Select Committee on Environmental Audit Minutes of Evidence

Examination of Witnesses (Questions 1-19)




  1. Good afternoon to you both, and thank you very much indeed for sparing us your time. And I am glad we are able to start on time; indeed, two minutes ahead of time, which is excellent. Obviously, we have got the Pre-Budget Report coming up, we think, on November 27, and we shall, of course, be taking evidence from the Treasury Ministers about that. But the advantage of this session with yourselves and the two other witnesses is that we can get some sort of idea of what you feel you would like to see in the Pre-Budget Report, as well as any comment you might have on ongoing issues which you have concerns about. Before we actually start cross-examining you—by the way, may I also thank you for your memorandum, which we are very glad to have—is there anything by way of a few brief opening remarks which you would like to add to the memorandum you have sent to us?

  (Mr Roberts) Thank you, Chairman. I think merely to record who we are. I am Michael Roberts, Director of Business Environment at CBI, which covers a range of policy responsibilities, environment, transport and energy are some of the chief ones.

  2. It sounds rather a lot?
  (Mr Roberts) Yes, it is a challenging brief. And on my left is Richard Jackson, who is Senior Policy Adviser within my directorate, specifically with responsibility for energy matters, and has been doing most of the work recently on environmental taxation that we refer to in our memorandum. I do not propose to make any further statement, I think the memorandum speaks for itself.

  Chairman: Excellent; thank you very much indeed. Now we would like to start off with just talking about the extent to which you are engaged in the run-up consultation to the PBR, and I know Mrs Clark wants to ask you about that.

Mrs Clark

  3. Thank you. I would like to start off by actually asking you about your members; do they actually put a priority on a high-quality environment as an economic tool, and do they see it as being an essential economic asset, rather than just being a sort of nebulous, jolly good thing? Just to carry on and develop that. Tourism, as we know, has been really, really badly hit by the countryside shut-down caused by the tragic foot and mouth outbreak, and we also know that poor air quality can actually cause health problems, such as asthma, and, of course, these will reduce labour productivity and they will increase the bill on the NHS?
  (Mr Roberts) I think the simple answer to your question is that the extent to which businesses value the environment as an issue will vary; however, on aggregate, I think, we are seeing an increasing recognition of the importance of environmental issues. Currently, something like 80 per cent of companies now report on their environmental performance, in one way or the other, to different degrees and in different ways, but I think that is a signal of the growing importance across the piece. Within that broad perspective, clearly, there are businesses who have a particular focus on environmental issues, utilities, for example, in the energy or the water sector, have a particular focus on that; for others, environmental issues are not going to be, if you like, a clear and present item on their radar screen. And, I suppose, the challenge for much of environmental public policy is to find ways in which those companies and those businesses can be incentivised further to improve their environmental performance.

  4. My second question is exactly the same as the first, only I am substituting the word Treasury for CBI. How far do you think that the Treasury regards a high-quality environment as an important economic asset?
  (Mr Roberts) I am not sure I should be answering on behalf of the Treasury. I think, increasingly, it is part of their agenda as well. We mentioned in our memorandum the very basic fact that in the Pre-Budget Report there is now a specific section devoted to environmental policy, and particularly how fiscal and spending policies relate to the environment; so, to that extent, I think there is an indication of the extent to which they take it seriously. I suppose, from the point of view of business, our concern is that a legitimate interest in environmental issues by the Treasury might be used as an opportunity to raise taxes from the business community in ways that we might not, frankly, feel entirely comfortable with; so there is a concern there on our part about some of the motives behind what is, broadly speaking, I think, legitimate concern.

  5. We know that you regularly do submit proposals to the Government prior to the Budget and Pre-Budget Report, but can you develop that and explain your involvement in the development of Budget measures, Budget thinking, and also the degree of access which the CBI has actually got to key decision-makers; how much do the Treasury actually respect you, do they ask for your opinions and views in advance, and how involved are you, do they really take any notice of you?
  (Mr Roberts) Yes, they do. I think the relationship is multifaceted, they do ask us for our views, unsolicited, and we, in turn, also approach them with our views. As part of our regular public policy cycle, we provide submissions not only to the Budget in the spring but the Pre-Budget Report in the autumn. The development of our views on the Pre-Budget Report and on the Budget is one that engages consultation with our membership in the round. And, in addition to simply developing positions on paper and then sending them into the Treasury, we will have meetings with Ministers at all levels, and also with officials at all levels. So I would say that there is a full and constructive relationship with the Treasury on their Budgetary process.

  6. Full and frank then?
  (Mr Roberts) Yes.

  7. Good. How involved are you in the same way with the Spending Review, particularly with environmental concerns, sustainable development?
  (Mr Roberts) We do tend to get engaged in the Comprehensive Spending Review process.

  8. Do you always get engaged in it, or is it sometimes you will be asked, sometimes they will forget about you?
  (Mr Roberts) We have been engaged certainly over recent years.

  9. So it is increasing then, the involvement?
  (Mr Roberts) I think so, and, to be fair, with regard to your sub-question about our engagement specifically on the environmental agenda, I would say that it is not the main item on which we engage in the CSR process, we tend to have what we regard as a slightly different or more important priority. So, for example, the role of spending on transport priorities within the CSR is a key priority area for us and we engage very heavily and have engaged very heavily in that process, and there may be other public policy areas, such as education, which are similarly so. The environment per se is perhaps not as high a priority as those other ones.

  10. So it is fairly low ranking, in terms of your economic concerns and priorities, would you say?
  (Mr Roberts) I think perhaps we are looking at it in a slightly different way. I think the way we would answer your question is that in highlighting our priorities for transport expenditure, for example, we will pay particular attention to some of the environmental implications of that spending package. So, for example, in the work that we have done to support the Government's commitment to the ten-year plan on transport, we have indicated the desirability of a programme which will deliver genuine environmental benefit in terms of reducing pollution.

  11. Finally, I am rather mystified, how can you separate environment from transport, are they not holistically bound in together, and would it not be better if you looked at them in that way?
  (Mr Roberts) I think I suggested in my last answer that we do not disaggregate the two, that we do actually see them together. But our main instinct or impetus for being involved in the CSR process is not one which is explicitly environmentally driven, or one which is driven by, if you like, the economic concerns of our members; and, at the end of the day, we are an organisation that represents the generality of the business community, and what we hear them saying to us is that their main priorities, in terms of, for example, public spending, are items such as transport or education.

  Mrs Clark: Thank you very much.

Mr Challen

  12. Can I ask just a quick supplementary. You have mentioned meetings with Ministers, which I presume are on a more or less ad hoc, subject by subject basis; could you tell me if officers of the CBI regularly meet in scheduled meeting formats with civil servants?
  (Mr Roberts) Yes, is the simple answer to your question. That is not to suggest that at the outset of any year we will have quarterly meetings set, with dates set against them. I think what we will do is ensure that we are engaged at the relevant points in the process, so in the run-up to the Budget, in the run-up to the PBR; and the meetings are a combination of regulars and meetings that are called on an ad hoc basis.

David Wright

  13. Chairman, I noted the comment on transport, and I thought it might be useful to dive in at this point with one or two questions about transport. You mentioned that you think there needs to be a more comprehensive review of transport taxation; what areas do you think are right for review at the moment?
  (Mr Roberts) With regard specifically to transport?

  14. Yes?
  (Mr Roberts) There are a number of concerns. I think the sort of overarching concern is the sense that road users, who are taxed in a number of ways, and quite significantly, do not really get a fair deal from the level and the style of taxation which is levied upon them, in terms of, for example, the quality of the network, which is paid for in part by that level of tax. Further to that, I think we would say that there are a number of initiatives in train in transport policy, the development of congestion charging, mainly in London though not exclusively, the possibility of workplace parking levies in a number of other urban areas in the country; all of these are adding further forms of charge or tax to road use, against the background of an existing tax system, which, as I suggested, at a very aggregate level, we would regard is not entirely fair for the motorist. And before the Government, or indeed other agents, take forward new forms of charge, there needs to be a fundamental review of how all of these constituent bits fit together, to see whether or not they are delivering, if you like, (a) economic objectives, and (b) environmental objectives, in the best possible way.


  15. What did you mean by `a fundamental review'?
  (Mr Roberts) In terms of the extent, for example, to which the tax mechanisms are the most targeted way of changing behaviour in a positive manner. Let me be specific. We suggest in our memorandum that pollution from road use, from use of vehicles, is sensitive to the conditions on the road at the time, so the more congested the conditions the heavier the fuel use, the greater the amount of pollution. If you want to do something about that, if you want to try to encourage a positive change in behaviour, our belief is that fuel duty is a rather blunt way of trying to signal the need for a more effective use of the network at that time; something like congestion charging would be, on certain conditions, a more effective way of doing that. So we feel that there is a need to be looking at how these different instruments in aggregate work together to the best effect.

Sue Doughty

  16. That is quite interesting. When we are looking at areas particularly in the South East of England, where we are really talking about fairly heavily congested areas, how far, in practical terms, is the CBI thinking about encouraging people, from its point of view, to switch travel away from the car, in order to have more effective journeys? And I am thinking about the problems that employers face in actually bringing people into work and the problem about the massive amount of travel that takes place in the South East of England. So that when you are talking about investing in the network, the network of roads is certainly finite, have you got anything else you would be wanting to see there?
  (Mr Roberts) Priorities, from the business point of view, for investment in different parts of the country are clearly going to vary by mode. With regard to London and the South East, many of the priorities that we have indicated for investment are actually not just in road but also in public transport alternatives, a lot of those investment priorities will be rail-based, for example. But I think it is important to flag up that the extent to which changes in behaviour can be promoted do not rely just upon, if you like, major projects which are financed by the public sector, there are things which business can and which they are doing off their own initiative. So there are companies like Pfizer, for example, in Kent, who have their company travel plans, which are encouraging employees to car share or to use the bus in order to get to work. Companies like BAA, not only at Heathrow, are also adopting similar sorts of initiatives. So there are things sensibly which companies can do. Those sorts of initiatives will not necessarily be appropriate for all sorts of companies. I mentioned a couple of examples there where there are companies with large sites, obviously with large amounts of employees in a single area, and those are particularly amenable to the sorts of initiatives I mentioned; but there is good work under way.

  17. And is there more that the Treasury could do to encourage employers to take this approach?
  (Mr Roberts) I am not close to the detail in this area particularly, but my understanding was that certainly in the past there were some issues about the tax treatment of, for example, provision of buses to transport employees to and from the work site. I believe that there was an issue about this being treated as a benefit in kind and not being particularly tax efficient for businesses to provide, and that issue had been raised certainly in the past with the Treasury, and unfortunately I am not in a position to know where things got to on that.

  18. Yes, this is quite interesting really, if we are to do that dual thing of carrots and sticks about encouraging people to change patterns and really to have more effective transport systems as well?
  (Mr Roberts) I think our view is that, whilst there are certain principles by which one will want to look at whether it is right to use tax and fiscal measures as a way of encouraging change, there are examples of where it does work, or it can work. I think, in general terms, what has happened on the shift to unleaded petrol is a classic example of how the system can be made to work. More recently, with the changes which have been announced on company car taxation, anecdotally, the evidence seems to suggest that companies are generally starting to think about changing the composition of their fleet so that it is more environmentally effective, in response to the signals which have been sent by the fiscal regime.

Mr Jones

  19. You have already moved on to some of the territory that I wanted to explore, but, in summation of the answers you have already given, would it be fair to say that CBI membership as a whole understand the need to use taxation and agree that taxation can be used to modify behaviour; where they have problems is that that taxation is effective in delivering the change in behaviour that it wants to succeed, wants to encourage?
  (Mr Roberts) I think that is a fair summary of our broad position. I think experience, particularly recent experience, with the Climate Change Levy, to take one example, which has been particularly contentious within the business community, highlights the sensitivity amongst the general business community to the implementation of taxes, in practice.

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