Select Committee on Environmental Audit Sixth Report


The Environmental Audit Committee has agreed to the following Report:—


1. This Report looks at the environmental dimension of Budget 2000 in the light of the Committee's earlier work on the Pre-Budget Report 1999 and the relevant Government response.[1] The Committee's conclusions and recommendations are summarised below.[2]


    (a)  In terms of environmental taxation, we fully recognise the positive aspects of what the Government has achieved and the commitments it has made (paragraph 5).

    (b)  However, we still believe that the Government must set out a plan for developing, implementing and evaluating its programme of environmental tax reform. Work in progress does not appear yet to reflect all the areas of environmental concern set out in the Government's Sustainable Development Strategy. Nor does it amount to a strategic reform of the tax system to increase incentives to reduce environmental damage (paragraph 6).

    (c)  The Government must accept that increases in the proportion of revenue coming from environmental taxes is the only indicator of progress in relation to its own stated aim of "shifting the burden of tax from 'goods' to 'bads' ". If the Financial Secretary is suggesting that shifting the burden from 'goods' to 'bads' is not now an aim of the Government, or a meaningful goal at all, then we require a thorough explanation and a new Statement of Intent on Environmental Taxation (paragraph 11).


    (d)  The Government needs to do more to set out a strategic approach to budgetary and fiscal environmental policies and the interaction of these with other initiatives (paragraph 13).

    (e)  It is essential that the Government sets out clearly how it intends to pursue its programme of environmental tax reform. Major areas where such reform must play a more effective role, for example, include:

    —  new development, where there are significant perverse fiscal incentives in favour of greenfield rather than brownfield sites;

    —  waste, where huge changes in attitudes and behaviour are needed to meet targets in EU directives;

    —  energy, where notwithstanding the Financial Secretary's comments the evidence suggests that current and planned levels of UK investment in renewable energy technologies are much smaller than our competitors;

    —  water, where a failure to implement the polluter pays principle through a pesticides tax is resulting in substantial hidden subsidies for intensive farming as against organic farming for example, and extra costs borne by householders and business through water prices;

    —  transport, where steady increases in the overall cost of car usage and steady improvements in the availability of real alternatives (better public transport, more efficient vehicles and alternative fuels)—must go hand in hand (paragraph 14).

    (f)  The Government should revise the Code for Fiscal Stability, which contains the principles of fiscal management, to incorporate its commitment to sustainable development (paragraph 16).

Looking across the sustainable development agenda

    (g)  We expect much more discussion of environmental impacts alongside social and financial issues in the earlier "mainstream" parts of Budget Reports, and of the implications of Budget measures for—at the very least—the 'headline' set of indicators (paragraph 20).

    (h)  Given the scale of the environmental challenges facing the UK, the Government must set longer term goals and annual targets by which we can measure our progress year by year (paragraph 21).

Moving down the green tax agenda

    (i)  The Government must be consistent when comparing environmental costs for proposed green taxes. It should establish direct and indirect financial costs in all cases, and should clarify its approach to identifying and estimating non-financial impacts (paragraph 26).

    (j)  We reiterate our support for a Green Tax Commission as our preferred option for the promotion of environmental tax reform, especially in view of the support for this idea expressed by the UK Round Table on Sustainable Development. In the interim we recommend that the remit of the new Sustainable Development Commission should include a responsibility to advise HM Treasury on sustainable development economic instruments (paragraph 29).


    (k)  We were disappointed that the Government's response failed to address our recommendation that Partnerships UK (the new body responsible for assisting the development of PPP and PFI projects) should have sustainable development included in its aims and objectives. We expect the Government to remedy this situation in line with our recommendation (paragraph 30).

    (l)  The Government should work much more systematically, within the framework of EC regulations, to promote "green" procurement (paragraph 31).

Climate Change Levy

    (m)  We are concerned at the slow progress of negotiations on the Climate Change Levy whose target date for introduction is April 2001. This is causing considerable uncertainty (paragraph 36).

VAT on energy-saving materials

    (n)  The Treasury, in consultation with the DETR, should extend the reduced rate of VAT to cover products with significant energy-saving features such as low-emission glass and energy-efficient boilers (paragraph 45).


2. Since it was established in November 1997 the Environmental Audit Committee has reported on the environmental dimension of each of the Government's Pre-Budget Reports and Budgets. In our Fourth Report of this Session we looked at the Pre-Budget Report 1999 giving specific consideration to three areas where environmental taxes were under consideration or proposed—pesticides, aggregates, and the Climate Change Levy. The Government's response to our report is appended at page xxiii.

3. This report draws upon the conclusions of Budget 2000; the Government's response to our Fourth Report; a number of submissions by various organisations after the publication of the Budget on 21 March 2000; and oral evidence from Mr Stephen Timms MP, Financial Secretary to HM Treasury.[3] In this report we discuss some strategic issues—including the Government's progress against the Statement of Intent on Environmental Taxation,3 and the extent to which it has integrated environmental considerations into a fiscal strategy addressing all areas of concern. The report also looks at progress on specific measures and highlights concerns which we continue to have. We were grateful for the specialist advice offered to us in this work by Professor Paul Ekins of Keele University and Forum for the Future, and Mr Chris Hewett of the Institute for Public Policy Research (IPPR).

1   Fourth Report from the Environmental Audit Committee, 1999-2000, The Pre-Budget Report 1999: pesticides, aggregates and the Climate Change Levy, HC 76-I (hereafter 'the Fourth Report'), the Government response (see Appendix to the Report) and Budget 2000: Prudent for a Purpose, HC 346, HM Treasury, March 2000. Back

2   Some of the conclusions and recommendations set out in paragraph 1 are different to those that appear in the body of the Report to assist with reading them in isolation. Back

3   The oral and written evidence is set out in this volume after the Government response (Appendix to the Report). Back

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