WEDNESDAY 5 DECEMBER 2001
Mr John Horam, in the Chair
RT HON MR PAUL BOATENG, a Member of the House, Financial Secretary, CLIVE MAXWELL, Head of Transport and Environmental Taxes, and MICHAEL COLLINS, Policy Adviser in the Environment, Food and Rural Affairs Team, HM Treasury, examined.
(Mr Boateng) Chairman, yes. Can I, first of all, thank the Committee for this opportunity to meet with you, in order to discuss the Pre-Budget Report. Can I begin by introducing Clive Maxwell, on my left, who is Head of the Environmental and Transportation Tax Policy at the Treasury; on my right, Michael Collins, who works in Environment, Food and Rural Affairs. Just a few short words, if I may. First of all, to stress the importance that the Treasury places on Sustainable Development; we see it as vital to maintaining and developing a better quality of life for everyone, today and for generations to come. And whilst economic growth is obviously the key to rising national prosperity, our commitment is to ensure that it does not come at the expense of the environment. I would briefly flag up some important announcements to come over the next year, and they do represent the coming to fruition of announcements that have been made over recent years, because I know that has always been a concern of the Committee, to get a sense of progress in this area. First of all, the new company car tax system, which begins in April 2002, and then the new levy on aggregate extraction, which also begins in 2002. I would flag up, too, three recent announcements to which I would particularly like to draw the attention of the Committee, in terms of their demonstration of our commitment to Sustainable Development. First, Powering Future Vehicles draft strategy document, which the Committee will be aware of; we see it as an important document, builds on measures we have already taken, but also gives some indication of some that may be required in the future. We are co-signatory to the document, and we confirmed, as you will have noticed in the PBR, our support for this strategy, with further tax incentives considered in the run-up to the Budget. Secondly, the importance of the Green Technology Challenge, in the form of 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. And, thirdly, Chairman, and in conclusion, you will note that we have published the guidelines on Sustainable Development, provided to Departments as part of the Spending Review 2002, and I will have a particular remit, in the course of that Review, in ensuring that, as the bids are worked up by departmental colleagues, they take into account those guidelines and the importance the Government attaches to Sustainable Development. Thank you, Chairman.
Chairman: Thank you, Minister. We would like to start off with some questions about the broad strategy of the Treasury, and I know Mr Owen Jones wants to come in on that.
(Mr Boateng) On the contrary, we regard that as being at the very heart of our strategy to promote sustainable growth. We have set out the principles, in the Statement of Intent on Environmental Taxation, which we published in 1997; we believe, and continue to believe, in the importance of a strategy that includes tax incentives, we have established the principles and we now look to ensuring that we keep under review a range of possible measures, in order to continue to apply those principles in action. But the nature, Mr Owen Jones, of this area of policy is, as you know, that there will be many views on what the priorities for action should be, and that is why we put a particular emphasis on the continuing dialogue that we have with the non-governmental organisations, with the voluntary sector, and those concerned with the environment, and on a campaigning level, as well as with industry and business.
(Mr Boateng) I think it is a question of bringing forward, as we have always sought to do, a balanced package. It is about making clear, as I hope we have made clear, that we see scope for further initiatives as lying in three areas; first the development of existing taxes, and you will know that we are considering the future of the Landfill Tax credit scheme, and we will be consulting shortly on possible options there, including either keeping the scheme or replacing it with a spending programme. Similarly, we are committed to continuing to develop tax incentives, and you have there the example of the 100 per cent Enhanced Capital Allowances for investment in energy efficiency, which are part of the CCL package. And, secondly, reviewing the case for new taxes, which are already on the table; and the classic example of that, and one on which I recently had a discussion with WWF, for instance, is pesticides, where we are monitoring progress of the voluntary package but sending a very, very clear message to industry that if we do not see progress in that area then we will not hesitate to take the steps that we have indicated we regard as being a proper response, if voluntary action is not taken. And we keep constantly, as any prudent Government would, the option open for new taxes, in any event, and we are consulting and continue to consult with DEFRA, with the DTLR and the DTI on what those might be.
(Mr Boateng) I would say, yes, but then, of course, I would say that anyway, would I not; so let me give you a practical example of the way in which I see, in one important area, environmental impacts being taken into account. If you take transport, what you have seen there is a mix of initiatives, fiscal, regulatory, voluntary; mediating the environmental impacts of transport does require a mix of measures, and if you take road transport, the fiscal, where cleaner fuels, low-sulphur fuels, helping reduce emissions of regulated pollutants directly, and, via higher efficiency, exhausts, after treatment systems have been incentivised in the UK, through fuel duty differentials. So that is one part of it. Linking that with the regulatory, in terms of European emission standards, and the voluntary, if you look at the agreements arrived at between the Commission, the European, Japanese and Korean automobile manufacturing associations, in relation to vehicles sold in Europe and the reduction of their carbon emissions. I think that does amount to a strategy; but, within that strategy, decisions have to be made, a balance has to be struck, between what are, clearly, competing interests and competing demands.
(Mr Boateng) I hope it is more than simply a set of incremental measures. I think we can put it, I have tried to put it, within a policy framework. But the point I would make is, a decision on which type of policy instrument to use will depend on the circumstances; it is the role of the Chancellor, Treasury Ministers and officials to come to a view about that, about the relative balance and merits between taxes, on the one hand, tax reliefs, on the other, public spending and regulation. There will be different views about that and they will be views that will differ from the business and industrial sector to the environmental sector, people will have different views; some will think we have not gone far enough, others will think we have gone too far. And colleagues will have sensed, in terms of the debate in the House, for instance, around the Climate Change Levy, that is a debate that rages, and colleagues will also have noticed our absolute commitment to the Levy and our belief that it is absolutely vital, in terms of our meeting the Kyoto objectives; and I would suggest, as a country, we have taken some important steps on the way to meeting those objectives, and we are getting there.
(Mr Boateng) I think we need, first of all, to look carefully at the detail of this report, and we will be deciding how to take the work forward. It is early days, and I am reluctant to give any definitive views on the detail. But what I will say, I would argue that we are already doing a lot in the area of Resource Productivity and Sustainable Development. PIU have made an important contribution to the debate, it is a debate we want, we need to engage all the stakeholders in considering these issues. And, in terms of both the issue of indicators and the issue of targets, what I would say is, as the PIU report makes very clear, it is very difficult to identify a single resource productivity indicator, we need to continue to work in this area, in order to improve the indicators that are available to us. We have got some useful indicators in the UK Sustainable Development Strategy, as the Committee will be aware, that cover a whole range of economic, social and environmental factors, and they are going to be important, in terms of the process that I outlined in my opening statement, in relation to CSR 2002. And, as for targets, before we can have specific Resource Productivity targets, we need to have good indicators, and they are not there at the moment; but that is not to say that we do not have challenging targets. We have legally binding targets to reduce greenhouse gas emissions and to reduce waste going to landfill, and the Sustainable Development Strategy that we do have makes it clear that all those Sustainable Development indicators help move us in the right direction.
(Mr Boateng) I think it is important that we recognise the importance, the significance, of the principles that we laid down in the Statement of Intent on Environmental Tax, which I referred to earlier on. And they are, that they should be well-designed, that they should meet objectives without undesirable side-effects, keep deadweight compliance costs to a minimum, have an acceptable distributional impact, take account of any implications for international competitiveness. Now my experience of the way in which the Treasury operates, in order to design environmental taxes, is one of great care taken to involve the industry itself. If you take the example of aggregates, I have been doing a lot of work recently on that, in advance of the PBR, indeed, gave evidence to the Northern Ireland Select Committee on aggregates; and colleagues may well know that there are specific issues in relation to aggregates and Northern Ireland. And I know that, in finding a way forward, as I believe we now have, in relation to that issue, the involvement of the industry at every stage has been absolutely vital. So I do not actually accept the criticism that it is fiddly and overly complex, but I do say these are complex issues, and anyone who believes that there are simple answers that will enable us to address the environmental questions and make sure that we do not impact adversely on our competitiveness, really deludes themselves.
(Mr Boateng) The Government's view is, and I would not dream of saying that the Committee takes that view, because the Committee studies these issues in great depth, but I do have to say that some of the quite unfounded criticism that comes from business of the Climate Change Levy makes the very accusation that you have just outlined, and I think it is an accusation that has to be rebutted robustly, because a great deal of care was taken in the preparation of the Climate Change Levy. Which is why it has always been supported, for instance, by this Committee, why it is supported by the environmental movement, and why it was the product of a great deal of work done by Lord Marshall, with Treasury officials, and industry itself. So I reject very strongly the accusation that comes from that sector that this is fiddly and overcomplex; it is a complex issue, but I think the principles are clear, and I think our commitment to consultation and involvement is equally clear.
(Mr Boateng) I think, if I may say so, Mr Challen, you have gone straight to the point that I was trying to make about complexity, and there are undoubtedly instances on the margins where particular processes find themselves affected in a way, I think, that gives us all cause for concern; to a certain extent, they are the inevitable casualties, if you like, of developing a tax of this nature. What one has to do always is to seek to reduce the number of instances where you do have unintended consequences that are not able to be easily mitigated, and I would not pretend, for one moment, that there are not occasionally instances thrown up when there is an impact that affects particular industries in ways that are not necessarily helpful.
(Mr Boateng) I think what one has to do is to ensure, within the principles I have outlined, that you get that balance between fiscal, regulatory and voluntary measures. And, in relation to individuals, that balance is more heavily weighed in relation to regulatory and voluntary than it is in relation to the fiscal. Having said that, if you take the motorist, for instance, I do not think the motorist would say that he, or she, was not actually being the subject of fiscal action to tax out the "bads"; but undoubtedly there is a balance to be struck. And transport issues, I think, are a good example, and if you look at this PBR you do see a Government that is committed to encouraging the use and development of cleaner vehicles and technologies, and the emphasis is on the use and the development.
(Mr Boateng) Let me ask Mr Maxwell to give you the technical response to that first and then I will try to set it within the broader political context.
(Mr Maxwell) If we are looking just at regulatory measures then, of course, they are chiefly the responsibility of those Departments that are responsible for them, and they do have to look at the compliance costs for different people that are affected by those regulations, and carry out compliance cost assessments as a standard procedure when introducing new regulations.
(Mr Maxwell) In the case of greenhouse gas emissions, DEFRA is the Department that will be responsible for evaluating over time the success of any regulatory or voluntary programmes.
(Mr Boateng) And there is guidance given on how to undertake an environmental appraisal. The Committee will no doubt have and be aware of 'Policy Appraisal and the Environment', which DEFRA actually produces to assist them in this, and that guidance applies to all budget measures. But I do not think this is an area, and officials will have their views, which no doubt they will share with you, if you ask, where we can yet begin to say that we have all the answers; and I think we are going to have, as policy develops in this area, and this is still a relatively new area of public policy, we are going to need to develop better instruments in order to undertake environmental appraisal and evaluation. And the input of your Committee, the input of the academic community, as well as others who are actually front-line stakeholders, in order to help us to get it right, I think, is very important.
(Mr Boateng) As I have indicated, Chairman, there will be a divergence of view as to the scale of the task and the impact of - - -
(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.
(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, of unimpeachable - - -
(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 - - -
(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.
(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.
(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.
(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 - - -
(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
(Mr Boateng) I think they would be, Chairman.
(Mr Boateng) Mr Jon Owen Jones is being characteristically mischievous.
(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.
(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, as assessed.
(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 assessment.
(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.
(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.
(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.
(Mr Collins) But the principal lead is in other Departments.
(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 of estimate.
(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.
(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.
(Mr Boateng) That is what we aim to do.
(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.
(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 Boateng) That is not something to which I have addressed my mind.
(Mr Boateng) That is not something to which I have addressed my mind.
(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.
(Mr Boateng) It could be, in relation to carbon emissions, but that is not the purpose or intention of this particular measure.
(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.
(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.
(Mr Boateng) It would seem to me to make sense to include them.
(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 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.
(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.
(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 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.
(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.
(Mr Boateng) It depends what you mean by negligible; it means less than £5 million.
(Mr Boateng) To us all, Mr Best.
(Mr Boateng) I think it is indicative of the levels of yield that are indicated there. But I do think it is important to remember that we are looking there at pilot projects that are designed to inform future decisions; so if, on the basis of that work, certain decisions were to be made then the sums would be considerably more than £5 million. But, as it is, less than £5 million, it is not, within the wider scheme of things, a very, very large amount of money, no, it is not.
(Mr Maxwell) I would just add, this stage of the Green Fuels Challenge followed an earlier stage at which the Government consulted on different green fuels, rather than new green fuels, and, as a result, in the Budget, announced reductions in duty for various road fuel gases and biodiesel, which did cost significantly more than (this service ?).
Mr Best: That is helpful.
(Mr Boateng) No, Mr Francois, I cannot, it is entirely a matter for the Secretary of State.
(Mr Boateng) That, again, is a matter for the Secretary of State and for his Department, and I am not really able to assist in relation to the impact of talk.
(Mr Boateng) I am not able to assist, in terms of the impact of talk.
(Mr Boateng) Can I say, first of all, in relation to the Climate Change Levy, that it is the result of the Task Force to which I referred you earlier on; no-one would pretend that this is an easy area, it is not, but the package is broadly revenue-neutral for business, and it includes a range of exemptions, it includes a number of measures that are designed specifically to make it business-friendly. And, in terms of progress, in relation to the negotiated agreements, so far, we have 44 such agreements completed with eligible energy-intensive sectors, covering over 13,000 sites, and I think that is an indication that the compliance costs are not such as to dissuade companies, who see the benefit to them of entering into such agreements, from so doing.
(Mr Boateng) Well - Mr Maxwell.
(Mr Maxwell) I know that Customs & Excise have published a Regulatory Impact Assessment, and that is available on their website. I am afraid I do not know very much detail about it, but they will have published one as part of the standard budget process.
(Mr Boateng) I think it is early days yet. We have got a very good indication that the City of London is likely to become a world leader in emissions trading, they have already taken the lead in this area, and I would be very keen to give it time to bed in before even beginning to contemplate changes to the regime. The last thing the market wants is uncertainty in this area. Business, the City, have welcomed emissions trading, they see it as a profitable area of activity, and I am very keen, and I know colleagues in DEFRA are very keen, that we should take the lead here. It will be launched in the UK in April 2002, we are helping kick-start it, with the equivalent of £30 million after tax, which will be available from 2003-04, in order to provide an incentive for firms to join. So I am optimistic about it, and I think so is the City.
(Mr Boateng) I have not got one at this stage, because, as you say, such agreements were arrived at only a few days ago, and I do not know what the impact is. Mr Collins?
(Mr Collins) No.
(Mr Maxwell) No.
(Mr Boateng) The impact has not been dramatic; when we are able to ascertain what the impact is, I will certainly give the memorandum.
(Mr Boateng) No, not yet; not yet.
(Mr Maxwell) Just to say, I do not think those sorts of agreement highlight the need for schemes like emissions trading; obviously, responsibility for emissions trading is primarily the responsibility of DEFRA and for their Secretary of State.
(Mr Boateng) I think, if I may say so, it is a perfectly proper question, and it is a very interesting question, and when we have an answer we will certainly let you have it.
Chairman: Thank you very much indeed.
(Mr Boateng) We certainly do recognise the difficulties faced by CHP at present, since the introduction of the New Electricity Trading Arrangements, and its impact on price; and we certainly will be, and are, considering the environmental case for more favourable treatment for CHP within the CCL. I think it is important to say that CHP still has relatively favourable treatment, compared with conventional electricity generation, but undoubtedly NETA has made a difference. As to whether or not we will be seeking full exemption under state aid, we have not made any decisions yet, while we are carrying out that evaluation, and we have not made any approaches to the Commission.
(Mr Boateng) We certainly intend that, in the run-up to Budget in 2002, that assessment will need to be made, and I really do want to stress that we have by no means ruled out a Pesticides Tax, it remains an option, and no-one should be under any illusion that if the partnership approach does not work and if we are not satisfied in making that assessment that it is working then we will take the necessary measures. We know that pesticide use is associated with damage to biodiversity, we know that it leads to water contamination; we have said, and I will repeat, that the tax could be a useful tool in addressing those environmental impacts, everybody has to understand that, and we have not changed our view one iota from that. But we have made it clear that we are prepared to give the partnership approach a chance, and that voluntary package of measures has been in place now since April of this year. DETR published some work on a possible design of a tax in 1999, so that design work, as it were, has been done, and we intend to keep that under constant review, so it will not take long to get it off the shelf, the dust will not be allowed to accumulate on it.
(Mr Boateng) Mr Maxwell.
(Mr Maxwell) There is a steering group that has been set up to oversee implementation of the package and to review progress on the package; that involves a number of environmental organisations, so I am sure they will be very rigorous in their - - -
(Mr Maxwell) I do not have a list in front of me now.
(Mr Boateng) We will be happy to make the criteria known to the Committee. My own view about this is that we need to be as transparent as we possibly can; everybody has to understand where the goalposts are. And if the assessment, as I say, is not one that demonstrates that the voluntary approach has worked then we will take the necessary steps.
(Mr Boateng) I would be very surprised if that was not a factor that they took into account.
(Mr Boateng) No.
Mr Jones: Thank you.
(Mr Boateng) I think the phrase that we have used is that the Tax will be assessed in the run-up to Budget 2002. What I must not do in any way is to anticipate what the Chancellor will do in 2002, in terms of his package; but what I regard it as my duty to ensure is that the Chancellor, in the run-up to making his decisions about Budget 2002 has the product of this assessment.
(Mr Boateng) The Chancellor will have the assessment, and he will then determine what will be in his Budget.
(Mr Boateng) I am very anxious to ensure, in relation to landfill, - - -
(Mr Boateng) I shall come back to my preoccupations about landfill, because that has a very important role to play in terms of our determining what we do with waste as a whole; but officials attended the summit, PIU are now doing a study, and officials will have an input into that.
(Mr Boateng) That I am going to resist doing, generally, in terms of waste. I am quite happy to share with you some conclusions I am reaching tentatively in relation to landfill, but, in relation to the subject matter of the summit and the study, I do not think it will be helpful for me to come to a view about that.
(Mr Boateng) I did not attend; officials did.
(Mr Boateng) Yes; if you would, Mr Collins.
(Mr Collins) The principle objective of the summit, I think, was for DEFRA Ministers, in particular, to hear views from outside stakeholders, so, I think, quite deliberately, officials from other Government Departments sat and listened. The day was designed very much to provide local authorities, NGOs, those in the environmental management sector, to offer views about the nature of the waste problem and possible solutions, so that DEFRA Ministers, in particular, but Government generally, could take away some of these ideas and think about them and develop them, as we consider how we are going to take waste policy forward. So I think we used this very consciously and very deliberately as a listening event rather than as an event to put forward particular views from particular bits of Government.
(Mr Boateng) We are always looking for opportunities to make a contribution to the development of environmental policy through the machinery available to us; so I am looking forward enormously to the outcome of the PIU study. You can be absolutely sure, and I am sorry to go back, well, I am not sorry, because I do actually think it is very important, if you look at the issue of waste and landfill, I think you will agree that the challenging targets that we have set, in Waste Strategy 2000, to increase recycling, are assisted by the approach we have taken to Landfill Tax, which is to increase the rate on active waste by £1 a tonne each year to 2004. And all the evidence that we have, in relation to the impact of fiscal policy on landfill, is that it does cause people to change their behaviour, and that is why we are committed to reviewing the Landfill Tax after 2004, that was why we set out a long-term strategy of rate increases, and the environmental effectiveness of the tax is reinforced thereby, and waste producers and managers get a clear message of the importance of their planning ahead.
(Mr Boateng) They are likely to be higher; do you agree with them?
(Mr Boateng) My view is that it is working, and that all the evidence is that increasing it, in the way that we have, has a positive effect on producers and managers planning in the way that they need to in order to look at alternatives. My view is that it is one of a range of instruments, economic and regulatory, that help us meet these challenging recycling targets, and the review of the rate after 2004 will cause us to see whether or not we need to increase it yet again, and increase it in the light of the evaluation we make at the time of its success.
(Mr Boateng) No, because we keep taxes under constant review, obviously, but we have committed ourselves specifically to reviewing the rate after 2004, and DEFRA have taken forward their consultation on a £140 million Waste Challenge fund, and so that is all part of an approach, as I say, that uses both economic and regulatory instruments.
(Mr Boateng) No; that would not be correct, Mr Barker. What we do is constantly to keep the level of taxation under review. We are committed, we are committed to reviewing the rate in the run-up to 2004.
(Mr Boateng) That is a very interesting idea, and the PIU will be incorporating that in their study, and that too will inform our decisions.
(Mr Boateng) I have got lots of thoughts on waste, but what I have to do is to contain my enthusiasms in a way that does not cause me to trespass on the Chancellor's prerogatives and on programmes of work.
Chairman: You are not alone in that, Minister.
(Mr Boateng) If I may say so, I think that is a perfectly legitimate and widely-held view; that is certainly the message that we receive, and it is a very powerful message. What I would say, in response to it, is that it is a message, of course, that we have heard, in one sense, because we have pre-announced a five-year programme of increasing, we have sought to balance the need for a strong economic signal to reduce reliance on landfill, with the need for those affected to develop alternatives, and it is important that people are given an opportunity to develop those alternatives.
(Mr Boateng) We do, and we are consulting on how best to use it. The message I get from you, Mrs Doughty, and from those who put this case, in the way that you have, is that they would like us to move faster, and I hear that. But I do think we will have to make an evaluation of the pace of the development of the alternatives.
(Mr Boateng) We need to make sure, which is one of the reasons why we are looking at the Landfill Tax credit scheme that that work is done and that we do develop effective alternatives, at a pace that will enable us to keep the pressure on, in relation to landfill.
(Mr Boateng) I do think it is important, whilst accepting much of what you have said, to realise the progress that we have made in this area over the years and the lessons that we have learned, not least through the activities of Committees such as this. My first experience in this House was on the Environment Select Committee when it was chaired by Sir Hugh Rossi, whom a number of colleagues will recall. And, when you look at the history of activity in this area, it has invariably been as a result of the work done by Select Committees that steps have been taken to help us down the road to where we are now, and I think that continuing work and pressure will be needed; that is my assessment. I think this is something that we need to do, in partnership, building a consensus, and there is an increasing consensus in this area.
(Mr Boateng) I am sure you will.
(Mr Boateng) It is very much being taken into account. That is what I find attractive about it, it is empowering and enabling of local communities, and we must make absolutely sure that whilst it is important to direct more resources towards sustainable waste management, and the discussion we have just had indicates that very clearly, we do not want to lose that, and I am very clear about that, in my own mind. And that is why we need to consult with interested parties to ensure that worthwhile projects continue to attract funding during the transition to any replacement programme, and the replacement programme is such as to contain and to replicate those qualities that you have rightly outlined.
(Mr Boateng) It is not broken, but it is not delivering as I think the Committee and ourselves would want it to deliver on the issue of sustainable waste management, it just is not; it is doing some good, worthy work, in exactly the way that you have described, but they are areas where we need to find a way of doing better. I had, I think, a very useful meeting with those who administer the scheme, just a few weeks ago, where we shared some of these concerns.
(Mr Boateng) That is a very interesting point. I am not aware of any work having been done on that?
(Mr Maxwell) The escalator does not apply to the inert waste.
(Mr Boateng) No. I think it is a very interesting point, and some work does need to be done on this.
(Mr Boateng) We will do some work on it and I will inform the Committee of the outcome.
Mr Barker: Thank you.
Chairman: Thank you very much indeed.
(Mr Boateng) No, we cannot do a UDI, because the whole basis of the tax, the successful operation of the tax, is dependent on others being prepared to operate it, and, therefore, it is actually important to arrive at an international consensus on it; the work stream launched at ECOFIN on 22 September, which we supported, will help on that. I do not think the Commission have yet given us any timetable. We are obviously enthusiastic about the study. There are also studies being conducted by the OECD and the United Nations; they, too, are important, if we are to address successfully some of the technical complexities that are thrown up by the tax. So we have agreed the need for further work. Also, within the Treasury, we seek to keep in touch with the academic, and indeed wider, NGO, debate in this country and overseas, and if the studies generate the practical suggestion as to how to overcome the problems associated with implementing the tax, well, that is something that we will obviously need to consider very seriously.
(Mr Boateng) We are not opposed to the Tobin tax in principle, we are not convinced that the tax will be particularly effective in stabilising international capital flows, but we are attracted by the revenue-raising possibilities presented by the tax and are committed to exploring the full range of options for increasing the amount of financing available for development purposes. And, indeed, the Chancellor, most recently, in his speech in New York, called for the international community and national governments to substantially increase their Development Assistance budgets, and called for a new International Development trust fund, and now, arguably, that trust fund, were the technical issues in relation to Tobin to be successfully overcome, could be the recipients of a Tobin tax. But the Chancellor's commitment to this is not dependent on us overcoming the technical obstacles to an effective tax of this sort, he wants to see a fund set up in any event.
(Mr Boateng) It is certainly realistic, it is certainly attainable, and, given our present levels of spending in this area, we are entitled to have a degree of optimism that it will be reached. The Chancellor has made it absolutely clear that we have got to find ways of increasing financing for poorer countries; it is important to see what we have done, which is a marked improvement on what went before, I think everybody would agree, in the context of our commitment to debt relief and to our overall policy, in relation to International Development. So no room for complacency, but some real steps forward made.
(Mr Boateng) I think it is precisely the sort of assessment that one would expect from the OECD. I think it is very helpful. I think it is a goad to us to do better, and I think we should also be very clear that we have a number of important partners in the international community, amongst the developed world, who would do well to emulate our own example since 1997 in this area.
(Mr Boateng) We will not be publishing the Sustainable Development reports, we are publishing the guidance, but the reports themselves are internal documents, they will be closely associated with Departments' bids for resources, and we do not think it would be right, quite frankly, to publish them. However, we have published the guidance, and the Committee was very keen that we should do that.
(Mr Boateng) We have also developed a procedure which will involve my meeting with Green Ministers, with Secretaries of State, to indicate to them very clearly the importance of their ensuring that their bids reflect the guidelines; also making clear to them our commitment to ensure that integrating Sustainable Development into the Spending Review is a commitment that we take very seriously. And when they meet with the Chief Secretary, in the course of the PSX meetings, they can expect the Sustainable Development implications of their bids to be part of the subject matter of those meetings. That is a very clear steer to departmental colleagues that we mean business.
(Mr Boateng) My experience as a spending Minister is, and you will know this, Chairman, only too well, one wants one's bids to be successful, and one couches one's bids in a term that is likely to make them successful. And if the clear steer from the Chief Secretary is that you had better take Sustainable Development seriously, and the Financial Secretary is going to be meeting you in advance in order to make sure that you understand the guidelines and their purport, then you are likely to take that pretty seriously.
Sue Doughty: Thank you very much indeed.
(Mr Boateng) We have gone a bit further than that since that information was provided to the Committee. Shortly after I became Green Minister for the Treasury, I spoke at the Sustainable Development Forum for the Chancellor's Department, made it clear to them that Ministers would be expecting the Department to ensure that it took Sustainable Development seriously, and I think that message is getting through. And certainly I was quite pleased to see, in terms of the approach that we have taken, for instance, to water, at (GOGS ?), that we are on target to have reduced our water use, I think, by more than a half. I have got the figures here. We have got currently an annual water bill of £40,000, the expected bill after participation in the Watermark Project is £14,000; so that is a significant saving of £26,000. In terms of the use of the Government estate and the Sustainable Development Framework there, in the Greening Government outlines, we have achieved an 'excellence' rating; and in terms of the refurbishment of the west end of (GOGs ?), again, there is a requirement on our private sector partners there to use their best endeavours to maintain and to obtain maximum credits from the Building Research Establishment environmental assessment methodology. So I think you are absolutely right, if I may say so, to point out the need for us to tackle the issue seriously and to be leading by example, and I hope, when we are judged on these matters, as we surely will be, in due course, we are found to be doing that.
(Mr Boateng) Because it would compromise, we believe, the integrity of the process in which Departments must feel able to put their bids in, in a way that ensures that they are judged on their outcomes rather than their inputs.
(Mr Boateng) I would be very, very reluctant to give any commitment to alter the current arrangements in relation to the Spending Review, it is something which, as you know, is a very, very closely guarded process, both by the Treasury and by the spending Departments.
Chairman: Minister, thank you very much indeed. That was a very rewarding session.