Supplementary Memorandum from HM Treasury
ENVIRONMENTAL TAX
STRATEGY
1. Can Mr Timms clarify whether the target
for shifting the tax burden originally included in the 1998 Treasury
PSA (and those of C&E and IR) has been dropped from the 2000
PSA? Could he also explain, if this is the case, why it has been
dropped? [QQ106-110]
As part of the SR 2000, departmental PSA's were
focused more on targets at the highest level. The Treasury's PSA
is set in terms of these wider priorities, and individual targets
include "increasing the productivity of the economy"
and "promoting a fair and efficient tax and benefit system
with incentives to work, save and invest".
In meeting the Treasury's overall aim of raising
the rate of sustainable growth and these two objectives in particular,
sustainable development and environmental considerations are very
important. Not only is this reinforced by the considerable progress
that has been made in recent Budgets, but there is now an environmental
chapter in each PBR and FSBR. Although the development of the
tax system so that it underpins sustainable development and delivers
environmental objectives is no longer shown separately in the
PSA, it remains an ongoing priority for the Treasury, Inland Revenue
and Customs and Excise.
ENVIRONMENTAL APPRAISAL
2. Could we have a copy of the assumptions
and calculations on which the estimated carbon reductions of 0.1
MtC to 0.7 MtC from fuel duty changes is based? [QQ4-7. Cf also
Budget Report, table 6.2]
The range of between 0.1 and 0.7 MtC from fuel
duty changes represents the predicted outcome from the DETR model
on emissions forecasting (0.1) and the DTI model for emissions
forecasting (0.7). Details of the modelling for the DETR figures
can be found in "The 10 Year Plan—Tackling Congestion
and Pollution: Background to the Modelling Process", and
DTI modelling in "Energy Projections for the UK, November
2000".
3. Could Mr Timms clarify whether any quantified
estimate of the effects of changes in car and lorry VED has been
made? If so, please provide a copy. [QQ4-7. Cf also Budget Report,
table 6.2]
As stated in table 6.2 of the EFSR, these changes
are believed to provide reductions in emissions of CO2, NOx, and
particulates. However it is not possible to quantify precisely
the effect of the changes in car and lorry VED.
FUNDING FOR
RENEWABLES AND
THE USE
OF CCL RECEIPTS
4. Mr Timms promised to provide a note which
set out the total funding being made available for energy efficiency
initiatives and the promotion of renewables. It would be helpful
if the note clarified the source of funding for each initiative
(eg whether it is from CCL revenues, National Lottery, SR 2000,
or other), and any changes in funding since Budget 1999 (ie the
extent to which successive budgets or spending reviews have introduced
extra funding or re-allocated existing funding from related or
completely different budgets). It would also be helpful to include
a figure for total funding, subdivided into energy efficiency
promotion and the development of renewables. [QQ35-47, 87-92]
The note should also clarify, in particular:
(a) whether the £100 million over
three years allocated in Budget 2001 to the Carbon Trust is funded
from CCL receipts and effectively comprises two thirds of the
£50 million a year energy efficiency fund announced in Budget
1999;
(b) how the £100 million funding
in Budget 2001 for the Carbon Trust relates to the £130 million
referred to in the Climate Change Programme as CCL receipts which
the Carbon Trust will manage;
(c) what has happened to the remaining
one third of the £50 million a year energy efficiency fund
(Budget 1999);
(d) the amount of new funding, if any,
which Spending Review 2000 added, and clarification (including
specific reference) of the statement in paragraph 6.28 of Pre-Budget
Report 2000 that "the 2000 Spending Review announced a
new £50 million a year energy efficiency fund to promote
energy saving and reduce greenhouse gas emissions . . ."
[our italics];
(e) where the £30 million resulting
from the forecast reduction in the budget for enhanced capital
allowances in 2001-02 has been re-allocated, and similarly the
£10 million relating to 2002-03;
(f) whether the planned budget (2001-02)
for the EEBPP of £22.5 million (DETR 2000 annual report page
45)—amounting to £67 million funding over three years—will
be ring-fenced on its transference to the Carbon Trust and be
additional to the £100 million allocated by Budget 2001.
(a) The majority of the climate change levy
(CCL) revenues will fund the 0.3 percentage point reduction in
employers NICs contributions. However, approximately £150
million a year of CCL revenue will be used for energy efficiency
measures. This is split into:
— £50 million per year for the
"CCL energy efficiency fund"
— £100 million per year for enhanced
capital allowances for energy saving investments
Further details are given below.
THE CCL ENERGY
EFFICIENCY FUND
£50 MILLION PER
YEAR (£150 MILLION
OVER THE
THREE YEARS
OF SR 2000)
(b) The £100 million shown as allocated
in Budget 2001 represents two-thirds (over three years) of the
CCL energy efficiency fund. This funding goes to the Carbon Trust
who will provide energy efficiency advice and audits to business
and will promote low carbon technologies. This funding was announced
in SR 2000 and includes around £6 million per annum allocation
to the Devolved Administrations. The DAs may choose to buy into
a UK wide Carbon Trust.
(c) £50 million of the energy efficiency
fund—the remaining one-third of the fund (over three years)—has
been allocated as follows:
— £13 million per year for DTI—Renewable
Energy Technologies
— £4 million per year for MAFF—Energy
Crop Programmes
These allocations were also announced in SR2000.
(d) New funding allocated for energy efficiency
activities in SR2000:
| 2001-02 | 2002-03
| 2003-04 |
| Carbon Trust (not inc DAs) | £26.5 million
| £26.5 million | £26.5 million
|
| Emissions Trading | |
| £30 million |
| Fuel Poverty | | £14 million
| £18 million |
CCL FUNDED ENHANCED
CAPITAL ALLOWANCES
(e) The cost of the enhanced capital allowance scheme
will be determined by take-up. At the time of publication of the
Climate Change Programme, the estimated 1st year cost for scheme
was £100 million. Due to a later than anticipated start for
the scheme, this estimate has now been reduced to £70 million.
For 2002-03, the sum set aside for the scheme is £130 million.
The table below shows the different strands of Government
funding for renewables. The Government is also supporting renewables
via:
— the Renewables Obligation, which will require
all licensed electricity suppliers to acquire a specified proportion
of electricity from renewable generators;
— the climate change levy exemption, which will
apply to most renewable generation;
— the Non-Fossil Fuel Obligation (HFFO)—the
current means of supporting renewables—where existing contracts
will remain in place.
| Mechanism | Financial Resources
| Timescale |
| DTI capital grants for offshore wind (from ccl energy efficiency fund)
| £39 million | Over 3 years from 2001-02
|
| New Opportunities Fund | £50 million in total
| All to be committed by 2005 |
| —energy crops | —at least £33 million
| |
| —offshore wind | —at least £10 million
| |
| —small scale biomass heating/CHP |
—£3 million | |
| Announcement in the Prime Minister's speech to the WWF on 6 March—allocation to specific technologies to be decided in the light of the Performance and Innovation Unit's forthcoming report on resource productivity and renewables
| £100 million | Over 3 years from 2001-02
|
| MAFF Energy Crops Planting Scheme | £29 million, including £12 million over the next three years from the ccl energy efficiency fund
| Over 7 years |
| DTI New and Renewable Energy R&D | £55.5 million
| Over 3 years from 2001-02 |
| DTI PV Demonstration | Initially £10 million
| Over 3 years from 2001-02 |
5. Please Provide Your Latest Estimates for 2001-02, 2002-03,
and 2003-04 of (a) Receipts from the Climate Change Levy; and
(b) the Cost of the 0.3 per cent Employers National Insurance
Reduction [QQ10, 35-47]
The following figures constitute our latest estimates and
were published in Budget 2001, on an accruals and indexed basis.
| | |
(million) |
| 2001-02 | 2002-03
| 2003-04 |
| CCL | +1,000 | +1,030
| +1,055 |
| NICs Cut | -1,050 | -1,100
| -1,150 |
ENERGY SAVING
PRODUCTS
6. Could the Treasury clarify whether there is an inconsistency
between the range of products installed under the HEES scheme
and the range eligible for reduced rates of VAT on the installation
of energy saving materials? [Q64-66. See also the Committee' second
report, HC 71-I, 2000-01, paragraph 123.]
There is no inconsistency. The HEES provides grants for the
installation of heating system measures (controls etc) and energy
saving materials in the homes of the less well-off, and complete
central heating systems in the homes of less well-off pensioners.
All items installed under the HEES benefit from the reduced
rate of VAT.
PESTICIDES
7. Mr Timms referred to a timetable and milestones for
implementing the pesticides voluntary package between now and
next February. Could the Committee have a copy of the timetable
and any supporting documentation setting out what is expected
at each stage? [Q60]
The Government has proposed the following timetable to begin
the implementation of the package:
| By 1 April 2001 | Implementation of package to begin.
|
| By 1 June 2001 | A steering group to oversee the monitoring of the package, with an independent chair, to be established.
|
| By 1 September 2001 | CPA and NFU to confirm to Ministers that effective mechanisms are in place to ensure take-up of measures.
|
| By 1 October 2001 | Chairman of steering group to provide first progress report on implementation of the package to Ministers to inform Pre-Budget 2001 decision on the pesticides agenda.
|
| By 1 February 2001 | Chairman of steering group to provide second progress report on implementation of the package to Ministers to inform Budget 2002 decision on the pesticides agenda.
|
AGGREGATES LEVY
8. Budget 2000 contained an estimate of £385 million
revenues from the Aggregates Levy in 2002-03. Has the Treasury
revised its forecast since then? [QQ52-56]
The latest forecast for the revenue from the aggregates levy
is £380 million in 2002-03. This revised figure includes
more recent information regarding industry output, and incorporates
a behavioural response to the Levy.
9. What is the Treasury's latest forecast for the cost
of a 0.1 per cent reduction in employers National Insurance contributions
in 2002-03? [QQ52-56]
The latest forecast for the cost of a 0.1 per cent reduction
in employers national insurance reductions is £360 million
in 2002-03.
URBAN REGENERATION
10. Mr Timms stated that he considered the three pilot
Urban Regeneration Companies as "promising initiatives".
Has there been any evaluation of these three pilots? If so, please
provide a copy. [QQ76-77]
DETR have produced a report on the pilot urban regeneration
companies—this is attached and is also available on the
DETR website at:
http://www.regeneration.detr.gov.uk/research/companies/index.htm
SPENDING REVIEW
2000
11. Mr Timms promised to provide a table setting out exactly
how the PSAs refer to sustainable development indicators. [Q 100]
The coverage of headline indicators of sustainable development
in Public Service Agreements was detailed in table 2.2 of the
Second Annual Report of the Green Ministers Committee. This showed
that nine out of 15 headline indicators were directly reflected
in PSA targets, and a further three indicators were clearly related
to PSA targets that should deliver improvements in those indicators.
INTERNAL AUDIT
12. In the Treasury's previous memorandum to the Committee
on Greening Government (Sixth Report from the Environmental Audit
Committee, The Greening Government Initiative 1999, HC426-III
1998-99, page 129), you stated that: "A specific environmental
audit, addressing all issues, is a topic in the assessment of
audit need to be put to Treasury's Audit Committee in 2000".
What was the outcome of this? Has an environmental audit now been
carried out? If so, please provide copy. [QQ123-124]
HM Treasury's memorandum sent to the Committee in 1999 on
The Greening Government Initiative 1998-99 noted that a specific
environmental audit was a topic in the assessment of audit need
to be put to the Treasury's Audit Committee in 2000. The Treasury
Internal Audit team now plan to carry out an environmental audit
in the financial year 2001-02, subject to approval by the department's
Audit Committee. Although precise coverage will not be known until
the audit is scoped prior to commencement, it is expected to focus
on the department's environmental objectives and how these are
delivered.
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