Examination of Witnesses (Questions 660
- 679)
WEDNESDAY 14 JUNE 2006
RT HON
DOUGLAS ALEXANDER
MP, MR SIMON
WEBB AND
MR NIGEL
CAMPBELL
Q660 Dr Turner: What you are saying
effectively is that you are not actually going to address transport
emissions because it is easier for other people to reduce emissions
in their area. If you take that to its logical conclusion, and
given the predictions for aviation growth, et cetera, transport
emissions could take up our whole global target emissions leaving
absolutely no room for any emissions by any other sector of the
economy by 2050 unless transport bears its share of the burden.
Mr Alexander: My understanding
is that transport emissions more closely tracks GDP growth than
other sectors of the economy.
Q661 Dr Turner: I am coming to that.
Mr Alexander: In terms of the
point that you make in terms of aviation, that is why, even prior
to my arrival at the Department for Transport, during the British
Presidency of the European Union I worked for, and was indeed
pleased to see the outcomes of the Environment Council which secured
a greater degree of consensus on the need to move this forward
than previously. Even a cursory reading of the newspapers in the
last couple of days reflects the fact that there are major players
in the airline industry, for example Lufthansa, who are on record
yesterday as saying that they oppose the inclusion of the aviation
sector within the Emissions Trading Scheme any time soon, and
to recognise what a significant prize we achieved with the Department
for Transport, working extremely closely I understand with the
Department for the Environment, to secure those conclusions in
the Environment Council in December. I do not say that all the
issues have been resolved. There is much further work that we
do still need to undertake, but I believe that it is the right
policy given the inherently international nature of air travel.
I believe we have made significant progress in terms of the conclusions
of the Environment Council. There will be, I understand, a further
vote in the European Parliament next month on exactly this question
of aviation coming within ETS. Indeed, we now look forward by
the turn of the year to the European Commission producing its
legislative proposals as a consequence of what under the British
Presidency we achieved. So I can assure you that we take very
seriously the challenge of emissions from the aviation sector
in particular, but we are convinced that the right response to
that, given its inherently international nature, is to include
aviation within the Emissions Trading Scheme.
Chairman: We will come back to aviation
in a moment.
Q662 Dr Turner: You are saying that
the Government accepts that the growth in carbon emissions mirrors
economic growth, but that is precisely one of the most important
arguments because if you take our global emissions and our total
economic growth, then the growth in emissions has been decoupled
from economic growth. Indeed, one of the biggest questions in
tackling climate change is that if we fail to decouple growth
from growth in emissions then we have no chance. So I cannot understand
the logic of accepting, in this important sector, the growth and
continued growth—
Mr Alexander: Historically, it
has been the case that there has been, in terms of trend, a correlation
broadly between GDP growth and transport emissions, but of course
you are right to recognise that we want to work actively to decouple
them. That is why, for example, in terms of the RTFO that I mentioned
you can see progress there; it is why, in terms of aviation and
that sector we want to see it brought within the Emissions Trading
Scheme at a European level; it is why we continue to believe that
there is a significant contribution that can be made by sustained
investment in public transport, in terms of giving people effective
choices to make. So does that set challenges for us? Of course
it does, but, equally, I do not, and would not, wish to advocate
a scenario which says that the cost of meeting our environmental
obligation is that we should not, as a country, pursue economic
growth. I think, in many ways, there are technological solutions
to this and there will, of course, be a behavioural dimension
to this, and, as I sought to reflect at the outset of my remarks,
our challenge is to work effectively with industry and, indeed,
with the public to set a policy framework which incentivises the
outcomes that we would like to see.
Mr Campbell: May I put some numerical
description on that? I think what is going on here is there is
a consequence of economic growth, and then there are policy measures
to reduce carbon emissions, whether by decoupling or other policy
measures, such as the Renewable Transport Fuels Obligation. In
1995 carbon dioxide emissions were 150 million tonnes of carbon.
If you look in the Climate Change Programme review document you
get a number, for 2010, that says before the policy measures were
announced it was 144, but actually if you take away the policy
measures in the first Climate Change Programme you would have
had 161 million tonnes of carbon. So the economy proceding and,
also, demographic factors would have changed from 150 to a rise
to 161. A series of policies in the first Climate Change Programme
brought it to 144. A series of policies in the Climate Change
Programme review of the document that you have seen takes it to
132 to 137. So as well as some decoupling, what has gone on is
an increase and that has been pushed down by new policy measures.
Q663 Dr Turner: Yes, but not in the
transport sector.
Mr Campbell: And in the transport
sector. So that 6.8 million tonnes of the saving, getting us down
from 161 to in the 130s, is in transport. So what you are seeing
is the transport—
Chairman: It is a lower rate of growth
of emissions rather than an actual cut in emissions. I think we
have had quite a lot of time on this.
Q664 Colin Challen: The 2004 White
Paper used projections about the future cost of oil per barrel:
in 2010 the price was going to be $23 and by 2020 it was going
to be $28. In the light of recent experience, have you now obtained
new projections for those years 2010 and 2002 for the price of
oil?
Mr Alexander: The first thing
is you would anticipate, again, I have taken a fairly close interest
in this, not least given the terms of the evidence you have received
from the editor of Petroleum Review, both in terms of the
issue of peak oil and, also, in terms of the issue of oil price
forecasts. The first point, just in terms of the machinery of
government, is to recognise that it is not the Department for
Transport which itself sets what is the Government's view as to
the oil price but is indeed compiled by the Department of Trade
and Industry. The oil price scenarios (I have sought to look into
this in light of the evidence you have received) are based on
what the Government judges to be realistic assumptions about possible
alternative paths for GDP growth, global oil demand and supply
and investment in the oil industry. They take into account assumptions
used by organisations such as the United States' Department of
Energy and the International Energy Agency, an intergovernmental
body independent of the industry formed to advise consuming nations
on energy issues. The oil price scenarios were last updated in
February 2006, and these will be reviewed and published as part
of the Energy Review, so it will be a DTI lead on this, but this
will be something that I understand will be covered in the Energy
Review, which will be published in the months to come.
Q665 Colin Challen: Of course, these
projections are just that: they are projections and not statements
of fact. Clearly, they must have influence on how you plan things
Previously, until 2000, we were planning things on the basis of
a fuel duty escalator; we now have an escalator, thanks to market
forces, which has probably taken us well beyond where that previous
one would have taken us. How has that affected your planning within
the Department? It must have had some impacts, and what impacts
have been evident as a result?
Mr Alexander: As I say, we work
closely with the DTI in terms of the published figures that are
produced, but you are right to recognise that not simply is it
the case that fiscal measures are set on a year-by-year basis
but, also, there is volatility within the oil sector.
Q666 Colin Challen: What has changed
in the Department's thinking, as opposed to its discussions with
other departments about the figures? What has actually changed
in the Department's thinking? Could we ask, for example, whether
the Department welcomes the current price because it might suppress
demand and, thereby, eventually reduce carbon emissions, or does
it see it as more of a threat because it damages economic growth,
or brings the prospect of inflation, which I understand is a clear
concern around the world at the moment? What is the Department's
position, if you like? It must have a view on where prices are
going.
Mr Alexander: I think the Chancellor
of the Exchequer might have a view if the Secretary of State for
Transport suddenly held forth on our view on international oil
prices and how it will affect global inflation. It reflects the
fact, of course, that all of the departments I have mentioned—whether
it is the DTI in terms of the economy, whether it is the Treasury,
both in terms of its international responsibilities for global
markets or, indeed, its stewardship of the economy, and ourselves
in terms of transport—follow these issues closely. The updated
energy projections, that I reflected in my remarks, in February
2006 do quote prices on 2005, 2010, 2015 and 2020. The point I
would make is that it tends to be that, given many of the projects
we are working on are longer-term measures and making longer-term
judgments, those figures towards the end of that spectrum do matter
to us and we will follow them closely. We are working closely
with the DTI in terms of the Energy Review at the moment, and
that will be the next opportunity at which these figures are updated.
If you are suggesting that we take an interest in this matter,
of course we do, but so, too, do the other departments. The international
oil price is a fact rather than a policy or an aspiration on the
part of government and our job is to recognise those realities
in terms of the global oil market while, at the same time, recognising
that there is considerable divergence even within the global oil
market as to where oil prices will be. I saw that in an interview
in Der Spiegel on Monday Lord Browne, the Chief Executive
of BP was giving his indication as to where he judged the oil
price to be in years to come, and suggesting that there would
be some softening in the global price of crude. Clearly, he is
entitled to his opinion, but that is the job of the DTI, as I
say, on the basis of the sources—
Q667 Colin Challen: I can understand
your reticence in not wishing to trample over other Departmental
responsibilities, least of all that of the Chancellor, but does
your reticence conceal a neutrality on your behalf, for your department,
on this issue? The Government elsewhere does use the price mechanism
as a signal and as a means of suppressing demand. So is the Department
neutral on the question of the price of oil?
Mr Alexander: Firstly, you are
well aware that the issue in terms of, for example, petrol tax
is a matter for the Treasury. Of course, we have discussions ahead
of the Budget, as do all departments, with the Treasury but it
is not for me to set independent policy in relation to our fiscal
regime rather than the Chancellor of the Exchequer. Beyond that
there can be matters which are within your sphere of concern but
not necessarily your sphere of influence, and I think, probably,
the global oil markets would fall within something that we are
concerned about but I would not claim, as the Secretary of State
for Transport in the United Kingdom, that accounts for about 2%
of global emissions, we are able to direct, more than within our
own domestic market, prices as they have emerged through the global
oil markets.
Q668 Colin Challen: This issue does
have a bearing arising from concerns about peak oil. I am wondering,
in the light of your appointment letter and the Prime Minister's
request that you contribute to the Energy Review, whether the
Department has made representations to the Review on the issue
of peak oil, and what impacts that may have. A supplementary question,
if you like, is: does the Department take a view on when we will
reach peak oil?
Mr Alexander: Our view is that
global oil production will not peak before 2030, but again that
is a cross-governmental view rather than simply the view of the
Department for Transport. That is contingent on sufficient investments
being made. This is consistent, as I sought to describe in my
earlier answer, with the view of the IEA, most other governments
round the world and, indeed, the oil industry itself, and reflects
what we have judged to be several flaws in the argument that was
put to this Committee by one individual who clearly takes a very
different view in terms of the timing at which peak oil will be
reached. Simon, you might want to say a word in terms of how,
in practice, we are working closely with the Department of Trade
of Industry in terms of the Energy Review.
Mr Webb: We have had a member
of the Department for Transport working on the Energy Review.
We think with these kinds of issues it is better for us to be
on the joint team approach with them, so we have had somebody
working there all the time, making sure, first of all, that we
are contributing transport expertise and, secondly, obviously,
we are very interested that long-term oil price projections are
being thoroughly addressed and that transport measures, which
are relevant in the context of energy, are being explored and
we have a modest menu of things that we are exploring within the
Energy Review. So I think we are thoroughly engaged on all that,
and that allows us also, as a department, to sort of calibrate
what we are doing in the light of the unfolding knowledge, so
that in our long-term strategic thinking we can take account of
both what the projections are and uncertainties about them.
Q669 Colin Challen: We are very different
countries, but do you think we have anything, in this country,
to learn from the Swedish example, where they are now proclaiming
a public policy commitment to reduce their dependence on oil by
2020?
Mr Alexander: Actually, I should
probably declare an interest, in that prior to my appointment
as Secretary of State for Transport, holding my previous position
as the Minister for Europe, I travelled to Stockholm and met with
Stefan Edman on 13 March, who is leading the Commission on Oil
Independence. That (it is curious how these events happen) reflected
the fact that I read in The International Herald an article
with the Swedish Prime Minister, a person who himself talked at
great length about Sweden's commitment to oil independence. I
was sufficiently intrigued that in the course of what was otherwise
a straightforward Foreign Office visit to one of our European
partners, I requested personally that I could meet with the Head
of the Oil Commission back in March. I did find it a fascinating,
albeit fairly brief, meeting with him, and I will be interested
to see the conclusions of the oil independence commission study.
My recollection of the time—and I appreciate the Committee
may have been in Stockholm since I was there—was that he
was bringing forward his recommendations in the summer, around
August. Of course, there is an anticipated general election in
Sweden in September, so we will all be following with great interest,
not least, as a Labour Government, the fortunes of the Social
Democratic Government in Sweden. In terms of the discussions that
I had with them at that point, and that was prior to my appointment
as Secretary of State for Transport (I can see my officials looking
worried at this point because they did not have the opportunity
to give me a brief before I went there), they emphasised a few
points to me: firstly, that they faced a particular challenge
in Sweden in that if you take an average Swedish car park it is
thirstier than an otherwise average European car park—the
predominance of Saab and Volvo mean that you tend to have more
energy-demanding vehicles. However, another strong emphasis that
was placed to me, which is quite distinctive to Sweden, is what
they describe as Swedish gold in terms of biofuels. They are convinced
that there are big opportunities within Sweden to see oil becoming
predominantly a feature of the transport sector of the economy
whereas, at the moment, oil, for example, in terms of housing,
accounts for a significant portion of oil consumption within Sweden.
So I would be very interested in the outcomes of the Oil Independence
Commission. I do not foresee circumstances in which we would be
arguing for oil independence, as a government; it reflects the
fact both that we are ourselves still a significant net exporter
of oil—I think, in terms of oil production, we are around
13th or 16th in the world, at the moment—but, at the same
time, I will be very interested in the conclusions of the report
to see whether there are lessons that can be learned in terms
of the kind of efficiencies in technology and public policy which
can assist us in the pursuit of our environmental goals consistent
with our economic and social goals as a government.
Q670 Colin Challen: Can I ask one
final question: I am just wondering if we are falling behind a
bit. The Swedes are going down that route; George Bush told the
Americans that they were addicted to oil and they had to do something
about it (I know there are layers of complication with that simple
statement), but last year at the Labour Party Conference the Chancellor
told us that we needed to increase production of oil and develop
more oil refineries and so on. Are we really in step with the
international community on this issue?
Mr Alexander: Having managed,
hopefully, to avoid conflict with the Treasury ahead of the Spending
Review on the fiscal regime in relation to petrol, I feel I now
tread rather close to Margaret Beckett as Foreign Secretary if
I comment too much on the line in the State of the Union speech.
There are a few points I would make, though: firstly, the issue
in terms of refining is somewhat different, where my understanding
(and I would not claim to be an expert who has worked in this
field for many years and many others have) is that one of the
reasons why we have a high oil price at the moment is actually
a constraint in terms of refining capacity rather than an ability
to access either new fields or fields which can increase their
levels of production. In that sense, it does seem to me to be
common sense, if there are considerable constraints on refining
capacity at the moment, to look at how that bottleneck can be
addressed in order to see the oil price reflect capacity rather
than simply a specific bottleneck in terms of refining. Secondly,
in terms of your point on President Bush's comment, I know that
that has been a source of great interest and great commentary
in the United States itself. I recently had the opportunity to
read a speech by Barack Obama, the newly-elected Senator for Illinois
in the United States, who took great issue with the assertion
that President Bush had made because he said: "It is easy
to state that as a fact but the policy consequences are somewhat
different". In that speech he argued from a different political
point of view that there needed to be far more work undertaken
in terms of policy measures. I sit here today on behalf of the
British Government, not the American government, but I think we
need to assess these matters not simply in terms of our public
statements but, also, our public policies. In terms of the British
Government position, as I say, I do not think even our harshest
critics could dispute the fact that on the international stage—whether
through the action that we took at the Montreal Conference towards
the end of the year, whether in terms of the fact we prioritise
climate change along with African global development as one of
the two key challenges that we set for the Gleneagles Summit last
July—we have been amongst the global leaders in prioritising
the issue of climate change. The final point I would make would
simply be to say that while they may be related I think there
are distinctive policy dimensions to the question of energy independence
and energy conservation. Of course, we, again, through the Prime
Minister's speech at the European Parliament last autumn, have
prioritised the work of the European Union in terms of taking
forward a common energy policy and within that common energy policy
one strand of work is around that issue of energy security; another
strand of work is around energy diversity and a third strand of
work is around generally liberalised energy markets within the
United States. I would not, in all circumstances, see the issue
around oil independence and oil security as being one and the
same.
Q671 Mr Hurd: The market has effectively
replaced the fuel duty escalator—certainly that is the argument
the Chancellor uses for not restoring it. Given that the impact
of higher oil prices has been felt at the petrol pump for a while,
what evidence are you seeing at the Department in terms of the
impact of higher oil prices on demand? If you are not seeing anything
yet when would you expect to see it bite?
Mr Alexander: The first point
I would make would be to say that often in the context of discussions
such as this the fuel duty escalator is seen simply as an environmental
measure, and my recollection of the circumstances in which actually
the fuel duty escalator was introduced by a previous government
was a need to find some extra money as much as (and I hope I am
not being uncharitable in that description; to secure revenue
is a reasonable aspiration of a chancellor in those circumstances)
to address specifically environmental concerns. Of course, it
is for the Chancellor to reach a judgment at each Budget in terms
of the volatility of the oil markets and the price of the oil
markets, and that has been reflected in the statements that the
Chancellor has made in recent years. My understanding and my recollection
of the statement that was made at the last Budget was that there
would be a further consideration of this, I think, in the autumn
of this year, in September. So, in that sense, it is a matter
which the Treasury keeps under review but it would probably be
better directed towards the Treasury, given their direct responsibility
for the fiscal measures related to transport.
Q672 Mr Hurd: My question was not
a political one but quite a straight one: what impact, in terms
of the data that you process, are you seeing in terms of the impact
of higher oil prices, on demand. Forget the politics, what actually
do you see?
Mr Webb: Over last winter there
was some reduction in the expected level of vehicle use, but we
need a rather longer run of numbers before you can tell whether
it was some other factor and the statisticians, I think, are able
to record the data, which is all out there. We are nervous about
making a firm conclusion, but I suspect there is something of
last summer-to-autumn's oil price rises in there. Traditionally,
there is quite a strong inverse correlation between price and
road use, though you have to recognise that you are already at
a high level because of the fuel duty and, therefore, the incremental
effect of an oil price change is actually much less than it might
appear at first sight because you have got such an amount of tax
already in there.
Chairman: We are about halfway through
our time, so can I urge my colleagues to be as brief as they can
with the questions, and I am sure the Secretary of State has got
lots of good points to make, so perhaps you could also respond
in the same vein.
Q673 Emily Thornberry: I want to
take you back to your expected return from the initiatives within
the Transport Department being around 25% of cuts in carbon emissions
in the UK, which I understand was your earlier evidence. Which
of the initiatives are likely to have the biggest impact, and
do they include the one which is the choice made by people as
to what type of car to buy, so perhaps buying more efficient cars,
and the impact of the Vehicle Excise Duty on that? We have seen
a change in the way in which people have bought company cars,
but that impact does not seem to be anything like as great on
the private market. Really, my question is a bit of a cheeky one:
I would be very interested to hear about your 25% and what it
is your top five might be, and does that include the choices that
people might make on the type of car they might buy?
Mr Alexander: This is actually
set out in terms of the Climate Change Programme in terms of the
actual numbers, and I will ask Nigel to say a word in a moment
in terms of numbers. In terms of the categories by which we account
for the transport portion of the projected savings: in 2010, in
terms of millions of tonnes of carbon, the Voluntary Agreements
package, including reform of company car taxation and graduated
VED, which was the specific point that you asked, in terms of
influence on purchase, 2.3 (that is in million tonnes of carbon);
wider transport measures, 0.8; sustainable distribution in Scotland
and Wales 0.1; the fuel duty escalator 1.9 and the RTFO 1.6.
Q674 Emily Thornberry: What is the
RTFO?
Mr Alexander: The Renewable Transport
Fuel Obligation, which is basically the sale of biofuels of 5%
within the mix by 2010. That was the point I made in the introductory
remarks. It may not be visible—indeed it will not be visible—to
car users but the effect of simply changing the biofuels or increasing
the portion of the petrol at people's pumps in the station by
up to 5% of biofuels has the effect of more than 1 million tonnes
of carbon, which is equivalent to a million cars off the road.
So it is a very significant measure and makes a significant contribution.
Nigel, is there anything you would add to that in terms of the
numbers?
Mr Campbell: Not much, except
to say that the Voluntary Agreements package actually makes an
improvement in fuel efficiency, whether that comes from people
driving in a more fuel-efficient and, often, safer manner (not
accelerating and braking so fast) or choosing a less environmentally
damaging vehicle through the company car tax reform or the graduated
VED system, or the technological fixes. All those three combined
add to the 2.3 million tonnes of carbon and 2.3 million cars off
the road, in effect.
Q675 Chairman: Is not the evidence
that it is a substantial incentive that really makes an impact
on people's choice of vehicle? That is why the company car tax
provisions have worked quite well. As yet, the very small incremental
changes in VED for ordinary private vehicles have not had much
impact. Is there not now overwhelming evidence that bigger VED
differentials are needed if there is to be any significant change
in car-buying behaviour by private motorists?
Mr Alexander: On the basis of
the numbers that I have just offered to the Committee, I do not
think there is a single response, in the sense that if you look
across the range from 1.6 million tonnes of carbon from the RTFO
(simply changing the fuel mix) through to and including the Voluntary
Agreements package, and those two elements that you have mentioned,
graduated VED and company car taxation, it is right to recognise
that the company car taxation system has, we believe, accounted
for significant savings. This is a matter which the Chancellor
will keep under review in terms of the judgments that he makes
both in terms of the company car scheme and, also, in terms of
VED, but there has been a significant decision taken in terms
of the last Budget in terms of the graduated or graded system
of Vehicle Excise Duty. Ultimately, that is a decision that is
made following discussions with the Department for Transport and
the Treasury at the time of the Budget.
Q676 Chairman: I appreciate it is
a Treasury decision. Whether, however, raising the VED for the
most high emitting vehicles by an amount which equates to about
half the cost of filling their tank could be described as "significant",
I think, is open to question. I hope that your Department will
make very strong representations before the next Budget about
this. Can I just move on to another issue, which is about the
fuel duty escalator? When that was frozen or abolished six years
ago greenhouse gas emissions from domestic transport did rise
quite sharply. We have touched on the question about the effect
of the oil price rise, but is it not now clear, because of that
rise in emissions, that the abolition of the escalator in response
to those fuel duty protests of September 2000 was a rather premature
response?
Mr Alexander: You will appreciate
that the period that you describe was somewhat before my time
as Secretary of State for Transport, so maybe I will turn to my
officials at this point, in terms of the large table of numbers
that Nigel has before him.
Mr Campbell: I was going to make
two points. One is that you saw quite a big increase between 2001
and 2002 in road transport emissions—they increased by something
like 2.5%. The following year it fell by nearly 2.5%, so if you
compare 2003 with 2001 it has increased a bit. I think, also,
to relate back to Mr Hurd's question, Simon rightly said why the
statisticians were not comfortable saying: "This year's prices
have done this to this much". If you look over a longer run
of data, broadly, 10% more on the fuel price reduces travel by
about 3%, and by encouraging cleaner fuels it reduces carbon emissions
and fuel use by about 7%. So the fuel efficiency thing is slightly
bigger—
Q677 Chairman: What puzzles me about
the Government's approach generally on cars is this: we now have
technology which will allow people to go on driving their cars—in
fact increase the amount they drive—and, at the same time,
achieve big reductions in carbon emissions if we could persuade
everyone to move to low-emission vehicles and to drive in a more
prudent and environmentally friendly way. Now, given that is the
case, that is a relatively easy policy for the public to accept.
No one is saying: "You can't go and see your granny on Saturday
by car"; they are simply saying: "Choose the environmentally
friendly car to do so", and yet the incentives to do that
are ludicrously feeble: there is a tiny differential on VED, we
are dithering about road-pricing, and it is going to be years
before it comes in except in a very small number of urban areas,
and we are doing relatively little about raising the duty on fuel,
yet all these are measures which could be introduced on a revenue-neutral
basis; no one says the overall tax burden should increase but
a very strong signal could be given to car users that: "Yes,
you can go on driving your cars as much as you want, as long as
you drive a greener car".
Mr Alexander: There are a number
of points I would make. Firstly, there is no one, single response
to this. For example, the RTFO will effectively have no impact
on individual drivers in the sense they will probably be blissfully
unaware in terms of the fuel mix at the pump but, nonetheless,
in terms of the actual impact on numbers it is itself very considerable.
Secondly, there is a challenge in terms of engine technology,
and we have seen significant progress being made in terms of engine
technology in recent years. We have had discussions at a European
level in terms of the Voluntary Agreements that we have secured
at a European level with a range of different manufacturers, including
Japanese and European manufacturers, and we want to see that go
further. Indeed, we are in discussions at the moment as to what
is the most appropriate way to take forward that agreement with
the manufacturers in terms of new car fuel efficiency, but there
is also work which can be undertaken in terms of, as you say,
cleaner cars themselves. One of the measures that took place under
my predecessor, I understand, was fuel-efficiency labelling to
equip people with the proper information at point of purchase
where they are deciding what vehicle to acquire. In addition to
that, as I say, there are fiscal measures; for example, both the
graduated Vehicle Excise Duty that I have spoken of and, also,
the company car scheme. However, I recognise that there is a contribution
that can be made and that is why I welcome the step the Chancellor
took in terms of the graduated Vehicle Excise Duty as a step in
the right direction.
Q678 Mr Hurd: You appear to have
dumped one of the policy levers, which is the Powershift grant,
which appears to leave you with a problem in relation to the target
for sales of low carbon cars, which I understand is to reach 10%
of all new cars by 2012. That would require sales of around a
quarter of a million low-carbon cars per year but in 2004 sales
of these cars reached a total of 481. In the absence of the Powershift
grant and without a desire to move the VED differentials much
further, what policy levers are you going to use to get even closer
to that target?
Mr Alexander: Even with a Powershift
grant we were not convinced, on reflection, it was the right response.
Just, perhaps, to give you some of the history, in terms of Powershift
grants (because, again, you would anticipate it was a question
I asked my officials on arriving in the Department), Powershift
was suspended back in March 2005 following concerns about the
technology-specific nature of the programmes and the degree of
compliance with European state aid rules. We did notify the European
Commission for clearance in early 2005. However, a review of the
grants, as I understand it, by the Department concluded that the
benefits of four of the six programmes would be limited to the
purchase of emission reductions. In the absence of wider benefits,
such as market transformation effects, which, as I understand
it, was the original idea—that if we had these grants it
would actually have a transforming effect on the market—it
represented poor value for money. As in all of these schemes,
I think it reasonable that Ministers are charged with asking what
can have an impact in terms of market shift. On the other hand,
having a reasonable concern for prudence in terms of the public
finances, frankly, we are not convinced that giving individual
grants of such a small nature to individual car purchasers will
deliver the significant emissions reductions or a change in the
way that people, at the moment, approach issues of green transportation
to believe that it is the right way to go. That explains the decision
that we have taken. In terms of what will take its place, there
are a couple of things which I would highlight—as Nigel
turns the page for me. One is the low carbon R&D programme,
which specifically involves grants for industry for R&D into
low carbon. One of the features that has already been pointed
out by the Chair is the capacity of fleet purchasers to actually
have a differential impact. That is also the case, for example,
in terms of the work we have been doing with the transportation
sector in terms of logistics, where there are actually very considerable
gains to be secured in terms of carbon emissions from ensuring
that people are driving in a way that is also environmentally
friendly. The other approach is an infrastructure programme which
is, essentially, grants towards the cost of alternative fuel refuelling
points, for example gas, electric, hydrogen and bioethanol. I
understand from my reading of the evidence before this Committee
that there has been some interest expressed in terms of whether
we could in the future look to the kind of approach that has been
taken in Stockholm, where you have a limited number of these points
within a constrained city area. It would be by such an infrastructure
programme that we could issue grants if there was a city, like
London, which was willing to countenance that in the future.
Q679 Mr Hurd: Is the target still
there or is it just so out of sight that it is embarrassing?
Mr Alexander: We are not giving
up on the target but, on the other hand, the specific grants in
terms of the Powershift proposals we were not convinced would
assist us in reaching it.
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