Select Committee on Environmental Audit Minutes of Evidence


Examination of Witnesses (Questions 79-99)

MR CHARLES SECRETT AND DR TIM JENKINS

WEDNESDAY 14 NOVEMBER 2001

Chairman

  79. Welcome. I hope you are not too exhausted by listening to all of that?
  (Mr Secrett) No, not at all, we are raring to go, so thanks very much indeed for inviting us in.

  80. Thank you for coming, and thank you for what is a very sharply written memorandum, which we much enjoyed, at least, I much enjoyed, I am sure my colleagues did, reading, and we are delighted to have you here. Is there anything you would like to add to the memorandum you submitted to us, before we start to question you upon it?
  (Mr Secrett) No, Sir, I do not think so. I hope it is self-explanatory, though, obviously, in response to questions, we may well expand; but, no, we are fine.

Mr Lucas

  81. We have heard a little already about the Climate Change Levy from different sources. From your perspective, do you think the intense opposition from industry and their representatives has affected the Government's future approach to environmental taxation, or their perspective on it?
  (Mr Secrett) This is what we fear; and, as we say, in the Introduction to our submission, we do believe that the welcome path that both the previous Labour Government and the earlier Conservative administration, under Mr Major, had set off on, down an environmental tax and spend reform programme, is at a crossroads now. We see that one of the reasons why it is at a crossroads is because of concerted industry opposition to what we feel are sensible and generally mild `polluter pays' taxation and respending. We would like also to characterise our approaches, not necessarily focusing purely on environmental taxes. We think this may be a little misleading, and, as we made clear in our submission, we like to talk about sustainability, fiscal packages, where environmental, economic and social objectives are realised, as a result of carefully targeted and carefully designed tax, tax credit and spend packages. And I think that part of the confusion arises if one constantly focuses on one aspect rather than seize the opportunities to make progress in the round. It is very much, as you will appreciate from our submission, that that should then lead on to a strategic approach. We think that, because the Government is not quite convinced of the benefits of the strategic approach, we are also running into what seems to us to be unnecessary nervousness and prevarication on the Government's behalf from going down this route; the response to the climate change levy opposition is a good example of that. Having said all that, we certainly think that there are better ways of designing a climate levy than the current one, and, in a sense, it is a victim of its own complexity. We recognise that in both the climate levy and in the approach taken over company car subsidies, and on VED, for example, the basis of linking taxes to carbon emissions is a very good one. Now we would suggest that taking a strategic approach, as we argue for, leads inevitably to carbon taxation, and I think that when one gets into carbon taxation, from both an industry and a household point of view, one has the opportunity to take this strategic, in the round, approach, where one can both penalise, where one should be penalising, and reward, where one should be rewarding, and that is the approach that we would like to see adopted.

  82. Can I just pick up on a little phrase that you said, you started talking about households there, which we politicians get very nervous about in this environment, because it is an area that I explored with the Secretary of State for Trade and Industry a couple of weeks ago, when I raised the issue of a carbon tax, there is huge nervousness about any suggestion that domestic consumers are to be taxed on carbon consumption. How does one approach the public to explain the necessity of that, if you believe it is a necessity?
  (Mr Secrett) Carefully, strategically and over the long term; and I think that that is part of what the strategic approach does, it does not look to deliver immediate results and it recognises that we are in a fundamental transition, and that is where we have to go. We were very pleased indeed by the speech that the Prime Minister made in March, before the general election, when he quite clearly laid out three new core priorities for, as he then hoped for, a second Labour term. One was a low-carbon economy, the other was a low-waste economy and the third was in the greening of agriculture, all areas that we have covered in our submission. Now, clearly, when your bulk of fuel is carbon-based, you are not going to be able to make that transition quickly, and so one has to think strategically about how you make that transition over time. But the Prime Minister did talk about a low-carbon economy, and, therefore, that has to include the domestic sector. Similarly, the package approach looks not only at what one is using, in terms of fuels and energy supply, but where one can save energy and demand management. One of the great opportunities that we think is going to come out of a piece of legislation, the Warm Homes and Energy Conservation Act, as well as other energy efficiency measures, is going to be, over time, investments and hopefully tax breaks as well that encourage industry and households to cut down on the amount of energy that they use; as you do that, as you stress the positive and the economic opportunities of change, you can introduce in a transitionary way and explain what is going on, go out and consult. A key part of sustainability is to encourage participation amongst society; there are lots of opportunities that the Government can take through local authorities and through agencies, like the Sustainable Development Commission, for example, like the local authorities, like the Regional Development Agencies, to engage with the public and make the arguments, in a way that they spectacularly failed to do during the fuel crisis. And so that is the broad approach that we would advocate and argue for. I do not know, Tim, whether you want to pick up on anything about the climate levy.
  (Dr Jenkins) Yes. One of the points you raised at the beginning was whether the Government had adequately explained the reasoning behind and design of those policies, in a way, selling those own policies. In the case of green taxes, I do not think, to industry, they have done enough of that.

Mr Jones

  83. Sorry; but do you think you bear any responsibility for failing to make this case, as well as the Government, the spectacular failure of the Government, but also the spectacular failure of not just the Government?
  (Mr Secrett) Do you want to do the climate levy bit first, because otherwise we might lose that one, and I am certainly not forgetting that question, Sir, because it is a very important one.
  (Dr Jenkins) The point I was briefly going to make was that there are a number of elements of the design of the Climate Change Levy package that offer business opportunities, and they are ones that are not played up, either by trade associations or business organisations, despite the fact that their members can take advantage of these to reduce their tax under the Climate Change Levy. For example, they are rewarded if they buy green energy, the same as a household can do, they do not pay any levy on the electricity they get in that way. If they invest in renewables—

Mr Lucas

  84. Can I stop you there, because I think that is slightly misleading, because the cost of renewable energy is considerably more than non-renewable energy?
  (Dr Jenkins) But they do not pay the levy on the top of it.

  85. But it is no cheaper?
  (Dr Jenkins) The point is that they reduce their levy, they reduce the amount of levy that they will be paying if they buy—the difference between the two is not greater.

  86. They do not reduce their costs, at the present time?
  (Dr Jenkins) But they will reduce their costs by buying in electricity from renewables, compared with actually paying the levy on a normal electricity tariff.

  87. How; why?
  (Dr Jenkins) Because the rate of the levy that many of them are paying, or the rate of the levy that they are paying for buying in, is actually equivalent to the extra amount that they would be paying for renewables. Equally, the more companies that actually do so the faster and further the price will fall. The Government is, in a way, starting that process with some Departments now buying green energy, that amount, the rate of renewable energy, will reduce. There are a number of other business-friendly elements, for example, their investment in renewables of their own is exempt, as is the investment in CHP of their own and there is the enhanced capital allowance for investment in various cost-effective, energy-efficiency technologies that are currently available to all firms. So there are a number of ways in which trade associations and business associations are not going in and encouraging their members to take those points up. In terms of the response to the levy, it was at its greatest at the point at which the negotiated agreements were being hammered out. Since those negotiated agreements have been signed, by the most energy intensive sectors, the amount of public disagreement with the Levy has reduced. Those who are most vocal are the sectors who feel that they are outside of that negotiated agreement process. There would be a lot to be said for many of the trade associations who have now signed the negotiated agreements, and more broad business organisations, to be more public about how their members can take advantage of those parts of the levy design that offer the chance to reduce their tax liability.
  (Mr Secrett) Can I just add something else, in answer to your question, because, again, I think that you are focusing on something that is a particular short-term, transitionary difficulty when one has so little supply of renewable energy. And, again, this is where, from the strategic approach, we see that it is very important to go down a path, say, followed by the Germans, where we are beginning to see massive investments being made in offshore wind, so that supplies really scale up over time. That is also part and parcel of what you do in the short term to get as acceptable a package of proposals together, knowing where you want to be, in terms of very different supply and demand balances, in five or ten years' time.

Chairman

  88. Can we come back to Mr Owen Jones's question?
  (Mr Secrett) Yes; sure. The fuel protests. I think it is extremely difficult for any NGO, at a time when the media are in a feeding frenzy, to make a breakthrough, and the fuel protest, the week, or the two weeks, of the initial fuel protest was just such a time. All the newspapers, I am sure you will remember, were not interested in any form of analysis of what was going on, it was purely headline-grabbing, circulation-chasing, coverage, and there was no—

Mr Challen

  89. If there were members of these organisations that actually took some other action to try to counterbalance that coverage, as opposed to the few hundred, or maybe two or three thousand fuel protesters, surely, that would have brought it back; did you do anything actually to try to campaign and motivate your members, in that respect?
  (Mr Secrett) Absolutely; and I am going to get on to that point in just a second. I just want to make a general point about how difficult it is, in these sorts of times, to get the media to do anything apart from what it is fixated on.

  Mr Jones: We can understand that.

Chairman

  90. You are speaking to the converted, I think.
  (Mr Secrett) Again, we have something else in common here. The second thing is, though, that, in times like that, where is the media focusing? It is focusing on what Government is doing or not doing and what Government is saying or not saying; and one could equally ask the question about opposition parties. Why did the opposition parties have such short shrift in being able to get their points across; it is because of the nature of that type of Anglo-Saxon debate. A third point that I would make about this though is that—

  91. Do you think, democratic rather than Anglo-Saxon?
  (Mr Secrett) No, I mean this sort of curious dialectic that goes on; you cannot imagine this sort of thing happening in Holland or Sweden or Norway or Denmark.

  92. You mean just because we have got red-topped tabloids?
  (Mr Secrett) No, it has its advantages, as well, but it definitely has disadvantages, particularly in looking at things analytically, or in stimulating reasonable public debate, is one of the things that we find very difficult to do, particularly at times of heightened crisis. A third point though that I would make is that Ministers had a perfect opportunity to come forward and make the case. After all, it was floods, and one does not have to come out and say, `this is definitely climate change happening,' but being able to go out and make the case, make the connections between events and behaviour. A fourth point that we wish that they had done is to take the opportunity to distinguish between taxes on dirty fuels, that should be high, and taxes on clean, or cleaner, fuels and technologies, that should be low. Again, that is part of the strategic approach. That was not coming forward from Government, and it should have been coming forward from Government, in our view. That then helps to change the nature of the debate and to create room for environmental and sustainability organisations to make the case. You, Sir, asked what we had done. We, Friends of the Earth, did a lot of press releases, of analysis, of special briefings, to MPs, as well as letter-writing to newspapers, as well as trying to find some opportunity for a voice to be heard, and we have to say that we were relatively successful; each day, or maybe every two days, we would have a TV interview or a mainline news interview.

  93. During the fuel crisis?
  (Mr Secrett) Yes, during the fuel crisis and immediately afterwards.[1] There was a debate that we took part in on Radio 4, I cannot remember the name of the programme but the one that takes the place of Any Questions, where Will Hutton and I debated two fuel protesters; we won by the largest majority that the programme had ever had, demolishing the fuel protesters' case. So there were some things that went on. The final point that I would like to make about this, which is perhaps slightly difficult, is that I think times like this also demonstrate that it is maybe a bit of a misnomer to say that we have an environmental movement in this country. I think that a lot of organisations, particularly the nature conservation organisations, which are the mass membership NGOs in this country on the so-called `environmental' side, are actually known, their political positioning, their popular support is drawn for their nature conservation stances. And, therefore, I think they find it extremely difficult, in times like this, which are seen as a social and economic set of issues, for their voices to be heard in the media. And I think that this is something that the NGO movement needs to address. How is it that the mass membership organisations, which are primarily, and I repeat, primarily, focused around nature conservation and wildlife concerns, are able to evolve to deal with economic and sustainability concerns. Now we believe at Friends of the Earth that we have done that, and we certainly consider ourselves to be a sustainability organisation.

  94. You are questioning whether they really are?
  (Mr Secrett) I am saying that, if you look at it analytically, whatever the policy positions of these organisations, and they produce excellent policy positions and their staff are expert on a whole range of sustainability issues, that, in terms of public positioning, in terms of political influence, it is not derived from their policy positions on economic or social issues, it is much more to do with nature conservation issues, and therefore I think that this makes it very difficult for the movement's voice to be collectively heard at times like these; and I think that is just a fact.

Mr Challen

  95. Can I ask you the same question that I have asked the previous two organisations, and that is, do you have access, as much as, say, the CBI, ad hoc meetings with Ministers, regular scheduled meetings with civil servants?
  (Mr Secrett) We do have regular meetings with civil servants. We have been working on environmental economics, sustainability economics, now, for eight years, consistently producing our Blueprints for a Green Budget over this time period; we have established a reputation for environmental economic and sustainability analysis. We do have regular meetings with civil servants, both as part of a wider group of NGOs that meets every six months now, which we find a very helpful position by Treasury, and we ourselves, as other NGOs do, meet individually with civil servants. However, I do not think that we have anything like the access, either collectively or individually, that the CBI enjoys.

Joan Walley

  96. I just want to follow up this point, because I think it is an exchange that we have had on previous sessions of this Committee. And, if I am right, one of the things which came out of the fuel crisis, whenever it was, was that the oil companies, arising out of that, as I understand it, got a regular audience at Number 10, on a virtually weekly basis, and that the whole issues that arose out of that were directly the concern, on a weekly basis, of information that was feeding into Number 10. What I would really like to do is to see how the points that you were making, about the need to think for the long term, the need to get policy there not just for today in an instance but to look at it for the long term, and the transformation that needs to take place, how there can be that similar input from those who would want to put environmental sustainability on the very top of the list, how that could actually be done. How do you feel that the Pre-Budget Report that we are looking at now could be a mechanism, if you like, for assisting that; why are we not having the same weekly meetings or the same appraisals going into Number 10 arising out of concerns to get this right for the long term? Is it because there is not that support from the country at large, beyond your individual members; how do we make people literate, or is there an issue about environmental literacy that really needs to be looked at?
  (Mr Secrett) I think there is, and also sustainability literacy; and these things change, depending on your yardstick, over relatively slow timescales, they are measured over decadal timescales, we are only really, in policy terms, beginning to come to grips with the agenda laid out at Earth Summit One, at Rio de Janeiro, in 1992. If you look at the evolution of agencies or organisations or departmental strategies, from nature conservation to environmentalism to sustainability, which last takes into account social justice and equity issues as well as prosperity and environmental protection issues; it is slow; it took a long time for the Environment Agency to be formed, an Environment Agency now coming to terms with gradually moving into sustainability and social justice issues, looking at the link between, say, poverty and environmental degradation. So I think that is part of it. Look at the way that departmental strategies have very slowly evolved, the role of the Green Ministers; it is slow stuff, measured over decades, so I think that that is part of the problem. What we are trying to highlight, in terms of the Pre-Budget Statement is that, in this first Pre-Budget Statement of the new administration, now is the time to move from the welcome statement of principles, that we saw in the first Statement of Intent, into a strategic repositioning and set of commitments; and we have laid out in our submission what we think that strategic refocusing should be. But the Sustainable Development Plan, the Sustainable Development Plan of the Government, the second one, is an opaque and general document, and I think that that is also part and parcel of evidence of how slowly things move.

  97. Sorry, if I can just stop you there and say, okay, if that is an opaque document, presumably, you are saying that you would like it to be a clear document; how do things like research, that is undertaken by individual Departments, and in particular research undertaken by the Treasury, how can that be used to provide the transparency so that there is a much greater possibility of a clearer strategic statement? Do you know what research the Treasury is doing? We are not quite sure exactly what research has been done by the Treasury, because we questioned the Green Minister back in March 2001 and we understand that significant research was done, but we are not very clear exactly what environmental research was done; are you aware of it, and what input do you have into all of that?
  (Dr Jenkins) We are not always clear about what research they are doing. If Treasury are looking at a particular tax measure, sometimes the research involved is a public exercise, as with, say, the aggregates levy. In the case of the Green Technology Challenge, which is the capital allowance scheme for environmental technologies, which we lobbied for very heavily and consequently have had a lot of contact with Treasury over. They certainly did research looking at how other countries have implemented such a measure; we were not aware of that and we certainly have not seen the results of it. It happens to back up exactly the position that we had and research that we have done of a similar nature. So I suppose the answer to the question is, on occasions, we do know what the research is, partly because that research, on occasions, has been used as part of the process of developing the measure; on other occasions, it is clear that they are doing work on their own and they are not making it as public.
  (Mr Secrett) It tends to be on specific things, like the Green Technology Challenge; five years ago, we were advocating the Dutch List system of environmental technologies to favour with tax incentives to Treasury, and we found that Treasury listened, engaged, they saw that we were able to provide them with the information about what was going on, to Ministers, to civil servants, and then they pursued it through the GTC. On specific instances like that, yes, we do know what is going on, and we are often party to helping a change occur. In the generality, no, we do not know what is going on, and for something that we may touch on a little bit later, in terms of the Comprehensive Spending Review, the lack of transparency over what the sustainability guidelines are that have been issued to Departments, for example, is a case of where we think that the Treasury holds its cards too close to its chest. And they could usefully open up a little bit more, because there would be a lot of help that they would get, both from NGOs and from academia and from industry and business in helping to make this strategic transformation, to get one's head around very different sets of economic as well as political principles. And that is the type of transformation that we believe Treasury and the rest of Government should be pursuing strategically.[2] But it does require people to believe, and possibly, possibly, the support is not there from Number 10. We think that this is a case in which Number 10 and the Cabinet Office and Treasury have to work very, very closely together, to realise, say, previous manifesto commitments to put environmental concerns at the heart of all Government decision-making; that is a big challenge when you are not used to doing it. The departmental structures do not help either.

Chairman

  98. Do you think they have got worse?
  (Mr Secrett) Yes. There are lots of institutional obstacles that get in the way because Government is so often based on the past, and moving into a new future takes time. And when it comes to economic measures you have to do it slowly in case you get it wrong; so, again, that is why the strategic approach is one that we commend, because it helps one to deal with these complexities at a slow and steady but progressive pace.

Joan Walley

  99. Just finally, I want to ask about the perverse greenfield and brownfield VAT differentials, and the way in which, from all kinds of an environmental perspective, we want to see investment in brownfield sites, and the way in which, across Departments, so you have got, that very point that you have just mentioned, of Treasury, DTI, all the other Departments, there does not seem to be that strategic approach. I do not think there is time for a lengthy response now, but at some stage I would really value some response from you, perhaps written, if necessary, as to how that could be addressed in the inquiry that we are undertaking at the moment?
  (Mr Secrett) We certainly can do that.


1   Mr Secrett added later that Friends of the Earth also followed the fuel convoys, with their own banners and gave media interviews, putting the sustainability case. Back

2   Using polluter pays taxes in all sectors, and respending these revenues through direct investment and tax breaks to foster innovation in developing and using environmental technologies, creating jobs, stimulating new companies and export opportunities, while cutting pollution and conserving natural resources, not inefficiently wasting them. Back


 
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