Examination of Witnesses (Questions 100-119)
ANGELA EAGLE
MP
3 FEBRUARY 2009
Q100 Dr Turner: Last summer we recommended
that the Government introduce a car scrappage scheme because there
are an awful lot of old, highly polluting cars out there. People
are paying them to trade in their cars for greener models. The
French have in fact introduced such a scheme. The Germans have
announced that they will do so, too. Treasury did not rule it
out last year but told us they were monitoring the situation,
and this is what Ministers were saying last week. What exactly
are you monitoring and what test does it need to pass before you
will adopt the measure?
Angela Eagle: We are a bit sceptical
about its value for money, so we are continuing to monitor it.
When the French scheme was introduced initially it was actually
thought to be revenue-neutral. It is now costing up to €200
million a year and being far more expensive than they originally
estimated. Interestingly, they have just extended it to cars which
emit up to 160 grams of carbon per kilometre. You are quite right;
the Germans are looking at a scrappage scheme, and Austria has
announced that it is thinking of a scrappage scheme, but there
is widespread scepticism in other parts of the European Union
as to whether it is good value for money. Not everybody can afford
to buy a new car, even if they have a government grant for scrapping
their old one. That is one of the difficulties. We are not ruling
it out at all but we are still quite sceptical that it is a good
use of taxpayers' money.
Q101 Joan Walley: On that point,
can I ask what value you are putting on the environmental benefits
of that when making this assessment?
Angela Eagle: I do not know whether
we are measuring it in that way, but I am certainly happy to send
you a note about how we are assessing scrappage schemes.
Q102 Joan Walley: I return to the
questions about the £535 million, which included the money
that is spent on the rail carriages, that being part of a bigger
£3 billion stimulus package and obviously a £1 billion
investment package announced by the Department for Transport.
Can I ask you about all the projects that will then be funded
and what assessment the Treasury has made of the net impact on
carbon emissions for this whole fiscal stimulus package?
Angela Eagle: Because the green
stimulus part of the Pre-Budget Report is money brought forward,
with the exclusion of the £100 million from Warm Front which
we can measure and there will be certain carbon savings from that,
we can let you know, again in a note, about the loans to the automotive
industry and the package for ultra low carbon vehicles, which
is extra money that has been announced since the Pre-Budget Report.
By definition, money that is brought forward will not add, except
at the margins, to carbon savings because it will just mean that
homes are insulated a year or two earlier than they would have
been without the extra money, and so that will be quite minor.
In terms of jobs and supporting the economy when that is needed,
we believe that because of where we are in the economic cycle,
having a green part of the fiscal stimulus was a good and timely
thing to do. We believe that the recession gives us a great number
of challenges economically. One of the ways of actually dealing
with the challenges economically is to keep in mind and certainly
not forget that we need to transform our economy from a green
point of view as well and to take every opportunity that we can
to try to arrange that in these circumstances; it gives us benefit
in the future. That is what the green stimulus was about.
Q103 Joan Walley: Is not the crux
of all of this that we have measures being taken by Government,
measures being proposed by the Treasury—the Pre-Budget Report
is a part of all that—but that needs to go hand-in-hand
with the new green deal ideas. Therefore, is this not exactly
the time, if Government is bringing forward capital investments
now to help us through these difficult times of recession, that
the Government should now be accepting that this is a transformational
time and the green aspects of this need to be superimposed on
the new arrangements? It is no good having, for example, road
widening or new contracts for cars if we have an opportunity to
do green transport, an opportunity to do low carbon cars? Why
is it not a requirement that everything has to pass this green
test? This is a once-in-a-lifetime opportunity, surely?
Angela Eagle: I think it is important
that we separate out some of the money that has been brought forward,
the £535 million, which is already allocated in the Comprehensive
Spending Review to be spent slightly earlier, a year or two earlier
than it would have been in normal circumstances, from the transformational
monies that are being spent anyway, the £50 billion I was
talking about earlier, and the new legal structures that we have
put in place, the carbon budgets, with the renewable strategies
and all of those things. The fiscal stimulus is merely moving
forward monies that had already been allocated. The transformation
is happening I think all around us. If you look at the extra money
that has been announced for ultra low carbon vehicles and the
extra £1 billion of loans to the automotive industry, those
do bring forward and hopefully speed up and pull through new technologies
and enable them to be applied in this country and used earlier.
Q104 Joan Walley: Given what you
have said earlier, that the Government has changed the response
and now has an 80% carbon target, and that has come about relatively
recently, is there not a case to have a similar shift in terms
of looking from a different perspective at these capital projects
brought forward? We have already heard in evidence in the previous
session that, for example, some of the contracts for the new low
carbon cars involving new environmental technologies are not being
connected up across different government departments. There does
not seem to be a mechanism for that to happen.
Angela Eagle: I think that you
are right that this is a transformational time. Some of the work
that is being done to tackle the problems that have been caused
by recession will put us in a better position than we would have
been without these challenges to transform a range of our infrastructures.
If you are saying we should prevent all investment unless it is
absolutely green, I think the paradoxical result of that might
be less expenditure and cuts in public spending, which would have
the opposite effect on the recession. We have to be pragmatic
and pull forward those things that we can; we also have to recognise
that many green technologies are at an earlier stage of development.
We have to support them and certainly ensure that they can carry
on being supported in their early stages and not let down by the
lack of venture capital funds, for example, and we are taking
a close look at how to do that. We have to protect our future
green industries in that way. It would be a mistake to assume
that we are ready to go with many of these things immediately.
We are trying to do this in an appropriate sequence.
Q105 Joan Walley: May I put three
questions on the Warm Front Scheme or the Home Energy Saving Programme.
May I turn to that? There is £6.8 billion in this programme.
Could you perhaps say how many jobs in the UK are being sustained
by this spending?
Angela Eagle: I do not know whether
I have the exact numbers of jobs in the UK that are being sustained
by the funding. You can see how that is made up: we have the CERT
(Carbon Emission Reduction Targets) monies, which is £2.8
billion of spending over three years on energy efficiency issues
in households, ranging from boilers and more efficient heating
and insulation; the spending of a 20% increase in that target
as part of our response to the current conditions; a Community
Energy Saving Programme, which taken together with the 20% increase
is nearly £1 billion of extra expenditure; nearly £900,000
of Warm Front expenditure[19];
and £2.2 billion of expenditure on energy efficiency issues
within the Decent Homes monies. All of that is to be spent in
households in the UK to put in energy efficiency measures. I cannot
imagine that that would be anything other than very job-intensive
in this country. If you are asking me for an exact figure of jobs
that that creates, I do not think I have that. I do not know whether
we have an estimate: 350,000 people are already employed in the
UK low carbon goods and services sector. We cannot put a figure
on this package but we estimate that the number of jobs could
rise to one million in the next 20 years. Clearly, the thing about
packages like this is that they have to be delivered in the UK
in the houses of everybody, so it is very domestically based.
Q106 Joan Walley: In respect of the funding
that goes into the Home Energy Saving Programme, how much of the
money is spent on energy efficiency measures and how much is helping
people pay winter fuel bills? It is a programme that was originally
a fuel poverty programme but has somehow been married with an
environmental programme. It would be useful to have a breakdown
of the costs there.
Angela Eagle: The £6.8 billion
figure that I have mentioned today is all about the actual programmes
for improving energy efficiency. None of that involves any of
the monies that are spent on winter fuel payments; that is separate.
There is £2 billion a year extra spent on winter fuel payments;
and about £150 million, there or thereabouts, on the cold
weather payments, although I suspect that will have gone up after
this week in terms of the way we think it is going.
Q107 Joan Walley: To clarify that,
none of the money in that figure you have given us is going towards
the money that the energy companies spend on helping vulnerable
people who have difficulty paying bills? That is separate from
the winter fuel payments.
Angela Eagle: Yes.
Q108 Joan Walley: In terms of the
money that has been spent by the energy companies, presumably
they are having to charge higher bills in order to recoup their
money. How are you making sure that that responsibility on the
energy companies is not pushing their people into fuel poverty?
Angela Eagle: Clearly, the issue
with the numbers of people in fuel poverty is very sensitive to
the price of energy, and the price of energy can be very volatile,
as we have seen in recent times. Obviously, the measures that
have been taken have been concentrated particularly on those who
are vulnerable and fuel poor to begin with. We monitor energy
prices to make certain that if any of the costs of CERT are passed
on, we know exactly how. Again, I can get you more information
about that if you want it.[20]
Q109 Mark Lazarowicz: I have some questions
about Heathrow Airport expansion, which was mentioned briefly.
This relates very much to the economic issues rather than perhaps
the wider issues. One of the things that the Secretary of State
for Transport said in his statement when he announced approval
of the expansion was that the decision to expand Heathrow would
"help secure jobs now and in the future". When does
the Government expect the construction work on the new runway
and terminal actually to begin? How does that relate to the economic
stimulus package at the present time?
Angela Eagle: It clearly does
not relate to the fiscal stimulus package. This is an ongoing
circumstance that has been contemplated for many years. I think
2003 was the appropriate Transport White Paper that dealt with
this issue. A process has been going on since then. I do not think
anybody on either side of the argument has tried to claim that
building a third runway at Heathrow would be anything to do with
the fiscal stimulus package that the Pre-Budget Report dealt with.
There is a huge planning process to go through before anything
happens with the third runway at Heathrow. That all has to be
done and clearly that will not be happening in the next couple
of months; it is an ongoing process. There was an economic assessment
of the proposals, as you will know. I can give you some Treasury
views on that, but if you want practical detail of how the Department
for Transport are going to go ahead, I think you had better get
them in here and ask them,
Q110 Mark Lazarowicz: I understand
that and I appreciate there are many aspects on the issue. The
Secretary of State did specifically say that the decision would
help secure jobs now and in the future. Could I get some indication
now and for the future what form this will take.
Angela Eagle: Today Heathrow directly
employs 70,000 people; indirectly it employees 30,000 people.
My understanding of the impact assessment of the additional jobs
created as a result of a proposed third runway would be 10,000
jobs directly, 15,000 indirectly, and 60,000 temporary construction
jobs, but I do not think that anybody would want to stand up and
claim that these jobs are going to come into existence this month
or next month to deal with the economic downturn that we have
now.
Q111 Mark Lazarowicz: Do the figures
you have give any indication of when they might start having an
effect?
Angela Eagle: They are not going
to start having an effect until after planning permission is applied
for and granted by the authorities. Clearly, apart from a few
jobs in design and engineering, I do not think you are going to
see jobs on the site imminently until those processes are over.
Q112 Mark Lazarowicz: Can I ask a
specific question about the air passenger duty receipts aspect
of the decision? The controversy relates very much to your responsibilities
in the Treasury. As I understand it, the Government has counted
the projected increase in receipts from APD at Heathrow towards
the calculation of economic benefit to the country, but surely
that could be to some extent at least counterbalanced by the fact
that UK residents will be paying APD which will be set against
the benefits received by the Treasury if we are going to have
a correct calculation?
Angela Eagle: There is an economic
impact assessment that has been done on the entire proposals,
and I know they are controversial, to create a third runway at
Heathrow. That has been peer reviewed by Michael Spackman, who
agrees that the Department for Transport's methodology for assessing
economic and environmental impact is in line with Treasury guidance.
We agree it is in line with the guidance. I do not think it is
very helpful for me to go into great detail about how that impact
assessment was decided. It is completely and perfectly up to you
to disagree with all aspects of it or particular aspects of it.
The impact assessment came to the conclusions it did. Its methodology
was peer reviewed and approved as a sensible and appropriate methodology.
Clearly, if there are arguments about the detail of that, then
they have to be had, but that is the context in which the Treasury
reviews the decision.
Q113 Mark Lazarowicz: Can I ask a
specific question which is not about the methodology but about
one particular way in which the methodology was applied, returning
to the APD question. If you cannot provide an answer today, maybe
you can provide one at a later stage. Did the Treasury, in calculating
the economic benefit of the APD receipts, take into account the
extent to which the APD would be paid for by British taxpayers?
Angela Eagle: I think I am happy
to write to you about that.[21]
That is probably the best way of dealing with a point as specific
as that in a vast and very large impact assessment. I merely
make the point that the approach that the
Department for Transport made in the impact assessment has been
peer reviewed independently and agreed as appropriate. I accept
that you have a different view, and I am happy to write to you
about the specific point on APD that you make.[22]
Q114 Mark Lazarowicz: I have one even
more technical question on APD, which you may wish to write about.
As I understand it, transit passengers or those catching connecting
flights that have not originated in the UK do not pay APD. Do
you know how many of the projected additional passengers resulting
from a third runway will fall into that category? If you cannot
find the answer today, perhaps you could write to us?[23]
Angela Eagle: I know that the
impact assessment assumed that those who are transit passengers
did not add to positive economic impact; and it assumed that whether
they were UK citizens or foreign born citizens, those that do
travel to or from UK destinations do add to economic wellbeing,
presumably because it is assumed that they are going to involve
themselves in some economic or leisure activity that would benefit
our economy. Apart from that general observation, again I am happy
to write to you.[24]
Q115 Mark Lazarowicz: Would it not make
sense perhaps to try to charge APD on those who fall into that
category, precisely because they are not having an impact on the
UK economy otherwise?
Angela Eagle: There are any number
of assumptions you can make in economic impact assessments in
great detail. This economic impact assessment has been done in
line with Treasury methodology by the Department for Transport.
It has been peer reviewed by independent economic consultants
who agree that it is an appropriate way of appraising policy which
accords with Treasury guidance. Again, it is up to you obviously
to object to any particular part of that. The only thing I can
do is to make the general point that it has been regarded and
judged to be an appropriate way of doing an economic assessment.
It came to the conclusion that there were economic benefits that
outweighed the environmental costs of developing a third runway.
I know that is controversial. That is the approach that was taken.
That is the decision that was announced, but I accept that you
have difficulties with individual aspects of it. Rather than having
particular views about assumptions, all I can do is make the general
observations that I have made about the appropriate nature of
the economic impact assessment that was made and published by
the Department for Transport.
Q116 Mark Lazarowicz: My question
was not actually challenging the economic impact assessment. All
I was doing was asking if you have any plans to levy a tax on
those transit passengers or others who currently will not pay
APD because of the way APD was defined?
Angela Eagle: I think the important
thing about developments in aviation taxation is the successful
agreement that aviation will enter EU ETS, the emissions trading
scheme, in 2012, which will mean that we can cap aviation emissions
thereafter and ensure that we can keep them at a set level and
then bear down on them. I think that is probably the most important
decision with respect to aviation that we have been able to come
to in a very long time. Therefore, we can ensure that the carbon
emissions that come from aviation can be capped and thereafter
reduced over time. Issues on how we apply taxation are looked
at in every budget process. I do not think it would be appropriate
for me to speculate on what we might do with such taxes in the
future.
Q117 Chairman: Just so that we are
clear, transit passengers do not, in your judgment, confer an
economic benefit on this country. We know they do not pay air
passenger duty. They do of course add to carbon emissions. Why
are we using the existence of transit passengers as one of the
justifications for expanding in the UK?
Angela Eagle: Firstly, I did not
say that that was my opinion. I said that that was an opinion
and a judgment that was made in the impact assessment.
Q118 Chairman: So you disagree with
it?
Angela Eagle: No, I am not going
to say I disagree with it. I am not an expert on the technicalities
of impact assessments. I make the point that I have made quite
clearly about the policy appraisal and the appropriate methodology
according to Treasury guidelines, which informed the Department
for Transport's economic impact assessment, and they were peer
reviewed. I know it is controversial. I expect that many people
will disagree with aspects of it. All I have said today is that
it is being judged by independent appraisal to be an appropriate
methodology for doing this kind of assessment, and it has come
up with the results that it has come up with. It is incumbent
on all of you, if you wish, to object to different aspects of
it. That is fine. All I am saying is that it has been judged to
be an appropriate approach to try to measure an economic impact
assessment and try to see whether the environmental costs of this
development outweigh the economic costs. The judgment has been
made that they do not, as those of you who listened to the Secretary
of State for Transport in his statement will have realised.
Q119 Martin Horwood: I have one last
question about the technicalities of the impact assessment, I
am afraid. You factored in the future cost of climate change using
the so-called shadow costs of carbon. The person who did the evaluation,
Michael Spackman, said it was in line with Treasury guidelines.
It may well have been. That does not necessarily mean it is appropriate,
as you have just claimed, because it used a very different calculation
to Lord Stern's recommendation, did it not, because it used a
discount rate that was more in line with traditional economics
rather than the almost negligible discount rate that Stern recommended,
which was 0.1% or something, thereby effectively valuing our grandchildren's
lives almost equally to our own. Have you rejected Lord Stern's
advice in that case?
Angela Eagle: No. Lord Stern's
price of carbon in his analysis was making the assumption that
there would be business as usual, a scenario that there would
be no attempt to deal with climate change in a business as usual
environment which would put that cost on carbon. The shadow price
of carbon is a price which has been developed to deal with policy
appraisals and the cost policy appraisals in a different environment,
which is where we are fighting to ensure that we mitigate the
costs of climate change. That is why there is a difference between
the discount rate that Lord Stern used in his report and what
is known as the shadow price of carbon, which is used for policy
assessments in the environment we are in now.
19 Note by Witness: Warm Front expenditure
is, in fact, £900million, not £900,000. Back
20
Ev 46 Back
21
Ev 46 Back
22
Ev 46 Back
23
Ev 46 Back
24
Ev 46 Back
| 
