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Mr. Simon Thomas (Ceredigion): It has been my pleasure and delight to be a member of the Select Committee on Environmental Audit since I came to the House in February 2000. The Committee does a sterling job in holding the Government to account on a wide range of issues. The Environmental Audit Committee's title is a misnomer, as the Committee acts as the House's Select Committee on sustainable development. No other Committee examines the Government's activity in that respect, or holds them to account on those matters.

Increasingly, the Government are adopting the sustainable approach. It is not always perfect, of course, which is why the EAC's scrutiny and reports are needed. However, the EAC's resources are stretched in accomplishing its task. If the Committee, in its role as sustainable development Committee, is going to be fully able to hold the Government to account on these matters, we need the openness referred to by the hon. Member for Rayleigh (Mr. Francois). In addition, the Committee must have the auditing powers and access to research that it lacks at present.

The EAC has proposed a Bill on those matters, which has been taken up as a private Member's Bill by the hon. Member for Bury, North (Mr. Chaytor). I hope that the Government will consider the Bill's merits, as it would be

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better if they took the initiative. In that way, occasional accusations that the Government are sliding away from some of their commitment to sustainability can be countermanded.

As the hon. Member for Orpington (Mr. Horam) said at the start of the debate, there is more to sustainable development and its promotion by the Government than environmental taxation. Although I shall confine my remarks to the issue of environmental taxation so as to be as brief as possible, I believe that the phrase "environmental taxation" is itself misleading. A better phrase would be "taxation for sustainable development", and it should cover everything that the United Kingdom must try to do.

The first thing to say is that the Government have retreated from their pretty radical and welcome position on environmental taxation. The June 1997 statement of intent on environmental taxation encompassed many things. It stated:

that is, the whole system, not just environmental taxation—

That final phrase—

is what made me consider the statement to be more about sustainable development. It recognised that the environment, social justice and the economy go hand in hand.

Unfortunately, the current statement of intent does not recognise that. The 1999 pre-Budget report said merely that the Government would consider using the tax system on a case-by-case basis. That is a real weakening of the Government's intent with regard to promoting sustainable development through the taxation system.

It was suggested earlier that the Government are merely pausing or taking a breath before moving on to a more radical phase. I do not see where more radical proposals are going to come from, although, of course, I hope that they do appear. The Government are prepared to scatter a few carrots around to encourage and incentivise the "goods", but they seem very wary about using the big stick on the "bads".

The background to the matter is public reaction, such as the protests that greeted the abolition of the fuel duty escalator. If the Government are to lead on these matters, they must explain them to the public.

The Government are to be congratulated on what they have done with regard to Kyoto, for example. They have taken an international leadership role on that matter, and the statement earlier today was worthy. However, the Government have not led the domestic agenda in the same way. If they want to be remembered as the Government who instituted sustainable development and incorporated it fully into the fabric of the UK, they must do much more.

David Taylor (North-West Leicestershire): The hon. Gentleman mentioned that another hon. Member had said that the Government were drawing breath, but does he agree that they have approached the matter of the

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aggregates levy like a bull at a gate? The levy is due to be introduced in three weeks, but no detailed regulation covering its implementation and enforcement has been published. Have not the Government been over hasty in some areas of environmental taxation?

Mr. Thomas: I agree, and I shall deal with the aggregates levy in a while.

The energy review that has just been published recommends that the Government should create economic instruments to bring home the cost of carbon emissions. There is therefore another incentive to take such matters further.

The Government must address four principles when they consider environmental taxation. Although not all the principles must always be observed in environmental taxation, accusations that such taxation is a stealth tax can be circumvented if one or more of them are used to underpin the tax. Moreover, the Government must make it clear that the principles are used to underpin the tax. They could do that by means of an independent green tax commission, which the EAC has proposed in the past. I hope that such a commission will be established, but for the moment I shall concentrate on the four principles.

The first is the polluter pays principle. It is well known and widely understood, but it implies ring fencing and hypothecation. The Treasury, under all Governments, has been reluctant to consider that in the past, but increasingly it is seen as a valuable way to put the principle into effect.

The second principle is that the tax burden should be switched away from income and employment, and on to the consumption of resources. That is very important. The hon. Member for Orpington said that sustainable development meant treating the world as though we intended to stay. That is by far the most concise definition that I have heard, but we must switch the tax burden in the way that I described if we are to make that a reality. The difficulty is that we must also bear in mind a commitment to social justice in the matter—after all, the poor should consume in the same way as the rich. The redistribution of resources requires social justice in the tax system.

The third principle is the internalising principle—that the cost of producing goods should reflect real costs rather than actual costs. In other words, the external costs of production should be present in the final price of goods. The obvious example of an UK industry in which that does not happen is nuclear energy, but adherence to the principle can be difficult. For example, in a globalised market, how do we work out external costs? What are the external costs of what Bush has done with steel in the US? Does fuel consumption in this country have external costs in respect of global warming, climate change or the floods in Mozambique? The principle has its difficulties, but I believe that it must be taken into account when any environmental taxation is considered.

The fourth principle is that environmental taxation can be used as a practical policy tool in achieving certain objectives. In other words, the theoretical cost is sometimes less important than whether we use taxation to incentivise a "good" or penalise a "bad". The obvious measure to which the fourth principle applies is the reduction of carbon dioxide emissions. That may entail imposing for a time a certain amount of penalising taxation, as we will be trying to change people's behaviour.

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Taxation in such circumstances does not always work, as the Government's change of mind on fuel duties shows. When the fuel duty escalator was introduced in the 1993 Budget, the then Chancellor, the right hon. and learned Member for Rushcliffe (Mr. Clarke), said that it was also about achieving a cut in carbon emissions. However, one of the problems for the public was that there was no evidence that the levy would work in that way. Subsequent Governments have produced very little evidence in support of the contention.

More to the point, when the fuel duty escalator was frozen in the 2000 Budget, no evidence was produced about how that would affect traffic congestion, carbon dioxide emissions, or anything else. The Government were very remiss—and very ungreen, if I can put it that way—in not producing that evidence, and they were criticised for that failure by a short, sharp report from the EAC.

Issues relating to, for instance, fuel taxation demonstrate the potential complexity and difficulty of environmental taxation. In fact, the one thing that did stop carbon dioxide emissions from transport and reduce traffic congestion by—I think—5 per cent. was the fuel duty protest. That week in September achieved something that taxation has not been able to achieve.

The problem with transport costs is that the point at which taxation really bites and starts to reduce road transport is the point at which, by definition, it becomes unacceptable to the public. There must be alternative incentives, perhaps involving road pricing or public transport.

We must also ensure equality of choice throughout the country. At present, environmental taxes such as fuel taxes penalise the poorest rather than the richest. The hon. Member for Reading, East (Jane Griffiths) gave a good example relating to liquefied petroleum gas. There is not a choice in rural areas such as mine. There are only 93 fuel stations in Wales providing LPG, which means that it would be difficult to travel around Wales using LPG alone. I think that there are only five such stations in my county.

The hon. Lady said that 50,000 vehicles were running on LPG. As she may well know, the official registered figure is 26,694. Until the infrastructure is in place, whether for LPG or for biodiesel, people will not make the choice. Sometimes an incentive is needed. The power shift programme, which helps people to convert their vehicles, applies only to new vehicles. The vast majority of my constituents live in rural areas and drive older vehicles.

Government policy in this respect has not been a complete failure, as is demonstrated in the Environmental Audit Committee report. I was disappointed, however, that the idea of a pesticide tax had been shelved. I feel that that should be looked at again, and that more research should be conducted into how voluntary regulation is working.

Landfill tax presents a clear example of our failure. It should be given a much higher priority. I think it was the Environmental Audit Committee that suggested a rate of £25 per tonne. I am particularly worried about the fact that the tax is still only £2 a tonne for inert wastes. There

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is a mismatch between the landfill tax and the aggregates tax, which, we have been told, is intended to reduce primary extraction and encourage the use of secondary materials. Given a tax of only £2 a tonne on inert wastes, I do not see how the landfill tax can work hand in hand with the aggregates levy.

As the hon. Member for North–West Leicestershire (David Taylor) said earlier, some of us were in the House within a month of the implementation of the aggregates levy. Many of us who claim to be environmentalists have found ourselves wrestling with the question of how we can support the levy in its present form. My particular worry is that the way it is currently being implemented may lead to the closure of the smaller quarries. For instance, a quarry in Ystradmeurig in my constituency supplies the road stone for my constituency and neighbouring constituencies. If it closed, there would surely be more road transport because of the need to transport the material, and more carbon dioxide emissions.

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