Examination of Witnesses (Questions 60
- 79)
TUESDAY 4 APRIL 2000
MR STEPHEN
TIMMS MP, MR
JOHN HALL
AND MS
HEATHER MASSIE
60. Could I just raise two things about this
fund? Firstly, how much of the estimated £380 million which
is going to be raised from this tax is actually going into the
Sustainability Fund? Is there any indication of that yet?
(Mr Timms) We have not put precise figures on that
but the 0.1 percentage point reduction in employer national insurance
contributions, if I remember rightly, would absorb something like
£350 million, so the balance I guess, whatever that eventually
turns out to be, would be available to a Sustainability Fund.
61. Who will administer that, especially in
the light of the hostile reaction by the industry and its apparent
splitting off in all directions? Who is going to do the administration
of the fund?
(Mr Timms) As you know, we are going to be legislating
for the levy next year and one of the main tasks we have between
now and then is to sort out precisely those and other details
of how the fund will work, and we want to carry out a full consultation
on that point. I hope we will be able to do so on a good and well-tempered
basis with all parts of the industry.
Joan Walley
62. A series of further questions on that subject.
Can I ask you, first of all, the purpose of the levy presumably
is a reduced demand for aggregates?
(Mr Timms) It is two-fold. It is, as I said a moment
ago, to ensure that the price of aggregates more fully reflects
the environmental costs associated with quarrying, and also to
encourage use of recycled and waste material. Quite how the market
will respond to the improved price signals which are created,
we will have to wait to see.
63. I have one very specific aspect in relation
to Mr Grieve's comments just now about the reinstatement of street
works. In respect of the consultation that you have just referred
to which will be taking place, would it be possible, for example,
for you to consider not going further forward with the proposal
of a levy in respect of reinstatement of street works until such
time as the statutory guidance has been changed to allow for the
material used to be no longer primary aggregates but to be recycled
aggregates?
(Mr Timms) I think it would be difficult to have a
different rate of levy depending on the use to which aggregates
were to be used. We have said we will legislate next year, that
the levy would be introduced in 2002, so there is a period of
time before it takes effect. My initial view is that it would
be difficult to set different rates for the levy depending on
how the aggregates were to be used, given that they were being
sold in the UK. I am not sure one would know at the point at which
the aggregates were sold how they were going to be used.
64. I wonder whether, therefore, through the
Green Ministers' Committee, you might be pursuing this case about
how to get the code of practice revised so as to allow and encourage
the use of recycled aggregate. It seems to me that unless you
change that, you are going to have a contradictory policy which
will reflect on the finances of the public policy as well.
(Mr Timms) I certainly cannot think of any in principle
reason why recycled aggregates cannot be used in that context
and I would be glad to look into the matter again.
65. So you will be taking that up with the Green
Ministers' Committee. We would be very interested to hear the
outcome of that. On another slight contradiction, our Committee
has been quite critical of the OGC, the Office of Government Commerce,
in the past in our reports because of their failure to genuinely
put environmental integration at the heart of the work that they
do. I just find it a little bit strange that they have actually
said, "Procurement must not ...", I stress "not",
"... be used as a vehicle for delivering policies such as
environmental sustainability." In respect of the aggregates
levy, is there not a contradiction in terms here? How do you see
this being resolved because presumably the sticking point of the
voluntary agreement you were seeking to reach with the aggregates
industry is based on this issue of procurements, and if 40 per
cent of procurement is government-led, surely we are in a situation
where it is virtually impossible to carry out what the Helsinki
Agreement and everything else said about putting environmental
sustainability and environmental integration at the heart of government
procurement policy? Is this not all at odds and is a further item
which needs to be pursued through the Green Ministers' Committee?
(Mr Timms) The central task for public procurement
is about value for money and I think all of us would think that
is right.
66. But I thought the Treasury was looking not
just at value for money but at environmental sustainability with
the indicators and so on as well?
(Mr Timms) Indeed, but the point I am making there
is that the central concern with procurement has to be about value
for money and beyond that there is a variety of approaches we
can use to address the sustainability point. We are constrained
in that by the EU requirements, by competition—
67. Can I interrupt you there? You say you are
constrained by EU requirements, but my understanding is that EU
requirements are that we should have environmental integration.
Therefore, if it is a point of European policy where there is
this contradiction, is this not something which the Government
should be taking up with the Commissioner?
(Mr Timms) There are two points. First of all, what
the EU says about public procurement is pretty clear and the sort
of things that the QPA was arguing for, particularly with the
Sustainability Fund, clearly fell outside what EU rules allow.
One of the benefits of the tax route in this area is that by ensuring
that the environmental costs are reflected in the price, we can
leave it then to the normal market mechanisms to make adjustments
and to change the proportion of recycled aggregates and so on
which are in use. If one attempts to do that more directly through
procurement rules, then we do get into some very difficult territory.
Now I am not saying there is nothing which can be done, but it
is difficult territory and territory which needs a good deal of
thought, and the fact that the Quarry Products Association wanted
us to do some things in this area which clearly were in conflict
with the existing rules highlights the difficulty.
68. I think it would be very helpful and useful
if you were able to provide the Committee with the undertakings
that the QPA gave and why in your view they were unacceptable.
Could you give me that information now?
(Mr Timms) I hope I have explained—or certainly
attempted to explain—what it was that was unacceptable in
the QPA package. The QPA was asking us to go down a road which
had very, very serious legal problems about it. Clearly that was
not something which the Government was in a position to do. This
was particularly around the issue of the Sustainability Fund,
that public procurement would only take place from sources, from
quarries, which were contributing to a Sustainability Fund. That
would be in conflict with the rules and, of course, in any case
it would not be possible for the Government to bind what, for
example, local authorities choose to do with their procurement
policies or the devolved administrations. So when it came to a
decision being made, the fact is there was not a viable package
on offer.
69. Presumably you took legal advice?
(Mr Timms) Absolutely, we certainly did.
70. Could we have a look at this?
(Mr Timms) The advice is internal Government advice
that I have received and it is subject to the normal rules about
advice to ministers.
71. I think you can see our position. We have
just been going through a similar issue in respect of VAT, where
we were told it would be unacceptable to do it because of European
constraints, and now find that that has been reversed—and
we are very pleased about that—and we see a similar situation
arising here. I think we would be very interested to see that
legal advice which ruled out this whole aspect of sustainability
being included in Government procurement policy.
(Mr Timms) The point about VAT, of course, is that
it is a result of a policy change in the European Commission.
If there were to be—and it would have to be a major policy
change—a change on this front, clearly that would change
things. But the position currently is pretty clear.
72. Finally, what policy are you adopting where
it might be difficult to calculate the environmental values appropriate
for whole life costings?
(Mr Timms) I am sorry, is this a question about aggregates?
73. Yes, in relation to the procurement policy
and the advice which has come out from the HSE.
(Mr Timms) Sorry, I do not entirely understand the
question. On aggregates, in terms of what the cost per tonne of
the levy should be, that was the subject of very, very thorough
research commissioned from London Economics, which came out with
a figure of £1.80 per tonne, and we proposed a figure which
is rather less than that in taking the levy forward. In terms
of, can we take the whole life cost into account, then the answer
is yes.
Chairman
74. One of the things which Customs & Excise
said in looking at the aggregates tax in the various stages of
discussion was that it was very difficult to distinguish between
primary, second and recycled aggregates. That was obviously a
problem. Are you confident that you can minimise the use of primary
aggregates and maximise the use of recycled and secondary aggregates
and that the tax would do that in the light of the difficulties
in defining what those are?
(Mr Timms) Yes, I am confident we can resolve those
definition questions which, as you said, are quite important.
75. Why is not all secondary aggregate subject
to the tax?
(Mr Timms) One of the aims of what we are doing is,
as I have said, to encourage the use of recycled aggregates and
waste. What we have to be careful to do is ensure that we do not
end up with perverse incentives or loopholes being created and
opportunities for avoidance, and going down the road you have
suggested we would have the potential to do that. So there is
quite a tricky definitional issue here. I think by ensuring that
there will be an exemption for recycled aggregates and waste,
then we are on safe ground in that respect.
76. Yes, you are in danger of getting into a
very considerable degree of detail and complexity in exempting
some secondary materials and not others, I would have thought.
(Mr Timms) As long as we do it properly and we get
the definitions right, then I think we are safe. As you know,
we have consulted on the draft clauses for this already, so we
have had the opportunity to look pretty carefully at how to do
it and I am confident we can resolve any difficulties of this
kind.
77. I think you might have to rely on the goodwill
of the QPA which might not be quite so forthcoming in the light
of recent events.
(Mr Timms) As you know, I am concerned by what I have
heard as being reported as them saying.
Chairman: We will now move to the subject
of waste and I know Mr Savidge wants to ask some questions about
that.
Mr Savidge
78. Returning to the subject you have just mentioned
of secondary aggregates and perverse incentives, we would recognise
the need to use inert waste in restoration work on landfill sites,
but would you recognise the danger that the very tax exemptions
which are granted for that purpose could be a perverse incentive
for people to use secondary aggregates in landfill rather than
to re-use them?
(Mr Timms) I am going to have to ask you to put that
point to me again. I am not sure I followed it.
79. You were talking about possible perverse
incentives, to what extent does the fact that we give tax exemptions
for using secondary aggregates in landfill restoration work actually
provide a perverse incentive for those secondary aggregates to
be used in landfill rather than being re-used?
(Mr Timms) The use of that kind for landfill I think
is benign, is it not, and probably helpful from an environmental
point of view?
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