Examination of Witnesses (Questions 1-19)
24 MARCH 2004
MR SIMON
BULLOCK, MR
ROGER HIGMAN,
MS BRYONY
WORTHINGTON AND
DR HUGH
ELLIS
Q1 Chairman: Welcome. Good afternoon.
Thank you for coming in. Did you want to make a few introductory
remarks? We have had your press release on the Budget, "Brown
Ignores the Environment Again"[1]which
may be a summation of your views, but if you have any brief comments
to add we would be pleased to hear them.
Mr Bullock: Yes, we would be very
grateful to make some introductory remarks. First of all, I am
Simon Bullock and I work on Environmental Taxation Policy; Bryony
Worthington is our UK Climate Campaigner; Hugh Ellis is our Planning
Adviser and Roger Higman is our Environmental Limits Co-ordinator.
So, briefly, to set out what we think three priorities for the
Treasury should be: a priority for us—and I think we share
this view with Tony Blair, it seems—is to tackle climate
change to deliver at least 60% cuts in carbon emissions. This
level of target means that all sectors will need to do their part;
domestic, transport, aviation and industry. We feel that to do
this the Treasury must set a strategic approach to set the right
economic framework to deliver that target, for two reasons: first
to provide the incentives to change behaviour and redirect investment,
and secondly, to signal the Government's intention that it has
a strategic commitment to tackle this which will underpin all
of its policies across all departments. Our view is that although
at the moment there is some reasonable rhetoric we do not have
such a strategy, as we can see from the Government's own projections
on, for example, transport and aviation emissions. So the first
of three priorities, we feel, is that the Treasury should set
an economic strategy to deliver 60% carbon cuts. Within that there
are two priorities. The first would be to link the Budget more
clearly to the spending review, particularly the coming spending
review this summer. Taxes and economic instruments need to be
introduced as part of well-designed packages, it has been argued
for a long time, and a stronger link with spending is needed.
Some proportion of revenue is needed to provide appropriate incentives,
some spending will be needed to reinforce tax policy and some
is also needed to address any adverse impacts that taxes may have.
As an example for that we would cite transport. The right incentives
are crucial. As we can see, the costs of motoring are continuing
to fall and they need to increase, but that is not enough on its
own; we need to have that hand-in-hand with spending to create
alternatives for people to travel by public transport or make
walking or cycling safer. The last priority for us is that this
strategy should be very clear and open about the environmental
and social objectives of its strategy. Often it has not been spelt
out clearly enough that policies should be intended for environmental
and social means, and these goals should be linked together as
well. Again, transport for us is a good example of that. There
is an urgent social need as well as an environmental need for
alternatives to the car. Friends of the Earth are very keen on
ensuring that policy delivers environmental and social goals together.
If you look at transport, 60% of the poorest fifth of households
do not have access to a car. Even for the whole population, 30%
of the population do not have access to a car, so for those people
having decent alternatives, a decent transport network and safe
streets to walk on is an absolutely crucial thing and a basic
need for most people. I have brought with me today a copy of a
report we have done (I will leave a copy for you). It is work
we have done with communities in Longsight, an area of Manchester
with very low areas of car ownership, and we were asking them
what they wanted to see and what their priorities are for transport.
Overwhelmingly it is better buses and safer streets. It is an
issue that is eroding the quality of life for them and people
in the city. So this is an example of where improving public transport
and safety would meet environmental and social goals together.
To conclude my opening statement, I think the two crucial elements
to deliver a carbon strategy for the Treasury—to meet the
60% target—are clear, linked social and environmental goals
and to link tax with spending, particularly with the spending
review coming up in the next couple of months.
Q2 Chairman: Thank you very much for
that. We will come back to a number of the points you have raised
in a minute or two. Can I ask you, first of all, whether you think
the Government has, as it seems to claim, an environmental tax
strategy?
Mr Bullock: I think the statement
of intent on environmental taxation in 1997 was very good. Two
statements, in particular, were very good. The first one was that
growth must be stable and environmentally sustainable, that quality
of growth matters not just quantity; and the second that the "Government
will aim to reform the tax system to increase incentives to reduce
environmental damage. That will shift the burden of tax from goods
to bads." We think that was a very good initial, starting
statement. In Labour's first term we felt they went quite a long
way on this agenda: they introduced a climate change levy, they
introduced an aggregates tax and they put in some good measures
on road taxation. Since then we feel they have stalled, relatively.
They have back-tracked on transport taxation; environmental tax
as a proportion of GDP is 10% and has been around 10% for ten
years—that is not moving up or down particularly much. They
say there is a strategy to deliver a low-carbon economy, (coming
back, again, to climate change and a 60% target), and for some
sectors they are doing quite well; there is a long way to go and
there is a lot more to do, but in industry, for example, we are
going in the right direction. For the domestic sector things,
at least, are not getting any worse. However, two areas which
are really crucial are transport and aviation, and the trends
are in completely the wrong direction. We see the Government's
tax and spending policies having a major effect here in stopping
us getting towards those climate targets.
Q3 Chairman: Coming back to one of the
points you made earlier, is not the reason why it is moving the
wrong way on transport exactly to do with social attitudes and
social issues? We saw it happen with the fuel crisis/protest and
the public objections that were raised. Whilst it may be the case
that 60% of the poorest fifth do not have a car at all, there
are an awful lot of people who are not well-off who do, and who
object very strongly when the price of running their cars goes
up.
Mr Bullock: I think this is a
clear example of the need to link environmental and social goals
and deal with tax and spending at the same time. Of course, it
would be politically very difficult to increase the costs of motoring
if alternatives to the car are not put in place. I would note,
however, that since 1980 the costs of motoring overall have fallen
and since 1997 the costs of motoring have fallen as well. We have
a tax and spend policy which does not provide for those alternatives.
If you look at the spending figures the Social Exclusion Unit
put out on transport, buses and walking get very small comparative
sums compared with other modes of transport. Bus spending, I think,
is around a third of annual spending for rail, or maybe a quarter—I
forget the exact figures.[2]
Overall, though, they said that spending is very regressive. The
poorest fifth of the population get 12% of the transport spending
budget and the richest fifth of the population get 38% of it.
So it is very important in the Comprehensive Spending Review that
the Chancellor puts more money into creating decent alternatives
to the car.
Q4 Chairman: Taking it back to my first
question, it seems, in the context of what you have just said,
that rather than there being an environmental tax strategy which
has stalled, there is no strategy as such at all.
Mr Bullock: That is one way of
putting it, yes.
Q5 Chairman: There were some initiatives,
there were some statements, there was Tax and the Environment:
Using Economic Instruments published in 2002. These do not
amount to a strategy.
Mr Bullock: No, I do not think
they do. That is why we are calling for an overall carbon strategy
which would link the transport, aviation, domestic and industry
sectors. As I say, we need to take action in all of these areas
to ensure that overall that 60% target is met.
Q6 Joan Walley: Can I just press you
a little bit further on that and ask: if you were advising the
Chancellor how that strategy should look, are you saying there
should be an action plan to it, or what would you say should be
flagged up in that, in a bit more detail?
Mr Higman: If I can come in on
that, I think, firstly, we are looking to see that the Chancellor
review all the areas of taxation in respect of carbon emissions
to make sure they are moving forward on each of those areas. There
are some areas that are not being taxed at all at the moment.
Secondly, we have to consider other environmental impacts, and
there are areas where we have seen voluntary initiatives, for
example on pesticides, where we feel that tax approaches might
be more suitable. We are looking for the sorts of initiatives
that the Treasury was putting forward in the late-1990s to be
reinstated, and that level of commitment moving forward to get
the amounts of taxation on environmental bads increased such that
we can reduce taxation on things that are considered to be environmental
goods, like labour.
Q7 Chairman: In the light of that, what
do you see as the role for fiscal instruments? Do you see them
as a way of reflecting the cost to the environment of various
activities, or do you see them as a way of managing demand—as
a stick to beat bads?
Mr Bullock: We would say that
the role of any fiscal instrument is to achieve the policy objective
rather than simply just to internalise the external costs, which
is I believe something the Committee has touched on before.
Q8 Chairman: Do you think internalising
the external costs is a worthwhile activity?
Mr Bullock: I think it is worthwhile
in that it certainly would be better than doing nothing. If you
look at aviation, for example, the external costs are not being
tackled at all at present due to the lack of duty on various sorts
of fuel. But we feel we would need to go beyond that. There are
a large number of methodological difficulties in internalising
external costs. We have got reservations about that almost at
a moral level in some senses, in that it assumes that all environmental
resources have a price and that there is no such thing as critical
natural capital, that environmental goods can always be traded
off. We would think that just dealing with internalising the costs,
although it would be a useful and necessary first step, if that
is the practical way to proceed at the moment, is worth doing,
but in the long-term the price mechanism should be used to meet
the policy objective rather than just to iron out externalities.
Ms Worthington: I would only add
that there is an obvious trend in government to move to more flexible,
market-based economic instruments. Where they are designed well
and lead to the achievement of environmental objectives we support
the use of those. I think the Government's policy is now far broader
than simply a fiscal and spend policy; it now has a third string
in its bow, if you like. I do not think they have, perhaps, been
as explicit in telling us what their attitude to those instruments
is and it might be useful for them to make a statement about their
continued use of these trading mechanisms.
Q9 Chairman: Coming back to something
Roger Higman said, we hear a lot about environmental taxation
and managing, controlling and punishing bads. Do you think there
is enough done within the fiscal environment to encourage good
behaviour? Are there a sufficient number of carrots (on the basis
of what you said) as well as an insufficient number of sticks?
Mr Higman: I think in some areas
there are. Clearly, we have got incentives for alternative fuels
and we support those. We may want to argue about the details of
those but we generally support the framework. In other areas it
may not be enough to give fiscal incentives, we may actually want
to give direct support, financial support, through spending. Again,
an example we have already mentioned, public transport, is a very
good one. You can reduce the taxation of public transport quite
substantially but that may not be the most effective way of providing
the alternative people need. So, in that sense, we do not see
it as simply a question of taxation.
Mr Bullock: To add a little bit
to that as well, if the Government was to increase road fuel duty
just to keep the overall motoring costs constant, so no extra
burden to motorists, that would raise between £16 and £30
billion pounds over the period to 2010, depending on the global
price of oil. We feel that a large amount of that revenue could
be used to create those incentives for alternative behaviour.
For example, if you were to put a Safe Route to School into every
school in the country that would cost a mere billion pounds compared
to the £16 to £30 billion figure. If you wanted to put
20 mile-an-hour zones into every residential street in the country
that would be around £500 million. If you wanted to put a
comprehensive network of bus lanes into the total built-up area
that would cost £1 billion as well. So there is a major opportunity
in the spending review coming up and the review of the transport
10-year plan to use some of the spending which should be raised
from increasing motoring costs into providing safer streets, improving
safety and improving public transport.
Q10 Joan Walley: Have you actually got
all of those details set out in some separate report that you
have done?
Mr Bullock: Ourselves and Transport
2000 will be publishing it on Monday, so I can get it to you.
Joan Walley: That would be very helpful.
Q11 Chairman: Yes, it would. Thank you
very much. Can I just finally ask, we used to hear from you about
Green GDP. I know that Roger Higman, for one, has been with Friends
of the Earth for quite a long time. What has happened to Green
GDP as a concept? Has it departed?
Mr Bullock: No, I think not. In
fact, the new Economics Foundation published a report very recently
with an update called Measure of Domestic Progress, which
is in fact very similar to the Index on Sustainable Economic
Welfare. I think this agenda is still very relevant, mainly
because it highlights that not all types of growth are good. It
shows that much growth comes from running down environmental resources,
treating capital like income (as no business would do); it shows
that a lot of growth has large costs attached, like climate change
and air pollution. So where we see the advantage of Green GDP
is that it focuses on the fact that growth is for a purpose, it
is not an end in itself; it is there to improve the quality of
life, and from that you can show that some growth is just not
worth having. It is very important that this debate continues.
I think there is a danger that it simply focuses on how best to
adjust Gross Domestic Product; it is not just about fiddling with
the indicators or going down some statistical black hole, what
is important is the idea behind Green GDP, which is that we need
to focus on quality growth. We think this is a really major issue
because, in principle, in the statements of intent and subsequently,
Tony Blair and Gordon Brown have both said that quality growth
is crucial, but we do not feel the Government acts on this in
any strategic way. If the Treasury was to take quality growth
seriously it would use economic instruments not just to promote
any old growth but to promote growth that meets its environmental
and social goals. I think this is part of the sustainable development
idea; that you should link economic, social and environmental
goals together. What we see, unfortunately, from Government on
quite a number of occasions is that it still trades-off these
goals—the language is very much about balance, about trading
off. A good example was the Aviation White Paper where the environmental
damage was considered to be the price to pay for economic growth.
Our view is that the Government should use economic instruments
to promote growth sectors in the economy that do not damage the
environment or people's health. That is why it is so important
that the Green GDP debate continues.
Q12 Mr Challen: I was very struck by
the headline of your overall press release, issued on 17 March,
"Brown Ignores the Environment Again", and I was particularly
struck by the "Again" word at the end. Obviously you
do share some of the frustrations that this Committee has. To
what would you ascribe this caution? Is it lack of commitment
or is it confusion or is it, perhaps, a fear that if we go too
far too fast the electorate is going to boot us out?
Mr Bullock: I think, partly, it
may be to do with a perception that some environmental issues
are too politically difficult to deal with. I do not think that
is actually the case. Transport is a good example of that. If
you just increase road fuel duties then that is going to get people's
backs up, but if you link it very explicitly to tackling problems
and creating alternatives for people then I think it is much more
politically palatable. I do not know, Roger, if you want to add
anything.
Mr Higman: I think there are a
number of things I would say about that. Firstly, the Government
made a lot of progress, as you said, up until 2000, and I do not
think we would underestimate the importance of things like the
fuel protest in terms of dissuading the Government from the strategy
it was pursuing. What we are looking for, though, is for the Government
to recognise that although the pursuit may have got difficult,
the path may have got difficult, the eventual aim was the right
one, and what they were committed to in the late-1990s was the
right approach. Therefore, if you like, we need to get smarter
about how we do it. That is the message we would have put, and
that is where we have been a bit disappointed. We feel there might
be things that the Government could do that would not be so controversial
but would actually enable them to further the environmental tax
agenda in a way that they otherwise have not been doing. An example
might be the pesticide side.
Q13 Mr Challen: This was described as
a "Steady as she goes" kind of Budget, a consolidating
Budget—and we have our differences, probably, about that.
Should we not also try and consolidate the things that we have
done in terms of the environment—climate change levy and
things of that sort—which in their own areas are hugely
controversial and which some people might want to get rid of still?
Should we not allow things to work and to see how they work rather
than saying that every year we are going to have more and more
new measures?
The Committee suspended from 4.15 pm to 4.35
pm for a division in the House Mr Higman:
Essentially the question was why do we have to do more every year,
I believe. The answer, obviously, from our perspective is that
we are facing big environmental problems right across the range.
We think that climate change is the most prominent of those but
we have also got continuing air quality problems, we have got
problems to do with over-consumption of resources, problems to
do with water pollution and problems to do with abuse of fertilisers
and pesticides. All of these environmental problems need to be
tackled, in our view, and therefore we have been calling on the
Treasury to have a progressive movement so that eventually all
of those are tackled. That is why we feel that we need to do a
little bit more every year.
Q14 Mr Challen: Looking at a couple of
graphs in the Budget document (I forget what it is called: the
Red Book or something), if we turn to page 161 (I do not know
if you have access to it) it does show that there are fairly consistent
trends downwards in, for example, CO2 emissions from new cars.
I am just looking at the graph, which shows a steady downward
trend. Chart 7.4 on page 162, UK particulate emissions from the
transport sector show a dramatic decline. Some of it, of course,
is fairly predictive but, even so, there is an actual decline
in the last ten years, then a further decline down to 2015, and
then a very slight increase at that point. I am pursuing this
issue about how much can we get away with if we want to increase
these rates of improvement before people say "That's enough;
we are not going to go with it any further". That is the
cut-off point for any government. Is it not?
Mr Higman: There are a number
of things to say about that. Firstly, not all of those indicators
are going down. There are—
Q15 Mr Challen: So you dispute the—
Mr Higman: There are other indicators
where, if you look, for example, at the 15 government headline
indicators we had the report on last week, my recollection is
that in three of them the emissions are actually going in the
wrong direction and three of them are steady. So while we can
draw attention to those where we seem to be making progress, there
are others where we need to make more progress.
Q16 Mr Challen: Let us be clear on this:
you are saying that the Chancellor is using the information selectively
to bolster the case and is ignoring other relevant information?
Ms Worthington: Yes, absolutely.
The indicators that were used in the Budget—they used a
greenhouse gas statistic without comparing it to the year before.
If you look at what is happening in carbon dioxide emissions in
totality, they are increasing and have been increasing since 1999.
That is not a good record for a Government that is supposedly
using economic instruments to tackle climate change. So it is
absolutely true that they are using indicators selectively; if
they were to look at the totality of energy and fuel consumption
they would see big rises, and yet that is buried in amongst the
statistics that you really have to look out for in order to see
that that is happening.
Q17 Chairman: It is a fair point that
Mr Challen draws attention to, which is that the graph that he
refers to is detailing efficiency gains. It is reasonable that
efficiency gains are there and real, and where, as a result, individual
engines have been more efficient then there is a downward trend.
The problem, I take it, is that total volume of traffic continues
to rise and, therefore, the total problem continues to get worse.
Ms Worthington: Yes, absolutely.
The environ-mental goal for us is not efficient cars but to maintain
the integrity of the environment. I am afraid that indicator is
not very helpful in telling whether it is a green taxation policy
or not.
Mr Bullock: Efficiency is just
one element of the solution.
Q18 Mr Challen: You have argued for reinstating
the fuel duty escalator and larger differentials in the VED.[3]
Would you put some figures on that? I have not seen any myself
so I am wondering how far you would go down that route.
Mr Bullock: We commissioned some
research from the IEEP a couple of years ago which is still up-to-date
but shows that if you were to increase the road duty to keep overall
motoring costs constant that would raise £16-30 billion.
It depends on the global price of oil, but it would range between
16 and 30 billion. On VED, currently the Government has lower
rates for more fuel-efficient cars but we believe that there should
be an incentive against gas-guzzling, very fuel-inefficient cars,
so we are proposing a series of bands, £200, £250, £300,
£350 and £500 according to carbon emissions. The Department
for Transport's research shows, I believe, that if you had a £100
differential between bands then that would persuade 47% of people
to buy a more fuel-efficient car. So we think it would make sense
for the Government to extend the VED range at the higher end as
well as creating incentives at the lower end.
Ms Worthington: There are other
economic instruments that we know the Treasury and DfT are considering
which would, in fact, increase the cost of transport, whilst delivering
a valid gain. The one that they are looking at at the moment is
to create an obligation for renewable fuels, so that it becomes
obligatory to sell a proportion of bio-fuels within your fuel
mix. That would have the effect of a very precise instrument.
It would be spread across all industry so it would lead to an
increase in the cost of transport but it would also deliver environmental
gain.
Q19 Mr Challen: If the money (£16
billion) that you estimate might be raised in these two particular
ways was hypothecated to public transport, do you have any evidence
to show that that would have greater public acceptance? Have you
done any polling on that subject, for example?
Mr Higman: I think there has been
polling looking at motorists' attitudes in general to these things.
We do not necessarily carry out extensive polls on every single
item of policy—we have not got that sort of level of resources.
The opinion polls I have seen have suggested that although there
is hostility to some aspects of increased taxation, that is mollified
quite dramatically when the money is used to promote an alternative.
We can see that, also, in press reactions to government policies
where large sections of the media have been crying out for more
resources to go into alternatives.
Ms Worthington: The best example
of that is congestion charging, where you saw a new facility that
was directly linked to visible improvements—the number of
buses, frequency of buses and the cleanliness and newness of buses.
So where it is obvious, it is common sense; people can see that
the payment is going directly to something that they can perceive
to be changing. That has made that a more popular instrument.
1 Press release, 17.3.04. Please see www.foe.co.uk Back
2
Mr Bullock later added that for passengers it is between a third
and a quarter. The Social Exclusion Unit says of the Transport
10 year plan: "of the plan's £20 billion allocation,
11% relates directly to buses, compared with 40% for passenger
rail". Back
3
Vehicle Excise Duty. Back
|
