Examination of Witnesses (Questions 120-139)|
BOATENG MP, CLIVE
WEDNESDAY 5 DECEMBER 2001
120. Just going back to Mr Owen Jones's question
about strategy, Minister, before we get on to some of the individual
taxes, it is not just a question of the fact that there were no
new measures in the Pre-Budget Report, and no new environmental
measures, not only that, but the complexity which Mr Owen Jones
pointed to of, for example, the Climate Change Levy is admitted,
indeed, you yourself admitted the difficulty of dealing with some
of the exceptions, and so forth, but it is also the fact that
the measures you have introduced, and you talked about further
measures in the next Budget, are frankly peanuts, by comparison
with the task which confronts us. The Royal Commission on Environmental
Pollution has been talking about reducing carbon emissions by
60 per cent by the year 2050, the Government has committed itself
to very bold targets of 10-12 per cent in a shorter timescale;
but the Climate Change Levy raises only £1 billion, the Government
spends £400 billion every year, it is 0.3 per cent of employers'
National Insurance contributions. Okay, you may say that is a
new tax, because the Landfill Tax was introduced by your predecessor,
only a fraction of a percentage point of industrial costs, these
are small beer; that is what concerns us, the task is enormous
and what you are doing is tiny.
(Mr Boateng) As I have indicated, Chairman, there
will be a divergence of view as to the scale of the task and the
121. I do not think there is any divergence
of view about the scale of the task, because the Government is
committed to targets about carbon emissions, which are publicly
(Mr Boateng) We are certainly committed to it, but
people have different views as to how to arrive at the end we
all seek, and some would want us to go faster, some think that
we have already gone too far and that the regulatory and fiscal
burden is too great; and we have to strike a balance, and we take
into account, and have to take into account, those divergent views.
But if I may, with respect, take issue with you on the notion
that there is nothing in the PBR; we have launched consultations,
and I think significant consultations, on ten environmental measures,
they are outlined in the Chancellor's Statement, and, I think,
as a package, that is not insignificant. And consultation is not
an excuse for inaction, it is a necessary, preparatory part of
a process, that does involve, I think, significant change.
(Mr Maxwell) I think I would just like to add, it
is not only the value of the taxes that matters in this context,
it is the way that taxes are structured and designed. And I will
give the example of something like the company car tax system,
for example, which is overall revenue-neutral, so it will not
score in that sense as being extra tax for environmental purposes,
but the structure of the company car tax system from next April
will be changed significantly; that will give environmental benefits
arising as a result. So these things can be done without necessarily
affecting, in all cases, the overall tax revenue; there is an
issue about design of taxes as well.
(Mr Boateng) And some are designed specifically to
be revenue-neutral, in order to counter the charge that is made,
`oh, yes, this is another stealth tax.' Well, it is not another
stealth tax; the point of these measures is to change the culture,
to change the climate in which decisions are made. And, as I say,
if you look at the PBR, I think, for instance, the options for
a lorry road-user charge, that is, potentially, an enormously
significant step. The issue, and it is an incremental one, but
it is nevertheless one which we have had some representations
on from industry, the achievement of employer-provided buses.
I think these are important responses to issues that do demonstrate
an ongoing commitment.
122. You rightly said, Minister, this is a relatively
new area, I think that is a very fair point, the whole business
of shifting the taxation from "bads" to "goods",
in green terms, and so forth. And that is one reason why this
Committee proposed a Green Tax Commission, not to preclude anything
the Treasury might want to do but simply to do research into this
area, on a non-party basis, so there could be some broad, objective
understanding of what was a "good" tax, in these terms,
and what was a damaging tax. You refused to have that, you refused
to consider that, you turned that down, as a suggestion by this
Committee; so, therefore, could I ask you what specific research
the Treasury itself has carried out in the last couple of years
on the scope for the use of environmental tax measures?
(Mr Boateng) Let me just, if I may, take the note
of the Committee's previous view in this area. We have always
taken the view that the best way of proceeding is to ensure that
we engage stakeholders in the practical task of working with ourselves
in developing fiscal responses to the policy issues that have
been identified, and identified in ways that also involve those
stakeholders. So, if you take the example which I gave earlier
on, of the Climate Change review, the view that we took was a
Task Force on economic instruments and business use of energy,
chaired by someone with an established track record, in industry,
123. If I may interrupt you, that was three
years ago, the Marshall Report came out three years ago; what
I am asking you is, what have you done in the last two years to
go beyond what you have already done on the Climate Change Levy,
which we understand and agree with, what have you done beyond
that, in the last two years?
(Mr Boateng) What we would say is that officials,
special advisers and myself meet on a regular basis, both with
the green NGOs and with industry and business, as part of the
process of ensuring that they have an input into the development
of the Chancellor's
124. Have you commissioned any research papers,
(Mr Boateng) Let me ask Mr Maxwell to answer.
(Mr Maxwell) A couple of examples I have mentioned,
the Aggregates Levy is based very much on independent research
that was carried out under contract to the DETR, as it was then.
125. Not by the Treasury?
(Mr Maxwell) No, because the environmental expertise
tends to reside in other Departments, so we normally do it on
a sort of contractual basis through other Departments; that is
the normal way of proceeding in this area. I think, also, another
example would be some of the changes to lorry Vehicle Excise Duty
that came into effect on 1 December this year, and they were very
much based on work that was done, again, I think, through the
DETR, as it was then, by NERA, environmental research experts.
So they are two examples. I think, also, the Inland Revenue has
been working with some academics on various transport tax ideas.
(Mr Boateng) I am interested in the Committee's view
on this, obviously, and I think that my concern with the idea
is that there would be a real danger, which you would be aware
of, Chairman, from your experience of Government, of such a body
simply becoming a vehicle for a variety of external groups, organisations,
interests, a lobbying vehicle, essentially, it would not actually
be a constructive policy mechanism. And that what we need to do
is to be able to satisfy the stakeholders, which includes the
green NGOs, which includes business, industry, and also which
seeks to find a way of including another important set of stakeholders,
who sometimes get forgotten in all of this, the consumers, that
includes them in a process that is credible and that withstands
academic scrutiny for its objectivity and rigour, and we have
to be able to do that. We have to be able to do that in relation
to aggregates, we have to be able to do that in terms of the measures
we are taking in relation to road transport.
126. So, if I can just summarise what you are
saying, therefore, in terms of, you do not agree with a Green
Tax Commission, for the reasons you have said, and I understand
the argument, I do not agree with it but I understand the argument,
so what you have done internally, in Government, and not in the
Treasury but in other Departments, is something on lorries and
something on Aggregates Tax; that is the total sum of your research
into environmental taxes over the last two years?
(Mr Boateng) I do not think that would be a fair summation,
and what I will do, because I think it is very important the Committee
should have a very clear idea of this, is to commission a memo.,
which I will send to you.
127. That will be very helpful.
(Mr Boateng) That will outline the steps we have been
taking and with what Departments. But I would stress that the
way the Treasury has worked over the years, and it may be the
Committee feels we should work in a different way, in which case
I would be interested to hear it, is to use and to utilise the
experience and capacity of other Government Departments and their
links with the wider academic community. It may be that the Committee
will take the view that we ought to develop such a capacity within
the Treasury itself and, as it were, descend on other Departments
with our enhanced capacity, in order to
128. It sounds very frightening.
(Mr Boateng) That would be a very interesting idea,
if that were what was to come from the Committee, but it is not
the way that we have worked in the past
129. I think the other Departments would be
rather worried if the Treasury descended with even greater force
than they do already.
(Mr Boateng) I think they would be, Chairman.
130. If I might say, Chairman, one draws analogies
with health, at the moment, and the Treasury is obviously not
entirely reluctant to commission its own research.
(Mr Boateng) Mr Jon Owen Jones is being characteristically
131. Have you also done any research into the
effect on the environment of specifically non-environmental taxes,
the normal run-of-the-mill taxes, like Corporation Tax, in your
(Mr Maxwell) All budget measures go through an environmental
sort of appraisal sieve process, so that, as budget measures are
reviewed and considered for decision, an environmental appraisal
is done on them. So changes to Corporation Tax are looked at in
that light, yes, and if they are considered to have any environmental
implications they are investigated further.
132. As you know, the Department can decide
to publish those analyses, those environmental appraisals; do
you intend to publish the ones you have just mentioned?
(Mr Maxwell) I know that all regulatory impact assessments
of budget measures are published, as far as I am aware, so, I
think, in the vast majority of cases dealing with Corporation
Tax, the response would be that there was no environmental impact,
133. So you say there will be a nil return,
therefore we should not be told?
(Mr Maxwell) No, sorry, they are published, I think
the nil return itself is published, as part of a regulatory impact
assessment, or as an environmental line on the environmental impact
134. Just switching the subject, because I think
we have covered this fairly exhaustively; one area which the Treasury
does have responsibility for, of course, is Resource Productivity
indicators, because the Office of National Statistics is attached
to the Treasury, is part of the Treasury, as I understand it.
And you indicated, Minister, that there was difficulty in getting
proper indicators in this area, we were in a new area here, in
Resource Productivity, and the PIU had just published this report
on Resource Productivity. Can I ask you what the Treasury are
doing by way of research work in this area on Resource Productivity
(Mr Boateng) If Mr Maxwell or Mr Collins are not able
to assist on that, I will make sure that is included in the memorandum.
135. Are they?
(Mr Maxwell) Not at this minute, no; sorry.
(Mr Collins) I think that the policy lead rests with
DEFRA and DTI, in taking forward the work of the PIU. Treasury
will be involved in that, but it is not something that we have
the lead for.
136. So you are not diverting any staff resources
to that, inside the Treasury?
(Mr Collins) I think, as the work is taken forward
by the lead Departments, we will be involved in it, and there
will be staffing resources devoted to it.
137. But not at the moment?
(Mr Collins) But the principal lead is in other Departments.
138. I was interested in the Enhanced Capital
Allowances, and the anticipated cost of those. Can you tell us
what the cost to the Government of the Enhanced Capital Allowances
in the Pre-Budget Report is likely to be? And also, in terms of
the related position on development tax credits, is there a budget
set out for those at the present time, and have you any specific
ideas about how that budget is going to be deployed?
(Mr Boateng) In terms of the cost, I do not think
I can help you on that.
(Mr Maxwell) Sorry, are you referring to the new areas,
for instance, under the Green Technology Challenge?
(Mr Maxwell) No particular budget has been set for
those yet, because the technologies themselves have not been identified.
And the costs of awarding capital allowances like these are demand-driven,
it depends on how many pieces of equipment that qualify for that
form of technology are purchased, once the scheme is announced,
so it does depend very much on the selection of technology, because
it is a demand-driven programme. And without having yet decided
on those technologies it has not been possible to have any sort