Examination of witnesses (Questions 40-59)
WEDNESDAY 14 MARCH 2001
MR STEPHEN
TIMMS MP, MR
CLIVE MAXWELL
AND MR
JOHN HALL
40. Yes.
(Mr Timms) The point you have made is correct. There
is, as you say, an element of that which is being dedicated to
the development of renewable energy sources and that is outside
the £100 million that the Prime Minister announced last week.
41. So this will be £50 million that was
going to be 1999, £50 million 2000, and £50 million
2001, each of those three years, plus the extra money that was
allocated from the Climate Change Levy for renewables?
(Mr Timms) Let me ask Mr Hall to comment on that.
(Mr Hall) The existing Energy Efficiency Best Practice
Programme is being transferred into the Carbon Trust and that
money has been ring fenced. In terms of the base line that is
not changing. That goes into the Carbon Trust. On top of that
the Carbon Trust has an additional amount of resources of £100
million over three years which will fund additional energy efficiency
advice and will fund research into low carbon technologies. On
top of that, again from the revenues from the CCL, there is £50
million over three years to promote renewables technology. None
of that includes the stuff that the Prime Minister mentioned in
his speech.
42. It would be enormously helpful, Minister,
to have a note setting it out. One of the difficulties that we
have is that there are so many initiatives and there are so many
new initiatives and there are so many existing initiatives that
it is really difficult to keep track of them all and to see how
they are progressing through.
(Mr Timms) I sympathise with the Committee's difficulty.
I will be glad to provide a note.[1]
43. Can you also confirm to me—and you
have probably covered this already but just for the record—what
has happened to the extra £40 million from the reduction
in enhanced capital allowances in 2001-02 and 2002-03?
(Mr Timms) No, I have not covered that.
All that has happened there is that the announcement of the details
of the qualifying technologies was delayed somewhat from what
we originally intended, so things have gone backwards a little.
That is why we now expect—and this is conjecture of course—a
rather lower take-up of those in this first year because the information
has been provided a bit later than we originally thought. We originally
expected that we would be able to publish the details of that
in December. We are now expecting to do so as soon as state aids
clearance has come through at the beginning of April. Because
the information is available a little later than we had expected
we anticipate that the take-up will be a little lower in the first
year than otherwise it would have been. That is all that has happened
there.
44. Do you know why this is? Is this a failure
in communications or not getting the message across? Why is there
this failure to have the take-up that you had anticipated in the
first year?
(Mr Timms) Only that the information has not been
available to people up till now. In fact, just yesterday the Commission
did confirm its go-ahead for the enhanced capital allowances arrangements
that we had proposed. When we put those figures together initially
we expected to have that by December, but there has been a delay
at the Commission's end; that is all.
Chairman
45. There is a problem here which we touched
on in your exchange with Mr Gerrard about transparency, about
that information being followed through in a clear way year after
year. Our suspicion was, having looked at your figures and having
no help as it were other than our own resources, that the £100
million fund which the Prime Minister announced was not new money.
Indeed, only £10 million of that appeared to be new money
because £50 million had disappeared from the accounts into
the Carbon Trust and £40 million had gone from reduced estimates
for enhanced capital allowances. We may be wrong, but without
a clear explanation, running through the figures and making proper
comparisons form one year to another, even we, who are looking
at these things closely, do not know what is going on, and certainly
the general public do not know what is going on. You can understand
why there is a certain amount of suspicion: is this really new
money or not?
(Mr Timms) I guess that is why I am here, so that
I can provide the explanation. As I say, I entirely sympathise
with the Committee's difficulty on this. I can give a complete
reassurance on that. All that has happened is that the information
has been provided a little bit later than we originally expected,
which means that the benefits have been put back three or four
months, but there will be more later on.
46. Could we have a clear note on all this which
would set the whole thing out?
(Mr Timms) Yes, certainly, a note covering all the
funding sources for renewable energy first of all, addressing
Ms Walley's point, and explaining what has happened on enhanced
capital allowances[2].
Joan Walley
47. And to add to that, it further compounds
the difficulty we have in understanding what has happened because
we have got the press release which came out from the DTI on the
occasion of the boost for green energy and in a way, if I can
put this to you, perhaps through your work on the Green Minister
Committee which I know will come up later, we are looking for
some kind of an audit trail to be able to monitor what there is,
how it has been spent, what there is from one year to the next
and whether or not old money gets translated into new money. In
a way, when we are looking at renewables, for example, I would
suggest to you that that needs to be done in a holistic way in
conjunction with the DTI. Here we have got from the DTI a list
of different initiatives from the National Lottery and here, there
and everywhere. Unless we can follow it all through we are left
completely in the dark. Is that part of extra money? It needs
to be done in a joined-up way with other government departments
as well. When you give the Committee a note would you perhaps
look at not just what is coming through from the Treasury but
how it relates to other spending departments as well?
(Mr Timms) That will certainly be the case.
48. One final question if I may. Some time back
we did recommend that the Energy Saving Trust should administer
the fund for sustainable energy from the Climate Change Levy.
That was one of the recommendations from this Committee that was
not taken on board. We now note that we are going to have this
further body that is going to be created, the Carbon Trust. Could
you tell the Committee what that is going to do that is going
to be additional to what the Energy Saving Trust is already doing
and why it was necessary to have a separate body and why our recommendation
was not something which the Treasury felt it could agree to?
(Mr Timms) The Carbon Trust has a very clear role
in taking forward work which has been carried out in the past
but in a more effective way, not least because it will have significant
extra resources available from the proceeds of the Climate Change
Levy. The very important part of what is going to happen over
the next few months is that a lot of companies will want to get
advice about how they can reduce their energy bills. They will
see from next month entries appearing on their energy bills for
the Climate Change Levy. They will want to know how they can reduce
those payments, quite rightly, and it is very important that they
have access to good quality readily accessible information and
the provision of that will be a very important role for the Carbon
Trust.
49. How is that going to take advantage of the
expertise that is already there inside the Energy Saving Trust
and other organisations such as the Energy Technology and Efficiency
Best Practice Programmes? Have you thought through how you are
going to get the best advantage from the expertise that is already
there relating to these issues arising from the Climate Change
Levy?
(Mr Timms) Certainly the Carbon Trust will want to
draw on expertise that is available from those organisations and
others. Of course it is a matter for the DETR directly.
50. You are not afraid there is going to be
more confusion from all these different quangos being set up between
yourselves, the quangos, DETR and DTI?
(Mr Timms) I hope there will be less confusion because
I think the Carbon Trust will be seen as the place to go for good
quality readily available information on this topic. I am delighted
that Ian McAllister, Chairman and Chief Executive of Ford Europe,
has taken the Chair of the Trust. I think it is going to be a
high profile, readily accessible body. It is a different body
in that sense and I am very optimistic about the effectiveness
of its operations.
Mr Gerrard
51. Can I ask you about two specific taxes?
The first one is the Aggregates Levy. When this Committee looked
at the question of the Aggregates Levy last year we came to the
conclusion that there ought to be a levy but that there also ought
to be rebates, a little bit like the Climate Change Levy, that
you ought to be giving rebates to quarries that were being operated
in an environmentally friendly manner. It appears from the Budget
that you are proposing to move in that direction. Can you tell
me: how is that going to operate? How far will that rebate operate?
Is it going to be a question of making assessments of individual
quarries? Are you going to make judgments about types of operation?
How is it going to operate?
(Mr Timms) That is an extremely good question. I do
not yet know the answer and I think it will take some time to
come up with good answers to the questions that you are raising
which are extremely pertinent questions. Indeed, I think it will
take beyond the implementation of the Levy, which will take place
as you know in a year's time, April next year, until we have a
good framework in place for having differential rates of levy
for green quarries. As the Committee has rightly pointed out,
and we have accepted, there are attractions for doing that, for
rewarding environmental good practice, but quite how that is going
to be done we do not know. Officials are in discussion with the
Quarry Products Association, which is the quarries industry body,
that is very keen on making this change, and I think we will find
a way to do it but I think it is going to take quite a lot of
work.
52. If there is that incentive how confident
are you that it is actually going to be revenue neutral because
the intention, as I understand it, was that the costs of the Levy
would be equivalent to cutting national insurance contributions
plus the Sustainability Fund. You have already suggested a figure
of £35 million for the Sustainability Fund. Do you have estimates
for the other two of what is actually going to be raised from
the Levy (£1.60 per tonne) is going to bring in and whether
that equation is really going to balance, particularly if there
are uncertainties about where is a rebate?
(Mr Timms) It will be revenue neutral when it is introduced
next April on the basis that we have announced. Clearly what happens
beyond that we do not know yet. If there were to be a lower rate
announced for certain kinds of quarries, then that would no doubt
have an impact on the overall take from the Levy. That would depend
on what the lower rate is and who qualifies and so on, and those
are decisions we have not yet made and so we have not yet done
the calculations. Certainly when it is introduced next April it
will be revenue neutral.
53. Does that mean that you might end up with
the position of subsidising the Sustainability Fund? Is that money
guaranteed that it will stay at £35 if the take-up is not
as you predict?
(Mr Timms) I certainly would not want an outcome which
led to a sudden fall in the Sustainability Fund. I do not think
that would be in anybody's interests. Clearly it might well be
the case, and indeed it very likely would be that, if we went
ahead (as I anticipate we will and certainly I hope we will) with
a differential rate for green quarries, there would be an impact
on the overall tax take-up. That is inevitably going to be the
case.
54. Is it possible to give us an estimate of
what you anticipate the take being from the levy?
(Mr Timms) When it is introduced next April?
55. Yes.
(Mr Timms) I am sure we have got that figure.
(Mr Hall) The costing which informed the decision
in Budget 2000 was that the levy would raise 385 million on a
full year basis and the costs of the reduction in employer NICs
at 0.1 percentage points would be 350 million. That left 35 million.
At the time that the Chancellor made the announcement in PBR 2000
on the Sustainability Fund additional funds for the levy were
secured by a claim on the reserve for the two remaining years
of the spending period and obviously the next spending period
will take that forward.
56. One other factor that is going to affect
how much you take in the levy is going to be secondary materials
because, again, this was an issue that we discussed last year
and the difficulties there are in defining exactly what secondary
materials should be subject to the tax. What progress have you
made on that in deciding what secondary materials ought to be
taxed?
(Mr Timms) I do not think that we have announced any
changes on that front since I last talked to the Committee. As
you know, there are some materials that are going to be exempted
from the levy, for example china clay waste. We have had discussions
with people who have suggested to us that other quarrying waste
materials ought also to be treated in a more concessionary way
but, as you have also said, there are some very serious difficulties
about definition in doing anything along those lines. We have
not announced any changes on that and are not proposing any at
this stage. It is an issue that we will keep under review.
57. That was an area that the Committee had
some concerns about. So we can assume at the moment that it will
be the range of materials that was originally identified that
will be subject in the first place?
(Mr Timms) Yes.
58. But that you will review?
(Mr Timms) We will certainly keep the matter under
review but we are not proposing any changes to that at this stage.
59. Can I just turn to the pesticides tax.
(Mr Timms) Yes.
1 See supplementary memorandum. Back
2
See supplementary memorandum. Back
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