Finance Bill

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Mr. Jack: The hon. Member for Denton and Reddish challenged me to say why £10 a tonne was the right figure under the Conservatives. Is the Financial Secretary saying that he cannot judge whether £15 will ultimately be the correct figure until he has sucked it and seen what the effect will be in the real world?

Mr. Timms: We must know the effects of tax at different levels so that we can make an informed decision—particularly in response to representations from industry for significantly higher rates.

The measure is already having a significant impact on waste management. The recycling of inert waste is at an all-time high, there is increased composting of biodegradable waste, and more than one third of businesses are introducing or considering minimisation and re-use of waste. Overall, as the right hon. Member for Fylde (Mr. Jack) said, increases in household waste are running at about 3 per cent. a year. Despite that, active waste disposals are quite static at about 50 million tonnes a year. We can deduce from those figures that the tax is stopping what would otherwise have been a rising trend in the use of landfill. On the inactive side, waste disposals on which the lower rate of landfill tax is paid have had a dramatic effect, with the landfill amount falling from 36 million tonnes in 1997-98 to 30 million in 1998-99, while the recycling of construction waste has grown.

The right hon. Gentleman rightly said that several different factors are at work, but the landfill tax has undoubtedly played an important role in moving people away from landfill. I was disappointed that the hon. Member for West Dorset was unable to explain the Conservative party's policy on the landfill tax. He outlined a policy, but I am unsure whether it was the official one. He has made it clear that he would not have voted for the measure. The hon. Member for Mid-Worcestershire (Mr. Luff) has made it clear that he voted for it with reluctance. Presumably, the right hon. Member for Fylde voted for it with enthusiasm, as the previous Government introduced the tax, and he was a Treasury Minister at the time.

The day after the hon. Member for West Dorset made it clear that he would not have voted for the measure, the right hon. and learned Member for Rushcliffe (Mr. Clarke), in the same debate, mentioned the landfill tax as one of his major achievements as Chancellor of the Exchequer. Most people who have studied the landfill issue would subscribe to the right hon. and learned Gentleman's view rather than to that of the hon. Member for West Dorset.

Mr. Letwin: The hon. Gentleman is selectively quoting. We could all have gladly signed up to the measure if it had contained a rule that enforced fiscal neutrality. The problem with the present construction is that it allows for precisely the move of which we are now accusing him. All hon. Members accept the benign environmental effects of the landfill tax; the problem is that it can be misused. The hon. Gentleman has been talking for several minutes—albeit with interruptions—but has not yet addressed whether the measure is fiscally neutral.

Mr. Timms: I am looking forward to reaching that part of my speech, but I must first give way again.

Mr. Bennett: I was hoping that my hon. Friend might have probed Opposition Members about how they would have dealt with the major defect of the tax when it was introduced: no money was given to the Environment Agency or local authorities to enforce the measure and to deal with fly-tipping. Another important defect is that 20 per cent. of the money raised is directed to environmental schemes managed by Entrust, which is one of the worst regulated bodies in the country.

Mr. Timms: I am grateful to my hon. Friend for his comments, and I now turn to the point about fly-tipping, because it was also raised by the hon. Members for Kingston and Surbiton and for Mid-Worcestershire and the right hon. Member for Fylde.

I agree with my hon. Friend that more resources were needed to deal with fly-tipping, and the Government have introduced several improvements in that regard. However, the Committee should be aware that the majority of fly-tipped waste is household waste, and, as the right hon. Member for Fylde said, householders do not pay the landfill tax. The Tidy Britain Group has conducted research on that matter. Householders are not provoked to fly-tip their waste because of the landfill tax.

The situation is different for commercial operators, such as the company in the constituency of the hon. Member for Mid-Worcestershire. However, I was heartened by his remarks about the effectiveness of measures such as extra fines and the work of the Environment Agency in dealing with the problem in that particular case.

The Government take the problem of illegal waste disposal seriously. The penalties are severe: they include unlimited fines and up to two years in prison. I hope that those measures enable us to deal with the problem. However, the majority of fly-tipped waste is household waste, which cannot be caused by the landfill tax.

Mr. Luff: You would rule me out of order, Mr. O'Hara, if I entered into a debate on fly-tipping. My part of the world does not suffer from that problem, although large quantities of waste are produced by garden contractors, for example.

Money is not the problem with enforcement; money does not solve every problem. Lack of co-ordination of Government policy is the problem. In the case of Ivory Plant Hire, the Environment Agency, the district council, the county council, the police, the vehicle inspectorate, the traffic commissioners, the courts and, probably, others, were involved. If we are to tackle the problem successfully, that is how we should deal with it—rather than throwing money at it.

Mr. Timms: The Environment Agency has a free 24-hour hotline for the public to report any such incidents. That is the kind of measure that is required to tackle the problem.

The hon. Member for Mid-Worcestershire also asked about the landfill tax credit scheme, as did my hon. Friend the Member for Denton and Reddish. In the longer term, the Government are attracted to replacing all or part of the landfill tax credit scheme with a public spending programme to direct resources towards Government priorities on sustainable waste management. We will consult with interested parties on how the transition to that can be managed to ensure that worthwhile projects, of which there are many examples around the country, continue to attract funding under both the current scheme and any replacement regime. It is important that the resources available here are used to minimise landfill by encouraging recycling, a cause that is dear to my hon. Friend's heart. I am sure that it is dear to the heart of every member of the Committee.

The point that was made frequently by every Conservative Member who spoke, albeit in some cases with irony, was whether the increase of £1 a tonne would be fiscally neutral. I can confess that the landfill tax in the coming year will not be fiscally neutral. The Committee has me bang to rights on that. In fact we will give away a lot than we get. The reason is that the 0.2 percentage point reduction in national insurance contributions comes to £690 million. The forecast revenue from the landfill tax is £452 million. In other words, the revenue will be only two thirds of the amount that is being given away. I will gladly give way to the hon. Gentleman. I hope that he will apologise to the Committee.

Mr. Letwin: I may or may not be able to do that. Which 0.2 percentage point reduction in national insurance was it? I hope that it was not the item that we heard about in the context of the aggregates tax.

Mr. Timms: No, certainly not. When the previous Government introduced the landfill tax, they also introduced a reduction in employers' national insurance contributions of 0.2 percentage points. In the coming year—the year that we have just started—the loss of revenue that arises from that reduction is £690 million. The take from the landfill tax would be £462 million. That is the 0.2 percentage points reduction that was introduced at the same time as the landfill tax. [Interruption.] In other words, we are—

The Chairman: Order. I am finding it difficult to follow the Minister because of the distractions on my left.

Mr. Timms: I am attempting to make the position as clear as I possibly can to assist Opposition Members. The revenue from the landfill tax is significantly less than the revenue foregone by the reduction in employers' national insurance contributions introduced by the previous Government at the same time as the landfill tax.

Mr. Jack: I will put my hands and apologise if I am wrong, but is not that mathematical argument that he has just announced just a direct consequence of the fact that the Government have put up employers' national insurance contributions?

Mr. Timms: No. The right hon. Gentleman is a former Treasury Minister. He knows how employers' national insurance works. The product of 0.2 percentage points on employers' national insurance is certainly not affected by the rest of the national insurance contributions. It increases because salaries and wages increase. I do not want to add to Conservative Members' embarrassment, but having been pressed I feel that I should make the position clear. When the tax was introduced the cost of the 0.2 percentage point cut in employers' national insurance contributions was costed at £505 million per annum. Even that is more than the revenue projected for the coming year in landfill tax.

5.45 pm

Mr. Hendrick: Is my hon. Friend saying that the Government are giving tax cuts by stealth?

Mr. Timms: Some might say so. I fear that we will not hear many such allegations from Conservative Members. Having completely shot their fox, I urge the Committee unanimously to accept the clause.

Mr. Letwin: I am grateful to the Financial Secretary. Our proceedings have occasionally descended into torpor. It has sometimes been boring. This charming piece of casuistry has enlivened the proceedings and given us a memory to treasure. Never has a Minister illustrated the vacuity of his logic in so compelling a manner.

The Financial Secretary's argument is this: a particular cut in national insurance rates was made when the tax was introduced, which was, and was intended to be, fiscally neutral when allied to the tax itself. Fiscal drag has since increased the effect of that rate change. Therefore, according to his logic, it is fiscally neutral now to increase the tax. If that were a logic in which he believed, rather than one with which he chose to amuse the Committee, it would also follow that if the receipts from national insurance contributions at a given rate decreased, it would be correct to decrease the tax. Will the Financial Secretary observe that principle? No, he will not, because the two are wholly disjoined. He has made no change in the rate on national insurance contributions.

5.46 pm

Sitting suspended for a Division in the House.

6.1 pm

On resuming—

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