Select Committee on Environmental Audit Minutes of Evidence


Examination of Witnesses (Questions 60-72)

WEDNESDAY 30 APRIL 2003

JOHN HEALEY, MP AND MR PAUL O'SULLIVAN

Chairman

  60. We are slightly puzzled by that point about the process of policy development in Government, because you have just completed consultation on energy efficiency—the closing date was October 2002—and five or six months after that you have announced another one into the same area, energy efficiency. Can you explain to the Committee what these two things are?
  (John Healey) I think this Committee followed that first one quite closely and will know that that was a consultation on gathering the views on whether there was a belief and a consensus of view that there is a role for using economic instruments, which may range from taxation adjustments to charges to other forms of economic instruments, in order to promote energy efficiency. That was a very valuable and wide-ranging exercise. From that and from a very wide range of ideas that were put forward, we are in the process now of distilling some specific options on which we want people to give us views on their feasibility and desirability, which we are proposing to publish, albeit much more focused, shortly.

David Wright

  61. Minister, you will be aware that we have carried out an inquiry into waste in the UK and I wanted to ask you a couple of questions in relation to that. Firstly a specific one on the Waste Performance Management Fund, on which the Chancellor made some announcements in the Budget 2003 about the Waste Management Performance Fund for England. He suggested it would be, to quote, "non ring-fenced". Is there some concern, if that is the case, that local authorities will divert resources from the Fund to non-waste related projects?
  (John Healey) Perhaps I might answer that at two levels and in two ways. As a performance fund the concept of that means that local authorities would draw funds from it once they have achieved a degree of pre-agreed performance on waste management and recycling, or whatever it set. So, in other words, from this Committee's point of view and from my point of view as a Minister interested in and with some responsibilities for environment policy, it would be a fund that incentivised and then rewarded performance in terms of waste management, recycling. In keeping with using that approach, which we are doing in one or two other areas of government already, any funds that the authority that had achieved the performance agreed and required received could be used in whatever way they wanted. They may choose to reinvest them in waste but it would, in the end, be their local authority choice about what they did with those funds. In a sense that leads me on to the second and higher level, which is probably worth explaining, which is that the concept of a performance fund in this policy field represents an example of a much wider approach that government centrally is trying to take towards its relations with local government. Some have called it the new "localism" agenda but, essentially, the Office of the Deputy Prime Minister describes it very much as "freedoms and flexibilities". Essentially, it is wanting to reduce the degree of ring-fenced funding and tight policy direction that comes from the centre down through local authorities.

  62. That is positive and I welcome that. How can you ensure that we are incentivising smaller local authorities through schemes such as this? The concern I have is that if you are a large metropolitan authority or you are a large player generally you will have the resources to draw on to develop projects and schemes. What about support for the smaller local authorities?
  (John Healey) I think, Mr Wright, if I may say so, you raise quite an important point. Much of our work at the moment is at quite an early stage and that would need to be, I think, one of the considerations that we take into account as a government as we devise the more precise objectives in the way that this scheme will operate.

  63. Secondly in relation to waste, last time you appeared before us, we spoke about the Landfill Tax arrangements. The initial rate of Landfill Tax was based on a broad evaluation of environmental costs. If the tax is to rise to at least £35 a tonne will this not be far higher than the level of environmental costs involved? We like to try and have it both ways on this Committee.
  (John Healey) Yes, it will. The reason that we and many experts and analysts in the field suggest that that sort of level in the medium to long-term is required for the rate of Landfill Tax is that that sort of level, it looks to all of us, is likely to be required in order to shift the sort of behaviour that we see at the moment established and very heavily dependent on landfill. So that rate reflects our analysis and others' analysis of what will be required to change the behaviour in terms of waste management methods.

  64. So this is a policy shift in Government that you are actually after? Rather than making a cost evaluation and transferring that into a fiscal measure, what you are saying is that we are discounting that on this particular tax?
  (John Healey) No. If you like, it is an "environmental costs-plus" level. Our judgment is that in order to achieve the policy objectives and targets that we have set to divert much more waste away from landfill, in order to increase very substantially the levels of recycling and re-use that we have in this country, in order to achieve that policy objective we need to use the Landfill Tax rate as an instrument that goes beyond simply internalising the environmental costs of landfill itself.

Gregory Barker

  65. On landfill, I think most people welcome the Government's introduction of the Landfill Tax although we regret it is not more ambitious and being implemented quicker. You are right to say that it will change behaviour. You mentioned recycling and re-use but is not the reality that in terms of the waste stream the tax is not going to prevent the generation of waste which is still growing year-on-year from households, it is simply going to displace waste into the next cheapest disposal option, which is incineration? I wondered what urgent thoughts the Treasury have given to an incineration tax which will actually level up that waste playing field and, really, prevent an exit for waste that is not going to landfill, to really start to put some heat under the recycling and re-use strategy?
  (John Healey) I think the first important thing to bear in mind is that the Landfill Tax is not the only policy lever in this field that will have an impact. We have got tradable landfill permits which will be introduced shortly, we have got a substantial increase in spending and a number of other things that will affect and, hopefully, improve the nature of the way that we manage, dispose and increasingly recycle and re-use waste. On incineration—

  66. You would accept that simply by raising the Landfill Tax you have made incineration more economically attractive?
  (John Healey) By looking to raise Landfill Tax we are looking, and likely, to reduce the attractiveness of landfill as a disposal option.

  67. And the next is incineration?
  (John Healey) I do not think it is self-evident that that will all get diverted to incineration. I do not think the evidence is necessarily that that is simply what is happening. What I hope it will do and what we aim to see with the policies that we are developing and will put in place that I have talked about is that we will get in the UK a better balance across the waste management, disposal and recycling policy than we have had to date. On incineration itself, we have said that we will consider the case for an incineration tax but we need to do that in the context of the work that we have now commissioned, which is a comprehensive study of the environmental health effects of all waste disposal and management methods. If I may say so, I think one of the weaknesses that has bedevilled this as a policy area across government in the past is that there has been a single concentration on a particular disposal method—whether that is landfill, incineration or recycling and composting—and what we have not done sufficiently in the past is worked out what precisely for the UK and local authorities in their own patches is the best balance of waste management disposal and recycling policy across the board. I think we are moving substantially towards that and the Landfill Tax rate increases will have an important part to play. However, it is important to remember that they are not the only policy lever and they are not the only dynamic in the system.

  68. I am surprised to hear you say that there is no evidence that it is leading to greater incineration when there is a major incineration build programme going through the planning system at the moment and a number are actually under construction. The problem, of course, with incinerators is that they all operate on very long contracts—up to 25 years—and as a result have a very depressing effect on the potential and incentive to recycle, re-use and minimise.

  It is the case that incineration is the next cheapest option, without question. It is the next cheapest option after landfill. The Government needs to address this urgently because you will simply displace. We can debate the quantum but without doubt there will be waste displaced from landfill and diverted into incineration.
  (John Healey) What I said is that I do not believe there is evidence for a simple shift out of landfill straight into incineration. In fact, the point you raise, Mr Wright, is an important one and part of one that we are giving, and will need to give, consideration to as part of trying to find out the best policy balance for Britain. The lead times, at present, for many large-scale incineration projects can be as long as seven years. That rather suggests that a simple transfer from landfill to incineration is unlikely to happen lock, stock and barrel.

Sue Doughty

  69. Just adding one or two further points to those made by Mr Barker, he and I both served on the Waste Emissions Trading Bill and so we are very familiar with these concerns. Certainly you mentioned tradable waste permits but, in fact, in the Committee stage of that Bill there was very substantial concern that as time went by, the effect of that Bill, which we all support because we all want diversion away from landfill, in the absence of a viable alternative, would lead towards incineration. I take your point about a seven-year lead time but everybody is putting in their plans at this stage for that, and what the councils have major concerns about—quite rightly—is that they want security of decision making; they want to know that the decisions that they make now are going to be right in future and that they will not be putting themselves in an awkward position over contracts in the future and changing contracts. Councils will go for the safest option. That is the nature of local government. This is where we are deeply disappointed about the fact that there were opportunities, possibly, where the Government could signal that "We are really very keen on particularly looking at recycling". I take your point about the study, and we all want to see that but, not pre-supposing incineration is the only show in town, until that work takes place we will always have that problem, because decisions are being made on almost a daily basis in this area.
  (John Healey) I agree with you, Mrs Doughty, that we would not want to see and should never pre-suppose that incineration simply becomes the alternative to landfill. I am not sure that the activity that we are seeing on some very imaginative recycling schemes that are going on within local authorities bears out the contention that local authorities will always go for the safety-first option. There may be an element of that and I think it is reasonable and right for the Committee to draw their concerns about this to my attention. It does figure in the work that is going on within Government at the moment, and I hope, on the basis of this study that we have commissioned on the environmental health impacts, we are going to be in a position in late Autumn to be much clearer about the balance that we need to seek and how to get there.

  70. One further brief question from me because, as you will be aware, we took a deep interest in the World Summit on Sustainable Development in Johannesburg and the outcomes of that. DEFRA has been working with other departments to get commitment to the outcomes into delivery plans, and the Treasury will be monitoring these delivery plans. What we would like to know is how many departments have actually incorporated the commitments into their delivery plans for Service Delivery Agreements, because I understand the Treasury are monitoring this now?
  (Mr O'Sullivan) Yes, we have been investigating this as an issue. We are aware that some of this will be done for some of the existing delivery plans but quite a bit is going to be in the context of drawing up delivery plans for the next Spending Review. We need to just clarify how far departments have got at this stage. I think we had probably better return with a precise figure on that for you about where that stands now. [6]

  71. Will there be a reporting process for this that we can see?
  (Mr O'Sullivan) I think either way we would report on the departments against delivery plans and PSAs, where there is a well-established process through on-going White Papers, on how departments are delivering their PSA targets. The Government will be reporting on that in the usual way.
  (John Healey) I think we would say that we have made a start in the Spending Review of 2002 in pursuing what you have outlined to us. We did not do it as comprehensively as it may be possible to do. As Mr O'Sullivan says, we are bearing that in mind as we begin early work on the Spending Review for 2004.

Chairman

  72. Thank you very much indeed, Mr Healey and Mr O'Sullivan. That was a very rigorous session, I think. Thank you very much indeed.

  (John Healey) Thank you.





6   See supplementary memorandum below Back


 
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