Examination of witnesses (Questions 300
- 319)
MONDAY 14 FEBRUARY 2000
RT HON
MICHAEL MEACHER
and MR STEPHEN
TIMMS
300. You may notice where they are grown. One
place would be the Netherlands, another would be Spain, another
would be France. They all have one thing in common, which is that
currently they do not exercise any levy on their horticultural
sector for a variety of reasons. Spain and France just do not
do it anyway, but the Netherlands have an exemption for the reasons
already set out. Do you think that is likely to have a bearing
on the competitiveness of the UK horticultural sector?
(Mr Timms) The French Government is preparing an energy
tax and their officials were in the Treasury quite recently swopping
views on that subject. I have made the point already that preserving
the competitiveness of UK firms in every sector has been a very
important consideration throughout this process and it continues
to be so and we will continue to look at difficulties that are
drawn to our attention.
301. The other aspect of competitiveness is
the issue of how such a levy could be collected and administered.
In the case of horticulture you are dealing with a large number
of small to medium sized companies with no collective body to
represent them other than the NFU. What you appear to be seeking
is an administrative framework driven by the NFU as the police
of that which will be extremely hard to manage. We have already
had evidence as to the likely complexity and cost of that which
they will have to pass on to the sector.
(Mr Timms) I do not think that is a concern about
the Climate Change Levy—
302. Yes it is.
(Mr Timms) No, because the levy will simply be added
onto the electricity bills.
303. But to get their 80 per cent rebate, which
they are certainly at least going to seek to get, they are going
to need to have a process of achieving compliance with an agreement,
will they not, and they have already set up arrangements whereby
I think they told us it was going to be £200/£300 charged
back to each member company involved to cover the cost?
(Mr Timms) Maybe this is what I am going to hear about
at the meeting later this week. I have not seen any proposals
along those lines at this stage. The sector might take the view
that entering into a negotiated agreement is too complex a process
and they would not wish to do so.
304. But the penalty for doing that would be
that they will not get the 80 per cent, they will get a higher
level levy.
(Mr Timms) That is right. I think I need to make it
clear to the Committee that the position at the moment is that
negotiated agreements have been drawn up on the basis of IPPC
and there is a very good reason for that. There is a significant
requirement placed on all those sites and sectors covered by IPPC
that does not apply to others and therefore there is a very good
reason for treating those sites differently from the point of
view of the Climate Change Levy, but we are prepared to consider—and
I go no further than that—proposals for an alternative and
a wider basis—
305. You are aware that horticulture is not
covered by that?
(Mr Timms) No, it is not and it is not party to a
negotiated agreement.
306. So therefore they have got a problem. Sorry,
the industry has got a problem; you haven't.
(Mr Timms) As I have said, we are prepared to look
at alternatives. I have not seen any alternative proposals as
yet. I think it is a little bit premature to start talking about
the difficulties of administering an agreement. At the moment
we are nowhere near embarking on a process of negotiation.
Mr Curry
307. I want to pursue with Mr Timms his point
about maintaining the competitiveness of British companies. If
under the IPPC, after all Mr Meacher's attempts to minimise the
cost and after all the attempts to come to a global framework
for the agreement, it still became clear when this was levied
that it was going to be a couple of pounds per pig on the British
producer which was not going to be levied on a Dutch or a Danish
or a German producer, would you think it necessary to take steps
to remove that disadvantage?
(Mr Timms) I would not necessarily do so. It would
be necessary in order to form that judgment to consider the wider
position on business taxation and, of course, producers in the
UK enjoy the lowest rates of business taxation as a whole in the
EU and have an advantage as a result of that.
308. With respect, we could all give that answer.
(Mr Timms) It is the correct answer.
309. If you take the pig industry at the moment,
you will know the situation it is in. You will know there is a
series of charges which it faces which are not faced elsewhere.
You will know that it is disappearing. I do not want to exaggerate,
but people are going out of business significantly. On the principle
of the last straw on the camel's back, would you contemplate,
on the grounds that in the generality of things they were actually
well off even though they had not noticed it at the time, an additional
charge which represented in that element a competitive disadvantage
with their competitors?
(Mr Timms) First of all, the pig sector is different
from the horticulture sector because it is covered by IPPC and
therefore is eligible to enter into a negotiated agreement. Assuming
that process is successful, there will be an 80 per cent reduction
in the rate of levy charged on pig farms, including very small
pig farms which are not covered by IPPC, where we have made it
clear that if sites would qualify other than for their size just
below the size threshold on IPPC they will still be eligible for
inclusion in a negotiated agreement, except for the very smallest.
So they will have the 80 per cent discount. They will also benefit
from the reduction in National Insurance contributions. So I think
one needs to look at that wider picture before drawing the conclusion
that Mr Curry invites me to draw.
Mr Mitchell: You have just failed to get a commitment,
which no Treasury Minister has ever given anyway in advance. Let
us move on to rebates. Michael Jack?
Mr Jack
310. We are talking about the 80 per cent rebates.
Why are these not geared to precise amounts of energy saved rather
than general agreements to save energy?
(Mr Meacher) They are actually related to energy saved
because an industrial sector which is seeking a negotiated agreement
has to convince my Department that they have adopted cost-effective
measures sufficient to justify receiving the 80 per cent discount.
We intend to make a rigorous analysis on the basis of the ETSU
figures of what that industrial sector can achieve. So it is based
on energy saved over and above what happens now, business as usual.
311. Does this question of the agreement take
into account historic achievement?
(Mr Meacher) Yes.
312. How far back are you going?
(Mr Meacher) What we have said is that we are concerned
to achieve all reasonable cost-effective measures. If they have
been achieved in the past, all well and good. That will mean there
is less to be achieved now than in the future. If little has been
achieved in the past then considerable improvement is still required.
313. So there is no way that this 80 per cent
rebate is a negotiable item where you could have 90 per cent for
somebody who has got an extremely good track record but 70 per
cent for somebody with not so good?
(Mr Meacher) What we have said is that you will only
get it if we achieve all cost-effective measures. If you achieve
less than that you will not get 70 per cent, you will get nil.
So it is a very powerful whip to ensure that industries achieve
the full requirement which we think they are capable of and which
is also in their own economic interest. I would underline that
point.
314. When we started our inquiry we had a lot
of concerns put to us about what the definition of good quality
combined heat and power schemes was and since then you have published
a consultation document which you are attempting to elicit the
facts on. Can I just ask you factually who have been or who are
in general terms the consultees on this?
(Mr Meacher) Who?
315. Who are the people who are the consultees?
Is it aimed at the level of the enterprise or the representative
body or anybody who happens to click on the web site or what?
(Mr Timms) This is the Customs & Excise consultation
paper? It is anyone who wishes to comment and, indeed, as Mr Jack
says, it is on the web site.
316. So you believe it is put out by Customs
& Excise. According to the copy I have, it says prepared and
issued by the Department for the Environment, Transport and the
Regions and various other people but not Customs & Excise.
Is there another one?
(Mr Timms) There is indeed. There is a consultation
document that has gone out on the back of the announcement the
Chancellor made in November about exemptions from the Climate
Change Levy for energy—
317. They are not for combined heat and power,
are they? My question was that there was a concern in the horticultural
industry particularly and in other parts, e.g. the food sector,
and British Sugar expressed a concern about the definition of
what was a good quality combined heat and power scheme. You then
issued a consultation document. I presume the one you are talking
about with Customs does something different from the one that
I have seen from my Michael Meacher's Department?
(Mr Timms) The two are being developed in parallel,
but they are separate documents.
318. Are you going to meet together to sort
out any differences of opinion?
(Mr Timms) Indeed.
319. The one the DETR has put out is the one
that interests me because it is the one I have seen. Who is it
aimed at, is it the technicians or growers?
(Mr Meacher) It is aimed at anyone who has an interest
and wishes to give their views about what good quality CHP implies
and how the rules which we have set out—they are pretty
technical rules, but are those fair, are they equitable and we
are inviting anyone with an interest to give their views.
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