Finance Bill

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Dawn Primarolo: What a nice Committee it is this afternoon. Long may that last—although I have a feeling it is only a lull before the storm. I thank the hon. Gentleman for put my response on the record, so that it is clear.

I assure the hon. Member for Arundel and South Downs that extremely close consultation took place with the Department for Culture, Media and Sport on the issue of the list of the national museums and galleries to which the scheme would apply. We have to go slightly further than that Department. For one reason or another, other Departments sponsor national museums and galleries, all of which are being drawn together for a list that will be published no later than 1 September.

The hon. Gentleman's second question was why do we not simply admit the schemes to section 33. I am sure that he appreciates that section 33 provides for the refund of VAT to local authorities and similar bodies so that VAT does not fall as a burden on local taxation. To be covered by section 33, bodies must carry out a local authority-type function and have the power to levy directly on local taxation; that was the policy of the previous Administration, too. National museums and galleries do not undertake that type of function, so we shall publish a list of the museums that will have access to the scheme.

The hon. Gentleman asked why access to section 33 was so tightly controlled, but then he answered his own question. If it were not, everyone would want access, and that would not be permissible. That is the reason for our approach, which is entirely consistent with the arrangements that we can make within the nationally determined decisions in respect of the sixth directive. The exemption is, in effect, a grant.

Question put and agreed to.

Clause 96 ordered to stand part of the Bill

Clause 97 ordered to stand part of the Bill..

Schedule 30 agreed to.

Clauses 98 and 99 ordered to stand part of the Bill.

Schedule 31 agreed to.

Clauses 100 and 101 ordered to stand part of the Bill.

Clause 102

Landfill tax: rate

Question proposed, That the clause stand part of the Bill.

Mr. Oliver Letwin (West Dorset): The purpose of the clause is to increase the landfill tax by £1. My intervention is aimed at a single project: to discover by what proportion and by what means the Government are cutting national insurance contributions equivalently. They must be doing so, because no less a person than the Financial Secretary has assured us on various occasions that the aggregates tax, the climate change levy and the landfill tax remain fiscally neutral measures. Therefore, it must be the case that the Government will introduce a proportionate decrease in national insurance contributions, or introduce some other measure to the same effect. Strangely, so far the Committee and the House have not been privileged to hear from the Government by what means they will achieve that.

I know that Hansard has difficulty in revealing the tone that hon. Members adopt, so I must explain that the tone in which I make these utterances is ironic. I do not expect such a statement from Ministers, but I would be delighted should they surprise me and genuinely prove that they intend this to be a fiscally neutral measure. I fear that there will be no such action. however, and this is the clause that gives the lie to the assertion that any of these measures are intrinsically fiscally neutral.

Mr. Andrew F. Bennett (Denton and Reddish): Can the hon. Gentleman tell us whether the Conservative party still believes in the landfill tax? Does it believe that it should be going up?

Mr. Letwin: The Conservative party does not believe that the landfill tax should be raised, or that by raising it the Government are using it as an environmental measure. They are raising money. The Conservative party believes that the Government's intention is to do exactly the same thing in due course with the aggregates levy and the climate change levy.

The Financial Secretary to the Treasury (Mr. Stephen Timms): The hon. Gentleman recently told the House:

``I was not in Parliament to vote for the landfill tax and I would not have voted for it if I had been.''—[Official Report, 23 April 2001; Vol. 366, c. 83.]

Can we infer from that that the Conservative party would reduce or abolish the landfill tax were there to be a Conservative Government after the forthcoming election?

Mr. Letwin: I have no intention of being dragged into making policy announcements by the Financial Secretary. The Conservative party does not believe that raising the landfill tax by £1 is a fiscally neutral measure. I repeat my challenge to the Financial Secretary to abandon the amusements of pre-election party games and tell us whether the assertions that we have repeatedly made over the past two years are true. The Government see such measures, as taxes and intend to raise the charges bit by bit, thereby giving rise to exactly the problems that I have always imagined might reside in such a form of tax.

Incidentally, that is precisely the reasoning that led Liberal Democrat Members and myself to believe that the suggestion put forward by the hon. Member for Kingston and Surbiton had real merit. What is needed is some hypothecation, a Rooker-Wise amendment, some transformation into charges, or something that makes such crypto-environmental measures have a genuinely fiscally neutral effect. We would then know that the Government were not just playing party games, but intended fiscal neutrality. As things stand, we have no such assurance. We have the revelation in clause 102 that the Government now intend to show that they are willing to raise one of the three taxes without an offset.

Mr. Bennett: Does the hon. Gentleman accept that the intention of the tax was to reduce the amount going to landfill and to encourage minimisation and recycling? If all those things had been achieved, would he not agree that even putting the tax up by £1 could have been fiscally neutral, as less money would be being paid?

Mr. Letwin: The hon. Gentleman is right. The aim was noble. That is common ground on both sides of the House. We all want to see a reduction in landfill. We are not having an environmental argument, but a fiscal argument. Secondly, I do not know, and I wait to hear whether the Financial Secretary knows— although I hazard a guess that he does not—whether the rather interesting proposition that the hon. Gentleman has just put forward is true. I doubt it. It certainly was not argued in that way by Ministers on the Floor of the House when we made those points on Second Reading. As far as I know, that case has not been argued in public.

If the Financial Secretary has an elasticity analysis that is rather better in quality than the elasticity analysis that he so signally failed to provide on tobacco duty, and it shows that the measure will be fiscally neutral, I shall withdraw my remarks. However, no such evidence has been produced, and I doubt both that the change is intended to be fiscally neutral, and that this will be the last rise. If the present Government are lucky enough—and the British public unlucky enough—and they are re-elected, all these taxes will be revealed in their true colours as items used by the Treasury to engage in taxation by stealth, which is wrong.

5 pm

Mr. Edward Davey: In this year's Red Book—or, rather, the white book—table C7 sets out public sector current receipts. It shows landfill tax receipts of £0.4 billion in 1999-2000, rising to £0.5 billion in 2000-01 and staying there for 2001-02. Some rounding off may apply to those estimates, but they do not mean that the revenues are suddenly falling away as the hon. Gentleman suggested. The Government may need to continue to increase the rate of the tax.

Mr. Letwin: The hon. Gentleman has injected a degree of interest into the debate. Let us wait and find out the Financial Secretary's intentions in that regard. It would be interesting if it were established that the net effect is neutral—or, in the absence of such a rise, would have amounted to a reduction. I acknowledge that the Liberal Democrats genuinely believe in their policy. If the intention of Her Majesty's Government—the current Government, that is—is also to make the taxes work in that way, in the end they might disappear altogether. They could succeed to such an extent that people moved on to do things in a different way.

It does not follow from the likelihood that the receipts would fall if the rate is not raised, that the rate should be raised. That is a non sequitur. We would first have to have established that the reason why the receipts were falling was something other than the effect that the tax was originally intended to have. If the reason why the receipts were stabilising or falling was that the tax was having its intended effect, there would be no reason—if it were an environmental as opposed to a tax-raising measure—to raise it at that point.

The Financial Secretary may be in a considerable bind here, but the Committee is fortunate in that he is both clever and honest. At this late hour of the Committee's deliberations, a little piece of history could be made, and we could gain a genuine insight into what Her Majesty's Government mean by fiscal neutrality, why the rate is being raised, and how its rise relates to past and future receipts. We could ascertain whether any studies demonstrate that the measure is fiscally neutral. If we receive answers to those questions, I might feel that part of this afternoon's proceedings have been worth while.

Mr. Davey: I have been tempted by the hon. Gentleman's speech into debating the theory of how the tax will work to promote recycling, reuse and environmental improvements. He argued that if it is working, revenue will fall, and questioned the Government's motives. It is too early in the game to start reducing the landfill tax rate. The Conservative Government and the present Government were right to set a long-term strategy of gently ratcheting up the pressure with small incremental year-on-year increases in the landfill tax rate. That sent out a signal to industry and the private sector that they needed to change their ways.

The Conservative Government introduced the tax at a relatively low rate. That was correct. With green taxes, there should be no desire to penalise different parts of industry and the private sector suddenly. We want to win support for environmental measures, and say to people that such measures are not about penalties, but about changing the market signals so that our commercial behaviour will take sustainability into account. The tax should start at a low rate and people should be sent a determined and clear signal that it will be ratcheted up. Instead of penalising people, we must make sure that the incentive is there for them to change their behaviour and their commercial and domestic processes.

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