Examination of witnesses (Questions 60-79)
WEDNESDAY 14 MARCH 2001
MR STEPHEN
TIMMS MP, MR
CLIVE MAXWELL
AND MR
JOHN HALL
60. Do you think now you are in a position where
you are happy with the package that has been put forward by the
Crop Protection Association? There have been some criticisms that
it really is not very firm, it does not have clear targets, it
does not have clear indicators. Are you happy that it is workable?
How are you going to judge whether it has been successful or not?
(Mr Timms) Let me just quote to you the comments that
were made by English Nature, Pesticides Action, Network UK, RSPB,
that has had a very close involvement in this, and the Environment
Agency. They have written in making the point that they "welcome
and support these measures which, if fully and satisfactorily
implemented, should provide measurable environmental and biodiversity
benefits". Effectively we have accepted the view that those
organisations have taken. Of course, that statement does contain
a caveat about "if fully and satisfactorily implemented".
We, therefore, set out a timetable for starting that implementation
process with a number of milestones between now and next February
and we will then review progress in delivering the package in
the run up to the Budget next year. Given that caveat about full
and satisfactory implementation we can be very optimistic about
the benefits that this package can bring forward. Again, it has
involved a lot of work on the part of the industry, on the part
of the farming industry and on the part of the NGOs who have taken
part in this as well. I think it has been an interesting initiative
and I very much hope it is going to prove to be successful.
61. Do you see any prospects in the longer term
for change as we get nearer to the principle of polluter pays,
particularly in relation to the costs of cleaning up water which
now fall on consumers?
(Mr Timms) I think the package will help. There will
be a number of costs associated with implementing the package.
I think we will need to see how much progress is made between
now and next February and review things at that stage. We reckon
that the cost to the industry of this package is going to be around
about £13.5 million per annum, so it is a significant cost.
62. But longer term you would not rule out changes,
especially in relation to water?
(Mr Timms) Rule out changes to what?
63. The fact that at the moment the cleaning
up of pollution in the water is paid for by the water consumer,
not by the person responsible for the pollution. Is that not something
that long-term we ought to try to address?
(Mr Timms) I want to focus for now on this package
being successful. I hope that will have a significant impact on
reducing the environmental costs of pesticide use but at some
point clearly we will need to review after a period of years,
if it is successful, what the impact on reducing costs has been
and we will need to have another look at it at that time. We are
not doing any work at the moment looking beyond the period over
which this package will operate.
Joan Walley
64. Just to turn a little bit to energy efficiency
and the issue of VAT as well. Certainly we feel that there is
a great range of products which are eligible under the Government's
own Home Energy Efficiency Scheme and yet there is a much more
limited range of goods which are eligible for reduced rates of
VAT. I am just wondering, given what you were saying about the
importance of clarity and getting the message across so that it
is clearly understood, is it not confusing the picture to have
so many different lists, some of which apply to VAT, some of which
apply to VAT on energy saving materials, and you have got a separate
list of, if you like, initiatives which can be taken under the
Government's own HEES Scheme but there is not any clarity about
what is eligible for energy efficiency support of one kind or
another? Would it not be better just to have a clear list of initiatives
that would perhaps be of advantage to go ahead with?
(Mr Timms) I hope that it is not too complicated.
As you know, we have announced we will cut to five per cent VAT
on services of renovating houses and flats that have been empty
for three years or more, converting a property into a different
number of dwellings, for example a house into flats, converting
a non-residential property into a dwelling, converting a dwelling
into a care home or vice versa and converting bedsits into dwellings
or vice versa. We are adjusting the zero rate of VAT to provide
relief for the sale of renovated houses that have been empty for
ten years or more. I do not think it is too complicated, at least
I hope not.
65. You do not think there is any inconsistency
there when you look at that and compare that to what is eligible
in terms of reduced VAT and what is eligible under the HEES Scheme?
You do not think it is sending out a confusing message as to what
is eligible for what, you think there is a consistency that goes
through it?
(Mr Timms) No, I do not think it is too confusing.
Perhaps I am missing something. You can point it out to me if
you think I am.
66. No, it just seems there is a lot of inconsistency
when it comes to energy efficiency. There is also a further complication
in that the Government is now introducing yet another list of
qualifying technologies, albeit ones which are geared towards
industry, under the proposals for enhanced capital allowances.
Would you like to comment on that as well in terms of consistency?
(Mr Timms) I do not see a consistency problem there
at all. The enhanced capital allowances I see as a very important
step forward in encouraging energy saving investments by commercial
energy users. I think we are anticipating when that list is published
on 1 April that around about 1,000 products will appear on it,
if I remember rightly. We have also announced in the Budget a
Green Technology Challenge where we are asking people to come
forward perhaps with additional ideas for technologies that ought
to have that opportunity available to them in the future. I do
not see a problem of consistency there at all, this is something
that is completely new which I think will be widely welcomed and
will be a further encouragement to business users to invest to
reduce their energy consumption.
67. If I can just move briefly to the Landfill
Tax Credit Scheme. There has been a lot of concern about this
and perhaps the way in which some companies are thought to take
advantage of it while at the same time having some beneficial
interests themselves as well. We are very keen to see the new
proposed demanding targets for tax credits for, if you like, sustainable
management projects coming in as quickly as possible. Do you have
a date for that? Do you know when that is likely to be introduced?
When can we expect details of the new proposals that the Government
is intending to go ahead with?
(Mr Timms) As you have said, there has been a lot
of interest in this. The new targets that we are proposing to
set for the industry to meet to be demanding for raising the percentage
of tax credits going to sustainable waste management projects,
I would expect those targets to be published within a month. As
you know, there have been, and you have made the point, a number
of concerns expressed about the operation of the Landfill Tax
Credit Scheme. We take all those allegations very, very seriously
and they have been thoroughly investigated. There are a couple
of cases being investigated, I think, by Hertfordshire Police
currently arising from allegations of that kind. On the whole
we are satisfied that the scheme has operated satisfactorily in
terms of propriety. I think the bigger concern I have is whether
the resources coming through the Landfill Tax Credit Scheme have
been deployed on projects which correspond as well as they should
do to the Government's highest priorities. What has particularly
been of concern is the proportion of the funds going to sustainable
waste management projects has been falling of late. That was why
we wanted to set these demanding targets and also why we are attracted
in due course to the idea of replacing the credit scheme, either
in whole or in part, with a targeted public spending programme
where clearly we could ensure that the funds were being used on
the highest priorities that we are facing.
68. Just to press you on that a little bit more.
When you say that, does that mean that you have actually completed
a review of the current Entrust scheme? About a year or so ago
you were saying there would be a review of that. You mentioned
matters relating to police investigations which I see as being
separate from the review of the scheme as a whole. Have you actually
carried out and undertaken a review of the current Entrust Scheme
and have you reached a conclusion on the way forward, or is it
nothing as specific as a review as such?
(Mr Timms) I would not describe it as a review of
Entrust. We have carried out a consultation process which has
led us to the conclusion that we would wish in due course to replace
the Landfill Tax Credit Scheme, either in whole or in part, with
a public spending programme but there is a good deal more work
to be done, not least in discussion with the environmental bodies
and the others who have been the vehicles for the Landfill Tax
Credit Scheme funds about how we take that forward, whether it
should be in whole or in part, and if it is in part in what proportion
and so on. There is lots of detailed work still to be done and
that certainly is not complete.
69. Does that mean that there will be a consultation
process on that with an opportunity to comment or is it a discussion
that you will be having at the next stage?
(Mr Timms) I would expect to be in discussion with
a number of interested bodies as we take that process forward
over the coming months.
Mr Loughton
70. Minister, can we talk about the urban regeneration
measures in the Budget, which we did discuss when you came to
see us before in the Pre-Budget Report, and specifically on the
Stamp Duty exemptions for the most deprived areas. When we discussed
this before there seemed to be some confusion as to whether you
thought this was a primarily business oriented incentive whereas
the DETR Ministers were taking the line that this was a residential
property oriented incentive. Has that apparent contradiction now
been resolved between your two departments?
(Mr Timms) I do not recall any confusion at all.
71. I do, very clearly.
(Mr Timms) The proposal is that there will be no Stamp
Duty charged on property transactions in the wards that are selected
and that applies equally to residential and to business properties.
72. Indeed. When we asked you what was the purpose
of it and what it was supposedly to achieve you very clearly took
the line, and the record will show[3],
that this was to encourage businesses to come into areas of deprivation,
whereas in strict contrast in other meetings, and in fact in announcements
in the House, the Environment Ministers have very much taken the
line that it was a residential scheme, and in fact the split on
Stamp Duty between residential and business is roughly 50/50 at
the moment. The one thing that has not been elaborated on any
further, which again we pressed you on at the time, is the definition
of these deprived areas to which the Stamp Duty exemptions will
apply. How much longer are we going to have to wait because you
know the Committee did express reservations as to whether it was
really going to target those people most in need of help as opposed
to owners of expensive properties in deprived wards in Islington,
for example?
(Mr Timms) First of all, I think the
real attraction, and in a sense you are quoting me correctly,
of this measure from my point of view is in stimulating urban
renewal by attracting businesses to locate in disadvantaged areas
and also encouraging a mix of housing types. I think there are
benefits on both sides. In terms of when we will announce the
list of wards which will benefit, what we are aiming for is to
identify the most disadvantaged wards on a basis which is fair
and transparent across the UK, not least withstanding the scrutiny
of this Committee which I know will be a close scrutiny. We want
to make sure we get this right. We have been working with the
devolved administrations to identify those wards that should qualify.
A new ward based index of deprivation for Northern Ireland is
going to be published in June and we need to take account of that
in finalising the list. What I can say with some confidence is
that we would expect the list of qualifying wards to be published
very soon after Finance Bill Royal Assent with the exemption taking
immediate effect.
73. On the basis of the various potential anomalies
that we have raised before and on the continued lack of clarity
on whether you are promoting it for business, although the DETR
are still promoting it for residential, have you—
(Mr Timms) I just make the point that I think there
are benefits for both properties.
74. Absolutely, I have no disagreement with
that. What I am trying to see is what is the rationale behind
it, primarily to promote business or residential areas. Despite
what you say, you are very clear what you think it is there for,
the trouble is your colleagues do not agree with that. On the
basis of the points we have raised, have you made any further
progress towards having a capping limit, say, on the value of
residential properties or, if what you say is really the case,
purely limiting it either across the board or in certain areas
just to businesses so that you do not have this anomaly? Whereas
if it is to be done on a ward by ward basis, and you are confirming
that it will be done on a whole ward on the basis of these indices—
(Mr Timms) Yes.
75. Therefore you must admit there is a potential
anomaly in the Islington case which I have brought up, and Members
have brought up time and time again, where the owner of a £750,000
nice Georgian terraced house, not to name any potential owners
amongst Government members, which happens to be in the same ward
as a run-down estate, few properties on which will actually be
worth above £60,000 and therefore not qualifying for any
Stamp Duty at all, on the basis of what you are promulgating will
benefit very nicely indeed and the people in the area of deprivation
within that ward will benefit not one jot, or only slightly. If
you are first of all admitting to that potential anomaly, what
checks and balances are you considering bringing in to avoid that
or are you happy it should be a blanket exemption?
(Mr Timms) What I advise the Committee to do is await
the list of wards and then we can have a discussion about these
decisions and others. Of course, attracting new businesses in
to disadvantaged areas does have very substantial benefits for
the people who live in those areas. You were suggesting that the
people living on estates where properties are of relatively low
value would not benefit from this but they certainly will if we
are successful, as I believe we will be, in attracting new businesses,
new jobs, new enterprise into areas where there has been far too
little enterprise in the past. I think that would be a very big
gain. Most of the high value transactions that will benefit from
this will be in commercial property or in land for development.
There will, no doubt, also be some big residential properties
that are purchased for conversion into residential units, multiple
residential units, for sale or for rent. We see relief for transactions
of that kind as being very valuable in encouraging the establishment
of diverse communities. No doubt you will return to these matters
when the list is published. I would not favour, and we did have
this discussion last time I think, attempting to draw a distinction
between residential and business properties in terms of this exemption,
I think that is an unnecessary complexity. There are benefits,
significant benefits, in terms of building prosperous and diverse
communities for the Stamp Duty exemption on residential property
as well as on business property.
76. We agree with all of that, Minister, but
the point I am making, and you are not ruling it out, is that
there is a very distinct possibility that the owner of the property,
the example of which I gave, would save £30,000 and yet the
number of people in properties on deprived estates in the same
ward whose homes perhaps are worth more than £60,000 residential
is negligible, and on that basis it would seem to be a rather
self-defeating Stamp Duty on the residential side in which case
you could just limit it to business, the merits of which are for
everybody, and I agree with that, or you could cap it at people
with properties above a certain level or it only applies to people
doing conversions and everything else. That is purely the point
I am making and I am just trying to see whether you are making
any progress or you are happy that you do not need to make progress
so that the less deserving, to put it one way, of the exemptions
you are trying to bring in do not scoop the big exemptions. I
do not think we will get any further on that. Can I just ask you
about the Urban Regeneration Companies where in the Pre-Budget
Report based on the three pilot companies which were established
post-Rogers, those being East Manchester, Sheffield and Liverpool,
the Pre-Budget Report, and the Urban White Paper a week later,
promised up to a dozen further Urban Regeneration Companies, of
which one has been announced in the form of Corby thus far. I
am not aware there has been any progress report on the success
or otherwise of those three pilots in the three places I have
mentioned to warrant rolling out up to a dozen more. Is the Treasury
happy that those pilots have been a success? If they are, on what
criteria is that based and when will they publish the results?
(Mr Timms) We are certainly taking a close interest
in the development of Urban Regeneration Companies as they evolve
beyond the three pilots. They are still pilots. I think it is
too early to draw firm conclusions from those pilots about the
way forward. We will consider, as we have said, providing Corporation
Tax relief for company donations to Urban Regeneration Companies
and similar bodies across the UK when we are in a position to
do so. For now we want to wait until the final form and functions
of those bodies are clear, which at the moment, because they are
still pilots, is not the case.
77. Is this not slightly putting the cart before
the horse, that without knowing, as you have just admitted, how
well or not the three pilots have done, conceivably 12 more fully
fledged companies could be in operation, of which you have already
done one, before certainly we know and you have assessed the evidence
to suggest whether they have been a success or not? Surely a pilot
is something that needs to be tried, assessed and if it has been
successful then turned into a real scheme? It strikes me that
you are going to have 12 real schemes before you have even assessed
whether the pilots have been beneficial or not.
(Mr Timms) We do see them as a very promising initiative
for effecting regeneration in our urban areas but we will take
a view at a future Budget about the appropriate Corporation Tax
treatment for them. I think that what we have done has been right,
we have identified this as a promising initiative, we have identified
a way in principle to assist them and we will make a decision
on the detailed arrangements as soon as we are in a position to
do so.
78. The Corporation Tax treatment of those companies
is an entirely separate issue on which there have been no pronouncements
from the Chancellor. All I am concerned about is whether they
are a success in terms of are they doing the job that they are
set up to do, on which I am not entirely clear. Do they have sufficient
teeth to achieve the targets set by the Government? How much more
resources do they need to achieve that? For example, what assurances
are there that these Urban Regeneration Companies, be it three
pilots or one fledgling company in Corby, will have environmental
protection and sustainable development ideals and targets built
into their remit?
(Mr Timms) Let me just return to the Corporation Tax
point because we have said that we will consider providing Corporation
Tax relief for company donations to those companies and other
similar bodies across the UK. That was the announcement that we
made.
79. That is a side issue, it is not Corporation
Tax of the companies themselves.
(Mr Timms) No, indeed, it is the Corporation Tax relief
point. The aims of the companies and the detailed briefs they
are being given others are in a better position than I am no doubt
to comment on, but I certainly would expect to see—I think
one can be absolutely certain—that a commitment to sustainable
development will be built into companies and other institutions
having an urban regeneration brief, as these will.
3 Second Report of the Environmental Audit Committee,
The Pre-Budget Report 2000: Fuelling the Debate, HC 71-II,
2000-01, p18, Q123. Back
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