Examination of Witnesses (Questions 30-39)
MR SIMON
BULLOCK AND
MS SARAH-JAYNE
CLIFTON
23 JANUARY 2007
Q30 Chairman: Good morning and welcome.
I guess you understand that your fellow colleague has been defeated
by the transport system this morning. A warm welcome to the Committee.
I think you probably know most of us from previous contacts. I
wonder if you could start by giving a summary of your views about
the Stern Report—its strengths and weaknesses as you see
them.
Mr Bullock: My name is Simon Bullock
from Friends of the Earth and this is my colleague Sarah-Jayne
Clifton who is a corporates campaigner. To our mind the Stern
Report was a major turning point on carbon change. I think we
would probably all agree that over the last five years or so the
science has really hardened on climate change and things get stronger
every year; but the major stumbling block and barrier to action
has been this perception that tackling climate change would be
bad for the economy; that is a very prevalent view—without
a lot of evidence, I must argue. What the Stern Report does so
very powerfully is turn that argument completely on its head and
say that in fact it is far better for the economy if we act now
rather than delay. To our mind, that is the central message from
the Stern Report, that urgent, strong action is needed now. What
would follow from that would be pretty much a new strategy on
climate change from this Government. As we have seen over the
last ten years, despite a lot of strong rhetoric, carbon emissions
have not come down; and, despite a number of good measures, they
are largely piecemeal and what we need is a strategy to drive
carbon emissions down in a way that is good for the economy. Overall
we strongly welcome the Stern Report, and we hope that it will
lead to a major effect throughout Government. Would you like me
to say what I think about the response to that so far?
Q31 Chairman: Yes.
Mr Bullock: Two things really.
Firstly, it is very welcome that the Government is using the Stern
Review at an international level to drive progress there, to get
some of the more recalcitrant nations on board. I think that is
a very positive step. I think a problem so far has been that Treasury
ministers in particular have downplayed the potential for UK action.
They are all arguing that unilateral action is where it is at;
we do not need to do very much at the national level because,
again, the argument comes across that it may damage UK competitiveness,
and we should not really act alone. I think that is a misreading
of the Stern Report. The Stern Report has two huge chapters, Chapters
11 and 12, which set out why action on climate change unilaterally
is good for the economy, good for the UK's economy and how, if
we do it properly, there are major economic benefits from innovation,
new technologies and efficiencies throughout the economy. I think
that is the message that the Government has missed—whether
deliberately or not I do not know. Certainly the first response
that the Government had to Stern in policy terms was the Pre-Budget
Report and there was shockingly little in there about how to drive
the UK to a low carbon economy. To our view that was exceptionally
disappointing given the very strong statements that both Gordon
Brown and Tony Blair gave at the launch of the Stern Review saying:
this is the most important document to come out of Government
in the last ten years; it is the greatest challenge we face; and
it can be positive for the economy if we tackle this issue. Then
to see so very little in the Budget was immensely disappointing.
Q32 Chairman: That is very helpful.
Stern's calculations produce a higher figure for the Social Cost
of Carbon than the Government previously used hitherto. Could
you illustrate what difference it would make to environmental
taxes, spending and so on if that high Social Cost of Carbon was
actually factored into the Government's own calculations?
Mr Bullock: Firstly, we do agree
with the Stern Report that there should be a higher social cost
of carbon, both because the old figure is based on old analysis
really, a 2002 Treasury view of 2000 science; we have moved on
seven years so it is more up-to-date science which covers more
impacts and uses a more ethically defensible discount rate, so
treating future generations more fairly. We strongly support what
is effectively a tripling of the Social Cost of Carbon. We think
that is right, although probably still is an under-estimate given
that the science gets stronger every year. In policy terms, I
think where it would have the biggest effect is if it was reflected
in the Government's policy appraisal mechanisms. They currently
use the 70 pounds per tonne of carbon across Government and it
affects lots and lots of different things. In the last six months
we have seen it heavily affect the levels of recycling the Government
is prepared to countenance in its new waste strategy. If you triple
the rate of the Social Cost of Carbon that would mean, in the
options you put across and what recycling you go for, it would
come out much more favourable for recycling than incineration
or other options. That is a practical example of where it would
be very different. If it was applied to the Aviation White Paper,
again that would dramatically affect cost benefit calculations
the Government has there. Currently I think they use a figure
of aviation's climate costs of £2-4 billion. If you triple
that that then radically affects the net balance of net positives
or negatives for that expansion programme. It comes across in
lots of other ways as well. Building regulations is another recent
example. I think it was Yvette Cooper who considered standards
for building regulations being unnecessary gold plating. However,
if you use a higher figure for the Social Cost of Carbon then
they are absolutely justified. I do not think it is just an issue
about green taxes; I think it runs right the way across Government.
On green taxes themselves, I think what the figures do is show
that taxes generally should be a lot higher if we are to stop
climate change; but that the level of taxation should not be just
to internalise the external cost; but it should be designed in
policy packages across Government so that carbon emissions come
down. That is the overall goal, to have a cap and stick to it.
We hope the analysis behind the Social Cost of Carbon is that
carbon damage is much greater than we had previously thought,
and that is what should drive policy.
Q33 Colin Challen: I am getting the
impression that you feel the Treasury's economic strategy lacks
coherence in its attempts to change people's behaviour and you
have mentioned that taxes need to be a lot higher. Could you give
a couple of concrete examples of where taxes and perhaps regulation
should be stiffened up to change people's behaviour? Could you
quantify the level of change you think that could bring about?
Mr Bullock: Yes, I will give an
aviation example to start with. The Government previously has
ruled out increases in Air Passenger Duty; I think saying that,
it was not really an environmental tax. However, in this Pre-Budget
Report it has changed its focus and said it is well known that
if you increase Air Passenger Duty it clearly would have an environmental
effect, because it affects the level of growth you get in aviation
emissions. It put up Air Passenger Duty, doubled it from five
to ten for the cheapest flight; and, to our mind, it is a good
thing they have recognised that Air Passenger Duty, in the absence
of Fuel Duty and VAT on fuel, can have an effect on slowing the
growth in aviation, but the level it put in place is just not
sufficient. There is a report by the Environmental Change Unit,
University of Oxford on aviation policy where they say that, if
you wanted to slow the growth in aviation, not stop flying but
slow the growth in aviation as predicted, the doubling or tripling,
then you would need an Air Passenger Duty escalator every year
going up by £10 or £15 a year depending on what type
of ticket it is; obviously the higher rises for the longer haul
flights. That is an example where the Government is saying, "Yes,
it could have an effect", but it is not putting them in place
in anything like the level needed to affect demand.
Q34 Colin Challen: I think the real
question is whether or not you have to raise the price of travel
to such an extent that it actually puts people off. As we know,
the cost of travel as a proportion of people's disposable income
has gone down. Do you have any evidence that recent increases
in fuel costs have deterred any motorists from making their usual
number of journeys, because we have seen car travel, particularly,
increasing year on year?
Mr Bullock: Firstly, on the overall
costs of different modes of travel, even though fuel price has
gone up recently, it is still the long-run trend since 1970 that
the costs of motoring have gone down whereas the costs of bus
and rail have gone up. What we would like to see, we are not advocating
heavily a tax on the motorist in any way. What we have got to
do is have a system whereby gradually it becomes cheaper, easier
and more convenient for people to use alternatives.
Q35 Colin Challen: That will take
a very long time. Why can you not just come along as a pressure
group and say, "Right, fuel duty has to be doubled; £2
a litre is fairer than 86p a litre for the environment";
or is that too radical for you?
Mr Bullock: Not at all but, firstly,
I would say we are a sustainable development organisation. To
our mind environmental and social objectives are equally important.
Yes, we have to stop climate change but we cannot stop climate
change in the way that desperately affects people who have no
other option. It is currently the case that if you were to do
something as immediate as you say, double fuel duty overnight,
then what would happen to the people who rely upon the car to
get them to work when there is no reasonable alternative to get
there by any other means?
Q36 Colin Challen: Ken Livingstone
introduced the congestion charge overnight and saw a massive improvement
in public transport almost overnight. That was a very quick change
in emphasis.
Mr Bullock: I think the congestion
charge is a very strong example of how politicians with a clear
idea of what we need to do can effect change much quicker than
other politicians think is possible. What Ken Livingstone did
was a great thing but London is a bit of a different example
really, in that even before the congestion charge there were decent
alternatives in most places; there is a decent bus service; there
is a decent tube service. In lots of parts of the country, for
example Manchester which does not have a decent bus service or
a decent tram service, it would be much harder. What we would
advocate is, yes, fuel. We certainly do advocate that fuel duty
must go up; but we argue very strongly that it must go hand-in-hand
with that money going directly to improving public transport;
changes to the planning system so that people do not have to travel
20 miles to their work; making walking and cycling decent alternatives
so people can feel, yes, they can let their children walk to school
and not having to drive them. It is a mix of the two things. It
is the same argument basically why we do not advocate at the moment
increases in domestic energy prices; because although that would
have an effect on climate change, it would have a desperate effect
upon the millions of people who live in fuel poverty. That is
why we argue that the first step should be a massive increase
in the spending that Government puts into domestic energy programmes
for energy efficiency and the like. We would argue that, for example,
you could use the increased aviation taxation—they have
just raised a billion pounds from Air Passenger Duty—and
it would be far more politically palatable if the Government were
to say, "We will invest that money into a major programme
of energy efficiency grants for people across the country",
particularly poor households, to have their homes decently insulated,
with decent modern appliances, so they are not having to spend
such a large proportion of their income on electricity.
Q37 Colin Challen: How much needs
to be spent, do you think, on creating a low carbon economy based
on low carbon technologies? How quickly could you achieve that?
What sorts of sums are required? Could you do it without making
yourself electorally unpopular because surely these will mean
greater costs on individual consumers?
Mr Bullock: It is almost two or
three orders of magnitude higher spending needed then current
spending. You look at areas such as what the Government did in
the Budget this year, the Pre-Budget Report on energy efficiency
in the home—I think it put in place £7.5 million for
better coordination of the Warm Front Programme; and, to our mind,
what would be required is spending in the order of billions. There
are 14 million people with a million households which have absolutely
no basic energy efficiency measures. The Government should be
putting in far greater sums of the order of £1-2 billion
a year to provide grants, whether it is from council tax rebates
or direct grants the details can be worked out and there are a
number of different ways of doing it; but the issue is the scale
of the change that is required. Rather than having little demonstration
projects which, although they are worthy, they affect 5,000 or
10,000 homes, we need to be talking about millions of homes over
the next three or four years. The Stern Report is correct and
he is saying it is not just action some time in the future, it
is action right now. You are right, there is potential for the
green tax agenda to be politically unpopular; and that is why
we think the spending agenda is such a critical part. It is very
difficult for things to be politically acceptable if it is solely
exhortation while, at the same time, the economic signals are
all in the opposite direction. With bus and rail being more expensive,
and planes and cars becoming cheaper then a political message
where it days, "Don't use your car so much", is never
going to be successful. That is why we would argue that the Treasury
in particular needs to have an overall strategy; not just a green
tax strategy but one that links tax and spending with regulation;
so that it is cheaper and easier for people to go green. Currently
if people who want to go green put a solar panel on their roof
there are planning difficulties, it is expensive, there is low
pay-back and they do not get the money when they export the electricity
to the grid. There are all sorts of barriers to it which make
it, frankly, a pain in the arse. If it was made cheaper and easier
for people, and it is the Government who can do this, then that
is what would drive the change we need to see so quickly.
Q38 Joan Walley: There needs to be
a radical agenda there. How do you get public acceptance of that?
Mr Bullock: I think things have
changed in the last five years. Five years ago on climate change
people did not see it particularly as a big problem. It was something
that would happen a long way away, or was not even very certain
to happen. That has changed, that is one thing. Secondly, there
was quite a bit of evidence polling that people would be prepared
to countenance even things which directly affected them in a negative
way if it could be seen that it would improve the environment
in other ways. I cite as an example of that the MORI poll of last
year which said that 60% of people would be prepared to take higher
taxes on flights, and that rose to 73% if the money was then spent
on improving the environment; that is largely an issue again of
linking the tax and spend agenda together; but it does become
very politically unpopular and difficult to sell it if green taxes
are stigmatised as being stealth taxes. I can see entirely how
people would think they are stealth taxes if, for example, Gordon
Brown puts up Air Passenger Duty by £5, raises a billion
pounds and there is nothing throughout the rest of his Budget
on spending any money to improve the environment. It is seen as
a stealth tax and it probably is a stealth tax; so the
way you make it politically acceptable is by saying, "We
will spend it on giving it back to you rather than keeping it
for general Treasury spending".
Q39 Joan Walley: Just going back
to the Treasury and to Air Passenger Duty, why do you think the
Treasury has changed its mind; why did the Chancellor change his
mind on that? We have had a Financial Secretary before our Committee
in the past saying that that was not really an option to increase
it. Why do you think there has been a change of heart?
Mr Bullock: Probably I think it
is due to increasing political pressure on the Government to do
something about climate change, and also the correct perception
that aviation, compared with almost every other sector, does get
away pretty scot-free with it tax exemption, and not being part
of the Kyoto system as a whole. There was pressure from within
the Government as well; the leaked letter from David Miliband
to the Chancellor in October was saying basically, "Yes,
the EU ETS system may be a good vehicle for bringing aviation
emissions down in the long-term, but in the short-term we cannot
let nothing happen on aviation in the next ten years, the next
decade", the next five or six years I think he meant. There
is an understanding that something needs to happen; but it was
a bit of a strange decision because they did say that expressly
we were going to use Air Passenger Duty as an environmental measure,
but the level at which they brought it in was not sufficient to
have anything like enough effect. If you look at the Aviation
White Paper Review in December that was basically saying that
even if you increase aviation alongside current policy initiatives,
if you raise the cost of flying, it still will not do much to
dent the increase in flying. To do that, as the Oxford University
Report says, you do need to have high net raises in Air Passenger
Duty. Maybe it is just a sign that they are hoping by showing
they are doing something on aviation that that is better than
nothing.
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