APPENDIX 5
Memorandum from the Country Landowners'
Association
1. The CLA welcomes the opportunity to give
evidence to the Environmental Audit Committee on the subject of
environmental taxation. We represent some 50,000 landowners, who
between them own around five million hectares of rural land in
England and Wales. Many of our members have farm businesses, and
are therefore pesticide and energy users, other members are involved
with the production of aggregates, and others own land that will
be affected by climate change, and even, in some cases, threatened
by future flooding from the effects of global warming.
2. Any Government regulations must be in
accord with the "Principles of Good Regulation" - Targeting,
Consistency, Accountability, Transparency and Proportionality.
We feel that each of the three possible environmental taxes would
fail to satisfy one or more of the principles. For example:
(a) A Pesticides Tax would be a blanket measure,
rather than a targeted measure. Management of pesticides
is the issue, not use per se. Increasing costs by taxation
with the aim of controlling use, will not deliver better management.
(b) An aggregate tax, levied at the point
of production, given the highly competitive nature of the industry,
would be most likely to be swallowed up in the production process
without leading to a net increase in price to the consumer. In
our view it would, as a result, fail to influence the level of
production, and therefore fail to deliver any environmental benefits.
This also falls down on the principle of targeting.
(c) A climate change levy would fail to satisfy
the principle of proportionality. The proposal to recycle the
levy to make it "neutral" to employers via the employers'
national insurance contributions would discriminate heavily against
farming of all kinds, given that agriculture is dominated by micro-businesses
who do not employ workers other than the directors.
3. We remain opposed to the three proposed
taxes in principle, and outline our previous objections and alternatives
for each tax below.
PESTICIDES TAX
4. We do not believe that a pesticides tax
would meet the Government's criteria for a good environmental
tax, as set out in the Statement of Intent on environmental taxation,
on a number of accounts:
— If the objective of the tax is to
minimise pesticide use, it will be unfulfilled. The 1996 Royal
Commission on Environmental Pollution report on the sustainable
use of soils states that "the risk of contamination of water
courses by pesticides depends on such factors as, application
technique, the capacity of the soil to bind pesticides, and pesticide
degradation techniques" - the actual amount of pesticide
applied is not a significant factor. The RCEP report also quoted
research at MAFF's Rosemaund Experimental Husbandry farm which
indicated that better management of pesticides application would
be the best means of reducing water pollution. A pesticide tax
is not focused on the management problems, which are the main
issues and would not in itself directly encourage good practice.
Only advice, information, voluntary agreements and incentives
will properly target these measures.
— A pesticide tax could result in undesirable
environmental side effects. It may encourage the use of cheaper,
older, less targeted, less environmentally-friendly pesticides.
In addition, it would not always encourage a switch from "bad"
pesticides to "good" pesticides. For example, pirimicarb
- a more environmentally-friendly insecticide - might be used
much less than other insecticides if a tax further increased its
price.
— We believe that the tax would not
increase growth and sustainability among farming businesses. It
is well known that buyers such as supermarkets might look elsewhere
for cheaper goods if farmers could not absorb their costs (often
farmers have no choice of pesticides to use) and were forced to
increase their prices. This could mean imported, less-environmentally-controlled
foods being sold in the UK, to the detriment of the UK rural economy.
— Aquatic herbicides are an important
means of controlling annual vegetation growth in rivers and drainage
channels, a vital operation to keep flood risk at acceptable levels.
They are used, particularly, in low-lying drainage systems in
East Anglia and elsewhere in locations where water level control
is essential to protect people and the developed and natural environment
against flooding. The taxing of these pesticides would not be
in accordance with good environmental taxation.
— The Statement of Intent stresses
the need for cost-effectiveness. We are concerned that the assessment
of compliance costs by ECOTEC, based on data from only one year,
is a poor basis for assessing cost-effectiveness. Further study
is needed.
5. We are convinced that the factors and
measures already in place, and in practice, are much more effective
at minimising pesticide use than an increase in pesticide costs.
Management practices are generally sophisticated, and acute environment
incidents involving pesticides are rare. Measures targeted on
improving practice - as the RCEP suggested—will be far more
effective in reducing risks of environmental damage than a simple
increase in the cost of pesticides. A tax is a blunt instrument.
We suggest more effort should be put into promoting minimisation
(eg through the Pesticide Forum). The package of activities should
include:
— Advice and information through The
Codes of Good Agricultural Practice and The Code of Practice
for the Safe Use of Pesticides on Farms and Holdings.
— Voluntary schemes, for example the
pilot Landcare project where the Environment Agency in partnership
with other interested organisations and land managers, are looking
at practical measures to reduce on and off-farm soil erosion -
which will in turn reduce pesticide losses into water courses.
The Sheep-dip strategy is also a voluntary Agency strategy assisting
the dissemination of advice on the practical aspects of sheep
dipping and what measures can be taken to avoid water pollution.
There are many conservation-minded farmers who adopt measures
and/or schemes voluntarily. They will ultimately be penalised
by a pesticide tax, and will be less able to afford to undertake
these conservation measures.
— Agri-environment schemes such as
Countryside Stewardship and Arable Stewardship (pilot) encourage
effective measures to be taken to reduce pesticide loss into water,
such as the planting of arable wildlife strips and grass buffer
strips next to water courses, and maintaining and planting hedges.
— The 1998 Groundwater Regulations
will also have a substantial influence on the use and disposal
of pesticides, and the associated compliance codes will act as
an additional influence to minimise pesticide use.
— Continued research into safer, faster-degrading,
more environmentally-friendly pesticides is essential.
AGGREGATE TAX
6. We believe that the broad aim of any
environmental tax should in our view seek to influence the buying
choices of the consumer. Only by a reduction in demand will the
environmental effects of aggregates production be reduced. Price
signals at the point of consumption will give incentives to retailers
to offer alternatives, and will create market signals to enhance
the attractiveness of alternatives.
7. In contrast, an aggregates tax levied
at the point of production, given the highly competitive nature
of the industry and the relationship between the owners of the
minerals and the extraction companies, would be most likely to
be swallowed up in the production process without leading to a
net increase in price to the consumer. In our view it would as
a result fail to influence the level of production, and therefore
fail to deliver any environmental benefits.
8. Whilst individual mineral operating companies
would undoubtedly wish to pass the costs of any new tax onto their
customers, none is in our view likely to be in a sufficiently
monopolistic position in order to be able to do so. Further, given
the current over-capacity in the industry, any operator adopting
such a pricing policy would be likely to suffer rapid reduction
in turnover and market share.
9. Consequently, rather than reducing the
amount of minerals produced, the reduction of net return arising
from a tax at the point of production would be likely to encourage
greater efforts by individual producers to sell more aggregates
in order to maintain turnover. This type of market behaviour is
evidenced in many primary industries, including agriculture.
10. Accordingly, if the aim of policy is
to increase the price of primary aggregates relative to recycled
material, any quarrying tax would have to follow the model of
the existing VAT regime. We consider that that is the only way
to ensure that the price signal is passed on to the consumer,
who would then be in a position to choose an alternative. It follows
from this reasoning that the tax should be ad valorem rather than
based on a tonnage.
11. We also consider that quite apart from
influencing the purchaser in order to reduce production, any tax
headlined as an environmental tax should necessarily be predicated
to environmental purposes, rather than joining the general Treasury
receipt. As very nearly all aggregates are extracted in rural
areas, the CLA proposes that any receipts from an aggregates tax
should be predicated to rural local authorities for use in discrete
environmental projects.
CLIMATE CHANGE
LEVY
12. We consider that an energy tax would
discriminate against UK agriculture, and threaten jobs and incomes,
at a time when the industry is burdened by the worst recession
for 60 years. We suggest, to protect UK farming against the risk
of unfair competition resulting from increased costs, that the
levy should only be adopted as part of a European-wide strategy
to curb global warming.
13. We also recommend that some of the cash
yielded by the energy tax should be devoted to minimising its
impact on farming and other primary production, and funding the
development of renewable energy sources. We are also keen for
other methods of reducing greenhouse gases to be used as alternatives
to imposing a potentially damaging energy levy.
14. The planned energy levy will have a
disproportionate effect on agriculture in general. The proposal
to recycle the levy to make it "neutral" to employers
via the employers' national insurance contributions would discriminate
heavily against farming of all kinds. Few farmers would benefit
because few employ other workers.
15. Agriculture is an intensive energy user
compared to the amount of employment it generates. In addition
to field operations using large horsepower tractors, temperature-controlled
crop stores and many areas of livestock production are likely
to suffer greatly. Intensive horticultural operations, which are
major contributors to the balance of payments, may be put out
of business. And unlike other forms of industrial production,
the areas for energy saving within agriculture are limited.
16. There may be other solutions to the
problem of climate change, instead of imposing an energy tax.
These could include expanding our renewable energy sources and
increased tree planting to absorb greenhouse gases. Allied with
emissions trading, these could add value to the economy, rather
than impose the disadvantages of taxation at the expense of incomes
and jobs.
September 1999
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