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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