Examination of Witnesses (Questions 260-279)
9 FEBRUARY 2005
JOHN HEALEY
MP, MS FIONA
JAMES AND
MR PAUL
O'SULLIVAN
Q260 Chairman: You can still hope even
if you are not at that stage?
Mr O'Sullivan: If one is able
to get the communiqué early on in the UK Presidency—certainly
we have been talking to the Commission and there is a lot of agreement
between us, the Commission and some of the Member States on this
way forward—it is a possibility that one will be able to
get a proposal for a directive out towards the end of the UK Presidency.
A lot depends on how other Member States react and how some of
the analysis on the details of how you bring aviation into the
Emissions Trading Scheme pans out. There are quite a lot of complicated
issues about linkages between aviation emissions and the existing
Emissions Trading Scheme. It is certainly something that, if it
is going well, we will be aiming to do.
Q261 Chairman: The communiqué
is supposed to be out in July or possibly September, is it not?
Mr O'Sullivan: Yes.
Q262 Chairman: It envisages taking forward
discussions about aviation fuel taxes, emissions charges and the
inclusion of aviation in the Emissions Trading Scheme as the third
of those three options. This suggests there is still a very live
debate going on within the European Union as to the best way to
tackle the growing climate change contribution of aviation and
that the Emissions Trading Scheme route is only one option which
is under consideration. That does not look terribly hopeful, does
it, in terms of getting resolution on this issue by the end of
the year?
John Healey: I think resolution
by the end of the year is a tall order. As Paul O'Sullivan has
indicated, it is possible and we will be pressing for that. In
many ways, if we were focusing all our attention on taxing aviation
fuel or aviation, we might be setting ourselves a more difficult
challenge given all the complex web of legal agreements and conventions
which govern that. The fact that a, we are giving such prominence
to the general question of aviation, doing more to pay its way
for the environmental costs it imposes, and b, giving particular
prominence to seeing its inclusion in the second phase ought to
be a source of encouragement to those who are concerned about
these environmental challenges which we face. My own view is to
make headway on this, like any other international discussions
and agreements, the wider the interest in this, the stronger the
pressure—not just the arguments which can be made by governments—the
more likely we are to see progress.
Q263 Chairman: We heard the President
of France talking about a tax on airline tickets in a speech in
Davos. One of the German ministers told Margaret Beckett that
he was in favour of taxes rather than the Emissions Trading Scheme
as a way of dealing with this. It seems to me you are a very long
way from making the argument. There is a danger that if you fail
to close this down and get a resolution, the debate will roll
on into discussions about Phase 2 of the Emissions Trading Scheme
and complicate that at a time when I think we all agree we need
to have much tougher targets in Phase 2, making the whole future
of the scheme much more difficult. You do not disagree with all
this?
John Healey: I think that is a
reasonable concern.
Q264 Chairman: Do you have a plan B?
John Healey: If we cannot achieve
the Emissions Trading Scheme inclusion of aviation?
Q265 Chairman: Yes.
John Healey: That is our primary
objective. I think, as I have indicated to this Committee before,
following the last Budget, we are also considering the case and
ways in which existing taxes, which relate to air travel, might
be made more finely focused on environmental tax ends.
Q266 Chairman: Emission charges, is that
what you mean?
John Healey: No, I am referring
to a conversation we have had in this Committee before about air
passenger duty, where it is not an environmental tax.
Q267 Chairman: It is not in the communiqué.
It is not under debate in the discussions at the moment. As I
say, it is aviation, fuel tax , emission charges—
John Healey: —that is UK
tax. What I think you are reading from there is essentially—
Q268 Chairman: —the Commission
Work Programme.
John Healey: Exactly; the conversations
and policy areas that are rightly matters for discussion across
the European Union. Certainly air passenger duty is not it is
a UK domestic matter.
Q269 Mr Challen: We are seriously considering
taking more unilateral action in the absence of bilateral or multilateral
agreements?
John Healey: We are recognising,
as we did back at the Budget, that the most effective action we
can take here is multilateral. We are focused particularly on
the Emissions Trading Scheme in aviation, but we have recognised
that we need also to be prepared to do other work if that becomes
necessary.
Q270 Mr Challen: Can we move on to wind
energy and renewables. According to the British Wind Energy Association,
the new business rates system coming in this year is going to
lead to something like a wind farm windfall for the Government,
with bills going up 700%, in their estimate. They say this could
lead to a one third reduction in development of wind energy. In
other regards, the President of the Renewable Power Association
has predicted the new biomass energy developments, affected by
this new business rates system, could be stopped in their tracks.
Does this not show that we have got different government departments
working together to ensure our big push for more renewables is
not reduced by this other action?
John Healey: The first thing I
would suggest is these bodies, if they anticipate problems, ought
to be making representations to us and as far as I am aware they
have not. The second thing to say to this Committee on the question
of business rates, as far as I am aware renewables are not being
singled out for particular treatment under the changes in the
system, nor are conventional generators, by comparison, in some
way getting a softer ride. As I understand it, the changes that
are coming in are part of wider rated changes which are made across
the energy sector, bringing the energy sector more in line with
the conventional business rating system. Again, as I understand
the position, some transitional arrangements will be put in place
to smooth the changes where there are significant effects for
existing projects and companies.
Q271 Mr Challen: Regardless of any absence
of representations from the renewables sector, a disproportionate
and damaging effect on them as compared with conventional generators
who, they say, is going to be benefiting from this system?
John Healey: Without having seen
the representations it is quite difficult to make that assessment.
Q272 Chairman: Can I suggest you look
at The Sunday Telegraph business section of about 10 days
ago.
John Healey: I would rather hear
directly from the associations concerned than a Sunday Telegraph
journalist.
Q273 Mr Challen: Would you be concerned
enough to look at it to see if this effect is taking place now
you are aware of it?
John Healey: Certainly, as with
any organisation with any issue, if they make representations
to me I will give them careful consideration.
Q274 Mr Challen: They have done their
calculations, I am not saying whether they are correct or not,
but perhaps they can only do their calculations once the Government
has said what it is going to do. Obviously the Government consists
of huge departments and some of these fairly new bodies, like
the British Wind Energy Association, perhaps do not have the same
resources to figure out things like this all on their own at a
suitable time to get the changes in place that they need to prevent
this damage from happening. Is it not fair to say this is something
which needs to be looked at whether or not you get representations?
John Healey: It is difficult to
look at it if we do not get the representations. My experience
of renewables, operators and associations is that, generally,
on matters of concern they are not slow in coming forward.
Q275 Chairman: This is a business rates
change and they may well have made representations to the Office
of the Deputy Prime Minister. Ms James, have you received any
representations from the Office of the Deputy Prime Minister about
this issue?
Ms James: I have not personally.
Q276 Joan Walley: Is it not an issue
where maybe we would expect the Treasury to be proactive in all
of this, rather than just sitting back waiting?
John Healey: If there is a problem
for particular operators in sectors we would expect them to draw
our attention to it. Without that being done, it is quite difficult
to argue that there should be an expectation that somehow the
Treasury should anticipate something like this. I do not think
that is unreasonable.
Q277 Mr Challen: The Treasury is responsible,
through all sorts of ways, for driving forward our renewables
commitments and perhaps these people have made representations
to the ODPM, but nobody here is aware of any representations coming
to the Treasury from the ODPM or these organisations.
John Healey: Chairman, perhaps
you will allow me to check whether there have been representations
to the Office of the Deputy Prime Minister. My experience, generally,
of this sector is that it is not slow in making representations
generally across Government.
Q278 Mr Challen: Can we have a quick
look at resource productivity, an agenda which has been rolling
on for quite a number of years. We had the DTI issuing a strategy,
the PIU did a report in 2001 and some other reports have been
produced, but the Pre-Budget Report still did not include any
overall targets for resource productivity. Why was that? What
can we expect to see emerging in the next Parliament in concrete
terms?
John Healey: This is an area of
technical work. Perhaps I can ask Paul O'Sullivan to answer.
Mr O'Sullivan: I think the whole
question about resources and targets is a lot more complicated.
In energy we have clear objectives. This is something which I
know Defra are thinking about in terms of things like their sustainable
development strategies and sustainable production and consumption.
As things stand, this is an area where exactly what the market
failures are, in terms of using resources, is still quite a complicated
issue. You can see market failures in environmental objectives
and energy where you want to achieve things. In terms of developing
a policy, this is something where Defra are considering alternative
measures and it is an important part of the work they are doing
on sustainable development. They have not got to the point yet
where, beyond protection of natural resources and some of the
targets you have in Defra's PSAs, they have targets of what would
be a desirable level of useful resources for particular materials.
Dealing with it practically, this is something they are considering
for their work through sustainable development.
Q279 Mr Challen: I recognise it is a
very complex area, but surely by now, after all these various
reports and the work of six years, we should be able to put something
in a Pre-Budget Report?
Mr O'Sullivan: In terms of what
goes into the Pre-Budget Report, we look at a set of environmental
objectives against which we have particular targets. We want to
be able to report on that and say whether policies, which are
particularly relevant to the Treasury, impact upon these, so things
like the aggregates levy which is obviously relevant to some of
these resources. Until we have PSAs which have more specific targets
across Defra, it is difficult for us to have a specific objective
which we would be reporting against in the Pre-Budget Report.
Obviously, as that work develops, if we start to get those targets,
we will want to start feeding that into what we are reporting
against and thinking about in terms of the Pre-Budget Report.
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