Examination of Witnesses (Questions 700-719)
RT HON PAUL BOATENG AND MR CLIVE MAXWELL
WEDNESDAY 6 MARCH 2002
700. Why was it that we had the fuel protests in September 2000?
(Mr Boateng) The fuel protests in September 2000 arose from a perception on the part of a section of industry that we had got that balance wrong. What we sought to do, and what we have always sought to do, is to get the balance right. The response from the industry subsequently, and also the impact of the price of oil, has in fact shown that that balance currently is about right.
Chairman
701. So it was not a lot to do with you actually, it was the drop in the price of fuel?
(Mr Boateng) It is a combination of a variety of factors and undoubtedly the price of oil is one of them.
Mr Donohoe
702. If we have average motoring costs, which you are suggesting we have, what is the rationale for the DTLR assuming that they will fall in real terms by 20 per cent over the next ten years?
(Mr Boateng) That is an assumption that is made taking into account the level of the price of oil and also taking into account the concerns that we have to have about competitiveness and productivity in relation to the industry and industry as a whole, and the impact of a variety of measures we have taken in relation to the taxation of vehicles which are designed to achieve environmental objectives, which are designed to ensure that we seek wherever possible to tax the bad and promote the good in terms of objectives. So you want to have a tax system which encourages people to use more fuel-efficient cars; you want to have a tax system which incentivises green fuel, and we make certain assumptions on the basis of the impact of those policies on the price of fuel.
Mr Donohoe: Do you not think then if you, as you are saying, want to be on the side of the motorist, it would be better to hypothecate the tax raised—
Chairman: I am sorry, Minister, I must adjourn the Committee automatically when a division is called.
The Committee suspended from 6.11 pm to 6.20 pm for a division in the House
Chairman: Minister, thank you very much indeed. Mr Donohoe?
Mr Donohoe
703. If you are trying to bring the public on board, Minister, would it not be better to have hypothecation as far as taxes on car owners are concerned? The Treasury seem to move away from that all the time.
(Mr Boateng) I am not sure that is fair, Mr Donohoe, because my understanding is that an announcement was made in 1999 that any future real terms increases in fuel duties would go into a ring-fenced fund to be spent on modernising the road network and improving public transport. That is the understanding that was shared at that stage. Indeed, the Government has announced that revenue from local congestion charges and work-place parking will in fact be ploughed back into local transport schemes in order to increase desirable behavioural outcomes and encourage local authorities to make their contribution to the sort of transport objectives which we would all share as being desirable ones. So I do not think it is a blanket opposition to hypothecation. Indeed, if you look at the way environmental taxation has developed generally across the piece, for instance in relation to the climate change levy, it is revenue-neutral and the money is ploughed back in ways which are designed to promote the achievement of the Kyoto Protocol targets.
704. The history is not all that good, is it, with the Treasury?
(Mr Boateng) That is something that you would say, I would not—
Chairman
705. But you could not possibly comment!
(Mr Boateng) I can comment but I would not necessarily share that view, but then we come at this from different perspectives obviously, I as a Treasury Minister, you as an inquisitor on this Committee.
Mr Donohoe
706. Correct me if I am wrong, but when road tax was introduced, I think in 1923, it was hypothecated, it was all to be put into roads. It was not a great tax. What we are now finding is that that has been lost somewhere.
(Mr Boateng) I think it is fair to say that post-1920s there was a move away from hypothecation. What I can share with you in terms of our approach to environmental and transport taxation today, on the basis of what I share with you in terms of the 1999 announcement and in terms of the way we have approached environmental taxation generally, is that the line as it were against hypothecation in the way you have described is not as hard as it was before. I think that is fair.
Chairman: Minister, I think we are going to have to ask you for briefer answers. We love you dearly but I do not think you want to stay with us for the rest of the evening.
Mr O'Brien
707. On the question of fuel prices, does the European Commission have any influence on our fuel prices?
(Mr Boateng) As a matter of principle it is for the Chancellor to set the levels of fuel taxation in accordance with the judgment he makes of the economic interest of the United Kingdom. So by definition the European Union and the Commission have only a limited role in that respect, although obviously an interest traditionally in minima as opposed to maxima.
708. Do the neighbouring communities then have an influence? The activities and behaviour and what is happening across the Channel? Does that have an influence on our fuel prices?
(Mr Boateng) Our concern has to be that balance that the Chancellor is required to make in terms of his judgment of the levels of taxation. Those judgments go to revenue, those judgments also go in this field to those wider objectives around the environment, around social inclusion, and around congestion—
Chairman: Yes, I think we have got the general idea; you have told us several times.
Mr O'Brien
709. We have looked at the European Commission Transport White Paper. The suggestion there is for fuel taxes to be harmonised across the Union.
(Mr Boateng) That is a suggestion that we would refute.
710. You would refute that?
(Mr Boateng) Yes.
711. Apart from the question of whether this is a legitimate role, is this actually a good idea in its own merits, do you think?
(Mr Boateng) Our position is very clear, Mr O'Brien. We believe—and I hesitate to incur Mrs Dunwoody's wrath—
Chairman
712. You should, you really should!
(Mr Boateng) I know, based on experience, Mrs Dunwoody! I would reiterate the points that I have made before about the Chancellor's judgement and his need to make his decisions in the light of the national interest as he sees it.
Mrs Ellman
713. The money required to upgrade the London Underground is not included in the 10 Year Plan, is it?
(Mr Boateng) The money required to upgrade—?
714. Is the money which is required to upgrade the London Underground, the PPP, outside the 10 Year Plan?
(Mr Boateng) I am afraid I am not able to assist you on matters that properly belong in the province of the Secretary of State and, indeed, in relation to spending priorities and the Comprehensive Spending Review, of the Chief Secretary. My concern and my ability to assist relate specifically to issues of taxation. So I am quite happy to get the Chief Secretary to drop you a memo if there are particular issues that fall to him on the Comprehensive Spending Review, but I am unable to assist.
Chairman
715. Mr Maxwell is looking very uncomfortable.
(Mr Maxwell) As the Financial Secretary explained, I am the Head of the Environment and Transport Taxes Team in the Treasury.
Chairman: I see.
Mr Stevenson: I wonder if I could ask this: is the Minister prepared to assist us in getting his colleague to come to the Committee?
Chairman
716. Would you like to do that?
(Mr Boateng) Mrs Dunwoody, I am sure you and your Clerk will address any appropriate invitation to my colleagues in the Department.
Chairman: We as a Committee are so fond of the Treasury that we send you almost weekly invitations, and you all say no. I cannot think why, since you interfere so much in transport!
Mrs Ellman
717. Issues in relation to the Treasury are material to our consideration of the PPP, so would you give us a commitment that you will deliver that message to the appropriate person?
(Mr Boateng) I have no doubt that the Chief Secretary will pay very careful regard to all matters that emanate from this Committee.
718. Including that one?
(Mr Boateng) To all matters, Mrs Ellman.
719. The 10 Year Plan assumes that 20 major local charging schemes will be implemented, and many authorities have said that they cannot do this until they have an approved public transport system. Would you agree that the local authorities should borrow money on the strength of future revenue schemes?
(Mr Boateng) It is undoubtedly the case that it will be for local authorities to make the decision, and the power that they were given was an enabling rather than a prescriptive one, as to whether or not they will wish to go down the route of congestion charges. The advantages for them are clear, because it makes available to them additional resources for their own transport purposes, but they would need to make the judgement.
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