Memorandum from Green Alliance
Introduction
At the start of a new government, this enquiry
provides an opportunity to take stock of the government's progress
toward using tax and government spending to achieve environmental
outcomes. We would like to highlight four areas in which the Treasury
has the potential to make a significant contribution. Firstly,
we consider its overall direction and positioning in the sustainable
development debate. Secondly, we look at the prospects for environmental
taxation, and thirdly, the role of the Treasury in implementing
the findings of the Performance and Innovation Unit's study of
resource productivity. Lastly, we examine how the Treasury can
use the forthcoming Spending Round to achieve sustainable development
objectives.
The role of the Treasury in sustainable development
Over recent years, the Treasury has made considerable
progress in promoting environment and sustainable development.
In particular, their "statement of intent" about a shift
toward greater environmental taxation; the introduction of the
climate change levy; and the recent decision to incorporate sustainable
development criteria into Spending Round guidance stand out.
Despite this progress on the ground, however,
the Treasury consistently fails to make a political case for the
environment. The Chancellor has never publicly set out his vision
for environmental policy, and the Treasury rarely publicises the
progressive environmental policies that they have implemented.
Other government departments and ministers have done this far
more successfully—for example, the DTI's sustainable development
strategy has received high-level ministerial backing; and the
Prime Minister has, on several occasions, outlined his views on
the way forward for the environment.
This reluctance to make the political case acts
as a brake on practical policy measures. During the October 2000
fuel protests, for example, the government did not make the case
for fuel tax as an environmental measure, and did not make the
link with climate change. Without a proper justification of environmental
measures, they will continue to be unpopular. Making the political
case must be the next step forward for the Treasury. The first
step could be to publish a revised "Statement of Intent on
Environmental Taxation", extending the text to cover spending
policy and management of economic policy more generally.
Where next for green taxation?
As discussed above, progress has been made on
green taxation, but at the start of a new government, there is
the need for the Treasury to reaffirm its commitment to shifting
the tax burden. Environmental tax reform is a long term process,
not a one-off announcement. The measures taken in the first term
were very welcome, but must be seen as the first building block
in a much deeper reform of the tax system. In terms of practical
steps forward, there is much that the Treasury can do to build
on existing initiatives, and increase their effectiveness. This
includes:
— Transport taxes: In the short term,
the VED differential between clean and polluting vehicles could
be increased—it is much smaller than differentials elsewhere
in the EU. In the longer term, we would hope that fiscal and spending
measures are part of the Government's forthcoming consultation
on Powering Future Vehicles, which should point the way to hydrogen-based
systems.
— Waste taxes: There is general agreement
that the landfill tax is too low to have any real impact, and
it should be increased considerably. The Advisory Committee on
Business and Environment has recently called for such an increase
and the Environment Select Committee called for it to be increased
to £25 per tonne. It could also be extended to incineration,
so that it becomes a waste disposal tax. More of the revenues
should go to support waste minimisation and recycling, including
doorstep collection.
— Agricultural taxes: The Food and
Farming Commission, due to report by Christmas, should be used
to reopen the debate about pesticide and fertiliser taxes. Revenues
could be used to help support a greater shift towards low input
agriculture.
— Aggregates tax: We welcome the introduction
of this tax, and believe it will be most effective if it is applied
at a uniform rate, sending a clear price signal on aggregates.
— VAT and regeneration: There is a
strong case to be made for a differentiated rate of VAT on repairs
and renovation of listed buildings, as suggested by the National
Trust.
— Energy taxes: We would expect the
Treasury to play an active role in the energy policy review, currently
underway in the Performance and Innovation Unit of the Cabinet
Office. There has been some concern that the Treasury has not
been engaged in the review—Despite being on the advisory
group, the Financial Secretary did not attend the first few meetings,
though he did take part in the most recent one. In the short term,
the climate change levy should continue to increase, with the
revenues being used to cut other business taxes or support energy
saving measures. We see no environmental justification for exempting
nuclear energy from the levy. The question of domestic energy
levies also needs to be tackled in the medium term.
The pre-budget report and resource productivity
The Performance and Innovation Unit's study
on resource productivity will be published this month. We would
expect the Treasury to take a lead in implementing the report's
findings, and the pre-budget report speech by the Chancellor is
a good opportunity to signal this intention. In particular, resource
productivity should be seen alongside labour productivity as a
key policy driver. Indicators and targets for resource productivity
should inform policy across the board. The Environmental Audit
Committee could return to this issue once the report is published,
in order to asses the progress of the Treasury, DTI, DTLR and
DEFRA in progressing this agenda.
Spending Round 2002
The pre-budget report will be used to officially
launch the 2002 spending round. It is encouraging to hear that,
as part of SR2002, departments are being asked to assess the impact
of their spending bids on sustainable development. This has been
a long-standing recommendation of both NGOs and the Environmental
Audit Committee. There is also increased staffing capacity within
the Treasury to deal with this, and a willingness to discuss the
process with stakeholders, including NGOs. This is a welcome step
forward. The following recommendations set out how we believe
the Treasury should carry out its commitment:
— The Treasury should publish its spending
round guidance. The guidance is not sensitive information and,
if it is not published, it is more difficult for stakeholders
to work with government to meet common objectives. It is also
impossible to hold departments, or the Treasury, to account. Whilst
accepting the need for confidentiality surrounding the bids themselves,
we would ask for greater transparency and accountability in the
spending round process.
— There is a need to ensure that departments
are taking their responsibilities seriously, building in considerations
of sustainable development at all stages of the process, rather
than carrying out a post-hoc justification of their bid. There
should be an iterative dialogue between departments, the Treasury
and other stakeholders to ensure this.
— Sustainable development considerations
are a useful way of assessing or testing departmental bids. In
particular, the Treasury could assess whether the bids contribute
to the government's sustainable development strategy, and the
quality of life indicators.
— Departmental PSAs could be linked
directly to the sustainable development strategy and its indicators,
and, given the cross-cutting nature of sustainable development,
greater use could be made of joint PSA targets, such as the previous
DETR/DTI joint target on climate change.
Environmental NGOs are working closely with
the Treasury and departments to contribute to this process. Given
the high level of activity around the spending round and sustainable
development, we would strongly recommend the Environmental Audit
Committee to conduct an enquiry into SR2002 in due course.
9 November 2001
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