Spending Review 2002
14. We are concerned that economic and social objectives
are reflected in departmental Public Service Agreement targets,
whereas environmental objectives are not.
Public Service Agreements (PSAs) are designed
to ensure that the Government delivers policy outcomes effectively
and that it focuses effort on its priorities for action. PSA targets
enable the Government to demonstrate progress against specific
priority outcomes, but are not intended to represent the entirety
of the Government's activities in a particular area of policy.
For example, although the Government has not established a specific
PSA target on improving water quality it nevertheless remains
an important aspect of environment policy, with national and EU
targets that must be achieved and against which progress is reported.
The Government believes that following
Spending Review 2002 departmental PSAs and the targets they contain
reflect fully the social, environmental and economic dimensions
to sustainable development. The Government notes that in its report
(paragraph 74 and corresponding table) the Environmental Audit
Committee has omitted a number of environmental objectives and
targets set in SR2002. For example, the table does not record
HM Treasury's new environmental objective (Objective 10 in its
PSA) nor does it record DTI's PSA target (target 4, shared with
Defra) on reducing emissions of greenhouse gases.
Conclusion
15. The scale of environmental challenges
facing the developed world is daunting. Fiscal policies can play
an important role in altering over time both values and behaviour.
In our view, the Treasury have set an excellent objective—over
time, to reform the tax system to increase incentives to reduce
environmental damage—but have yet to back this up with an
adequate strategy. We hope that they will take full account of
our comments and recommendations, and that the Government will
display greater commitment in taking this agenda forward.
The Government has introduced or reformed
a range of important incentives to reduce environmental damage,
including taxes on energy, transport, waste and aggregates; tax
incentives to encourage environmentally-friendly technologies;
and the introduction of the voluntary initiative on pesticides.
The principles underpinning these measures are set out in 'Tax
and the environment: using economic instruments', which also describes
the approach that the Government has taken in putting these measures
in place.
Government intervention must be proportionate
and well targeted, and take account of other factors such as distributional
effects and business competitiveness, which is key. This highlights
the importance of well thought through approaches and well designed
measures, but this also means taking time to get the measures
right. But as progress shows, this has not been at the expense
of existing or future action.
The Budget has announced a number of further
measures, including a package of reforms to improve waste management,
further enhanced capital allowances for environmentally-friendly
technologies; and further measures to encourage cleaner road fuels
and vehicles. The Government is also discussing the use of economic
instruments and aviation and will consult shortly on specific
measures to encourage domestic energy efficiency. These measures
confirm the Government's commitment to using the tax system to
help encourage environmental improvement, while recognizing the
need also to ensure economic growth during a period of global
economic downturn.
HM Treasury
28 April 2003
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