Examination of Witnesses(Questions 20-39)
WEDNESDAY 11 DECEMBER 2002
JOHN HEALEY
MP, MR PAUL
O'SULLIVAN AND
MR MICHAEL
COLLINS
20. So there is a possibility that you may increase
the escalator sooner rather than later to get there?
(John Healey) What we have announced and confirmed
is that in 2005-06 the landfill tax will rise by £3 a tonne
and from 2006-07 onwards it will rise by at least £3 a tonne
but the timetabling and those sort of judgments are not ones that
we can make precisely at this point.
21. Did you give any consideration to an incinerator
tax again where we are looking at sustainable waste management
and moving towards increases in recycling. Was any consideration
given to this?
(John Healey) I am sure you will remember from the
Budget this year there was confirmation that we are looking at
incineration tax. That was confirmed by the Chancellor when he
introduced the Budget in April. We are continuing that work: we
are looking at the possible role that incineration tax or other
economic instruments relating to incineration might play. The
important next step in this process is to commission as thorough
an environmental health audit as we can of the impacts of the
range of waste management methods and techniques. In my view,
one of the weaknesses of the way that waste has been approached
in the past and one of the weaknesses of the debate about this
has been that focus has been on specific methods of waste management
disposal, and I do not exempt governments from that general observation.
The European Union Landfill Directive does exactly that—it
is simply about landfill tax—when what we need to do and
what the Pre Budget Report lays the grounds for us to be able
to do is take a judgment about the proper mix and balance that
is appropriate for Britain in terms of how we minimise the amount
of waste we produce, how we dispose of it most effectively and
environmentally sustainably, and also how we increase the amount
of re-use and recycling that we can achieve. Incineration plays
a part in that at the moment; I have no doubt it has a part to
play in the future; but whether or not an incineration tax or
other economic factors relating to incineration have a part to
play is a judgment that we will be in a better position to make
once we have solidly based and better based the information we
have about the environmental and the health impacts across the
range of different technologies and waste disposal methods.
22. Can I ask you about the Waste Not Want Not
report at this stage because it was mentioned in the Pre Budget
Report, and very little information was available about what was
happening with that document and on the website there was an executive
summary but not the report, and since then I understand it has
been issued to selected people in draft form but not available
by and large in printed form. This seems to be a document partly
underpinning some of the other things that are happening in terms
of not only looking at fiscal instruments which are discussed
in the documents described but also the areas under consideration
which go hand in hand so that you look at the whole problem together
and see how these fiscal instruments in practical terms are going
to be used to deliver sustainable waste management.
(John Healey) You are right, it is a useful document
published alongside the Pre Budget Report; it was a report to
government, not of government; and my understanding was that it
was published on the day alongside the Pre Budget Report. I am
happy to make sure you get a copy if you have not yet seen one,
and it was useful basis for some of the further work we need to
do and the Pre Budget Report announcements in many ways represented
the first and early government response to some of the issues
and analyses that they set out.
23. On that report, and I would appreciate a
copy, certainly my department and others spent some time trying
to get hold of a copy of that, and printed versions have been
available to certain people in draft form but not necessary in
final form, with only the executive summary on the website, and
when I have been to the Vote Office to request it, it has not
been available.
(John Healey) I am puzzled by that because it does
not fit with my understanding of what has happened. I am not sure
what your department is but I can certainly make sure you get
a copy.
24. This is the Vote Office. Having gone there
it certainly has not arrived on my desk, so I would appreciate
one. Could we move on to the landfill tax credit scheme because
this is an area which I think has been very popular? It is seen
also as funding for environmental schemes; it has been very popular
because it is identified as private fund raising; it can be used
to leverage other funds in a very successful way; and we have
seen quite a wide variety of initiatives resulting from this.
The industry is now saying that this scheme is effectively being
chopped off at the knees, and there was a question in the House
last week asking about the landfill tax credit scheme. What is
happening to it?
(John Healey) Once again, if you study the detail
of the Pre Budget Report it is pretty clear. You will be more
familiar than I am as members of the Committee about the criticisms
made of the landfill tax credit scheme and of the report by the
PAC and the Environmental Select Committees. From April next year,
roughly two thirds of the revenue stream from the landfill tax
credits will be transferred to public spending programmes to support
better waste management, better levels of recycling. That will
mean about £100-110 million per year. Roughly one third of
it, about £47 million, will be available for a reformed but
reduced landfill tax credit scheme that will be focused on local
community environmental projects, and it is a balance between
recognising that some of the credit systems of the scheme demonstrated
that this was not producing a strategic or a significant impact
on waste management and recycling challenges we face, and—quite
rightly as you point out—the value that many local groups
and local communities place on having the landfill tax credits
and payments from this scheme for very local projects. I have
to say, as others have said, having a scheme in this area when
we are faced with the sort of challenges that other members of
your Committee have already pointed out, dealing with waste that
is supporting the renovation of churches or the refurbishment
of village halls, in the context of having to make from time to
time some quite difficult decisions about priorities is simply
now not sustainable, so in terms of the landfill tax credit scheme
around about a third will remain in a reformed scheme that we
are discussing within trust, and about two thirds will be available
from April to support more strategic, if you like, developments
trying to deal with the waste and recycling problems we face.
25. I am rather concerned. I appreciate that
complaints were made and concerns about the variety of what that
scheme was really there to achieve and it was a scheme that was
never going to entirely satisfy everybody, but on the other hand
there are schemes which are running now which will suddenly find
themselves without funds because of the suddenness with which
the announcement was made, where funds were almost allocated and
then there was expectation that the scheme would run next year
and they are not. These are not the church roof schemes but more
the remediation, the substantial environment improvement schemes
where suddenly the money seems to be disappearing. My concern
about this is that if the escalator is in place and, as you have
said, the revenue that you are getting from increased income is
not to swell the government's coffers, and I appreciate the points
about local government and the other recycling schemes there too
and I support those, then some very good schemes that have been
happening to start building in that area may not continue because
of the way that scheme was being treated.
(John Healey) I am grateful to you in a sense for
raising that point because the one feature on which we have made
a commitment which I did not mention is that for those projects
which have already had tax credits allocated on to the scheme
and for which the credits are already available and will continue,
our assessment of the balances in the scheme will mean that we
can secure that. In terms of new projects one area of the work
that the group that I will lead will do over the next few months
is to ensure that good projects, new projects, that may previously
have looked to the old landfill tax credit scheme will have an
opportunity to secure funding under the other method that we will
use for disbursing the funds, the £100-110 million.
26. Will this happen in sufficient time? We
are talking about jobs here as well, organisations which may have
20 or 30 people, where the funding is going to dry up unless this
is taken as a matter of urgency to understand what the succession
schemes are going to be and to enable them to plan for the future
through this change.
(John Healey) I am very conscious of the uncertainty
that there is in many of these environmental groups. As I say,
those projects that have already secured the funding and had that
committed will continue and I hope that will give some reassurance
to those involved, but I am also conscious of the importance and
the urgency of the work we need to do to make sure we can put
in place clear arrangements for both parts of the system from
April so that we minimise the period of disruption and certainty
and allow the best continuity that we can where we have projects
that we do want to see developed.
27. Could I raise one more concern as well about
this which is the anomaly with the church roofs and the village
halls which a lot of groups have profited very nicely from. It
has been very nice to see and I appreciate they may have been
anomalous within the scheme. However, it has been a very welcome
source of funding from groups who do not want to take lottery
money because their religious or personal beliefs will not allow
them to take the profits from the lottery. Will there be any other
schemes or opportunities to look at schemes which will allow such
organisations to benefit without going back to lottery-sourced
money?
(John Healey) The short answer is no, that has not
been part of the work we have been doing in trying to develop
a much more soundly and sensibly based waste policy. In my role
in considering this that is not a matter that I regard as my direct
responsibility, though I recognise there are going to be consequences
for local organisations and groups in the future and I do recognise
it is probably going to make me one of the most unpopular members
of the government as a result. Nevertheless, the decisions that
we have taken on this I think are right because of the challenges
that this Committee above all recognises in the waste and recycling
field.
David Wright
28. I am intrigued by this. Why did you not
just change the criteria of the old scheme? If you were not happy
that the money was being spent on church roofs and buildings,
why did you not change the criteria at that point instead of re-inventing
wheel on the scheme? Secondly, a number of organisations are counting
income from the landfill tax credit scheme as a private sector
leverage contribution, and I have talked to organisations that
are getting a 5/6/7:1 leverage ratio on the basis of this money.
How will they tie into the new scheme and will it be incredibly
bureaucratic like most of the other schemes that people have to
apply for from government?
(John Healey) Firstly, our analysis—not just
ours but the analysis—of the way that the scheme has worked
suggested that in order to achieve the objectives we need to in
this area the degree of redesign and reform of the scheme was
such that it would have been quite difficult to do, and a more
effective way would be to redeploy round about two thirds of the
funding, as I have indicated, to a different method of delivery
and disbursement—and that is what we propose to do. In terms
of the match and potential of the money from the credit scheme,
I am highly conscious of that. I have in my own constituency a
number of organisations, including Groundwork Dearne Valley, that
do a remarkable job in terms of environmental work and I know
from my close association with them how valuable this is as a
source of funding. They will be able to draw, I hope, from the
successor scheme. I hope on the other side that the design of
the delivery arrangements that were made for this essentially
public spending programme do avoid some of the common features
we see in some funding programmes of excessive bureaucracy which
I know are a source of frustration, particular for smaller local
groups that do not have the experience or the capacity to jump
through some of the administrative hoops that are required.
Mr Francois
29. Can I press you further on precisely that
because one of the advantages of the current scheme is that a
lot of groups would report that it was relatively straightforward,
quick and unbureaucratic and that is why they liked it, because
they did not have to spend a tremendous amount of time applying
for the money and they usually got a decision one way or the other
fairly promptly which allowed them to plan. You made a slightly
disparaging comment about some of this money being used for refurbishing
village halls. Well, those village halls also used to get lottery
money and now invariably do not, and it is extremely complicated
even to get what they do because the community fund criteria were
changed a couple of years ago. So they do not get much money,
if any at all, from the community fund and they are increasingly
reliant on this as a source of income and now this is drying up
as well, so I think this is quite a serious matter. You had a
system which did work in at least some respects very well: it
was not broken: and now you have chosen to fix it.
(John Healey) The PAC and the Environment Committee
did not take the view that this was a scheme that was not broken.
On the other side you say quite rightly that many local groups
liked this scheme; you say they did not know how they were going
to spend it before they got it, and that is precisely the problem.
We are not able, as the PAC in particular will confirm, to tell
exactly what sort of impact the spending for this scheme has had;
we are unable to tell whether it is value for money or has been
effective. In the context where really significant sums of funding
are going through this scheme, my argument to you is that that
is not sustainable, and whilst we did not want to close down the
scheme, as some urged on us, entirely because of the value that
there is to many local groups and some of the good local environmental
projects that it can sustain, we do need, given the challenges
we face in dealing with waste in Britain, to do this in a different
way that we believe is going to be more effective and that is
the basis of the decisions we took.
30. Those village halls that have been using
this money did know how they were going to use it—to refurbish
or in some cases rebuild their village halls. They cannot get
the money from the community fund any more, and now they are not
going to get the money from the landfill tax credit scheme, so
where are they going to get the money from?
(John Healey) I think I have already explained to
you, Mr Francois, the position of potential sources of funding
for village halls has not been a feature of the analysis that
we have carried out and the decisions we have taken on this. I
am sorry to be so blunt with you but the priorities in this policy
area have been to deal much more effectively than we have been
able to do in Britain in the past with the increasing volumes
of waste we produce, the low levels of recycling generally that
we undertake, and secure in this area a better range of programmes
and policies that would deliver those environmental objectives
which are longer term and much more far-reaching than the issues
that you raise.
31. One more quick go on this: there was a national
lobby of my village halls groups that I went to that came up to
Parliament several weeks ago attended by the government PPS; they
then had a meeting with the government minister to go through
a number of these issues as I understand it, and they were told
that the government would look sympathetically on this issue and
would do what it could—and then they get this announcement.
So what is the government doing? All these people came up to Parliament,
they were met, people said, "We realise this is a problem.
We are going to do something about it".
(John Healey) You are an MP, you know how many people
come to Parliament and the range of issues that are brought to
MPs and taken to government ministers. You ask what the government
is doing about it—it is doing what we have set out in the
Pre Budget Report and what we will develop further over the next
few months in the realms of the Budget. I recognise this is not
going to be entirely popular everywhere and that some local organisations
and some members of Parliament might have wished us to take different
decisions. I have tried to explain clearly the decisions we have
taken and the basis for those decisions and the policy objectives
we are pursuing on this, and, Mr Horam, you and members of your
Committee will have to make your judgments on those.
Chairman
32. Coming back to the objectives of the landfill
tax credit scheme, you have just made the point that you felt
you could not control it and maybe it was going slightly askew
on church halls and so forth, and one of your predecessors did
attempt to do something about that in the letter Mr Timms sent
out on 3 May 2001 where he said, "We are setting you the
target of 65% of credits to go to sustainable waste management
projects". My information is that the industry responded
quite rapidly to that and did fulfil—indeed, over-fulfilled—their
target in that respect, so although certainly as in many schemes
of this kind some things went wrong a lot was going right, so
are you not killing off the good for the sake of the best?
(John Healey) I do not believe we are killing off
the good for the sake of the best which is why we have tried to
strike a balance between what are competing arguments in a competing
case. You are right that the level of spend on sustainable waste
has gone up and I welcome that. In the end the judgment we had
to take was that a tax credit scheme could not secure sufficient
value for money and in particular could not allow us the strategic
direction that we require in this field, and that most commentators,
including this Committee, have observed has been lacking from
this field in the past. We could not achieve that strategic direction
through the operation even of a fully reformed landfill tax credit
scheme.
33. But is not 65% good enough when you also
consider the point Mr Wright made, that there is a lot of gearing
involved in this in the sense that because the existing amount,
£137 million according to your document, attracted between
£4 and £10 for every pound spent of other public money
from Europe and other sources, there was a lot of money which
suddenly you have cut out for one or two things that have gone
wrong? This is a big, big change for one or two things which may
have gone wrong.
(John Healey) It is a big change but describing the
weaknesses and flaws not just of the operation but the design
in terms of what we want to achieve as one or two things that
have gone wrong I suggest may be underplaying—
34. But 65% was going right.
(John Healey) 65% as far as we could tell was going
to projects that fitted a category of waste management. The impact
of those we were unable to tell: the co-ordination of those was
impossible under this scheme, so coming back to the two fundamental
weaknesses that were still there in the nature of this scheme:
(1) a convincing belief that we could get value for money by doing
it simply through the landfill tax credit scheme and (2) because
the nature of this scheme, and this Committee knows better than
me how it works in practice, does not allow the strategic direction
that we need to see in the waste management field if we are going
to tackle the job properly.
35. I suggest, Minister, this is the dead hand
of the Treasury trying to claim the money back. This was an exciting
scheme which had been going for 4 or 5 years, was doing a lot
of good, maybe some bad as well, and suddenly the Treasury looked
at it and said, "We need a bit of money to be seen to be
doing something in another area", and grabbed this money.
It is the dead hand of the Treasury and nothing will happen. You
have killed of an exciting private scheme because you do not know
what is going on.
(John Healey) I reject the suggestion that this is
the dead hand of the Treasury interfering and killing off a scheme.
36. I think that is accurate as a matter of
fact—you are killing off the scheme.
(John Healey) We are not, and I have to say I do not
accept that this is somehow the operation of the dead hand of
the Treasury. What I do accept is that we have now in the short
term a significant challenge to design and set up the way that
we will redeploy these resources because this is not money that
is going into the central government coffers of the Treasury,
and we have a significant challenge now in producing a programme
that allows us to do the things we could not effectively do through
the landfill tax credit scheme, and that is work that we will
now do across government with ministers from the DTI, ministers
from DEFRA, ministers from the ODPM's office as well as myself
reporting directly both to Margaret Beckett, the Secretary of
State for DEFRA, and the Chief Secretary for the Treasury Paul
Boateng, because this relates to taxation and to spending issues.
37. Did you consult with Mr Meacher when this
decision was made?
(John Healey) I had discussions with Mr Meacher and
with Lord Whitty in the weeks immediately before the Pre Budget
Report when we were considering these issues alongside the range
of other things that we confirmed in the Pre Budget Report.
38. He is quoted in the public print as being
stunned by this decision, extremely puzzled. That does not sound
like a minister who has been thoroughly consulted about the radical
change in a quite important scheme?
(John Healey) Well, if Mr Meacher is stunned or puzzled
I am not aware of it and he has not made those points to me. This
is government policy and was set out in the Pre Budget Report.
Mr Thomas
39. Minister, in your opening remarks to this
Committee you commended to us chapter 7 in the Pre Budget Report
and in particular box 7.1, and I would like to start with that
because in the text under 7.11 you state that UK carbon dioxide
emissions increased in 2000 and in 2001 and were likely to increase
in 2002, yet your graph in box 7.1 shows the CO2 emissions going
down. Is that graph not misleading?
(John Healey) I was encouraging you to look at table
7.1. Can you tell me what the page is?
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