Examination of Witnesses (Questions 40
- 59)
TUESDAY 4 APRIL 2000
MR STEPHEN
TIMMS MP, MR
JOHN HALL
AND MS
HEATHER MASSIE
40. How will you measure the proposals against
the likely benefits of continuing or developing this voluntary
package, as compared to the benefits that may come from a taxation
regime?
(Mr Timms) I think that is a matter we will have to
consider in more detail as we get closer to the Pre-Budget Report
and when we have seen the full formal package from the BAA and
are able to have given it careful consideration. I think that
is probably a matter to come back to at that time rather than
today.
41. Will you be considering in this criteria
whether the development of a voluntary package, as opposed to
a taxation package, enables or better benefits one group of farmers
against another group of farmers? Because organic production does
not use pesticides, or certainly not organic pesticides. Other
production does use pesticides. If the polluter is not paying
there is an uneven market here. Will that be part of the criteria?
(Mr Timms) You make an interesting point.
42. Could I illustrate it. I have explained
this before. From the presentation we were given by the water
industry there appeared to be a very, very large amount of money,
hundreds of millions of pounds, being spent by the water industry,
and therefore by water consumers, in effectively subsidising the
use of pesticides. Given that subsidy is paid by people who drink
water, whether they are organic food eaters or non-organic food
eaters, it distorts the market?
(Mr Timms) Yes, I agree, there certainly has been
very substantial investment by UK water companies on this. There
is a clear case for the polluter paying. As I have said to the
Committee, that is a principle we support and we would expect
to be applying in this case, along with others. Whether the tax
route or the voluntary package route is the most effective way
to do that is a judgment still to be made.
43. Does the Treasury intend to carry out any
further work on developing ideas about tax measures in case the
voluntary package proves to be unworkable or does not deliver?
(Mr Timms) There are a number of pieces of research
on pesticides being carried out at the moment by MAFF and the
DETR. We are not proposing to commission further research beyond
that that has already been commissioned in this period up until
the autumn. The report that was carried out before by ECOTEC was
a good basis for our work in this area. Clearly if the package
negotiations do not prove successful then we will need to return
to that later on this year.
44. Whether there are taxation measures or whether
we go along with the voluntary proposals being developed, has
the Government thought or will the Government be trying to establish
some sort of independent advisory body to help farmers with information
in order to reduce their reliance on pesticides?
(Mr Timms) I think one of the attractive elements
in the voluntary package of proposals is likely to be about improved
information to farmers. How that would be achieved if the voluntary
package was not taken forward is a matter we would have to consider
at the time. We do not have any proposals for a new body on this
at the moment. I suspect that probably is not the way we would
want to take this forward anyway. I think there is an issue about
information; getting the right information to the farmers; getting
the farm employees adequately trained in using up-to-date equipment
and minimising the amount of pesticides they are using and so
on. I think there are range of issues in that area where there
is scope for some quite worthwhile improvements.
Sir Richard Body
45. Minister, may I first of all, as the Patron
of one of those voluntary bodies, wholeheartedly agree with your
last answer. You received, did you not, hundreds and hundreds
of letters (and so did the Prime Minister) in protest about a
pesticide tax?
(Mr Timms) Indeed, we had a consultation exercise
following the publication of the ECOTEC research; and it is certainly
true that there were very large numbers of letters saying to me
that the Government should not go ahead.
46. Did you notice in these letters a certain
similarity in how they were phrased?
(Mr Timms) That is a very interesting question. I
did not notice that. I can refer to other campaigns where letters
have been strikingly similar to each other. On the whole, the
impression I got from the pesticide letters were that they were
the writer's own work. Maybe I missed a pattern that was there.
I have certainly seen patterns elsewhere.
47. That was very cunning of those who were
drafting them. I am sure you now appreciate that a very large
proportion of those letters were drafted by sales representatives
of the agrochemicals industry going round to farmers, including
many of my own constituents who were frightened of the consequences,
and drafting the letters for them. Some of us wonder how naive
the Prime Minister may have been in making the statement which
he did to announce there would be no immediate pesticide tax?
(Mr Timms) I do not think there is any doubt that
there was quite serious concern in agriculture about the possibility
of a pesticides tax, and it certainly was a matter raised with
me by the President of the National Farmers' Union. No doubt there
will have been some activity of the kind you describe. There clearly
was quite a high level of concern in the NFU and elsewhere in
agriculture.
48. I appreciate there was a concern, but it
was largely in the context of what else farmers were to do, and
how they were to get away from what is sometimes called the "pesticide
treadmill". I would like to ask you this question: have you
considered whether there was any other country in the European
Union, with the possible exception of the Netherlands, which gives
less encouragement to our farmers and growers to go over to an
organic form of production?
(Mr Timms) That is a question I am not qualified to
answer, I am afraid. That is a question I think for MAFF rather
than for me. There certainly are pesticides taxes in a number
of other EU countries which may be part of the point you are making—not
all, by any means, but in a number of EU countries. What the position
is about incentives for switching to organic I am not sure.
49. I agree with you about that, but are there
not certain fiscal inducements in the other member countries to
go over to organic production which we have not got in our own
country?
(Mr Timms) There certainly are some encouragements
here to do that administered by MAFF. How the scale of those compares
with those in other countries, I am afraid I am not sure.
50. Minister, you were good enough to say that
these consultations would be open to almost anyone. You will,
I hope, welcome particularly contributions from—and it is
not for me to say anything on behalf of them—supermarkets
as they have a major interest in this, as I am sure you appreciate.
I hope the Treasury does appreciate also that 70 per cent of the
organic food they are now selling is imported, and in the case
of some commodities it has risen to 80 per cent, and next year
is likely to rise still more, and they find the greatest difficulty
in obtaining organic growers in this country to supply them. This
is quite a concern which they have expressed over and over again
and some of them are taking very active steps themselves to subsidise
in different ways organic production. So I think they would appreciate
a little more sympathy on this pesticides tax, particularly if
you were to consider other fiscal inducements of the kind which
other countries in the Community enjoy, because otherwise, may
I say, you either have to be rich or a zealot in this country
to go into organic farming.
(Mr Timms) I think I am right in saying that I have
not received any representations from the supermarkets on this
subject but I look forward to doing so if they come forward with
those. Perhaps it is worth making the point as well, as you rightly
say, while there were lots of letters arguing against a pesticides
tax, there were actually very, very few arguing in favour. In
most of the issues we deal with, there is more of a balance in
the public debate, but for whatever reason in this one there really
were very few people saying this was something they felt the Government
ought to be doing.
Chairman
51. But in the real world we are talking about
the future of commerce worldwide and in the UK as well and there
is an opportunity here for the development of organic crops. Just
as we were saying earlier there is an opportunity for renewable
energy, this is clearly a growth area. Surely you, as the Green
Minister in the Treasury, should be proactive in this because
it is a major opportunity for the UK?
(Mr Timms) Hitherto, this has been an area for MAFF
and an area where I think MAFF has been quite active, and quite
a number of farms have gone over to organic as a result. I guess
it may be an area that we should be looking at as well in the
future but it is not an area we have looked at very closely up
to now.
52. I am anxious to encourage the Treasury to
take a proactive view. There is joined-up government with the
Treasury in the centre of things and comprehensive spending reviews,
et cetera, and I would like to feel that other departments which
may be doing the right thing have the backing of the Treasury
in trying to promote things which may be in the UK's interests
and in the interests of environmental sustainable development.
(Mr Timms) That is certainly a point of encouragement
which I will reflect on.
Joan Walley
53. Can I endorse what the Chairman has just
said and also press you a bit further on the representations you
received from the water industry on this subject? Presumably in
terms of cost, they bear some of the cost of actually removing
some of the pesticides. Were there no substantial representations
from them at all?
(Mr Timms) The water industry has already made very
heavy investment in this area. I do not recall representations
calling for a tax from the water industry in the process of the
consultation, but if I have forgotten something I will make sure
it is sent.
Mr Savidge
54. Just picking up the point you made, Minister,
that you were surprised that most of the letters seemed to be
against the imposition of a pesticides tax rather than in favour
of it, would there not be quite a few other cases where you would
find if you were proposing a new tax you would tend to get nearly
all the correspondence coming into you against that rather than
saying it was a wonderful idea?
(Mr Timms) First of all, I was reflecting on our experience
with the climate change levy where there were indeed many representations
expressing concern about what was being proposed, but there was
always a trickle of individuals writing to their MPs saying, "We
think it is very important the Government goes ahead with the
climate change levy because climate change is such a big threat
to the future of all of us." It was just something that I
noted that in the case of the pesticides tax that trickle of letters
did not seem to be there at all, for whatever reason.
Mr Grieve
55. Minister, could we turn to aggregates? The
announcement of the introduction of the aggregates tax and the
comments which you made on the evening of the Budget about its
necessity because of the lack of an alternative offer from the
QPA has attracted, certainly to my mind, the most angry response
I have ever seen from any organisation, really denouncing the
Government and you as telling complete untruths about the background
of the negotiations. The expression they use is that the claims
you made on the evening of the Budget were completely false, which
is strong language. It appears that the relations between the
Government and the QPA, and any voluntary arrangements, have been
very substantially damaged. Is there not a danger that you are
alienating the goodwill which has been built up in the manner
in which the negotiations with the QPA were handled, in view of
the strength of feeling they have expressed in their memorandum
to us?
(Mr Timms) I certainly have not seen the document
you are referring to and I am certainly very concerned if the
QPA has made that allegation because it is without foundation.
Let me just explain what happened with the aggregates tax. As
you will recall, we said in the Pre-Budget Report in November
that we were minded to go ahead with the introduction of an aggregates
tax in this Budget unless there was a significant improvement
on what were at that time revised proposals which had been put
forward by the QPA. So our intentions were absolutely clear and
unmistakeable in the Pre-Budget Report in November. There were
no significant improvements to the package since the Pre-Budget
Report and, worse than that really, the QPA began to attach a
number of conditions to the package which we were simply unable
to accept. Unlike the QPA, I do not want to go round making groundless
allegations, I want to express the view that the QPA I think made
a genuine effort in good faith to deliver a package which did
the job, but in the end they were not able to do so. They had
difficulties with a number of smaller quarries, there was a rival
organisation to the QPA set up which a number of smaller quarries
joined—
56. It is under 10 per cent of the total, is
it not?
(Mr Timms) In terms of the number of quarries it probably
is not under 10 per cent—well, it may be. But it was a significant
number of quarries which left. Others may well have done so if
the QPA had attempted to implement the package that they had put
forward. So in response to that, the QPA introduced a number of
conditions. What they wanted to do was, as far as possible, to
restrict public procurement to those who were signed up to the
QPA package; they had the Q-mark proposal which—
57. But the Q-mark was open both to QPA members
and non-members.
(Mr Timms) Indeed it was, but what they were hoping
was that the Government would only procure aggregates from firms
which were accredited with the Q-mark, whether or not they were
QPA members. The Q-mark included a range of commitments such as
subscribing to the sustainability levy, or the Sustainability
Fund, attaining ISO 14001, and the advice that I had was very
clearly that key elements of the Q-mark proposal were simply inconsistent
with EU Procurement Directives which, as you know, set tight constraints
on Government procurement policies. Our initial advice was also
that the elements of the package would be subject to legal challenge
on anti-competitive grounds, because they would be more difficult
for smaller firms to obtain. So the fact is that, come Budget
day, there was not a viable package from the QPA on offer, and
I am disappointed by the remark that you have attributed to the
QPA because that is entirely inaccurate.
Mr Grieve: I do not want to get too bogged
down in that, and also it is unfair to you because you have not
had a chance of seeing—
Chairman: I have given the Minister a
copy of the official memorandum.
Mr Grieve
58.—their detailed response and doing
that on the hoof is difficult for you. Before I move on perhaps
I can just round this off. Listening to what you have said, I
detect the problem that you perceive with the QPA package was
not a lack of willingness on their part but that the proposals
they came up with you saw as impractical from an anti-competitive
and EU point of view, which is not quite the same thing as a lack
of alternative proposals.
(Mr Timms) I think there is a number of issues. First
of all, there were very serious legal problems with what they
were proposing and I do not think the Committee would expect me
to be recommending to the Chancellor that he should go down a
road which was clearly illegal. So there was a very serious problem
for that reason. I think, beyond that, there was a serious concern
as well about whether the QPA would in fact be able to deliver
with over 50 quarrying firms having joined up to the rival association
before the package had got anywhere near to implementation. I
asked for the QPA to put its proposals in writing about a week
before the Budget. At that stage it was pretty clear that we did
not have a package that I could recommend to the Chancellor.
59. Turning away from that to what is actually
being done, as a Committee I think we will be universally of the
view we wish to reduce aggregate extraction and primary aggregate
use, but is this really going to achieve it? Is not the first
likely consequence that the quarrying firms are just going to
pass on the tax to their customers and not worry about it? Is
not the second problem that the Budget Report says that the tax
is going to encourage a shift in demand away from virgin aggregate
towards alternative material such as recycled aggregate, but the
principal use of aggregate is for road reinstatement and, as the
regulations stand, you have to use primary aggregate for that
purpose? So is that not another example of an area where, frankly,
the QPA, or any other quarry, is really going to go off laughing,
because they can simply pass the tax on and recycle it through
the system back to Government and highways authorities, quite
apart from anything else, whereas what was actually being offered
by the QPA was an apparent attempt at co-operation to achieve
an environmental good? How are these proposals in fact going to
secure the environmental objectives you want, especially in the
light of the Government's requirement on primary aggregate use
for roads?
(Mr Timms) I think there is pretty widespread agreement—at
least so I imagine—amongst everybody in this room that aggregates
extraction does impose very significant environmental costs on
the rest of society; noise, dust, visual intrusion, loss of amenities,
damage to biodiversity. What the levy will do will ensure that
the price of aggregates better reflects the environmental costs
associated with quarrying and it will also encourage the greater
use of recycled materials. What we have said is that all the revenues
raised will be recycled to business through a cut in employer
national insurance contributions and, as well, a new Sustainability
Fund which will be aimed at delivering local environmental benefits.
It is another very good example of the principle we have set out
and which the Committee I think has supported and we have been
taking forward over the past two to three years, of shifting the
burden of taxation from good things like labour to environmentally
damaging things. The answer to your question is therefore two-fold.
Firstly, what the levy will do is ensure that the price which
is charged for aggregates more fully reflects the environmental
costs associated with them. Secondly, by giving us access to the
Sustainability Fund we will be able to directly address environmental
problems associated with quarrying and there will be a fund of
money there with which to do that. So I think it will achieve
a very substantial improvement. How the members of the QPA respond
to that is clearly a matter for them.
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