Select Committee on Environmental Audit Minutes of Evidence

Examination of witnesses (Questions 40-59)



  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.


  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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