Select Committee on Environmental Audit Third Report



In its Third Report, January 1997, the British Government Panel on Sustainable Development (the Panel) considered the issue of government subsidies. Within this term the Panel considered the inclusion of, not only conventional public expenditure, but also, tax exemptions, capital grants, provision of transport infrastructure, insurance cover, research and publicity, and, going wider, implicit subsidies which occur where market pricing fails adequately to reflect external costs (i.e. pollution costs falling on the community as a whole). As part of this work, it commissioned research from CSERGE which indicated that environmentally damaging government subsidies might amount to in excess of £20 billion per annum. This was broken down as follows:

Sector£ million per annum
Electricity and gas supply1450
Coal protection225
Transportgreater than 14,378
Water supply2118
Totalgreater than 20,638

The Panel recommended that "the Government should set up a task force to draw up, within a year, aims and principles for the future use of subsidies" and that any proposals for new subsidies should be subject to environmental impact assessment.

The Government in its response accepted that it should draw up, by April 1998, aims and principles for the future use of subsidies. But it did not consider that setting up a task force was the most efficient or effective route as subsidies varied greatly from sector to sector and were best dealt with by those who understood the sectors in detail rather than by a central team. In addition the Government said that within the CSR, then underway, "each Government Department is charged specifically with reviewing existing subsidies within its remit to see whether the objective of its subsidies are compatible with the Government's commitment to achieving sustainable development or could be met in a less environmentally damaging way".

In its Fourth Report the Panel therefore followed up the issue and concluded that: "Whether this piecemeal approach will be effective remains to be seen. Until there is evidence to this effect the Panel remains unconvinced." (Fourth Report, February 1998, p.21). There was no further comment on this issue from the Government in its response to the Fourth Report and the Panel has not pursued the matter in subsequent reports.

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