Examination of Witnesses (Questions 167
- 179)
TUESDAY 7 DECEMBER 1999
MS RUTH
CHAMBERS, MR
TIM JENKINS
AND MR
TONY BURTON
Chairman
167. Welcome. Thank you for your evidence. Is
there anything you would like to add by way of an initial statement,
either the Council for the Protection of Rural England or Wildlife
and Countryside Link, to what you already said?
(Mr Burton) I have no formal statement to make before
the questions. I am Tony Burton, I am the Assistant Director at
CPRE and Deputy Chairman of Wildlife and Countryside Link.
(Mr Jenkins) I am Tim Jenkins, I am a
senior researcher in the Sustainable Development Research Unit
at Friends of the Earth.
(Ms Chambers) I am Ruth Chambers, I am Assistant Director
of the Council of National Parks but representing Wildlife and
Countryside Link today.
168. You have one hat on, not two?
(Ms Chambers) Perhaps one and a half.
Mr Loughton
169. I think you know what I am going to ask
you. Can we have your view of the aims and objectives, as you
think the Government see it, perhaps, as you see it, taking a
more contrary view on the tax? What can be achieved by the tax
as well which could not be achieved by a voluntary package?
(Mr Burton) The tax, in our view, and as we understand
it, in the Government's view, is part of a package of measures
to reduce the impact of minerals extraction. It cannot operate
in isolation from actions elsewhere, particularly in relation
to land use planning. It is an essential plank of what is now
a central pillar of the Government's Sustainable Development Strategy,
encouraging more prudent use of natural resources. We think the
Government has clearly stated that. We think it has taken rather
a long time to make the decision that is necessary but we see
the tax as part of a package of measures to reduce the impact
of extraction.
170. Perhaps I should have declared an interest,
Chairman, I am a member of CPRE in Sussex but that does not alter
my judgment at all. What is the greater package that you then
refer to, which has not come up earlier this morning, in terms
of the Government's other intentions of reducing minerals extraction?
What specifically are they in the context of, perhaps, the aggregates
industry?
(Mr Burton) The most important in the short-term will
be the revisions to minerals planning guidance, MPG 6, which has
now being delayed for a significant period of time while we have
waited for a decision on the tax. We understand the Government
is to issue an issues paper early next year, which will be followed
by a draft minerals guidance. That provides a whole raft of mechanisms
to the planning system for reducing some of the environmental
impacts and for tackling some of the huge existing land banks
which the minerals industry has across the countryside for future
extraction.
(Ms Chambers) If I may add, there are two other very
important parts of the regulatory package that are about to come
up for offer. One is in Wales with the National Assembly for Wales.
It is, at present consulting on its new minerals planning policy
framework for Wales, so things are starting to be done a little
bit differently there, which is obviously very interesting and
important. The other is the, hopefully soon, publication of a
MPG for marine aggregates extraction, which is obviously a very
important part of the policy framework as well.
171. You argue that the tax is a good thing
because it will reduce demand. From what you are saying about
other areas of the Government is thinking, it is all aimed at
reducing the amount that is coming out of the ground, therefore
there will be a reduced demand for it. What is the economic research
you have done to support the premise that the demand for aggregates
is sufficiently price elastic for the tax effect as a demand control
measure?
(Mr Burton) The influence will be there on demand
not just in the short-term but in the long-term. Indeed QPA's
own research on that issue recognises there will be an impact
and this research underestimates the potential future impact of
the expectation within the industry that that tax will rise every
time. The benefits of the tax are by no means limited to the effect
on demand. There are also substantial benefits in the use of the
revenues which will be raised in addressing many of the issues
which indeed the QPA's own voluntary package seems to address.
It is important to look at the issue as a revenue raising measure
for tackling some of the implications of aggregates production.
(Mr Jenkins) If I could add on elasticity, ECOTEC,
who did the work for QPA, have pointed out that whilst price movements
have happened in the past, which they base their analysis on,
they say that a response to a tax will be quite different from
a response to market price fluctuations, mainly because they will
be perceived generally as likely to go up and continue to go up.
It has an impact on it. There is an issue that the price increase
through the tax is likely to have more of an impact, it is likely
to be more elastic in response to that than is a normal price
fluctuation. The other thing to say is that, as with several environmental
problems that have issues in elasticity, the revenues, or a percentage
of revenues, can be used to address some issues that can be removed
to add an increase in elasticity within it. It is also true to
say that whilst the industry has figures on inelasticity, which
is generally about whether the recycled materials are likely to
be able to replace primary in any product, there is already evidence
that is happening in a continual process; there is innovation
which is moving that on, it is a dynamic thing, it is not set
in stone by any manner of means. In that sense the package of
measures the Government has which it currently does not have in
its armoury is that it is going to be able to use that price mechanism
to increase that replacement of the primary via recycled.
172. I am not convinced why that can be achieved
by a broad brush tax rather than a voluntary measure, because
if the amount of aggregates coming out of the ground falls then
the tax on it is going to fall as well, so there will be less
money to be hypothecated back into environmental improvements,
if indeed it is going to be hypothecated and that is not guaranteed.
What puzzles me is that in the Rocky Logic report you admit, and
I think the QPA admitted this, that the aggregates demand has
already fallen although part of it has been made up by recycled
materials, so the link between demand and GDP has been broken
by natural market forces. So what justification is there, therefore,
for further measures to reduce demand?
(Mr Burton) There are still substantial environmental
impacts from minerals extraction which are not currently being
picked up by the current regulations. We think the Government
needs to underpin and take advantage of some of the trends that
Rocky Logic picked up to further strengthen the moves towards
essentially a smarter economy which delivers economic benefits
at less cost to the environment through less construction aggregates
being mined out of the ground. We can take advantage of the trend
to accelerate that process through a combination of taxes, regulation
and other parts of the package. I do not think it is right to
see this as an either/or. Many elements of the QPA package and
the tax can advance together to deliver a better industry and
an industry more suitable to the public policy objectives of sustainable
development.
173. But are not parts of that package at threat
if there is a broad brush tax because the industry will not feel
obliged to adhere to it other than its minimum commitments?
(Mr Burton) The industry would say that, wouldn't
it. We would see many of the elements of the package as part of
any modern, grown-up, environmentally-conscious industry. It is
simply good practice. The vast majority of the package we simply
see as the minerals industry catching up with the modern world,
recognising the environmental commitment it has to society as
a whole, and catching up with other sectors which have moved much
further and much faster than the minerals industry has so far.
174. So if the New Deal represents the manifestation
of a modern, grown-up, environment-conscious industry which has
now caught up, why do we need to tax it?
(Mr Burton) It is a more modern, grown-up, environmentally-conscious
industry than it was, but it still has a great deal to do, and
the Government's own research shows a fundamental mismatch between
the environmental impacts of aggregates extraction on the environment
and the current costs which are picked up by the existing mechanisms
of regulation. That is a mismatch which we believe a tax has a
part to play in reducing.
175. Do you acknowledge the limits on recycling,
which is obviously desirable. Unless you compulsorily knock down
more buildings, there is an upper limit of, as we have heard,
about 75 million tonnes a year.
(Mr Burton) We recognise that there are limits to
how far you can go. We think we can go further than we have gone
at the moment and some of the policy drivers towards, for example,
an urban renaissance would encourage greater use of recycled material
as we make much better use of previously developed land and buildings
for new development, and much less of new infrastructure. So there
is a whole set of measures which in our view are encouraging those
trends but, yes, there are limits both in terms of the availability
of material and the environmental impact of using that material
in the first place.
Mr Gerrard
176. May I ask WCL, did I detect a note of cynicism
in your report when you were suggesting that firms are taking
up ISO 14001 because it is good business?
(Mr Jenkins) That is precisely why firms do take it
up. Research shows that those firms which take up ISO 14001 do
so because they know it is good for their business. The DETR has
a unit of two people, I think, which goes out to promote to businesses
that they should do it because it will save them money in reducing
their risk and making them environmentally compliant and better
managed. Certainly internationally the evidence is that if you
ask what was the main reason why firms took it up, it was because
it is good for them. That is how it is designed, that is how it
is sold, that is what it is about.
177. So you think that is the driving force
rather than simply a desire to produce better environmental standards?
(Mr Jenkins) Yes.
178. You are saying they are doing it out of
an altruistic desire?
(Mr Jenkins) I think environmental management standards
are hard-nosed business practice. They know it will be better
for them to do so. There is an initial investment cost in doing
so but at the end of the day the firms who are selling it, who
put forward case studies for other firms to take it up, do so
entirely because they are able to demonstrate where it was they
actually were able to improve their business by doing so.
(Ms Chambers) There have been general changes in corporate
regard for the environment, not just from the minerals industry.
Companies are increasingly realising it makes good business sense
to promote environmental good practice in their firms. For example,
nearly two out of three companies now have environmental management
systems and I think these changes have been driven forward by
sectors other than the minerals industry, as Mr Jenkins said,
so at last, finally, we are beginning to see these very positive
enhancement initiatives operating within the industry as well.
Mr Jones
179. Chairman, the constant link between all
the contributions so far is an agreement there should be hypothecation.
There has been some level of disagreement about what the effect
of the tax would be on demand, but an agreement there should be
hypothecation. I suspect there is not so much agreement about
what it would be hypothecated to. What would you wish it to be
hypothecated to, whatever the income level is?
(Mr Burton) It is certainly a shame that that has
not been part of the process of consultation and debate with Government
at the moment, so we have not had that debate in the round. We
have simply had people pitching in with their own particular views
on the issue. I think there is a great deal in the package which
we could be using the revenue from an aggregates tax to fund.
I am particularly interested in the recognition by the industry
of the need for better resources for local planning authorities
for the monitoring and enforcement of conditions, which has been
for a long time a bit of a Cinderella of the minerals planning
system and one which is causing serious problems in the whole
minerals planning process.
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