Examination of Witnesses (Questions 140-156)
ANGELA EAGLE
MP
3 FEBRUARY 2009
Q140 Chairman: Not with the Committee.
Angela Eagle: Not with the Committee,
no, that is true. I think that we have demonstrated in the way
we have restructured VED in both of those ways that we wish people
to take account of the emissions of the cars they may buy, so
that we wish people to buy more fuel-efficient, lower emitting
cars. Despite staggering these changes over a longer period of
time, of which I know the Committee will disapprove, all I would
say in mitigation to you is that we have kept the structure.
Q141 Chairman: A majority of the
Committee warmly welcomed the fact that the budget last year recognised
that most car purchases are actually not new cars but second-hand
cars. What those proposals do is quote real incentives for people
to choose more fuel-efficient models within any particular category.
Given that that has now been substantially taken back and largely
removed from the proposals, what do you think is going to encourage
the purchaser of a second-hand car now to choose a fuel-efficient
model?
Angela Eagle: I think that is
slightly unfair. We will still move to the 14 new bands[25]
and, over time, that will create a circumstance to make bigger
differences between those bands with more advance notice, so that
we do not get into the circumstances that we were in. I thought
at one stage last year that the Committee were probably the only
friends I had in the world. I now see that I have alienated you,
too. This is just the way things go. The important thing is that
we have kept the environmental-based structures of these taxes
and we will have an instrument going forward to ensure that we
can signal to those in the second-hand market, with plenty of
advance notice, as well as those buying new cars that we really
do want you to think about the emissions of the cars that you
put on the road.
Q142 Chairman: It sounds a bit as though
you are hoping for the emergence of a bolder and greener government
after the inconvenient matter of a general election has taken
place.
Angela Eagle: That would be putting
terrible words in my mouth and I could not disagree with you more
from that point of view, Mr Chairman. I think you also need to
remember that in parallel, as you know, to this process of changing
the VED structures, we are also in a circumstance where EU regulations
will mandate, over time, the continuing improvement of the emissions
of cars. I know that you will have read in great detail the King
Report that came out with the budget last year, which also maps
out the likely approach that we can take to encourage the emergence
of entirely new engine technologies. I hope that, even though
you will have noted the Heathrow decision with disapproval, you
will have noted the £250,000 million of new money allocated
to encourage the emergence in the UK of state-of-the-art, low
emissions technologies for cars.
Q143 Chairman: You mention the EU.
Such is the power of the south German motor industry that those
proposals for mandatory improvements have again themselves been
greatly watered down. Do we take what you say as an assurance
that the British Government will be fighting very hard within
the EU for much tougher standards to be introduced faster than
the Germans currently want?
Angela Eagle: Clearly in an EU
context one has to get a qualified majority of the Environment
Council to come to an agreement and therefore one has to build
appropriate alliances to do that. You have rightly noticed that
there are various vested interests around that have an opinion
on these things. I think you will also have noticed that car manufacture
is having to look to government all across the world for assistance
in the current climate. That means that we can begin to mandate
much faster, I hope, technological shifts in this area than perhaps
would have happened naturally and without the circumstances in
which we find ourselves. I am quite optimistic that we can make
good progress in this area at EU level and also in our home-grown
industry.
Chairman: Certainly this Committee will
be fascinated to see the detail of how the package of help for
the motor industry is actually worked out because there is clearly
an option there to use that to accelerate a switch to greener
vehicles.
Q144 Mr Chaytor: Minister, does the
Treasury have a view on the oil price over the next three years?
Angela Eagle: We do not forecast
the oil price. We look at independent forecasts of the oil price
to help inform our decisions.
Q145 Mr Chaytor: What do these independent
forecasts of oil prices tell you at the moment?
Angela Eagle: We certainly would
not have a view either way on what should be happening to the
oil price. If you are asking me what my view of what the oil price
will be in the next couple of years, I do not think it is useful
for me to speculate.
Q146 Mr Chaytor: Do you accept the
view of the International Energy Agency in their report of late
last year which predicted a major global fossil fuel price problem
in 2012?
Angela Eagle: It is clearly the
case that as the global economy expanded, there were pressures
on what is obviously a finite fuel, and that is why we saw the
oil price spike that caused such hardship in the middle of last
year. It is also clearly sensible that developed economies should
be looking to see how they can replace those energy supplies as
finite fossil fuels approach the end of their supply. I do not
think I want to go into any greater detail than that.
Q147 Mr Chaytor: Minister, I think
we want you to go into greater detail because that is why you
are here.
Angela Eagle: Treasury Ministers
pontificating about the price of oil is not usually a very sensible
place for me to be.
Q148 Mr Chaytor: I am asking you
what the Treasury as an institution thinks about this and does
the Treasury accept that there will come a point in the not too
distant future when we reach what is commonly called peak oil?
Are you preparing for this and if so, why are you not more up-front
about the evidence of peak oil?
Angela Eagle: I think that there
are different views about when peak oil is going to arrive.
Q149 Mr Chaytor: What is the Treasury's
view about when it will arrive?
Angela Eagle: The Treasury's view
of when it will arrive can be shifted by sudden new oil finds
that happen that nobody assumed would happen. It is also important
to realise that there are technologies which mean that oil that
would not have been extracted in certain circumstances can be
economic to extract if the price goes up. The price spike for
example last year in petrol made a range of deposits in the North
Sea economic to extract. They are now back to being uneconomic
to extract. There is a circumstance here that responds to price.
What is absolutely the case is that all economies are going to
have to re-engineer and plan for peak oil, as you say, whenever
it arrives, and look to other forms of energy to bridge the gaps
that will be created. That is why we worked closely with BERR
when they were developing their recent report on the switch to
renewable energy sources. That is why we are extremely enthusiastic
about some of the very innovative work that is being done developing
wave power. That is why we wish to see those kinds of new technologies,
first of all the science done and brought to demonstration, and
hopefully then exploited as viable and economic sources of energy
in the future.
Q150 Mr Chaytor: In terms of the
public rhetoric of the Treasury and the way the Treasury tends
to project policies to the general public in budgets and pre-budget
reports, is it not true to say that there is still an assumption
that cheap energy will stay forever and that cheap energy should
be the goal of public policy? Indeed, this is what you have down
with the fuel duty issue in the Pre-Budget Report because the
VAT cut will make a nil effect and you have projected that as
something positive. Is there not a problem for the Treasury in
the fact that you are not prepared to engage the public as a whole
in the reality of rising fossil fuel prices?
Angela Eagle: The important thing
that the Treasury needs to do is ensure that there is a diversified
enough energy supply going forward to make it possible for our
economy to work and develop. I think we have been neutral about
whether that was fossil fuels or any other kind of energy but
clearly, given the challenges that we are facing with respect
to climate change, we need to develop energy generation in places
that would, in the past, have been regarded as economically inefficient
because they were too expensive to develop, such as wind and wave.
There will be a range of new issues and problems that come with
having a grid supplied by that, not least the intermittent nature
of that kind of energy supply. There is a range of issues about
that, that the Treasury is very engaged with. Clearly, if fossil
fuels are used, we have to mitigate the climate change effects,
the carbon emissions effects, of that, which is why we made the
announcements we made on carbon capture and storage.
Q151 Mr Chaytor: If I can bring you
back to fuel duty policy, the budget last year in the commentary
is claiming as a virtue that by 2010-11 fuel duty rates will still
be 11% lower than they were in 1999. If the Government wants to
embark on a Dutch auction of the fuel duty with the Opposition,
that is not consistent with a policy that is trying to inform
the public about the imminence of a fossil fuel crisis, is it?
Angela Eagle: I do not think it
is the Treasury's role to inform the public about the imminence
of the fossil fuel crisis. I think we have a general issue to
debate these things in democracies. We also have to ensure that
in our taxation policy we do not get to the stage where we prevent
people, via the costs of travel, being able to get to work and
perform as economic actors. I think it is always a balance. We
try to put forward these observations in a neutral way. I would
not say that we were boasting about the cost of fuel being 11%
cheaper in real terms. I think on those kinds of figures, you
also have to remember that because engines are more efficient,
people will travel far more miles with the fuel that they put
in their car than they used to. There are gains in efficiency
as well as changes in price that are accounted for in some of
those calculations.
Q152 Mr Chaytor: Can I come back
to the Treasury's role as an institution. We are now told that
nobody in the Treasury could have foreseen the impact of weak
regulation of the financial services industry and no-one in the
Treasury foresaw the impact of the American sub-prime crisis on
the British economy. Is there not a danger that because the Treasury
has not grappled more with issues of peak oil, we might get to
2012, find ourselves in this oil and gas price crisis that the
IEA predicted, and the Treasury deciding that it did not see it
coming?
Angela Eagle: I do not think we
have a crystal ball and I do not think our role is to produce
reports about what might happen. We have structures where we look
at threats to stability. We have structures where we look at the
way that the economy can demonstrate resilience in particular
scenarios, but we do not see it as our role, I do not think, other
than looking at academic treatises and analyses of the kind that
you have quoted, to take account of that in our policy making
but not to have some kind of national running commentary about
it in our budget reports.
Q153 Mr Chaytor: Minister, would
you accept that this may well be part of a major problem for government
and the country because, in terms of influencing the perceptions
of business, for example the Stern Report was very powerful in
winning the economic argument, but in terms of influencing the
perception of 20 million motorists or 15 million tabloid newspaper
readers, then there has been a complete absence of success? This
is a problem for government and you and the Treasury are part
of this. The question is: should the Treasury not be more proactive
in triggering a national debate, not only about climate change
but also about the evidence of peak oil?
Angela Eagle: There may well be
people in the Treasury who think an expansion of our already broad
remit would be a desirable thing. I am certainly happy to take
it away and think about it. We do a lot of this kind of work in
the conferences we have, in the reports that we produce, and you
have mentioned the Stern Report as one example of that. But I
am not sure it is the role of the Treasury alone to analyse this
and have a debate with the 15 million readers of tabloid newspapers.
That is something that the whole of our political structure needs
to do. I am not sure it is particularly a Treasury core function.
Q154 Mr Chaytor: Would you accept
that if it is the responsibility of the whole of the political
structure, then their efforts so far have been a complete failure?
Angela Eagle: I think that we
have to have a far more grown up, sensible discourse in our political
structures about some of the major structural challenges that
we will face in the future than perhaps we have managed in the
past. I like to think that rather dry technical economic treatises
like the Stern Report inform that but the way that it then gets
out and diffused into the debates that we have in wider society
is not only a matter for the Treasury; it is a matter for the
whole of our civil society.
Q155 Mark Lazarowicz: I have one
very specific question. Some groups have suggested that the financial
support given by the Treasury to banks, particularly in terms
of taking equity holdings, should be linked in some way to encouraging
a sustainable approach by those banks to the way they provide
support for business members, encouraging a more sustainable business
rather than a carbon-intensive business. What is your view on
that suggestion?
Angela Eagle: We took the action
we did first of all to stabilise the banks to prevent them from
collapsing. We have taken subsequent action to try to unfreeze
the credit markets and ensure that credit flows to business that
needs it. I think it would have been quite difficult to say, "But
we only want credit to flow to businesses that we approve of"
in that sense. We know that part of the results of the work we
have done in trying to unfreeze credit will be to support those
businesses, but I am not sure that we could have got ourselves
into a circumstance where we were somehow saying to banks, "But
you cannot lend to those that are not green enough".
Q156 Mark Lazarowicz: I do not think
we are saying that you should give that kind of specific direction
but can you not, for example, say to the people who are UK FI
appointed to look at a bank's board that one of your objectives
should be to try to ensure as far as possible a green approach
to the investment policies of a bank? Is that not quite sensible,
given the long-term trends in the economy?
Angela Eagle: Once we have got
ourselves into a position where we have stabilised the banks and
got lending working again, we will be in a position to look to
see during our stewardship of these institutions whether there
are any other parameters that we might wish to put before them.
I think at the moment the important thing is that we end up with
a financial system where credit is flowing again, and that is
the overriding aim of the work we have done. I am not saying absolutely
not in the future but at the moment we have to be able to ensure
that credit begins to flow again to all business so that we can
try to deal with and mitigate some of the effects on the real
economy that have been caused by the global credit crunch.
Chairman: Thank you very much indeed,
Minister. We have covered a reasonable amount of ground this morning
and we are very grateful to you for coming.
25 Note by Witness: There will be 13 new bands,
not 14, as indicated during the evidence session. Back
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