Memorandum by the Railway Development
Society (CC59)
CLIMATE CHANGE LEVY
I refer to your request for evidence regarding
the proposed Climate Change Levy in connection with forthcoming
Select Committee hearings.
May I say first of all that we only became aware
of this request at relatively short notice, and we have had considerable
difficulty discovering exactly what is being proposed, and indeed
in what way the proposals may have been affected by the Chancellor's
Financial Statement last week.
Whilst we would endorse the principle of a levy
on energy, we are concerned that the details of how it is to be
applied may have unintended but unfortunate consequences on rail
transport in two respects in particular. Firstly, it would seem
likely to impinge on the economics of rail freight operations
and undermine the competitive position of rail in the freight
sector, unless the exemptions proposed for public transport are
extended to rail freight. Secondly, there is likely to be a further
disincentive not only to electrical operation of rail services
but also to further railway electrification, if any part of the
railway industry is subjected to the levy in respect of traction
current.
A levy on electric haulage, at three times the
rate applicable to coal or gas, even if only on rail freight,
while diesel oil remains free of levy, risks producing a transfer
of freight traffic away from electric rail haulage back to diesel
haulage or indeed to road. This hardly seems a desirable move
in terms of sustainability and environmental policy objectives!
The ending of the automatic Fuel Duty Escalator,
proposed by the Chancellor last week, risks further compounding
this effect if in the event the rate is allowed to fall significantly,
although we of course welcome the undertaking to hypothecate such
tax as is raised, for public transport investment.
We are disappointed to note that the idea of
tailoring the levy to reflect the carbon content of each fuel,
in addition to energy content, has apparently been rejected on
the grounds of complexity. We feel that this undermines the objectives
of the policy, and ought to be reconsidered. It could be that
the difficulty arises from the minimalist approach of filling
in gaps left by existing taxes, rather than reviewing the whole
sector (including existing fuel duty, domestic energy levy, etc)
and replacing all these with a fundamentally new approach across
the board, based on the characteristics of each fuel and applied
at the point of power generation or fuel consumption. The present
approach makes the fundamental error of treating electricity as
a fuel, rather than a means of energy transmission.
In conclusion, we urge that all traction power
for rail transport (passenger and freight) is exempted from the
levy on electricity. We understand that this may now have been
conceded. Exemption is preferable to a rebate system, as the latter
ties up funds and amounts in effect to a one-off tax. We also
urge reconsideration of a carbon content element and of the erroneous
treatment of electricity as a primary power source. We note with
approval the reported remarks of the academic advisory panel of
environmental economists on this last point.
M.G Crowhurst,
Policy Adviser, RSD National Executive
November 1999
| 
