Examination of Witnesses (Questions 100
- 103)
TUESDAY 23 OCTOBER 2007
MR ANDREW
WARREN
Q100 Martin Horwood:
I am not saying it is my view. I am just asking the question.
Mr Warren: Manifestly it would
increase the complexity; it would be stupid to pretend otherwise.
I have to go back to what the main object of the exercise is;
and it is to encourage those paying the Levy to invest in measures
which will help to decrease their overall energy and, hence, carbon
consumption. If the measures which they could be installing have
increased in price as a result of this particular policy measure,
then it undermines the overall viability of the scheme. That is
the point that the National Audit Office were making. It is one
that I know you were asking for specific responses on. You have
my response.
Q101 Martin Horwood:
It would be even simpler to move to something like a carbon tax—it
just incentivises consumers and manufacturers to use the lowest
carbon route in each case?
Mr Warren: Are you asking me to
become Prime Minister! There are all sorts of things which could
be introduced and might be more effective. I am not sure they
are on the table before us at the moment. I think what we do have
before us is a scheme which at the moment is certainly raising
£¾ billion for the Exchequer each year, and it is reasonable
to ask whether that money is being wisely spent in terms of actually
recycling the funds. The trouble is, because we have not followed
the pattern of recycling the funds, I think it has undermined
the whole credibility of revenue neutrality environment taxes.
Essentially people have said, "Here's the biggest con"
and that has turned out to be just another way of the Treasury
raising money.
Q102 Martin Horwood:
As you have already said in answer to some earlier questions,
one of the confidence-building measures is the knowledge that
these things are actually making a difference. Can I just ask
you briefly, you have a rather alarming factoid in your memo which
is that only 9% of target units covered by a Climate Change Agreement
have actually been audited to make sure they have achieved the
energy savings they claim to have made. Do you think that is an
adequate level, or do you think we need a much more stringent
auditing regime?
Mr Warren: We need a far more
stringent auditing regime. That was a figure that again has emerged
from the work the National Audit Office did for this Committee.
I think that for all of us to have confidence that these quite
substantial tax breaks have been well earned, then we do have
to know that the sectors, who are the only ones who produce the
figures, are actually to be relied upon in doing so. To have only
done less than 10% of these is really not sufficient to give one
complete confidence that these tax breaks are justifiable. The
tax breaks, after all, are worth somewhere between £300-350
million a year in total. Were all these Agreements to have been
proved completely worthless, and were all the companies to have
failed to deliver even these relatively modest savings then, in
theory at any rate, the Exchequer would be receiving somewhere
between £300-350 million more each year. It is quite legitimate
to turn round and ask the question: "Are we convinced that
that public money foregone has actually been foregone deservedly?"
I am not sure that just 9% of the sites being looked at are sufficient.
Q103 Dr Turner:
Something else in your memorandum to us is the suggestion that
80% of the Climate Change Agreements is perhaps unnecessarily
generous, and that it might be just as effective in terms of saving
carbon if it had been 50%. What evidence do you have to support
that contention?
Mr Warren: As I instanced before,
the progenitor of this entire scheme was the Colin Marshall report
back in 1998 or so, and that certainly did suggest a 50% reduction
would deliver. A lot of the work that went on around that report,
which was commissioned by the then Chancellor, did suggest that
we would offer just as much of an incentive there to companies
to look at this if the discount was 50% rather than 80%. The same
answer to Mr Horwood earlier—we are talking about somewhere
between £300-350 million that we have foregone on this. By
dint of having a reduction of 80% rather than 50%, there is certainly
about £120 million extra that has been foregone, again because
of that generosity. If you were to ask me whether or not that
£120 million which the Treasury have not taken in could perhaps
have been better spent in terms of delivering the end objective,
which is improved energy efficiency and improved carbon savings,
I have to say the answer would almost certainly be yes. I am dubious
as to whether it was strictly necessary to be as generous as the
Government turned out to be in the end.
Chairman: Thank you very much indeed.
It is very good to see you again.
Mr Warren: Thank you very much
indeed for inviting me.
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