Select Committee on Environmental Audit Minutes of Evidence


Examination of Witnesses (Questions 300 - 319)

TUESDAY 18 JANUARY 2000

MR STEPHEN TIMMS MP, MR SIMON VIRLEY, MR DAMIEN MCBRIDE AND MS HEATHER MASSIE

  300. You do not believe that the Government's view that "the polluter pays" should apply to this industry?
  (Mr Timms) No, I do believe that the "polluter pays" is the right principle. That was one of the reasons for looking at a pesticide tax. However, I am saying that I think we have enough research data currently in order to make some progress on this, while recognising that there are still some things that we do not know everything about yet.

  301. Why does the Government's approach on aggregates differ so markedly from the Government's approach on pesticides?
  (Mr Timms) I would not agree that it does. In both cases we have commissioned research, we have carried out consultation, and we have developed proposals on the basis of the results. One difference of which I am aware is that the research work that has been carried out in the case of aggregates was a good deal more costly. It was a larger-scale study. There were a number of reasons for that, one of which I have already mentioned, that there happened to be more existing work on pesticides than there was on aggregates. The approach that we have taken, the careful step-by-step approach that I described at the outset, has been the same in both cases. That is the approach that I would like to see applied for future issues of this kind as well.

Mrs Brinton

  302. I want to take us back to the question raised earlier in relation to the RSPB evidence to us. That organisation was quite firm about this. It quoted two studies, saying that farmers could cost-effectively reduce pesticide use now and save between £100 million and £274 million a year. They were not firm on the figure of £274 million. If the industry is in such a crisis, why do you feel that farmers are not actually making such cost-effective savings? Why are they not taking advantage of that?
  (Mr Timms) Certainly I am conscious of the pressure that farmers feel that they are under at the moment. I think that there is widespread agreement about the potential for reducing costs here. As you will no doubt know, we are looking at the possibility of taking action on pesticides forward with a partnership approach. The sort of measures that would be examined within that package would be along those lines: looking at ways of working with the industry and farmers to reduce the amount of pesticides used, perhaps using less environmentally damaging pesticides than have been used in the past and a variety of measures of that sort. I believe you are right that everybody would benefit from that. There would be savings in costs and there would be a reduced degree of pollution as well.

  303. Concentrating more firmly on the NFU and BAA estimates of the impact of such a tax on farm incomes, some of us are being strongly lobbied by the NFU. I believe that it is fair to say that some of us believe that the NFU/BAA estimates are, in fact, rather grossly exaggerated. It seems that they have chosen to use worst-case scenarios all the time. What would you say about that? Do you think that they are deliberately slanting the argument and, in fact, avoiding a partnership approach?
  (Mr Timms) As I said earlier, there is a range of views here. It is clear that the figures involved are substantial. There is no dispute about that. Everybody agrees that that is the case and that there is a case for action as a result. The BAA has indicated that it is interested in a partnership approach to tackling the issue. They are coming forward with proposals on that approach. We shall look at those carefully and decide how to go on from there. I would not say that BAA has been unhelpful. It has sent in its proposals and we shall look at those very carefully.

  304. I find that encouraging, particularly as government policy is to encourage farmers to be custodians of the countryside with significant environmental responsibilities and they do not want farmers to be on one side and environmental groups on the other. Taking you on to the objectives of the pesticide tax, should those objectives be to influence distinctly the behaviour of farmers or to fund other measures to reduce usage, or as a sort of stick with which to encourage a voluntary change?
  (Mr Timms) The objectives of the tax would be a reduction in the level of pesticide usage, consistent with adequate crop protection. That is what we would look for. Because of the banding approach to the tax that was proposed—I think that the proposal made in the ECOTEC report was widely supported—I believe that we could look to a move towards less harmful pesticides where pesticides are used. The overall aim would be a reduction in the level of usage consistent with adequate crop protection.

  305. Looking at the long-term as well as the medium and short-term, what sort of level of elasticity would you consider would be the absolute minimum for any such tax to be justified as a demand management tool?
  (Mr Timms) The actual level of tax would be a matter for the Chancellor at the time of the Budget, as you know. The research that we have seen suggests that a tax of around 30 per cent of the product price would reduce pesticide use by between eight per cent and 21 per cent. That figure has been developed from research. The question of the level would be a matter for the Chancellor to decide at the time of the Budget.

  306. As always, you are not giving away any Treasury secrets. In terms of such a pesticide tax, I think it is true of all environmental measures of taxation and that is why we get such worried and frightened letters from particular lobbies. How much more work would you say would be required to develop detailed, clear, transparent tax proposals? In your view, when is the earliest that such a pesticide tax could be introduced? I know you cannot do it tomorrow.
  (Mr Timms) No. The earliest point for the announcement would be the Budget.

  307. The coming Budget?
  (Mr Timms) The coming Budget. Before moving to a decision on that we shall need to consider proposals put forward by the BAA.

  308. It is quite clear that the Government will be open and transparent about that and let people see the detailed work that has been going on. Whenever you try to change the tax base, lots of worries appear unless people are taken on board. All our witnesses have said to us that they feel that hypothecation of any tax to fund technology transfer and advice to farmers would be absolutely vital for its success. Would you agree with that?
  (Mr Timms) Do you mean hypothecation of an element of the pesticide tax?

  309. Yes.
  (Mr Timms) I would not necessarily agree, no. If we accept that the aim is a reduction in pesticides use consistent with adequate crop protection, I do not believe that that necessarily implies that the portion of the revenue should be used in the particular way that you imply. Clearly, that would be an issue that the Chancellor would need to take a view on in the run up to the Budget, but I would not regard it as an inevitable or unavoidable feature of a well-designed pesticide tax.

Mr Loughton

  310. Minister, as to good working practice, you have used the mantra that you want to see a reduction in the level of pesticide usage consistent with adequate crop protection, although I am not sure what that means. In practice, how will that be done? Will there be dual charging of different sorts of pesticides? You have also mentioned that less harmful pesticides should be encouraged. What is a less harmful pesticide? Is it one that is more dilute than a more harmful one? In that case, will it be taxed less and then the farmer can use more of that less harmful one, which would produce the same result? How will it work in practice?
  (Mr Timms) The proposals that we are starting with are those contained in the ECOTEC report. A system of four bands was proposed there and the report proposed how those bands should be defined. The suggestion was that there should be a variable level of tax added to the price of the pesticide, depending on which band the pesticide was in. That was fairly straightforward. That was a reasonably well-supported structure. Of course, the idea of a tax has been quite hotly debated, but in terms of the best structure for making a tax work, I think the proposals in the ECOTEC report have been widely supported.

  311. The key thing must be the effect. At the moment it strikes us that pesticides are bad and will be taxed—a broad-brush approach. There may be some variation as between some bands, as you say, but the Government seem to have done little work on the effect of them. You have quoted that a tax of around 30 per cent as an average would reduce usage between eight and 21 per cent. That is an enormous band. It strikes me that the Government have not done enough work on the effect. We have heard witnesses from the NFU say that there may be stronger pesticides that can be used through the use of technology right up to satellite positioning, or whatever, concentrated on areas of weeds in a field, rather than just a broad-brush approach. There are all sorts of technological advances that can be used, but what encouragement are you giving for those to be used if you just tax heavily the actual pesticide being used while being reluctant about any hypothecation towards better stewardship or farm management. At the end of the day will this just produce money for the Exchequer? What incentive will there be for the good farmer and the environmentally sensible farmer, who uses fewer pesticides or more effective pesticides which means having less of an impact on a wider area of land? One final point, are you taking on board the fact that it is not just a question of using less pesticide? If you use less pesticide the whole crop may, in some cases, become unviable. You will not just have an 80 per cent yield or a 90 per cent yield; unless you use a minimum amount of pesticide the whole crop may become unviable.
  (Mr Timms) First of all, I have not proposed a 30 per cent rate for the tax. I was simply referring to one research finding which was based on that figure. It is not a figure that I have endorsed. The structure proposed in the ECOTEC report, by having a different level of tax for pesticides, depending on their environmental impact, would have an encouraging effect of the kind that I think you are seeking. The imposition of a tax at all would, as we have said, reduce the level of pesticide usage, which I think would be widely acknowledged as a good thing. There may be other ways of achieving it and that is why we are looking at the partnership approach with the BAA, but nevertheless I believe that the tax would have the effect of reducing the level of use. It is important that we acknowledge that there is a need for pesticides to be used. That is why the statement that you referred to as my "mantra" includes the point about being consistent with adequate crop protection. I entirely recognise that and it is an important point. Pesticides have an important part to play in agriculture. We can frame a tax, I believe, that would acknowledge that and be consistent with adequate crop protection but would nevertheless produce increased incentives for lower or cautious or sensitive use of pesticides. That would be our aim.

Chairman

  312. Going back to your mantra, the fact is that both the NFU and the BAA have said to the Committee that there is no scope for reduction in pesticide use. I am surprised to hear you say that everyone is agreed.
  (Mr Timms) The British Agriculture Chemicals Association, with the support and some involvement from the NFU, has been working up proposals for addressing the issue. We asked for them by the end of last week and we received them by the end of last week. However, I have not yet had the chance to study them. The fact that those proposals have come forward, and indeed it has been confirmed in discussions that I have had with the BAA that it is their view as well, indicates that there is scope for some action in this area. They would prefer that we did not go ahead with the tax. We shall need to study the proposals that they have made and see whether they can make adequate progress in that area. My impression from the discussion that I had with them was that they saw a good deal of scope on the voluntary front for reducing the environmental damage from pesticides.

  313. If you have done the study, why do you not know what the scope is? Why does the Government not have a view? You said in answer to the original question that the Government have no view as to whether the RSPB was right or the NFU was right. Why do you not know?
  (Mr Timms) I think it is a reflection of the fact that there are a good deal of uncertainties in this area. Equally, skilled and able researchers can reach different views. However, it is important to acknowledge that the effects are significant and that there is, therefore, the basis for action to reduce them. I think there is agreement about that, and that is why we have proceeded as we have done.

Dr Iddon

  314. One of my last research projects was to develop biodegradable herbicides: molecules that did the job on the weeds, dropped onto the soil and were converted by organisms in the soil into relatively non-toxic materials which certainly did not end up in the water courses. That is the kind of research that is going on.
  (Mr Timms) You probably have the edge on me on that point.

  315. It is research that is going on and in my view it is research that you ought to encourage. I am pleased to hear you talk about the banding of a pesticide tax. My view would be that biodegradable pesticides of all kinds, if it can be proved that they are biodegradable, should not be subject to the tax so that we encourage their development. Unfortunately, if we apply this blunt instrument we may inhibit research of that kind. Has anyone raised that subject with you so far?
  (Mr Timms) The industry has, as you know, urged us not to introduce the tax at all. I have not yet received from anybody in the industry any proposals along the lines that you have described. Perhaps it would be helpful to ask Simon Virley to say a little more about how this banding system would work. As you know, that was proposed in the ECOTEC report. I think it has been a principle, at least, that has been quite widely accepted, although there is certainly scope for debate about the form that the bands should take.
  (Mr Virley) That is right. As the Minister has indicated, the principle of the banding structure has been widely accepted. A large number of representations on exactly where the band should fit have been made, allowing for the toxicity of different pesticides. There have been some representations made about what form of pesticides might be exempt from that. Obviously, that would be a matter for the Chancellor to decide upon on the scope of a tax if one were introduced.

Mr Jones

  316. Minister, you spoke earlier about the Government's desire to have a partnership approach with the industry. Would a partnership approach include representations from environmental organisations and agencies?
  (Mr Timms) We would certainly want to take account of the views of environmental organisations in taking that forward, yes.

  317. With respect, that is a somewhat obscure answer. Perhaps I can ask the question again. Would the partnership approach include representatives from environmental agencies?
  (Mr Timms) I have not seen the proposals that the BAA has come forward with, so I do not know whether they are proposing a structure on which representatives from different institutions would come together. If there is not, then I do not think that the suggestion that you are making would be one that would apply. However, it is very important. From time to time I meet with the representatives of environmental organisations. We pay careful attention to their views on all these matters including the pesticide tax. The RSPB has been particularly vociferous on this topic, although we meet with all the organisations. Certainly I am anxious to take full account of the views of the RSPB and others in taking this matter forward. Whether there would be a sort of institutional role, I do not know. I think that would depend on what form the partnership took. I apologise if you thought my remark was obscure. It was not intended to be. I wanted to make the point that I want to take full account of the view of those organisations.

  318. What public accountability would there be if the Government decide to agree to some sort of voluntary industry scheme?
  (Mr Timms) Again, you are pressing me on the details. It is a little early to talk about how this will work out in detail. As I have said, I have not studied the proposals that have been submitted, still less formed a view as to whether that is the right road to go down. I believe that it would be important, perhaps particularly in the pesticide area, that there was a good deal of public reassurance around our proposals and that there would be some reassurance for the alarm that there has been on this front. It is too early to say how that would work precisely.

  319. I can understand your inability to go into any detail about it, but I am sure that you understand that if a voluntary approach were decided upon, there would be a number of interests out there that would need to be assuaged that this was not simply a sweetheart deal and that there were some clear targets and penalties involved in the scheme. Do the Government have any views on those principles if not on the details?
  (Mr Timms) I entirely accept and agree with the principle that a range of interests would need to be reassured. That is something that we would want to take seriously. What form that would take, whether there would be targets, and so on, it is really too early to say. If the Committee would want, I would be very happy to come back to the Committee to talk further about whichever of the routes that we decide to go down.


 
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