Select Committee on Environmental Audit Minutes of Evidence


Examination of Witnesses (Questions 100-107)

MR CHARLES SECRETT AND DR TIM JENKINS

WEDNESDAY 14 NOVEMBER 2001

Mr Francois

  100. Just quickly, because I am conscious that the clock is running against us now. Just a point on appraisal and monitoring, very quickly. Do you think, in your opinion, that the Government have put in place sufficiently robust mechanisms for assessing the effectiveness of environmental measures; are there ways that you think they could improve the monitoring that they currently carry out?
  (Dr Jenkins) Are you saying, in general, or specifically to taxation measures?

  101. As a general point, but any specifics you can give would be welcome?
  (Dr Jenkins) I think one useful specific example, of a taxation measure, is the landfill tax, where clearly they were bringing in a tax where there was a drought of information about the waste arisings from industry. If the DTI is going to achieve its aim of, as the DTI put it, their top-level priorities of improving resource productivity by reducing waste regeneration, we are going to have a low-waste economy, and you have to be able to measure it. When the landfill tax was brought in it was quite clear that there was not detailed information in existence on waste arisings, transfers and disposal. One of the issues about monitoring the effect of the landfill tax is that, and there is a recent review of different environmental taxes across the European Union that makes this point about the landfill tax in the UK, the tax has actually stimulated the generation of the data, that is going to allow to be able to see not just the environmental impacts of that, about how little waste is produced, but also the economic effects of it, as well. Often, these green tax measures are a driver for getting that information to come through.
  (Mr Secrett) In our submission on the Pre-Budget Statement, I think there are two examples of where we think that the strategic approach can be usefully developed here on a consultative and participative basis. One of our main recommendations is that we think that the Chancellor should announce the formation of a high-level and high-profile task force to examine how the Government's measurement of economic growth can be modernised to reflect environmental and social quality factors, as well as quantity considerations, you know, the old GDP problem. And, similarly, picking up on an earlier question, about carbon taxation in the domestic sector, to, again, proceed in an open way through a task force, to be able to examine the options for a tax and spending package to reduce CO2 emissions from the domestic sector. Those are two sorts of examples where we think that a consultative research-based approach, involving others, can help develop the right sort of indicators.

  102. Can I ask you just one more, quickly. We have had quite a debate about Climate Change Levy today, and we have cantered round that course, but much has been made about the alleged revenue neutrality of it, and also for the aggregates tax, as well; and the CBI, as I think we have already heard, are concerned that there is insufficient transparency in all of this. In your opinion, is there a danger that over time the link to the reduction in employers' National Insurance and to the money recycled directly to the industry will actually be forgotten; and, in your opinion, does it matter if that is actually the case or not?
  (Dr Jenkins) If I may answer the second part first, yes, we do think it matters. And (b), well, yes, there must always be a danger that it would happen, but, I believe that the development of the Climate Change Levy which has been an important education process for the Government. From the first draft of the measure the Government has added important elements of package in particular the exemptions for renewables and Combined Heat and Power, was actually biting the bullet, which they were very much against, and we were lobbying hard for, which was the capital allowance for those companies who want to invest in cost effective energy-efficiency equipment to be given a tax break for doing so. So it actually brought together a package of policy measures. And I think a lot, and we would include ourselves, would have criticised the complexity of it, but, in actual fact, most of the positive comments that have come to the Climate Change Levy design, as opposed to its principle, which I think most people would support, have been that it has actually done this, it has actually been able to see that it is a package, it is about having a package that delivers environmental benefit, and it has to do that, not just by the brute mechanism of a price change, but actually using some of the revenue to be able to feed back to industry, in ways that stimulates on-going change and secures the dynamic efficiency of the measure itself. This education process will mean that the danger of losing that connection has been reduced. It will remain there and it will change at different times, obviously, when the economy as a whole is different and the Chancellor's priorities are different. But I do believe that this issue of driving home the strategic view, that, we all want to make sure that companies are taxed less for employing people and creating jobs and more for overusing energy, is something that the Government will be able to articulate better and recognise as a strategic and a political bonus for them to be able to deliver. The danger has been much reduced, but that is not to say it will ever go away.
  (Mr Secrett) I think, also, this is why it is very important to focus on hypothecation and revenue respending rather than revenue neutrality, which is something that we were able to hear the Committee inquire about earlier. And, again, the opportunities are here to make the economic case for this type of sustainability, fiscal package, not just to make the environmental case, but to make the economic case. We can see what is happening in other countries, in terms of the competitive gains that are made, the innovation gains that are made. We stand on the threshold of a whole new type of economy, as far as energy is concerned, transport, agriculture, materials use; the Prime Minister clearly signalled that, in that March speech, that he recognised. Treasury has to help deliver. You cannot rely on the market to do this, particularly when the market is framed in particular ways, and so there are, through fiscal strategy, huge opportunities to create domestic markets for environmental technologies, of all sorts, in all these sectors, that help British companies to develop the technologies to meet that domestic demand and then to be able to go and export. That, in simple terms, is a strategic model to follow. We have seen other countries do it, we have seen Denmark do it over offshore wind, for example, we see other countries moving into other sectors, doing the same thing, the Dutch are doing it, where there is a real danger that, once again, we will be left behind. And so it is to make the positive economic case, as well as the environmental case.

Mr Challen

  103. Do you think the Government should be doing less then to keep energy prices down, we have had NETA, and so on, through competition?
  (Mr Secrett) I think that what one has got to distinguish between, strategically, is between the type of fuels and to use market mechanisms to send out market signals that differentiate between using dirty polluting fuels or technologies that are wasteful or inefficient and using cleaner fuels, or developing them, bringing them onto the market and encouraging that technical innovation, whether it is to do with engines, or machinery, or appliances, or what have you. Now regulation also plays a part here, target-setting plays a part; so there is a policy package approach as well as a fiscal package approach that has to be adopted, that once again brings us back to joined-up Government, and delivery across Government, and fulfilling those very welcome manifesto commitments, low carbon, low waste, greening agriculture and the existing commitment on transport.

Chairman

  104. Talking about delivery; in the last Parliament, sustainable development was the responsibility of the Deputy Prime Minister, who had a very large Department, and the Sustainable Development Unit was part of that. Now, the Deputy Prime Minister does not even want to come to this Committee because he says it is not part of his responsibility, it is now a smaller, cut-up Department and the Sustainable Development Unit is simply part of that. Is that bad?
  (Mr Secrett) We think it causes real problems, to follow the sort of strategy that we are advocating and developing ourselves at Friends of the Earth. In simple terms, DEFRA covers 80 per cent of the land surface and 20 per cent of the population, in effect. Essentially, the political signal that has been sent out by DEFRA, we fear, is, environment and sustainability issues are about bunnies and bloody farmers; and we think that is a very, very dangerous political message when you have a sustainable development strategy and manifesto commitments that say entirely the opposite thing.

Mr Francois

  105. I am sorry, but after what farmers have just been through, do you think that really is an appropriate remark?
  (Mr Secrett) I come from a farming family, and I think that that is a perception and an appearance that is prevalent throughout Whitehall. And I think that that is one of the great mistakes of this institutional rearrangement. I think that there is a lot that will be able to be achieved through DEFRA, as far as building on the Prime Minister's commitment to pursue a greening of the Common Agricultural Policy and to deliver genuine sustainable development in social and economic as well as through environmental action, as far as the rural economy and farming communities are concerned. I am absolutely convinced that that is the right way to go, as far as the rural landscape is concerned and as far as the farming industry is concerned. And I think that that is the advantage of it. Finally, we are beginning to understand that, if you put environmental and social priorities at the heart of agricultural policy, this is the way to not only meet market demand but to create the market conditions where farmers, instead of going out of business, can start genuinely prospering, and that we have a whole range of policy measures and policy proposals in our submission that would enable that to be accomplished. But the question was a larger question in the context of a sustainable development strategy for the whole country, and I think that, in terms of what I have already said about Whitehall and Westminster perceptions of the new Department, there is also the danger that runs of when you have 80 per cent of the population living in urban areas, which, essentially, are going to be covered by other Ministries; again, it is not an example of joined-up Government.

Chairman

  106. Is there any way in which you can recommend that the Government can overcome that disadvantage?
  (Mr Secrett) In a sense, any institution or structure, well, all instructions, all structural arrangements, have weaknesses and fault lines, and if the strategy is there and the political will is there and the resources are there then you can overcome those inherent weaknesses.

  107. Do you think the political will is there in the centre of Government, i.e. the Cabinet Office, in particular, and the mechanisms for delivering policy, which is going to be all-important in this Parliament?
  (Mr Secrett) Let us be totally fair both to the new Secretary of State, to the new Department and the civil servants who are making a reasonable job of this integration, and to the fact that we are only a few months into a new administration; it is early days yet. We do not yet see the political will being demonstrated, but it is early days. We have had, I think, everyone, but particularly Government has been knocked off course by the power of recent events; and, obviously, September 11 is the most significant of those, I will not say distractions, in case I am misinterpreted, but you understand what I mean; and we have to give them time. The importance of the Pre-Budget Statement is that, now, in terms of a domestic agenda, this is the first opportunity for Government at the most senior level to signal its strategic determination to deliver on its sustainability commitments, in the sectors that are highlighted in the manifesto, that were highlighted in the Prime Minister's speech, and, indeed, were reflected in what we believe was a very powerful statesmanlike speech to his own Party Conference; there was a sustainability agenda embedded in there, both in the context of Europe and international politics, as far as trade and climate change were concerned. So we are getting signals, but it is action that counts, and it is what happens over the next year that is going to be critical in helping really to answer that question, and maybe in a year's time we are going to be able to be a lot more confident in our assessment over DEFRA and the Government's determination to pursue that sustainability agenda.

  Chairman: Thank you very much indeed. That has been a very interesting session, and we are grateful to you for devoting so much time and thought to it. Thank you.


 
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