Select Committee on Environmental Audit Minutes of Evidence

Examination of Witnesses (Questions 140-159)


  140. So when is it to be introduced?
  (Mr Boateng) That will depend on the outcome of the consultation, the shape and nature of the package.
  (Mr Maxwell) The Government has said that the intention is to introduce the allowances during 2002-03, at some point during the financial year.

  141. And it will be at that time you will have an idea of how much it is going to be?
  (Mr Maxwell) Yes.
  (Mr Boateng) Yes; and one of the reasons why we are undertaking a consultation in this way is because we want to make sure that the taxpayer gets a maximum bang for the bucks foregone, and in order to do that we need to get a very clear sense from the sector as to how best to overcome the financial barriers to investments that bring about environmental benefits, what those benefits are, in relation to the barriers. But I sense, from previous responses from yourself to some answers I was giving earlier on, that you will want to make sure that we are producing a market-based instrument that actually is relatively straightforward to claim and administer, and that it is, as it were, business-friendly, and I can give you that assurance.

  142. Presumably, that is the reason for the consultation that takes place?
  (Mr Boateng) That is what we aim to do.

  143. And do you intend to integrate the deployment of this income with, for example, the income from the Climate Change Levy, and is that all going to be part of a general scheme, in terms of investing in green technology?
  (Mr Boateng) The operation of the Climate Change Levy and the trust that is there, and people are entitled to rely on certainty in relation to that, it has not yet been determined how we are going to dispense the income from this.
  (Mr Maxwell) I think, the only thing I would add is that one of the areas in which the Government has said it will introduce new, further capital allowances is for further energy-saving technologies, and I would imagine there may be some scope to integrate that within the existing scheme to support energy-saving technologies, to make it easier for business to understand what is going on.
  (Mr Boateng) Not least in the sense that the existing scheme can identify where those technologies can best be developed.

  144. And, within the scheme as a whole, have you any specific environmental objectives at this stage?
  (Mr Maxwell) Yes; the three areas that were announced were to do with particular environmental objectives. The first one related to climate change and air quality, and there were two areas of further work, energy-saving technologies and future cleaner vehicles and fuels; and then the second environmental objective was to do with water quality and water use, minimising water use.

Mr Thomas

  145. I just wanted to ask one particular question around technologies that the Green Technology Challenge have been looking at, because, of course, the Challenge itself was announced in the Budget; the change in the Pre-Budget Statement was around, as you have just mentioned, the fields they would be looking at, climate change in particular. Could you rule out, Minister, the use of a Green Technology Challenge to support capital allowances or research and development in the field of nuclear power?
  (Mr Boateng) That is not something to which I have addressed my mind.

  146. Would you?
  (Mr Boateng) That is not something to which I have addressed my mind.

  147. I meant, would you address it?
  (Mr Boateng) I would be happy to address my mind to it, and it is something, no doubt, that falls within the compass of the energy review currently being carried out by the PIU, and I will, happily, as I am a member of that committee, indicate to that committee the purport of your question and it is something that they can address. But it is not something that I have omitted, it is not something I have heard mooted or seen.

  148. But you would be aware of the way, obviously, that a Green Technology Challenge is launched in the Pre-Budget Statement, or following up the Budget, it seemed to be something that would support biomass, renewable energy, all types of alternative energy sources, and not perhaps something that would be traditionally associated with the possibility of being used for nuclear, which, of course, could be argued to have a positive climate change effect?
  (Mr Boateng) It could be, in relation to carbon emissions, but that is not the purpose or intention of this particular measure.

  149. But do you think that that whole question does beg the question of what sort of research the Treasury is undertaking on the impact of initiatives such as this, and they do dove-tail in with other initiatives being undertaken by other Departments? Are you confident, in the way that we have been discussing these matters here this afternoon, that you have those facts at your fingertips for you to say that your fiscal policies are having the right effect, at the right time, for the right technologies, rather than having a perverse incentive, as it might be argued, in terms of other technologies, which are not traditionally seen, at least, as being green or renewable?
  (Mr Boateng) I have not yet seen any examples in practice on the operation of the sort of perverse incentive that you have just drawn our attention to, I have not seen that happening in practice. But I think it is important to stress that the way in which we work in these areas does require us to ensure that we are addressing them across Government; so it is not just simply, as it were, the Treasury policing the system, it is ensuring that all those relevant Departments that have an interest are working together. And the Treasury, obviously, has to have an overview, and we do, and in the course of the development of any piece of environmental taxation, or, indeed, any piece of taxation, of course, there is consideration given to potentially perverse incentives.

  150. Can I ask you finally, on that, you mentioned, of course, that this was a consultation, what initial thoughts do you have, in going into this consultation, about the sorts of technologies that you would be looking to support; is it a completely blank piece of paper and you are just waiting for the industries and the manufacturers and the environmental organisations to come back with their suggestions, or do you have a clear idea of the sorts of technologies that might be allowable?
  (Mr Boateng) You have given some examples yourself, Mr Thomas, of potential in this area, and they are examples that one would expect the industry and those with an interest in this area to come up with and to seek to develop. But I do think it is important that the consultation is not, as it were, geared towards any predetermined conclusion, otherwise why have such a consultation, unless you are prepared to ensure that innovative and radical thought is given an opportunity to express itself.


  151. On your new proposal for a Research and Development tax credit for larger companies, which you mention in the PBR, there is no specific mention of environmental or Sustainable Development objectives; would you intend to include those in the objectives of the scheme?
  (Mr Boateng) It would seem to me to make sense to include them.

  152. So the answer is yes?
  (Mr Boateng) Yes.

  Chairman: We just want to have a word about environmental appraisal, and Mr Challen, I know, wants to come in on that.

Mr Challen

  153. I think, before I was on this Committee, back in March, Mr Timms came along and said that appraisal mechanisms would be put in place; can I ask you if those have been put in place, in relation to different environment policy instruments, and, if so, what progress you have made in establishing more of these systems?
  (Mr Boateng) I hope that the Committee will find that the results that are outlined in the Pre-Budget Report, at pages 136 and 137, do indicate that we have taken into account the strictures and the concerns of the Committee in terms of appraisal and evaluation, and that the guidance I referred to earlier on, that has been produced by DEFRA, on the methodology of environmental appraisal, is an example of that, and that guidance applies to all budget measures. And we decided to include certain measures in the appraisal tables, on the basis of a determination on our part as to whether or not they will have a significant impact on the environment, or serve an environmental purpose; and where an appraisal is justifiable, in terms of its cost being proportionate to the goals of the Government, we do carry out such an appraisal, and the result you see before you.

  154. Yes; and these obviously appraise environmental policies. I am just wondering how this might compare with appraisal of other policies, not least an area that I am particularly interested in, which is energy. We find, on page 123 of the Pre-Budget Report, that renewable energy over the next three years will account for total spending of £267 million. But I wonder if there is any pressure within the Treasury for appraisal of the efficacy of nuclear power and the money that that drains from the bottom of the well, how would it compare, do you appraise that, is there pressure to look at how these technologies compare, and what the future direction of those technologies should be, in this purely financial sense?
  (Mr Boateng) My view is that it is always important that decisions are based on the best possible evidence basis. The PBR deals with budget measures, there are no specific measures that would require us, therefore, to make an appraisal in relation to nuclear power and its costs. The PIU, however, as I have indicated earlier on, because I do think it is a very important piece of work, and obviously you are interested in it, is conducting an energy review, and we would expect it to be rigorous in its appraisals of the relative costs of various energy sources. And you refer to pressure; well, certainly, our exhortation is always that such analysis, such appraisals, should be carried out, and where we can assist we do.

  155. But is there anybody in the Treasury saying, `look, this is not a lot of money here,' on page 123, `compared with what we pour down this bottomless well called nuclear power'?
  (Mr Boateng) I am not sure we use that phrase. But, do we draw relative costs to the attention of Departments and those who propose policy, yes, that is our job, and sometimes people do not always appreciate having those relative costs pointed out to them, but it is part of our job, and we do it.

Mr Best

  156. A few weeks ago, we had Stephen Byers acknowledge that there was no concordat or formal working relationship between the Treasury and the DTLR on transport issues, yet there is a need for a balance between road taxes and duties, and the DTLR capital expenditure and the incentive schemes are surely a crucial way to get it right. What I am interested in is, is it a good idea to have, as it were, non-joined-up Government on this particular matter?
  (Mr Boateng) Of course, the Budget and fiscal measures are a matter for the Chancellor, and that is the way it is. If, however, you were to ask me the question, do we work very closely with the Department of Transport on, for instance, green travel plans, on work in relation to VED and road hauliers, VED and motorists, the answer is, unequivocally, yes, we do, we work very, very closely indeed. And I am not quite sure what is meant by a formal concordat, but if you take the example of the Green Fuel Challenge, that was the result of a very close and productive relationship between officials, and indeed between Ministers, it is something that we do together, and I will be disappointed if the impression was given to the Committee that we do not work very closely together. My colleague, the Minister of State for Transport, and myself were together in Committee this very morning, on issues in relation to social exclusion and transport, where we were certainly addressing some of the issues that we have touched on here today.

  157. I am sure, Minister, that you have a very good working relationship with your colleague, I am sure of that, it is just that he indicated to us that there was no formal working relationship between the two Departments; now, is that so?
  (Mr Boateng) I do not know what is meant by `formal working relationship', we have a very close working relationship, but I shall ask those who have had a longer association with both Departments than myself to respond, in terms of their understanding of `formal working relationship', but I think we have got a very close one.
  (Mr Maxwell) I have meetings on a very regular basis with officials in the DTLR to discuss a number of these tax matters.

  158. I wonder if I can ask, it is the issue of the Pre-Budget Report, on page 170, there are some asterisks at the side of the Green Fuels Challenge pilot scheme. I suppose that indicates that the expenditure is negligible, perhaps less than half a million a year, and that that will be so through into 2004-05. Do you actually think that this represents an adequate response to the transport challenge facing the country?
  (Mr Boateng) It depends what you mean by negligible; it means less than £5 million.

  159. To me, that is an awful lot of money, at a personal level.
  (Mr Boateng) To us all, Mr Best.

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