Examination of Witnesses (Questions 40-59)
26 JANUARY 2005
MR ADRIAN
WILKES, MR
MERLIN HYMAN
AND MS
KAREN AITCHISON
AND MR
ROBERT EVANS
Q40 Mr Chaytor: Have you been engaging
with the Cabinet Office about their guide?
Mr Hyman: Yes.
Q41 Mr Chaytor: What kind of response
have you got?
Mr Wilkes: Not a very helpful
one to be honest. We seem to be going round in circles. We did
detail at length in our evidence the discussions we have had with
DEFRA, DTI and Cabinet Office economists. DEFRA have I think bought
into this and recognise that there is a need for improvement.
DTI in our meeting last year indicated that we should go and talk
to the Cabinet Office, and when we talked to the Cabinet Office
they said "We do not agree with your case and we are not
putting that in writing. If you want anything, look through the
Green Book." The Treasury do not actually have a unit of
economists that cover how this is all done, so there is some guidance
in theory and we would, in interpreting it, argue that it embraces
all the issues that we would like to see embraced within it, but
in practice it is not happening.
Mr Hyman: That is on the impacts
on our industry, but we did respond to the consultation draft
of the Cabinet Office guidance back at the beginning of 2003 and
they did toughen up within that the guidance on all the other
benefits, the benefits to the tourism industry, the health industry
and although we might like to see it more in bold, it is all in
there.
Mr Wilkes: It is in there but
it is not put into practice.
Q42 Mr Chaytor: This is the document
you have written to us.
Mr Wilkes: Yes, it is, and it
states the names of these documents.
Q43 Mr Chaytor: In these issues are there
often examples of academics beavering away in certain universities
who are particular experts? Are there any universities are pre-eminent
in this field of eco-economic analysis that you would recommend?
Mr Hyman: The leading person over
the years has been David Pearce who wrote some of those books
back in the Nineties on a blueprint for a green economy.
Mr Wilkes: If you would like us
to come back we can ask some of our members—
Q44 Mr Chaytor: It would be useful information
if any work is being done in university departments at the moment.
Can we just move on from the RIA question and ask about businesses'
general approach to environmental regulation. What do you think
of the approach that mainstream businesses or mainstream business
organisations take to this in terms of the figures that they come
up with? Are you content with the methodology they use there?
Mr Wilkes: Absolutely not. It
is interesting that you have got Green Alliance coming because
they published a fascinating book about a year ago called The
Private Lives of Public Affairs which puts together a convincing
argument that trade associations put forward to Government when
they are lobbying Government, which is the lowest possible argument
and the fact that it ignores very often companies who have been
very progressive when it comes to environmental, resource productivity
and innovation. We are very concerned generally that certain organisations
such as, dare I say, the CBI do try to scare ministers and policy-makers
with startling figures. In 2003 there was a headline in various
papers entitled "[The EU Directive on Environmental Liability]
the final nail in the coffin of British manufacturing". In
it there was a figure of £1.8 billion a year as the cost
of this directive on British industry; Lord Whitty told the House
of Lords a few months ago that the maximum cost would be £52
million per year, so that is an exaggeration of three hundredfold
or something. If you talk to WWF in Europe who produced a report
called "Cry Wolf" they found a fascinating quote from
the American Chemistry Council which was spending $50 million
lobbying around the Reach Directive. That is a lot of money. One
of their tactics is to "Conduct and publicise an economic
impact study to dramatise the potentially devastating impacts
to industry and consumers", and our written evidence contains
a number of examples, and we can provide many more, and the WWF
report has got many. I would come back to this recent DEFRA report:
the original costs of our air quality strategy were put at £22
billion and they turned out to be £3 billion. The benefits
to health and the environment—I do not really understand
that there are no benefits to our industry—have come to
£18 billion. So we have £3 billion of costs and £18
billion benefits.
Q45 Mr Chaytor: This is an imprecise
science.
Mr Wilkes: Yes, but from industries
that are having to clean up there is always imprecision in their
favour to scare you guys.
Q46 Mr Challen: Can we return to this
subject of the Cabinet Office and RIAs? Obviously, you have had
discussions with Cabinet Office officials and reading the written
evidence they said that they would raise your concerns when they
met with the Treasury. Did anything come of that?
Mr Wilkes: Not yet. We met with
them in November, they sent us an e-mail saying that they were
actually going to move on this in the last few weeks, and I suspect
that it was because this Committee announced in December that
it was looking into this issue. They are also blessed with a kind
of trouble-shooter who has come in from outside industry to the
Cabinet Office to look at issues of regulatory barriers to industries
and he is helping our industry in various areas. He is planning
to pull together a meeting of DTI, the Treasury, the Cabinet Office
and DEFRA economists, so we are hoping that some progress will
be made. I think a clear signal from this Committee would be incredibly
helpful and powerful.[1]
Q47 Mr Challen: Have you had any direct
discussions with the Treasury?
Mr Wilkes: They do not actually
have a unit that covers Regulatory Impact Assessments. We have
been in touch with the head of their environment tax team.
Q48 Mr Challen: It sounds to me slightly
Kafkaesque, you are going through these various doors but the
final door is always shut, even if you know it is there. I am
wondering whether the economists, who are no doubt both internal
and external people hired in—they look to the Treasury presumably
for their real guidance. Is that your impression?
Mr Wilkes: Yes.
Q49 Mr Challen: It is not something that
they are responsible to the Cabinet Office for. I am just wondering
if they actually get the message that you are trying to get across,
whether they have had that message and have never projected it,
or whether they got it in the first place.
Mr Wilkes: I think they would
have got it very clearly because we have been pushing this message
for several years and there have been letters to various ministers.
I know that civil servants are very good at passing memoranda
of meetings around, so I think they have got the message, but
we seem to have hit a brick wall for some reason.
Q50 Mr Challen: You have mentioned ministers
in the written submission and they obviously must take responsibility.
Are you aware of any discussions they might have had in three
ministers forum, for example, which I know are not public meetings,
but might send out signals that would make up joined-up Government?
Mr Wilkes: I am afraid on this
I do not know anything. I cannot explain it, it is baffling. It
has been baffling me for a year or more. I am sorry I cannot be
more helpful.
Q51 Mr Challen: That is alright. Can
I ask Mr Evans, obviously you are probably in a very good position
to assess the impacts of UK policies on competitiveness of environmental
technology and the environmental services industry. Do you think
the Government is doing enough on this subject, putting aside
for one moment the question that we have been focusing on there?
Mr Evans: I think the answer is
that it could do more, it certainly could more. We feel at the
moment that Government is listening—it did an awful lot
in the first term, but the message coming over in the second term
is that it wants to reduce the burden on industry and therefore
is less keen to promote environmental initiatives that it feels
are going to be in any way a burden on industry. That is the feeling
that we have and that is borne out by the evidence we see of policy
development.
Q52 Mr Challen: Are there any examples
of things that might have been considered but then fell foul of
that kind of approach?
Mr Evans: The evidence that we
see is a moving away from the Government providing policy measures
such as incentives for the environmental industry sector to get
their products out to the consumers in the public and private
sector who wish to involve themselves in environmental initiatives
and a falling back on pure regulation as the tool, hence the concern
over the Regulatory Impact Assessments because if that is all
you rely on and then you do not present the full case for the
environmental, it becomes very problematic. So that is as we see
it at the moment and we see that directly in policies such as
transport and energy.
Q53 Mr Challen: As you know, we had the
CBI here last week and they clearly feel that what they describe
as "excessive" regulation—I am not quite sure
what they mean by excessive—harms British competitiveness.
As a multinational company is that the view that you might take?
Mr Evans: No, we are a company
that benefits from the innovation that regulation can promote.
There are tougher regulations on vehicle exhaust emissions in
other parts of the world such as California, so it is not as though
the European market is disadvantaged because other markets have
tougher regulations. We have a situation whereby regulations could
be an opportunity to promote innovation and we see that as particularly
beneficial for our sector and we have a track record of delivering
lower cost solutions to our consumers: cars are so much better,
so much bigger than they ever were and without a significant increase
in cost.
Q54 Mr Challen: We tend to think of and
concentrate on big directly environmentally-enhancing products
or services, but are there spin-offs as well which in themselves
might have been borne out of this regulatory drive but then become
independent from the original focus?
Mr Evans: I think it is in employment
probably. I will hand over to Adrian but I will just make one
point on the employment side. If you look at the motor industry,
for example, the jobs involved in the environmental control of
emissions are high value jobs, both on our side but also on the
side of the people who work within the industry, and those are
the kind of high value jobs that you want to have rather than
metal bending or bashing jobs which could be conducted anywhere
else in the world. Consequently, if there was not a regulatory
push there would not be those people within the motor industry,
it would all gravitate back to a single research centre somewhere
in the States or somewhere in Germany and the UK would lose out.
Mr Wilkes: If you do not mind
I would suggest that Karen, who is the real expert in this area,
could actually add to that.
Ms Aitchison: In terms of opening
up the market for opportunity and innovation, there are some examples
of those kinds of opportunities. Certainly within our consultancy
we are looking at significant cost savings in energy and utility
bills and yet it is still a hard sell for us. We are working with
major multinational companies who on average we are helping save
five to twelve% of their utility bills, helping them to achieve
higher green targets and gain significant rebates, but it is still
very difficult because industry is reluctant to put out that cost.
So what we are saying is that it is through very negligible costs
that you are actually bringing about these massive savings. I
would say that in my view there is still a very reactive rather
than proactive approach, certainly in my industry, and I think
as Robert mentioned at least we have got the fallback of having
high environmental standards imposed through regulation, otherwise
I think in the case of self-regulation companies would remain
in general quite complacent.
Q55 Mr Challen: How well placed do you
think we are in this country to exploit this great market in environmental
products and services? Are we getting ahead of the crowd or are
we falling behind?
Ms Aitchison: I think the current
estimate is that we have around about five% of the market share
which is valued at something like £500 billion.
Q56 Mr Challen: Million or billion?
Mr Wilkes: The total market is
currently valued at about £515 billion worldwide.
Q57 Chairman: I thought that was dollars
not pounds.
Mr Wilkes: Dollars, that is right.
Ms Aitchison: Clearly, therefore,
we can up the ante there.
Q58 Gregory Barker: Where is that market?
Mr Wilkes: Primarily of course
in North America, Europe—
Q59 Gregory Barker: Do you know what
percentage is in North America?
Mr Wilkes: Of that market I think
it is about 20%.
1 This answer was amended by Mr Wilkes in his answer
to Q 64. Back
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