Select Committee on Environmental Audit Minutes of Evidence

Examination of witnesses (Questions 60-79)



  60. Do you think now you are in a position where you are happy with the package that has been put forward by the Crop Protection Association? There have been some criticisms that it really is not very firm, it does not have clear targets, it does not have clear indicators. Are you happy that it is workable? How are you going to judge whether it has been successful or not?
  (Mr Timms) Let me just quote to you the comments that were made by English Nature, Pesticides Action, Network UK, RSPB, that has had a very close involvement in this, and the Environment Agency. They have written in making the point that they "welcome and support these measures which, if fully and satisfactorily implemented, should provide measurable environmental and biodiversity benefits". Effectively we have accepted the view that those organisations have taken. Of course, that statement does contain a caveat about "if fully and satisfactorily implemented". We, therefore, set out a timetable for starting that implementation process with a number of milestones between now and next February and we will then review progress in delivering the package in the run up to the Budget next year. Given that caveat about full and satisfactory implementation we can be very optimistic about the benefits that this package can bring forward. Again, it has involved a lot of work on the part of the industry, on the part of the farming industry and on the part of the NGOs who have taken part in this as well. I think it has been an interesting initiative and I very much hope it is going to prove to be successful.

  61. Do you see any prospects in the longer term for change as we get nearer to the principle of polluter pays, particularly in relation to the costs of cleaning up water which now fall on consumers?
  (Mr Timms) I think the package will help. There will be a number of costs associated with implementing the package. I think we will need to see how much progress is made between now and next February and review things at that stage. We reckon that the cost to the industry of this package is going to be around about £13.5 million per annum, so it is a significant cost.

  62. But longer term you would not rule out changes, especially in relation to water?
  (Mr Timms) Rule out changes to what?

  63. The fact that at the moment the cleaning up of pollution in the water is paid for by the water consumer, not by the person responsible for the pollution. Is that not something that long-term we ought to try to address?
  (Mr Timms) I want to focus for now on this package being successful. I hope that will have a significant impact on reducing the environmental costs of pesticide use but at some point clearly we will need to review after a period of years, if it is successful, what the impact on reducing costs has been and we will need to have another look at it at that time. We are not doing any work at the moment looking beyond the period over which this package will operate.

Joan Walley

  64. Just to turn a little bit to energy efficiency and the issue of VAT as well. Certainly we feel that there is a great range of products which are eligible under the Government's own Home Energy Efficiency Scheme and yet there is a much more limited range of goods which are eligible for reduced rates of VAT. I am just wondering, given what you were saying about the importance of clarity and getting the message across so that it is clearly understood, is it not confusing the picture to have so many different lists, some of which apply to VAT, some of which apply to VAT on energy saving materials, and you have got a separate list of, if you like, initiatives which can be taken under the Government's own HEES Scheme but there is not any clarity about what is eligible for energy efficiency support of one kind or another? Would it not be better just to have a clear list of initiatives that would perhaps be of advantage to go ahead with?
  (Mr Timms) I hope that it is not too complicated. As you know, we have announced we will cut to five per cent VAT on services of renovating houses and flats that have been empty for three years or more, converting a property into a different number of dwellings, for example a house into flats, converting a non-residential property into a dwelling, converting a dwelling into a care home or vice versa and converting bedsits into dwellings or vice versa. We are adjusting the zero rate of VAT to provide relief for the sale of renovated houses that have been empty for ten years or more. I do not think it is too complicated, at least I hope not.

  65. You do not think there is any inconsistency there when you look at that and compare that to what is eligible in terms of reduced VAT and what is eligible under the HEES Scheme? You do not think it is sending out a confusing message as to what is eligible for what, you think there is a consistency that goes through it?
  (Mr Timms) No, I do not think it is too confusing. Perhaps I am missing something. You can point it out to me if you think I am.

  66. No, it just seems there is a lot of inconsistency when it comes to energy efficiency. There is also a further complication in that the Government is now introducing yet another list of qualifying technologies, albeit ones which are geared towards industry, under the proposals for enhanced capital allowances. Would you like to comment on that as well in terms of consistency?
  (Mr Timms) I do not see a consistency problem there at all. The enhanced capital allowances I see as a very important step forward in encouraging energy saving investments by commercial energy users. I think we are anticipating when that list is published on 1 April that around about 1,000 products will appear on it, if I remember rightly. We have also announced in the Budget a Green Technology Challenge where we are asking people to come forward perhaps with additional ideas for technologies that ought to have that opportunity available to them in the future. I do not see a problem of consistency there at all, this is something that is completely new which I think will be widely welcomed and will be a further encouragement to business users to invest to reduce their energy consumption.

  67. If I can just move briefly to the Landfill Tax Credit Scheme. There has been a lot of concern about this and perhaps the way in which some companies are thought to take advantage of it while at the same time having some beneficial interests themselves as well. We are very keen to see the new proposed demanding targets for tax credits for, if you like, sustainable management projects coming in as quickly as possible. Do you have a date for that? Do you know when that is likely to be introduced? When can we expect details of the new proposals that the Government is intending to go ahead with?
  (Mr Timms) As you have said, there has been a lot of interest in this. The new targets that we are proposing to set for the industry to meet to be demanding for raising the percentage of tax credits going to sustainable waste management projects, I would expect those targets to be published within a month. As you know, there have been, and you have made the point, a number of concerns expressed about the operation of the Landfill Tax Credit Scheme. We take all those allegations very, very seriously and they have been thoroughly investigated. There are a couple of cases being investigated, I think, by Hertfordshire Police currently arising from allegations of that kind. On the whole we are satisfied that the scheme has operated satisfactorily in terms of propriety. I think the bigger concern I have is whether the resources coming through the Landfill Tax Credit Scheme have been deployed on projects which correspond as well as they should do to the Government's highest priorities. What has particularly been of concern is the proportion of the funds going to sustainable waste management projects has been falling of late. That was why we wanted to set these demanding targets and also why we are attracted in due course to the idea of replacing the credit scheme, either in whole or in part, with a targeted public spending programme where clearly we could ensure that the funds were being used on the highest priorities that we are facing.

  68. Just to press you on that a little bit more. When you say that, does that mean that you have actually completed a review of the current Entrust scheme? About a year or so ago you were saying there would be a review of that. You mentioned matters relating to police investigations which I see as being separate from the review of the scheme as a whole. Have you actually carried out and undertaken a review of the current Entrust Scheme and have you reached a conclusion on the way forward, or is it nothing as specific as a review as such?
  (Mr Timms) I would not describe it as a review of Entrust. We have carried out a consultation process which has led us to the conclusion that we would wish in due course to replace the Landfill Tax Credit Scheme, either in whole or in part, with a public spending programme but there is a good deal more work to be done, not least in discussion with the environmental bodies and the others who have been the vehicles for the Landfill Tax Credit Scheme funds about how we take that forward, whether it should be in whole or in part, and if it is in part in what proportion and so on. There is lots of detailed work still to be done and that certainly is not complete.

  69. Does that mean that there will be a consultation process on that with an opportunity to comment or is it a discussion that you will be having at the next stage?
  (Mr Timms) I would expect to be in discussion with a number of interested bodies as we take that process forward over the coming months.

Mr Loughton

  70. Minister, can we talk about the urban regeneration measures in the Budget, which we did discuss when you came to see us before in the Pre-Budget Report, and specifically on the Stamp Duty exemptions for the most deprived areas. When we discussed this before there seemed to be some confusion as to whether you thought this was a primarily business oriented incentive whereas the DETR Ministers were taking the line that this was a residential property oriented incentive. Has that apparent contradiction now been resolved between your two departments?
  (Mr Timms) I do not recall any confusion at all.

  71. I do, very clearly.
  (Mr Timms) The proposal is that there will be no Stamp Duty charged on property transactions in the wards that are selected and that applies equally to residential and to business properties.

  72. Indeed. When we asked you what was the purpose of it and what it was supposedly to achieve you very clearly took the line, and the record will show[3], that this was to encourage businesses to come into areas of deprivation, whereas in strict contrast in other meetings, and in fact in announcements in the House, the Environment Ministers have very much taken the line that it was a residential scheme, and in fact the split on Stamp Duty between residential and business is roughly 50/50 at the moment. The one thing that has not been elaborated on any further, which again we pressed you on at the time, is the definition of these deprived areas to which the Stamp Duty exemptions will apply. How much longer are we going to have to wait because you know the Committee did express reservations as to whether it was really going to target those people most in need of help as opposed to owners of expensive properties in deprived wards in Islington, for example?

  (Mr Timms) First of all, I think the real attraction, and in a sense you are quoting me correctly, of this measure from my point of view is in stimulating urban renewal by attracting businesses to locate in disadvantaged areas and also encouraging a mix of housing types. I think there are benefits on both sides. In terms of when we will announce the list of wards which will benefit, what we are aiming for is to identify the most disadvantaged wards on a basis which is fair and transparent across the UK, not least withstanding the scrutiny of this Committee which I know will be a close scrutiny. We want to make sure we get this right. We have been working with the devolved administrations to identify those wards that should qualify. A new ward based index of deprivation for Northern Ireland is going to be published in June and we need to take account of that in finalising the list. What I can say with some confidence is that we would expect the list of qualifying wards to be published very soon after Finance Bill Royal Assent with the exemption taking immediate effect.

  73. On the basis of the various potential anomalies that we have raised before and on the continued lack of clarity on whether you are promoting it for business, although the DETR are still promoting it for residential, have you—
  (Mr Timms) I just make the point that I think there are benefits for both properties.

  74. Absolutely, I have no disagreement with that. What I am trying to see is what is the rationale behind it, primarily to promote business or residential areas. Despite what you say, you are very clear what you think it is there for, the trouble is your colleagues do not agree with that. On the basis of the points we have raised, have you made any further progress towards having a capping limit, say, on the value of residential properties or, if what you say is really the case, purely limiting it either across the board or in certain areas just to businesses so that you do not have this anomaly? Whereas if it is to be done on a ward by ward basis, and you are confirming that it will be done on a whole ward on the basis of these indices—
  (Mr Timms) Yes.

  75. Therefore you must admit there is a potential anomaly in the Islington case which I have brought up, and Members have brought up time and time again, where the owner of a £750,000 nice Georgian terraced house, not to name any potential owners amongst Government members, which happens to be in the same ward as a run-down estate, few properties on which will actually be worth above £60,000 and therefore not qualifying for any Stamp Duty at all, on the basis of what you are promulgating will benefit very nicely indeed and the people in the area of deprivation within that ward will benefit not one jot, or only slightly. If you are first of all admitting to that potential anomaly, what checks and balances are you considering bringing in to avoid that or are you happy it should be a blanket exemption?
  (Mr Timms) What I advise the Committee to do is await the list of wards and then we can have a discussion about these decisions and others. Of course, attracting new businesses in to disadvantaged areas does have very substantial benefits for the people who live in those areas. You were suggesting that the people living on estates where properties are of relatively low value would not benefit from this but they certainly will if we are successful, as I believe we will be, in attracting new businesses, new jobs, new enterprise into areas where there has been far too little enterprise in the past. I think that would be a very big gain. Most of the high value transactions that will benefit from this will be in commercial property or in land for development. There will, no doubt, also be some big residential properties that are purchased for conversion into residential units, multiple residential units, for sale or for rent. We see relief for transactions of that kind as being very valuable in encouraging the establishment of diverse communities. No doubt you will return to these matters when the list is published. I would not favour, and we did have this discussion last time I think, attempting to draw a distinction between residential and business properties in terms of this exemption, I think that is an unnecessary complexity. There are benefits, significant benefits, in terms of building prosperous and diverse communities for the Stamp Duty exemption on residential property as well as on business property.

  76. We agree with all of that, Minister, but the point I am making, and you are not ruling it out, is that there is a very distinct possibility that the owner of the property, the example of which I gave, would save £30,000 and yet the number of people in properties on deprived estates in the same ward whose homes perhaps are worth more than £60,000 residential is negligible, and on that basis it would seem to be a rather self-defeating Stamp Duty on the residential side in which case you could just limit it to business, the merits of which are for everybody, and I agree with that, or you could cap it at people with properties above a certain level or it only applies to people doing conversions and everything else. That is purely the point I am making and I am just trying to see whether you are making any progress or you are happy that you do not need to make progress so that the less deserving, to put it one way, of the exemptions you are trying to bring in do not scoop the big exemptions. I do not think we will get any further on that. Can I just ask you about the Urban Regeneration Companies where in the Pre-Budget Report based on the three pilot companies which were established post-Rogers, those being East Manchester, Sheffield and Liverpool, the Pre-Budget Report, and the Urban White Paper a week later, promised up to a dozen further Urban Regeneration Companies, of which one has been announced in the form of Corby thus far. I am not aware there has been any progress report on the success or otherwise of those three pilots in the three places I have mentioned to warrant rolling out up to a dozen more. Is the Treasury happy that those pilots have been a success? If they are, on what criteria is that based and when will they publish the results?
  (Mr Timms) We are certainly taking a close interest in the development of Urban Regeneration Companies as they evolve beyond the three pilots. They are still pilots. I think it is too early to draw firm conclusions from those pilots about the way forward. We will consider, as we have said, providing Corporation Tax relief for company donations to Urban Regeneration Companies and similar bodies across the UK when we are in a position to do so. For now we want to wait until the final form and functions of those bodies are clear, which at the moment, because they are still pilots, is not the case.

  77. Is this not slightly putting the cart before the horse, that without knowing, as you have just admitted, how well or not the three pilots have done, conceivably 12 more fully fledged companies could be in operation, of which you have already done one, before certainly we know and you have assessed the evidence to suggest whether they have been a success or not? Surely a pilot is something that needs to be tried, assessed and if it has been successful then turned into a real scheme? It strikes me that you are going to have 12 real schemes before you have even assessed whether the pilots have been beneficial or not.
  (Mr Timms) We do see them as a very promising initiative for effecting regeneration in our urban areas but we will take a view at a future Budget about the appropriate Corporation Tax treatment for them. I think that what we have done has been right, we have identified this as a promising initiative, we have identified a way in principle to assist them and we will make a decision on the detailed arrangements as soon as we are in a position to do so.

  78. The Corporation Tax treatment of those companies is an entirely separate issue on which there have been no pronouncements from the Chancellor. All I am concerned about is whether they are a success in terms of are they doing the job that they are set up to do, on which I am not entirely clear. Do they have sufficient teeth to achieve the targets set by the Government? How much more resources do they need to achieve that? For example, what assurances are there that these Urban Regeneration Companies, be it three pilots or one fledgling company in Corby, will have environmental protection and sustainable development ideals and targets built into their remit?
  (Mr Timms) Let me just return to the Corporation Tax point because we have said that we will consider providing Corporation Tax relief for company donations to those companies and other similar bodies across the UK. That was the announcement that we made.

  79. That is a side issue, it is not Corporation Tax of the companies themselves.
  (Mr Timms) No, indeed, it is the Corporation Tax relief point. The aims of the companies and the detailed briefs they are being given others are in a better position than I am no doubt to comment on, but I certainly would expect to see—I think one can be absolutely certain—that a commitment to sustainable development will be built into companies and other institutions having an urban regeneration brief, as these will.

3   Second Report of the Environmental Audit Committee, The Pre-Budget Report 2000: Fuelling the Debate, HC 71-II, 2000-01, p18, Q123. Back

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