Examination of Witnesses (Questions 320
- 339)
WEDNESDAY 23 FEBRUARY 2005
MR NICK
EYRE AND
MR BRIAN
SAMUEL
Q320 David Taylor: Next year will
see the introduction of home information packs and part of that
will be home condition reports with obligatory energy audits,
which allows at least in principle for fiscal incentives via stamp
duty to those who have invested in energy efficiency measures.
Six weeks ago a Bill was introduced in the Commons which would
have introduced such fiscal incentives. It seems to be an open
and shut case but do you see any problems? What are the problems,
what are the barriers to such a measure being incorporated into
legislation?
Mr Samuel: I think there is one
main, obvious barrier and that is in the report actually being
carried out to the required standard. Obviously that requires
you to have people who are capable of carrying out those surveys.
After that it is actually getting people to take up the opportunities
that will then exist through reduced stamp duty. Of course stamp
duty only applies to the 1.2 million homes per annum that are
sold so therefore other mechanisms, perhaps incentives through
reductions in council tax, might also be required for those non-movers.
The other point of course concerns those houses that are below
the stamp duty threshold of £60,000 (or £150,000 in
the most deprived areas) so some form of grant scheme would actually
be required to address those particular segments. These could
be funded by increases in stamp duty for homes above the £250,000
bracket so it would be revenue neutral. Although that is quoted
as a barrier we believe it can be readily overcome.
Q321 David Taylor: Your report is
admirably concise and pretty comprehensive. The section on fiscal
measures has got eight particular suggestions but you identify
establishing incentives as the single most important fiscal change
needed. Could you just back that up with some figures on the sort
of savings there might be and the costs that there might be as
part of the incentive?
Mr Samuel: I think the level of
savings will depend on the level and type of measures that are
implemented. If you use the most basic cavity wall insulation
and loft insulation you are perhaps looking at 0.2 million tonnes
of carbon per annum. That should provide savings of around about
£58-£60 million and at a cost of £190 million per
annum. If you then went further and looked at better heating controls
then perhaps you are looking at 0.25 million tonnes of carbon
with savings of around about £70 million and at costs of
around about £220 million.
Q322 David Taylor: You would tell
the Treasury this is revenue neutral because you would be increasing
stamp duty further up the range. I presume that you are aware
of how controversial stamp duty has become. Do you think this
is politically tenable?
Mr Eyre: I think we would leave
it to people who have to face elections to decide whether—
Q323 Ms Atherton: Thanks a bundle!
Mr Eyre:—whether stamp duty
should go up as a disincentive to energy inefficiency or down
as an incentive to energy efficiency. What is clear to us is that
there needs to be an incentive. All we are saying is that you
can make that revenue neutral if you want. It is clearly a political
decision how to do that.
Q324 Ms Atherton: You mention that
council tax could be used as an incentive to encourage energy
efficiency for those who are not moving. If I were lucky enough
to live, say, in the South of France what incentives might I find
in France or other European countries to encourage me to make
that investment?
Mr Samuel: France has implemented
a different system whereby in return for energy efficiency investments
in property you would then get a rebate on your income tax. In
the case of the UK where there are 4.5 million people who fill
in tax returns, the majority obviously through pay-as-you-earn,
it would perhaps over-complicate tax forms as well for a number
of people. So the French system has definitely got merits and
is proving successful there but whether it can be readily applied
to the UK, and if so would it be any better than stamp duty and
council tax rebates, I would question.
Q325 Chairman: How many houses are
bought and sold each year out of the total proportion of the housing
stock?
Mr Samuel: It is about 1.2 million,
7% I think.
Q326 Chairman: So you have only got
7% that could be the subject of your fiscal incentive and 93%
remain untouched?
Mr Samuel: Yes but it is each
year so obviously over time it does increase. From our perspective
it is probably better to tackle those 1.2 million houses, bearing
in mind there are only 300,000 houses at the moment getting cavity
wall insulation.
Q327 Chairman: And that number is
of the built stock, not new houses?
Mr Samuel: It is of the built
stock.
Chairman: Right, okay.
Q328 Mr Lepper: Can we turn to transport?
22% of the UK's CO2 emissions are attributable to transport,
95% of that attributable to road transport. We were quite concerned
to hear that schemes like Powershift, Clean-up and New Vehicle
Technology schemes were being cut this year. The Secretary of
State for Environment, Food and Rural Affairs assured us at our
last meeting[9]
that although they might be about to be abolished they were going
to be replaced by better schemes and so far as she was aware there
would be no cuts in the finances available for these replacement
schemes. Can you tell us a bit more because I know with the Department
for Transport you are involved in those schemes. Could you tell
us a bit more about why Powershift, Clean-up and the rest are
going and what is going to replace them?
Mr Eyre: I think we can say that
the reason is that the Department for Transport, having taken
legal advice, was concerned that two of the schemes—Powershift
and Clean-up which are grant programmes—might not comply
with the European Union's state aids rules and therefore took
the decision to close those as from the end of this financial
year. We were already discussing improvements to those programmes
with the Department for Transport so we are now working with them
to allow the Government to put revised schemes which would be
designed to be state aids compatible to the European Commission
as quickly as possible. I think to say they have been cut whilst
it may be accurate perhaps it could be a little misleading. Certainly
the DfT has not indicated that it wishes to reduce our budget
for these sorts of programmes for next year and we are hopeful
of getting schemes up and running as quickly as we can, but of
course that does mean getting the necessary state aids approval.
Q329 Mr Lepper: That does suggest
that there is going to be a gap between the ending of those schemes
which do not meet the state aids criteria and their replacements;
is that true?
Mr Eyre: That is correct, yes.
Mr Samuel: Yes and the length
of that gap would depend on the time it takes to achieve state
aids approval.
Q330 Mr Lepper: Could you give us
any indication, any guess at how long that gap might be?
Mr Eyre: I think we are talking
months rather than weeks. I would happily attempt to be more specific
but I would simply be wrong so—
Q331 Mr Lepper: It has been suggested
to us that these changes came as a surprise to some people involved,
for instance in the road freight industry and other stakeholders.
Is that a justifiable criticism? You have suggested some discussions
going on over a period of time but others have suggested to us
that it came as a bit of a shock.
Mr Eyre: I suspect that the hiatus
did come as a shock because the Department for Transport, for
fairly obvious reasons, had not gone around saying to the industry,
"We are taking state aids legal advice on whether these schemes
are legal." That is not the sort of thing you would expect
a government department to do.
Q332 Mr Lepper: Did the state aids
issue apply to all of those schemes which are ending and/or being
replaced because again a point the Secretary of State made to
us is—and perhaps she did not dwell so much on the state
aids issue although she did mention that—there was also
a shift from an emphasis on air quality to climate change in the
nature of what the replacement schemes were attempting to do.
Mr Eyre: The intention is that
the replacement schemes should be more clearly focused. The Clean-up
scheme will continue to focus on air quality. The Powershift programme
will be replaced by a low-carbon programme which you will not
be surprised to hear focuses more on climate change. So the attempt
is to be very clear about the objectives of different programmes.
Q333 Mr Lepper: Do you feel from
the point of view of the Trust that there is sufficient liaison
between Defra, the Department for Transport, the DTI and the Treasury
on these important issues?
Mr Eyre: I think the strict answer
to your question is, yes, I think there is sufficient liaison
through the Sustainable Energy Policy Network and through other
meetings of officials and doubtless of ministers as well. I suspect
the issue may be one more of priority given to climate change
in some departments.
Q334 Paddy Tipping: Such as?
Mr Eyre: I think Defra and DTI
in drawing up the Energy White Paper have clearly given a very
high priority to climate change.
Q335 Paddy Tipping: The Department
for Transport?
Mr Eyre: There are some other
departments, of which you have named one, which perhaps (understandably)
do not give such high priority to climate change because they
have other burning issues.
Q336 Paddy Tipping: The oil companies
you mean?
Mr Eyre: No, I think it is to
do with the extent to which they see climate change as central
to their objectives as a department. I think perhaps we need to
push the message harder that because the use of energy and climate
change cuts across the whole of the economy and indeed all human
activity then it needs to be a central objective for every government
department and that should include the Treasury on taxation, it
should include the DFT on transport, and it should include ODPM
on housing.
Q337 Chairman: Is there a word that
is missing from your answer to the question where you said there
is enough liaison but is it, question mark, effective because
if you disaggregate the gains that have been made by the "dash
for gas" just about every other sector in terms of emissions
output (and transport probably being the worst example, particularly
re aviation) has been steadily increasing over the time when we
are supposed to be reducing in overall terms our greenhouse gas
emissions? Secondly, climate change judging by the Prime Minister's
prioritisation and this is supposed to be at the heart of government.
Some of the evidence we have received has suggested that it has
not quite reached the heart yet.
Mr Eyre: I would agree that the
reality is that some government departments are perhaps slower
to change than some of us would wish. That is because they have
got other understandable priorities. I really do not think it
is liaison; I think it is political priority.
Q338 Mr Lepper: Have you noticed
any discernable shift in those attitudes as we approach the UK's
Presidency of the G8 with the Prime Minister's stated emphasis
on the importance of climate change as one of the themes of that
Presidency? Has that filtered down into every department of government
from your perception of it?
Mr Samuel: If I can just refer
to a different department, the Department for Education and Skills,
we believe that informing future generations is a key aspect in
order to reduce climate change emissions. We have a very small
schools programme at the moment that only addresses 250 schools
but we have noticed more engagement from DfES in relation to developing
a Framework for Sustainable Energy. Previously the priorities
of that department have been different but it is moving towards
addressing these types of issues. I think the thing is the pace
of some departments is naturally slower than others because of
other issues at the moment. We would like to see sustainable development
and sustainable energy efficiency/carbon reduction being much
more deeply embedded in the future.
Q339 Mr Lepper: Perhaps the Prime
Minister needs to be doing a bit more to communicate across departments
the importance for him and for all of us of these issues over
the next year?
Mr Samuel: I would say that applies
equally to the regions and local authorities as well.
9 Wednesday 9 February 2005 Back
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