Select Committee on Environmental Audit Minutes of Evidence

Examination of Witnesses (Questions 44-59)



  Chairman: I think you have had the opportunity of having heard what the CBI have said.

  Mr Francois: Chairman, could I say, just very quickly, for the record, I do have a few shares in CORUS plc, because of the Climate Change Levy's potential importance for them, I should probably mention that; it's not a big number, but just to inform you.


  44. Thank you. Okay; well thank you both very much indeed. I hope you found that as interesting as we did, listening to what the CBI had to say. Thank you for your memorandum, as well. Is there anything you would like to add to that, before we ask you questions about that and other matters?

  (Ms Willis) No; just to say that we very much welcome this inquiry, as a way to take stock of where we are with environmental taxation and spending, and we think it is a really important role for your Committee to carry on scrutinising this. So I think that is all I would say by way of opening remarks.

  45. Thank you very much indeed.
  (Mr Hewett) Do you want us to introduce ourselves, as well? I am Chris Hewett, Senior Research Fellow from the Institute of Public Policy Research, and so this is actually a joint submission from two organisations.

  46. I think we have met before, have we not?
  (Ms Willis) That is right, yes.

  Chairman: We want to start off by talking about the overall situation. I know Mr Gerrard wants to come in.

Mr Gerrard

  47. In your paper, you made it very clear that you think there has been a failure to make a sufficient case for the environment; you also spend, I think, virtually the whole first page of the paper emphasising very much the role of the Treasury. Why do you think it is the Treasury that should really be taking the lead?
  (Ms Willis) We think that there is an important role for the Government overall to set out its environmental agenda very clearly, and we have seen progress on that front, that the Prime Minister, over the past year, has made a number of very public statements about his own environmental views and where the Government might be going next, in environmental terms, and we think it is important for each Government Department to set out its vision, or its views, on the environment. The reason we see an important role for the Treasury is because it is part of the centre of Government, and it does have a significant influence on Government policy across the board. And so we would expect both the Prime Minister and Cabinet Office and Treasury and all those parts of the centre of Government really to be the focus for integrating environmental sustainable development across the Government's agenda; although, obviously, we would not want the Department to renege on their own individual responsibilities, you need both, the Departments doing their bit and central Government helping that process along, to give clear signals.

  48. Do you think the signals have been clear enough? If we think back, for instance, last year, to the fuel protests, when it came to the crunch, is it not the fact that environmental objectives were just not mentioned in that argument; does that say anything to you?
  (Ms Willis) Yes. As far as the Treasury is concerned, we think that this is something that the Treasury needs to do now; it would be a really important step forward for the Treasury, and particularly for the Chancellor, to set out a positive case for their environmental agenda. Because one of the problems with the fuel crisis was that the environmental arguments for fuel tax and the arguments for environmental taxation per se had not been made in a public way; and, in fact, as you pointed out, in this Committee's report on this, when the Government was justifying fuel tax they did it on grounds of public expenditure for health and education, and they did not make the environmental case. And I think that was a real missed opportunity.

  49. You talked about the need for making views clear, and in your paper suggested we should have a revised Statement of Intent on environmental taxation from the Treasury. But then you went on to talk about extending the statement to cover spending policy and management of economic policy more generally, and I wonder if you could perhaps give us a little bit more detail about what that actually means, what you would expect to see in the Statement?
  (Mr Hewett) I think the Statement of Intent on environmental taxation that was published in the first Budget of the first term of the Labour Government, was a very strong statement of principle, signalling that the Treasury would take environmental taxation seriously, and a lot of measures, the Climate Change Levy, the Aggregates Tax, the extension of the Landfill Levy, all those measures were, in a sense, tied to that statement of principle at the beginning of the term. I think there is a question about whether, as all those measures were implemented, the principle started to be lost a little bit in the debate around the detail, the Climate Change Levy is one example, but making that statement at the beginning at least set the stall out and was a very useful statement, and, yes, presaged some genuine policy change. What did not really happen in the last term was integration of environmental objectives into the Spending Reviews; as this Committee has also said, the Spending Reviews did not take into account the environment in the same way as the Budget process did. So what we are saying is two-fold, really. Firstly, there is a need to restate the political priorities of environmental tax reform, go back to the beginning, why do we need to shift the tax base from labour to pollution.


  50. It is the Chancellor who should do that, you think?
  (Mr Hewett) The Chancellor should do that in his Pre-Budget Report, we think.

  51. Rather than the Prime Minister, or . . .
  (Mr Hewett) Yes; this is about Treasury policies, about the Spending Review as a tool of the Treasury and of taxation policy. So, first of all, there is a need to restate that political case for green tax reform at the beginning of this Parliament, and then extend that to taking the opportunity of the new spending round and promoting some of the processes which the Treasury are putting in place to integrate sustainable development into their Spending Review. That political statement should be extended to look at all sides of Treasury policy this time round.

Mr Gerrard

  52. How much detail would you expect, because the Committee has said, and you have said, that we will perhaps want to see how environmental policies were taken into consideration in the Spending Review; well what more than that would you want to see put in a Statement of Intent, how much more detail would you want to see in a Statement of Intent, or are we in danger of just ending up with a wish list?
  (Mr Hewett) What is required is a strong statement of principle, which then specific measures can be tied to throughout the Parliament, for example, a much better use of Government procurement policy to stimulate environmental markets, which may entail more spending but actually would be there for a purpose, it would be extra spending through Government procurement to stimulate the recycled materials markets, renewable energy, whatever those different markets may be.

  53. Do you think there is any possibility that the opposition there has been to the Climate Change Levy, for example, is going to make a difference to the Government's attitude? Do you suspect, or fear, any weakening of the commitments on environmental taxation?
  (Mr Hewett) There has been opposition, clearly; the fuel protests, and the way the CBI positioned itself on the Climate Change Levy, along with other industrial groups, that has affected the way the tax has been implemented and has made it more difficult for the Government. But this is always a problem, the loser groups always shout loudest, and I suspect, if the Government were to reverse the tax shift and if it were to say, `okay, we will cut energy taxes and we will increase employers' National Insurance contributions' then you will get different sectors of business saying, `actually, we don't want Britain putting more costs on labour,' and so in a sense the losers will always shout the loudest. In a sense, the Government has to take that on the chin, if it genuinely believes that the policy will work, and the evidence across Europe is that it does work; so I think they should just stick to their principles.
  (Ms Willis) And if I could just add to that, if you are looking at public opinion then the public opinion we saw last October came out strongly against fuel tax. But you have to remember that there is a significant proportion of public opinion that is very much in favour of environmental improvement, and there are three million people in this country that are members of environmental organisations, that is more than any political party, more than all the political parties; there is a significant body of support, and the Government is not appealing to those people at the moment, and there is a lot that it could do to reach those people.

Mr Lucas

  54. Where were they last October, in the fuel protests?
  (Ms Willis) Last October, they put on a joint press conference at the Labour Party Conference, which did not get any coverage.

  55. But, seriously, do you think it would have made a great deal of difference at that time if the environmental argument had been made by the Government, rather than the argument that `we need this money to pay for health and education'?
  (Ms Willis) I think the fuel protests were a symptom, and that was just one particular example. What we would argue is that if the Government were making a positive case for environmental measures and were making arguments clear and setting out their priorities, and looking at what they were encouraging as well as what they were discouraging, then you might not get such vocal opposition in that particular instance. Unfortunately, once these things hit then it becomes a media story and things just snowball, at which point it is very hard to influence them.
  (Mr Hewett) Mistakes were made on fuel duty but those mistakes were made when the Fuel Duty Escalator was increased in the first place. If you look at what the Government did in its Budget documentation, there was an increase in fuel duty, there was also a decrease in income tax; if those two things had been explained, at the time, at the beginning of the Parliament, if the Government had been honest about what it was doing, then I think some of the opposition to the fuel tax might have been tempered, because a lot of people would actually like the income tax cut. Unfortunately, the Government tried to take credit for the income tax cut without being honest and saying where that revenue was actually coming from, which was fuel tax.

Mr Simmonds

  56. The conversation, so far, seems to be revolving around taxes; and I wondered what you personally both felt that the Chancellor should be doing, other than considering increasing taxes, for the benefit of the environment?
  (Ms Willis) I would argue very strongly that the debate should not just be about taxes. I think that one of the lessons that is coming through is that any dependence on fiscal measures alone will not be enough unless your other policy signals back that up. So we would argue that you need a tax to be part of a package of measures, whether that is on energy taxes or waste, you need all your policy signals going in the same direction. If you have fuel tax, you also need incentives for research into alternative fuels, you also need long-term signals for business so that you can actually promote the innovation which you will need to get the kind of step change that you need, and innovation, in order to achieve 60 per cent CO2 cuts; you are not going to get 60 per cent CO2 cuts through incremental change, there is going to have to be some real innovation breakthroughs to get there.

  57. And do you think there has been sufficient emphasis by the Chancellor in the past on, say, research and development, which I personally think the emphasis should be put on, rather than increasing taxation?
  (Mr Hewett) I think the way the Government needs to approach it, or the Treasury needs to approach it, is to start to integrate resource productivity—at the moment, the Budget process and the spending process have been driven by labour productivity. Closing the productivity gap, has dominated the Treasury's agenda but, that has been specifically about labour productivity. There is a whole parallel debate about resource productivity and about increasing the efficiency of materials used in the economy, reducing the amount of pollution we create, per unit of GDP. There is work going on in the Cabinet Office, in the Performance and Innovation Unit, looking at that topic at the moment; we would hope that some of the lessons learned from that research can be drawn across into the Treasury policy machine, if you like, so that some of these other measures which are currently being targeted at improving labour productivity also look at how you could stimulate innovation, targeted tax credits and R&D tax credits to renewable energy, into other environmental technologies, to improve that aspect of the efficiency of the economy, as well.

Mr Challen

  58. I am just wondering, in the pursuit of these policy objectives, how much influence you have with the Government, and indeed how much access you have to the Government? We heard that the CBI have ad hoc meetings with Ministers, and they appear to have regular scheduled meetings with civil servants; do the organisations that you represent, the NGOs, and so on, have similar access?
  (Ms Willis) I cannot speak for all environmental NGOs, but, having said that, we do co-operate, where that is beneficial; but I think it would be fair to say that we do have very useful dialogue with the Treasury and other parts of Government. With the Treasury, we meet on a regular basis with officials and advisers in advance of the Pre-Budget Report and the Budget, and we are also meeting on a regular basis over the spending round; so I would say that is a very useful and constructive process.

Sue Doughty

  59. I think, talking more about liaison with the Treasury, this Committee has had a lot of concerns about the apparent lack of research by the Treasury, despite the fact that they claim that they do a range of research on environmental matters. From where we are, we do not actually see a lot of output from that research, and in the past we have recommended the creation of a Green Tax Commission to promote research into environmental taxes. From where you are, how are you seeing this problem, in terms of the effect of Treasury taxation, their knowledge and understanding of the work that they are doing and the feedback on the environment; do you feel that the research is adequate, do you feel that there is any transparency at all in what they are doing?
  (Mr Hewett) In terms of the Green Tax Commission, IPPR was one of the organisations that recommended that at the beginning of the last term of the Labour Government, and there was a case for having a commission to look at the environmental tax issue in the round at that point in the process, and I think once you have started a shift in taxation there is less reason to create a commission. In terms of research, I think, actually, despite what a lot of the people who lobbied against the tax said, the work which went into the Climate Change Levy was pretty detailed, pretty exhaustive, it was pretty open, between the Task Force and Lord Marshall and all groups who had an interest in the Levy. And, I think, unfortunately, despite how much research and how much thought went into that process, if groups want to lobby against tax they will keep lobbying anyway. So I think there is quite good research and quite good transparency, in some instances.

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