Select Committee on Environmental Audit Minutes of Evidence

Supplementary Memorandum from HM Treasury


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.


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.


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.


    (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:
2001-022002-03 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


    (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.

    (f)  Renewables

  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.
MechanismFinancial Resources Timescale
DTI capital grants for offshore wind (from ccl energy efficiency fund) £39 millionOver 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 millionOver 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 DemonstrationInitially £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.
2001-022002-03 2003-04
CCL+1,000+1,030 +1,055
NICs Cut-1,050-1,100 -1,150


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.


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 2001Implementation of package to begin.
By 1 June 2001A steering group to oversee the monitoring of the package, with an independent chair, to be established.
By 1 September 2001CPA and NFU to confirm to Ministers that effective mechanisms are in place to ensure take-up of measures.
By 1 October 2001Chairman 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 2001Chairman of steering group to provide second progress report on implementation of the package to Ministers to inform Budget 2002 decision on the pesticides agenda.


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.


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:


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.


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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