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4.54 pm

The Financial Secretary to the Treasury (Mr. Paul Boateng): This has been an excellent debate. The number and quality of the contributions are a credit to the Committee, its Chairman and the seriousness of the subject matter. I exempt from those opening remarks the contribution of the hon. Member for Aylesbury (Mr. Lidington) and the hon. Member for Truro and St. Austell (Matthew Taylor) who—characteristically, I am afraid—is not in his place. Their contributions were hackneyed, ill-informed, partisan and grudging in the

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extreme about the Government's undoubted achievements in this field. However, this has been a welcome opportunity for the House to consider these matters. I share the view of some right hon. and hon. Members that the House does not spend as much time as it ought in considering environmental matters, so this debate is all the more welcome.

The Government's central economic objectives include the promotion of high and sustainable levels of growth and high levels of employment—growth must be stable and environmentally sustainable. Quality of growth matters, not just quantity. Delivering sustainable growth is a task that falls across Government. It is a core feature of economic policy under this Administration. The Treasury is committed to that goal. How and what we tax sends clear signals about the economic activities that we believe should be encouraged or discouraged, and the values that we wish to entrench in society. Just as work should be encouraged through the tax system, environmental pollution should be discouraged.

To that end, the Government have implemented a range of policies across the tax system to deliver environmental objectives. That is an ongoing and incremental programme. Over time, the Government will aim to reform the tax system and increase incentives to reduce environmental damage. That will shift the burden of tax from "goods" to "bads", encourage innovation in meeting high environmental standards and deliver a more dynamic economy and a cleaner environment to everyone's benefit.

I therefore take exception to the suggestion made by the right hon. Member for Suffolk, Coastal (Mr. Gummer) that this Government, and the Chancellor in particular, do not have much interest in environmental matters. He bemoaned the fact that the Chancellor was not present this afternoon. At the same time, he suggested, Janus-like, that somehow the Treasury had no business introducing the climate change levy because it is not an environmental Department. He cannot have it both ways. [Hon. Members: "Janus-like?"] That means looking both ways.

The Chancellor has put environmental considerations at the heart of the Treasury. To suggest otherwise is to try it on; the right hon. Member for Suffolk, Coastal knows better than that. I know that in some quarters he is regarded as a saintly figure in relation to the environment. My view is that his role is more impish than saintly, although I am prepared to accept that he is at least a candidate for beatification. That is to be welcomed, but I am a little sceptical about the evidence. Be that as it may, he ought to give some recognition to what the Government have achieved. I hope that he will take advantage of future opportunities to do that.

Of course, environmental taxation must meet the general tests of good taxation. It must be well designed and meet objectives without undesirable side effects. It must keep deadweight compliance costs to a minimum. Yes, we must be concerned about such costs and ensure that the distributional impact is acceptable. Care must be taken of the implications for international competitiveness, and that is our role in relation to the climate change levy. Far from accepting the strictures of the hon. Member for Aylesbury, I would argue that we have done just that. Where environmental taxes meet the tests, the Government have used them and will continue to do so.

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The launch of our statement of intent on environmental taxation in 1997 gave a clear indication of what the Government were determined to achieve. We have taken crucial steps forward, but we are the first to accept that there is more to do. However, credit should be given for the steps that we have taken. Indeed, credit has been given by independent, objective observers.

I note the contribution of the hon. Member for Rayleigh (Mr. Francois). I well remember him in his previous incarnation as the Conservative candidate in Brent, East. He showed all the necessary characteristics of a Conservative candidate in the borough of Brent. He was of brave heart and also demonstrated remarkable fleetness of foot. Both characteristics are necessary for someone who champions the Conservative cause in a borough such as mine. I am delighted that he has found a happy billet in Rayleigh and, no doubt, he has made and will make a distinguished contribution to the Committee on which he serves.

The hon. Gentleman is wrong to suggest that our commitment has lessened, that the pace of reform has slowed or that there is insufficient leadership from the Treasury. Over the next year, we will deliver on a number of important commitments, with the introduction of the new company car tax system and a new levy on aggregate extraction. I know that the Environmental Audit Committee has supported many aspects of these policies as we have demonstrated their efficacy.

Developing new tax systems has taken time. Much consultation with business, environmental groups and others has been required. I am sure that hon. Members will acknowledge and support the principle that consultation should be built into the policy process. Of course, we could move more quickly by implementing policies that had not been developed in that way, but that would be a false economy and, ultimately, would slow the pace of the reform that the overwhelming majority of those who have spoken in the debate want to happen. We have taken time to get our proposals right and to ensure that, as we protect the environment, we avoid adversely affecting either the businesses that drive economic growth or progress against our wider social objectives.

We have also been making new proposals. I should like to draw the House's attention to several recent announcements, mainly because they demonstrate the importance of sustainable development to Government strategy and because they effectively challenge some of the conclusions of the Environmental Audit Committee's report.

The Committee argues that we are not taking our strategy forward, yet we have made important progress on cleaner fuels and the pre-Budget report contains important new proposals on the green technology challenge. The Committee claims that we are not consulting stakeholders on new proposals, yet we are regularly meeting green non-governmental organisations and discussing new ideas with other Departments.

The Committee asserts that there is insufficient appraisal of the impact of Budget measures, yet the pre-Budget report appraisal contained for the first time a link with the sustainability indicators of the Department for Environment, Food and Rural Affairs. Surely, the Committee should welcome that. The Committee opines

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that the Treasury is showing insufficient leadership, yet we have published guidance on sustainable development, required Departments to produce reports alongside their spending proposals and have agreed testing public service agreements on environmental targets. That must be, and is, good news.

Let us turn to our new proposals. The Government have published the "Powering Future Vehicles" draft strategy, which is an important document considering the road vehicles of the future and the engines and the fuels needed to power them. The Treasury is a co-signatory to the document, which is an expression of our commitment to the environmental challenge. In the pre-Budget report, we confirmed that we will support this strategy with further tax incentives to be considered in the run-up to the Budget.

The pre-Budget Report also confirmed that the Government will seek to introduce further tax incentives to support environmentally friendly investment in three important areas. The green technology challenge envisages enhanced capital allowances for a further range of energy-saving technologies, for cleaner fuels and vehicles and for minimising water use and improving water quality. That is not the sign of a Government who have lost their way or who are pausing to gather breath; it is the sign of a Government who are committed to new initiatives, to the consultative process and to ensuring that stakeholders are with us on the changes that are necessary. We are moving forward.

I want to say a word about stakeholders, because we have made it absolutely clear that they had to be central to the development of new measures. That is why the climate change levy was preceded by Lord Marshall's taskforce on economic instruments and the business use of energy. That is why the aggregates levy was the subject of extensive discussion with the industry, including detailed consideration of the industry's proposals for a voluntary package, which we were not prepared to accept. Furthermore, our treatment of the issue of pesticides should not give anyone cause to believe for one moment that, if the voluntary approach does not work, we will hesitate to legislate. Make no bones about it: we will. We are determined to give the voluntary route a chance, but if it fails, no one should be in any doubt as to the determined action that will be taken.

The non-governmental organisations are with us on this. Chris Hewett, senior research fellow of the Institute for Public Policy Research, said in an article in New Economy that

Norman Glass, of the National Centre for Social Research, said:

Far be it from Treasury Ministers to blow the trumpet of the Treasury—that would never do—but to suggest that the Treasury has been holding back progress does not give credit where credit is due.

However, it is important that, as we propose new tax measures, we should have that vital dialogue with other relevant Government Departments—the Departments for Environment, Food and Rural Affairs, for Transport, Local Government and the Regions and of Trade and Industry. We are still very much in the market for new

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environmental tax measures, where a good case is made and the conditions set out in the statement of intent are satisfied.

On appraisal, it is absolutely vital that even policies designed and implemented with the support of stakeholders should pass their reality check. That is why we are committed to a full and frank system of appraisal. We are committed to an evaluation of the environmental impact of all Budget measures. That was not a characteristic of the Government of which the right hon. Member for Suffolk, Coastal was a member. They never issued clear guidance to all Departments on how to undertake environmental appraisals. They never ensured that the links between Budget measures and sustainability were made clear. All these measures will have a significant impact on the environment, and will serve an environmental purpose, so I absolutely reject the charge that the pre-Budget report fails to capture comprehensively the environmental impact of Budget measures; it does.

On leadership, no one should doubt our determination. Departments with a public service agreement have been requested to produce a sustainable development report, to be submitted alongside the analysis of resources in spring 2002. We do not discourage the establishment of PSAs with sustainability impacts. Many PSAs have a direct impact on the achievement of our sustainable development targets. Merely adding the words "sustainable development" to PSA targets would not increase that impact. We are determined, however, to ensure that they do make a difference.

It is perfectly true that sustainable development reports will not be published. Why not? Because they are internal documents, intended to clarify Departments' thinking about the implications of their policies. That is what they are for. They are not meant to be glossy brochures where the by-product is yet another reduction in our stock of timber. They are working documents, designed to achieve a specific result, and we are determined that they should do so.

Let us have no illusions about what would happen if the Treasury announced an intention to allow other bodies—the Environmental Audit Committee or the National Audit Office—to audit the Departments' efforts. The hon. Member for Orpington (Mr. Horam) knows very well the way of Departments. He has served as a Minister. He knows the disciplines of preparation for a spending round and he knows that the awareness of a forthcoming

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audit would inhibit the analysis of Departments, because they would have an eye on what would subsequently be made public.

We are serious; we want the output of those Departments in the process to add value to the work. We do not want it to be a box-ticking exercise. Nevertheless, in the aftermath of this process I would be happy to consider with the hon. Gentleman and the Committee how best we can ensure that it is demonstrably a real process, which has made a real difference, and we are only too happy to receive any ideas that he and the Committee have about how best we can do that, subject to the caveats that I have given.

I challenge the notion that the Treasury is not offering sufficient leadership. PSAs, sustainable development guidance, sustainable development reports and the integration of sustainable development into the spending review all suggest otherwise.

I do not accept that the policy is too complex. It is a complex world; the environmental challenge is complicated and our policy response must capture that complexity, not superimpose an artificial simplicity that would be bad for business, society and, ultimately, the environment.

Time marches on, and I am aware that another important subject will be debated this afternoon. However, I want to ensure that right hon. and hon. Members understand the seriousness with which we take this subject. I will seek to address in correspondence a number of the other points that have been made by right hon. and hon. Members. In conclusion, I would argue that we have done a lot, but that there is still more to do. We are grateful to the Committee—and its distinguished Chairman, the hon. Member for Orpington—for the commitment and determination that it displays in its work in challenging the Government to do yet more. I do not believe that the House or future generations, to whom we are ultimately accountable, will find us wanting in that respect.

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