in Scotland."--[Official Report, 19 June 1997; Vol. 296, c. 270.]
SEPA has been stumped by a loophole--a technicality--which has punched an enormous hole in its budget. That irrelevant ministerial reply displays a lack of understanding of the problem and a contempt for the needs of Scotland's environment.
"will have to have teeth, and know how to use them."
As things stand, SEPA's teeth have been blunted. That cannot be allowed to continue.
"SEPA will be Scotland's first national agency with the resources and expertise to tackle the distinctive needs of Scotland's environment".
I doubt whether the Minister could make that boast today, because, despite the good works and the great promise of the Scottish Environment Protection Agency, it no longer has the resources to complement its undoubted expertise. It certainly does not have the resources to move into a more proactive role, which many would welcome.
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