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2.41 pm

Matthew Taylor (Truro and St. Austell): The Environmental Audit Committee is an innovation for which we argued, and it is most welcome. It is a pity, however, that it did not get the powers that the Labour party in opposition envisaged for it. The idea was that it would be similar to the Public Accounts Committee, with the back-up and resources to do detailed work. All Select Committees suffer from a lack of resources. Although that applies to the Environmental Audit Committee, it has done some extremely good work nevertheless. The Minister needs to reflect carefully on its report. It makes a well argued and strong indictment against the state of environmental tax reform some five years into the Government's term in office.

As with any policy development, we need proper research and analysis of the problems to design effective environmental taxes. If we are not clear about the damage that is being done or the policy tools that are being used to address it, we are not going to be effective. Research and analysis do not take place as they should in government in general. There are far too few trials and too little analysis of whether Government policies are effective after they have been implemented. I have criticised the Chancellor before for introducing endless bureaucratic targeted schemes, few of which, if any, are properly analysed for their effectiveness subsequently in either cost or policy terms. The Select Committee report makes it clear that that is undoubtedly true of the Government's policies on environmental taxation.

The Committee criticises Treasury research as "inadequate". It states that:

"the Treasury is failing to provide adequate leadership and co-ordination".

It highlights the appalling, although typical, refusal by the Treasury to publish key information. It not only calls on the Government to make reports on sustainable development available to it, but points out that if the Treasury continues to keep secrets, the reports must, at the very least, be released to the National Audit Office because they are—or should be—a crucial part of the comprehensive spending review process.

The Committee also rightly criticises the lack of joined-up thinking across Government. The Government talk about that a great deal, but too often they fail to deliver on it. If the sustainable development unit is a cross-government resource, it needs to be involved in evaluating the sustainable development reports. If it is not, a suitable body needs to be created to do that.

The Treasury's worst record is on allowing public evaluation of its policies, which applies across the board, not just to environmental taxation. The House and the general public lack the opportunity to see the conclusions of audits of policies that are implemented by the Treasury and other Departments that it encourages to act in the same way. The reports have to be made public or their value becomes diminished. I support the Committee's call to have a unit within the Treasury which is responsible

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for environmental taxes, developing resource productivity indicators, monitoring the adequacy of environmental appraisal and co-ordinating a more strategic approach.

Mr. Mark Francois (Rayleigh): The hon. Gentleman has probably seen the press release that the Environmental Audit Committee issued to accompany its report. Following his important point on access to departmental sustainable development reports, is he aware that the press release says:

"It is particularly outrageous that the Treasury is proposing to keep secret sustainable development reports submitted as part of spending review 2002. This will make it impossible for Parliament to hold Departments properly to account"?

Matthew Taylor: Not only am I aware of that comment, but I strongly welcome it. We could understand the Treasury not making the reports public when it draws up the review, but it is a different matter when it keeps them secret thereafter, because that makes proper scrutiny of Government policy impossible. Sadly, it is not just environmental issues to which that applies. It is a long-running failure on the part of the Treasury, and it is getting worse year by year, as any hon. Member who has tabled parliamentary questions to the Treasury knows because they are stonewalled time and time again.

The Minister needs to recognise just how strong the report is. It has been produced by a cross-party Committee with a majority of Labour Members, and concludes:

"We strongly regret the refusal of the Treasury to provide us with the Spending Review main Guidance".

It comments that that

"vividly demonstrates that the Treasury will only share what it does not value or consider important."

That is a pretty good summary of the position that this Government at least have managed to get into with regard to making information available.

It is even more worrying that when we cross-question the Government, as the Committee and hon. Members have done, on their evaluation of implemented policy—policies on which money has already been spent—the answer is frequently that there is no systematic evaluation of their effectiveness. I strongly welcome the report's request that the Government should fulfil their commitment to incorporate systematic ex post appraisals in future pre-Budget reports. However, Committee members should be aware that the appraisals often do not appear because they do not exist, even in the Treasury. The Committee also says:

"We find it difficult to understand how the Government can decide what is the most appropriate policy mechanism, if it is not able to assess the effect of different policy instruments. We urge the Government to clarify how it proposes to develop appraisal and monitoring systems on a more comprehensive basis."

An overriding conclusion of what this and other Governments have done on environmental tax is that too often they have grabbed the green mantle in a way that simply hides the fact that the Treasury takes decisions that largely suit it. For example, the decision to opt for the climate change levy rather than a carbon tax was politically driven; it had nothing to do with best environmental practice. As a result, not only did that decision put huge administrative burdens on business in particular and, incidentally, on the Government, but the

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Government have been forced almost ever since to go through an endless process of rejigging the climate change levy in a desperate effort to make it work either environmentally or administratively.

Mr. Gummer: Is the hon. Gentleman aware that the Government have admitted that the reduction of emissions annually as a result of the climate change levy is less than the increase in emissions caused by the moratorium on gas-fired power stations? The fact that the Government at the time said that such an increase was immaterial shows just how small an effect such an enormously complicated system has on the environment.

Matthew Taylor: One great problem with the climate change levy is that it is not terribly effective in changing the way in which businesses operate. The whole point of adopting a carbon tax would be to tackle carbon use, which the levy fails to do. Although various efforts have been made to get round that problem, the situation is still far from ideal. In addition, the levy was introduced in one big block. A carbon tax could be phased in gradually in order to affect the real decision-making process of long-term capital investment, rather than penalise companies for past investment, as the levy has done, long after they are able to change those decisions. So, although the levy may be a stick of sorts, it provided little carrot and flogged a dead horse, since most investment decisions that it penalises have long since been taken.

Ian Lucas (Wrexham): Will the hon. Gentleman clarify whether he would support the introduction of a carbon tax that applied to individual consumers as well as business?

Matthew Taylor: My view on that matter has been consistent, and was presented in our manifesto in 1997, when the Government were first considering the matter. A carbon tax is the only way to address the matter successfully. By its very nature, it must apply to all fuels and therefore to all users on the basis of carbon use, but revenues could be directly used to compensate users. If they used more carbon energy, they would pay more; if they used less, they would pay less. However, ordinary people could be compensated from the revenue raised. I shall touch on that issue a little more in a moment.

It was precisely because the Government were not prepared even to countenance the possibility that households would be hit that they ended up with such an ungainly and relatively ineffective tax. You pays your money and you takes your choice, but it is rather unfortunate to end up with a system that is administratively highly expensive yet does not deliver the goods terribly well.

I want briefly to raise three issues. The first is landfill tax and the waste stream. Government policy on waste is in a mess; many Members represent constituencies that are in the process of trying to sort out that mess. Landfill is becoming expensive and less viable, but the Government are giving no clear steer on the approach that local authorities should take, and some decisions are having perverse financial effects. I am one of those who believes that incineration should be included in a levy system, but we need a comprehensive strategy for waste. The lack of such a strategy is a failing of the Government's approach to environmental taxation. They have taken on odd, individual items rather than providing a joined-up, overall strategy.

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I have worked hard in Cornwall to move the county away from a proposal for an incinerator. I think that we have succeeded. Cornwall Environmental Services—the company that deals with waste in the county—has withdrawn its proposals and is looking for other, better, more environmental solutions. Until the Government either take the decision on their public finance initiative bid for investment in recycling facilities close to homes, so that recycling makes environmental sense, or sort out their approach to incineration and its alternatives, it will be very difficult for any local authority to give a coherent lead. We need a lead from the Government.

Similarly, the development of the countryside is a huge issue—in my part of the country and in the constituencies of many Members. The Government say that they want more brownfield rather than greenfield development, but as the EAC report accurately states, at the moment there are perverse incentives to develop greenfield land. As a result, previously developed areas, particularly in inner-city areas, are being allowed to run down. The re-development of such brownfield sites is subject to a huge VAT burden that does not apply to greenfield development. That cannot make sense. In several Budgets, I have expected the Government to announce some action on the matter, but they have failed to do so.

In a country where there is a shortage of land, the value of development land is dictated by the amount that people are prepared to pay for the properties that are eventually built on it. So, not levying VAT on greenfield development affects not the eventual price of properties built but the price of land sold for development—a windfall gain for the owners of the land and an incentive for developers to find such land. The system needs urgent restructuring, and I welcome the fact that the report highlights that.

Nobody should feel—I hope—that I do not believe that environmental taxes could play a crucial part in how we address the environmental issues that we face. The biggest of those is catastrophic climate change, although we also see the destruction of our countryside. I shall give one other example of importance—the aggregates tax. I have always believed that the aggregates tax could play a major, beneficial role in encouraging re-use of waste material rather than raw extraction in many of the most beautiful parts of the UK countryside. I welcome the fact that the Government have gone down that route, but it might be helpful to touch on how positive an impact a well-designed environmental tax can have.

I have in my constituency the largest area of opencast china clay mining anywhere in Europe. The china clay industry tipped more waste material in my small part of Cornwall than the coal industry's entire output when it operated on a large scale in the early 1980s. Therefore, there is a huge waste issue in our part of the country. For 250 years, that waste material has successfully been used in road building in the county of Cornwall. Therefore, there is no doubt that such waste material can be used successfully as an aggregate. Indeed, I notice in reports on the state of Cornwall's roads that despite very low investment we have among the best roads in the country primarily because they were built using an awful lot of aggregate material and they tend not to break up as much as roads in other parts of the country.

In 1999, 500,000 tonnes of china clay waste material was used locally. Just 2,000 tonnes was taken out of the county by sea in an experiment to find out whether there

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was a market for such material in the Thames area. In 2000, 890,000 tonnes were used locally as Cornwall county council in particular followed a policy of using such waste material as much as possible. As part of the same experiment, 19,000 tonnes left the county in that year—mainly for the south coast but even to Germany.

By 2001, as the company began to gear up in the knowledge of the aggregates tax and to build up facilities for using the material, it managed to make use of 1.3 million tonnes of waste material—53,000 tonnes going out by sea. The dramatic change as a result of the aggregates tax is that, this year, the company expects to reach a figure of 1.6 million tonnes, with at least 200,000 tonnes leaving from Par docks. However, it is being told by the people whom they supply that, once the aggregates levy comes through, it can expect much higher levels of demand, which could add another 300,000 tonnes to the total. Therefore, as much as 500,000 tonnes will go out by sea this year in comparison with just 2,000 in 1999. Therefore, no one should be in any doubt that such measures can make a difference.

Incidentally, such good news can be set against the gradual reduction in the number of jobs in the china clay industry, as there has been an announcement today that another 300 local jobs are to be lost.

Yesterday, I understand that there was a meeting at the Department for Transport, Local Government and the Regions on the bid that has been put together by the Strategic Rail Authority, those administering objective 1 money in the county, Imerys—the main china clay company—and the DLTR for a major rail upgrade of clay rail routes and two new berths at Par. I hope that Treasury Ministers will get behind the bid. The project is set to cost more than £20 million, but it is believed that it will raise the tonnage of waste material to between 5 million and 7 million tonnes. With other local re-use, that means that all the waste from the china clay industry that can be used will be used, making substantial savings for the environment, not just locally but in other parts of the country, as well as protecting jobs.

It is worth bearing in mind that environmental measures can be effective. In my part of the world, the aggregates levy is doing exactly what it was designed to do. There is one problem, which affects the small, family-owned, traditional quarries that used to supply those services within Cornwall. The Government failed to offer them any alternative route for their businesses, and many of them fear that without some sort of invested support for new avenues of business, they will face sudden collapse through no fault of their own. We should consider giving them more of the resources that will come in to help them cope with the change. When they approach me, I tell them that change is the point of the policy, but I agree that they need help with the process of change.

The flaws are larger than the successes. On the whole, the measures have been badly targeted. Taxation of carbon has been wholly inconsistent, ranging from high rates on vehicle fuels to nothing on aviation fuel. The climate change levy is a muddle. The systems that have been adopted were adopted largely because they were simple for the Treasury, at the expense of environmental effectiveness and administrative cost.

Worse still, there is no clear medium-term strategy. As the Environmental Audit Committee points out, a rush of enthusiasm in 1997 has become, as far as anyone can tell,

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almost no enthusiasm and only a bit of spin doctoring in 2001-02, yet a medium-term strategy and a clear vision of the Government's direction are crucial if the policies are to be truly effective. Environmental taxation policy is all about changing people's decisions—above all, decisions on capital investment. If the householder deciding whether to invest in a low-energy hot water and central heating system or the business making major capital investment decisions cannot see where the policy is going, and if the Treasury gives no clear plan showing where environmental taxes are going, not only can we in Parliament assume that reforms are unlikely to happen, but, more important, people outside will assume either that they will not happen, or that they are so unpredictable that there is no point in making investments in preparation. A greener Treasury would be more open, because being more open is all about being more effective.

One reason why the Government are so unwilling to develop their environmental tax proposals is that they, like their Conservative predecessors, have been stung by complaints from the public about some of their major environmental tax initiatives—the road fuel protests under the current Government, and the campaign against VAT on fuel under the last Government. The public had a point in both those instances, because the Government, under the guise of environmental taxation, were raising the tax burden. My party and I have consistently argued, and we have consistently set out policies showing how it can be done, that the argument for environmental taxation will be won only when people see it as a process of reform of the tax system so that "bads" rather than "goods" are taxed, not as a means by which more tax is taken from people behind their back while claiming that it is all in the cause of good environmentalism.

The overall tax burden is not the issue: it is how we tax, not how much we tax. When the Government confuse the two, it inevitably causes the cynicism highlighted in the University of Surrey's recent report on public attitudes to environmental taxation in the UK, which said that people believe that such taxation is not about the environment, but all about stealth taxes, so they naturally oppose it.

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