Select Committee on Environmental Audit Minutes of Evidence


Examination of Witnesses (Questions 120-139)

RT HON MR PAUL BOATENG MP, CLIVE MAXWELL AND MICHAEL COLLINS
WEDNESDAY 5 DECEMBER 2001

Chairman

  120. Just going back to Mr Owen Jones's question about strategy, Minister, before we get on to some of the individual taxes, it is not just a question of the fact that there were no new measures in the Pre-Budget Report, and no new environmental measures, not only that, but the complexity which Mr Owen Jones pointed to of, for example, the Climate Change Levy is admitted, indeed, you yourself admitted the difficulty of dealing with some of the exceptions, and so forth, but it is also the fact that the measures you have introduced, and you talked about further measures in the next Budget, are frankly peanuts, by comparison with the task which confronts us. The Royal Commission on Environmental Pollution has been talking about reducing carbon emissions by 60 per cent by the year 2050, the Government has committed itself to very bold targets of 10-12 per cent in a shorter timescale; but the Climate Change Levy raises only £1 billion, the Government spends £400 billion every year, it is 0.3 per cent of employers' National Insurance contributions. Okay, you may say that is a new tax, because the Landfill Tax was introduced by your predecessor, only a fraction of a percentage point of industrial costs, these are small beer; that is what concerns us, the task is enormous and what you are doing is tiny.
  (Mr Boateng) As I have indicated, Chairman, there will be a divergence of view as to the scale of the task and the impact of—

  121. I do not think there is any divergence of view about the scale of the task, because the Government is committed to targets about carbon emissions, which are publicly known.
  (Mr Boateng) We are certainly committed to it, but people have different views as to how to arrive at the end we all seek, and some would want us to go faster, some think that we have already gone too far and that the regulatory and fiscal burden is too great; and we have to strike a balance, and we take into account, and have to take into account, those divergent views. But if I may, with respect, take issue with you on the notion that there is nothing in the PBR; we have launched consultations, and I think significant consultations, on ten environmental measures, they are outlined in the Chancellor's Statement, and, I think, as a package, that is not insignificant. And consultation is not an excuse for inaction, it is a necessary, preparatory part of a process, that does involve, I think, significant change.
  (Mr Maxwell) I think I would just like to add, it is not only the value of the taxes that matters in this context, it is the way that taxes are structured and designed. And I will give the example of something like the company car tax system, for example, which is overall revenue-neutral, so it will not score in that sense as being extra tax for environmental purposes, but the structure of the company car tax system from next April will be changed significantly; that will give environmental benefits arising as a result. So these things can be done without necessarily affecting, in all cases, the overall tax revenue; there is an issue about design of taxes as well.
  (Mr Boateng) And some are designed specifically to be revenue-neutral, in order to counter the charge that is made, `oh, yes, this is another stealth tax.' Well, it is not another stealth tax; the point of these measures is to change the culture, to change the climate in which decisions are made. And, as I say, if you look at the PBR, I think, for instance, the options for a lorry road-user charge, that is, potentially, an enormously significant step. The issue, and it is an incremental one, but it is nevertheless one which we have had some representations on from industry, the achievement of employer-provided buses. I think these are important responses to issues that do demonstrate an ongoing commitment.

  122. You rightly said, Minister, this is a relatively new area, I think that is a very fair point, the whole business of shifting the taxation from "bads" to "goods", in green terms, and so forth. And that is one reason why this Committee proposed a Green Tax Commission, not to preclude anything the Treasury might want to do but simply to do research into this area, on a non-party basis, so there could be some broad, objective understanding of what was a "good" tax, in these terms, and what was a damaging tax. You refused to have that, you refused to consider that, you turned that down, as a suggestion by this Committee; so, therefore, could I ask you what specific research the Treasury itself has carried out in the last couple of years on the scope for the use of environmental tax measures?
  (Mr Boateng) Let me just, if I may, take the note of the Committee's previous view in this area. We have always taken the view that the best way of proceeding is to ensure that we engage stakeholders in the practical task of working with ourselves in developing fiscal responses to the policy issues that have been identified, and identified in ways that also involve those stakeholders. So, if you take the example which I gave earlier on, of the Climate Change review, the view that we took was a Task Force on economic instruments and business use of energy, chaired by someone with an established track record, in industry, of unimpeachable—

  123. If I may interrupt you, that was three years ago, the Marshall Report came out three years ago; what I am asking you is, what have you done in the last two years to go beyond what you have already done on the Climate Change Levy, which we understand and agree with, what have you done beyond that, in the last two years?
  (Mr Boateng) What we would say is that officials, special advisers and myself meet on a regular basis, both with the green NGOs and with industry and business, as part of the process of ensuring that they have an input into the development of the Chancellor's—

  124. Have you commissioned any research papers, for example?
  (Mr Boateng) Let me ask Mr Maxwell to answer.
  (Mr Maxwell) A couple of examples I have mentioned, the Aggregates Levy is based very much on independent research that was carried out under contract to the DETR, as it was then.

  125. Not by the Treasury?
  (Mr Maxwell) No, because the environmental expertise tends to reside in other Departments, so we normally do it on a sort of contractual basis through other Departments; that is the normal way of proceeding in this area. I think, also, another example would be some of the changes to lorry Vehicle Excise Duty that came into effect on 1 December this year, and they were very much based on work that was done, again, I think, through the DETR, as it was then, by NERA, environmental research experts. So they are two examples. I think, also, the Inland Revenue has been working with some academics on various transport tax ideas.
  (Mr Boateng) I am interested in the Committee's view on this, obviously, and I think that my concern with the idea is that there would be a real danger, which you would be aware of, Chairman, from your experience of Government, of such a body simply becoming a vehicle for a variety of external groups, organisations, interests, a lobbying vehicle, essentially, it would not actually be a constructive policy mechanism. And that what we need to do is to be able to satisfy the stakeholders, which includes the green NGOs, which includes business, industry, and also which seeks to find a way of including another important set of stakeholders, who sometimes get forgotten in all of this, the consumers, that includes them in a process that is credible and that withstands academic scrutiny for its objectivity and rigour, and we have to be able to do that. We have to be able to do that in relation to aggregates, we have to be able to do that in terms of the measures we are taking in relation to road transport.

  126. So, if I can just summarise what you are saying, therefore, in terms of, you do not agree with a Green Tax Commission, for the reasons you have said, and I understand the argument, I do not agree with it but I understand the argument, so what you have done internally, in Government, and not in the Treasury but in other Departments, is something on lorries and something on Aggregates Tax; that is the total sum of your research into environmental taxes over the last two years?
  (Mr Boateng) I do not think that would be a fair summation, and what I will do, because I think it is very important the Committee should have a very clear idea of this, is to commission a memo., which I will send to you.

  127. That will be very helpful.
  (Mr Boateng) That will outline the steps we have been taking and with what Departments. But I would stress that the way the Treasury has worked over the years, and it may be the Committee feels we should work in a different way, in which case I would be interested to hear it, is to use and to utilise the experience and capacity of other Government Departments and their links with the wider academic community. It may be that the Committee will take the view that we ought to develop such a capacity within the Treasury itself and, as it were, descend on other Departments with our enhanced capacity, in order to—

  128. It sounds very frightening.
  (Mr Boateng) That would be a very interesting idea, if that were what was to come from the Committee, but it is not the way that we have worked in the past

  129. I think the other Departments would be rather worried if the Treasury descended with even greater force than they do already.
  (Mr Boateng) I think they would be, Chairman.

Mr Jones

  130. If I might say, Chairman, one draws analogies with health, at the moment, and the Treasury is obviously not entirely reluctant to commission its own research.
  (Mr Boateng) Mr Jon Owen Jones is being characteristically mischievous.

Chairman

  131. Have you also done any research into the effect on the environment of specifically non-environmental taxes, the normal run-of-the-mill taxes, like Corporation Tax, in your Department?
  (Mr Maxwell) All budget measures go through an environmental sort of appraisal sieve process, so that, as budget measures are reviewed and considered for decision, an environmental appraisal is done on them. So changes to Corporation Tax are looked at in that light, yes, and if they are considered to have any environmental implications they are investigated further.

  132. As you know, the Department can decide to publish those analyses, those environmental appraisals; do you intend to publish the ones you have just mentioned?
  (Mr Maxwell) I know that all regulatory impact assessments of budget measures are published, as far as I am aware, so, I think, in the vast majority of cases dealing with Corporation Tax, the response would be that there was no environmental impact, as assessed.

  133. So you say there will be a nil return, therefore we should not be told?
  (Mr Maxwell) No, sorry, they are published, I think the nil return itself is published, as part of a regulatory impact assessment, or as an environmental line on the environmental impact assessment.

  134. Just switching the subject, because I think we have covered this fairly exhaustively; one area which the Treasury does have responsibility for, of course, is Resource Productivity indicators, because the Office of National Statistics is attached to the Treasury, is part of the Treasury, as I understand it. And you indicated, Minister, that there was difficulty in getting proper indicators in this area, we were in a new area here, in Resource Productivity, and the PIU had just published this report on Resource Productivity. Can I ask you what the Treasury are doing by way of research work in this area on Resource Productivity indicators?
  (Mr Boateng) If Mr Maxwell or Mr Collins are not able to assist on that, I will make sure that is included in the memorandum.

  135. Are they?
  (Mr Maxwell) Not at this minute, no; sorry.
  (Mr Collins) I think that the policy lead rests with DEFRA and DTI, in taking forward the work of the PIU. Treasury will be involved in that, but it is not something that we have the lead for.

  136. So you are not diverting any staff resources to that, inside the Treasury?
  (Mr Collins) I think, as the work is taken forward by the lead Departments, we will be involved in it, and there will be staffing resources devoted to it.

  137. But not at the moment?
  (Mr Collins) But the principal lead is in other Departments.

Ian Lucas

  138. I was interested in the Enhanced Capital Allowances, and the anticipated cost of those. Can you tell us what the cost to the Government of the Enhanced Capital Allowances in the Pre-Budget Report is likely to be? And also, in terms of the related position on development tax credits, is there a budget set out for those at the present time, and have you any specific ideas about how that budget is going to be deployed?
  (Mr Boateng) In terms of the cost, I do not think I can help you on that.
  (Mr Maxwell) Sorry, are you referring to the new areas, for instance, under the Green Technology Challenge?

  139. Yes.
  (Mr Maxwell) No particular budget has been set for those yet, because the technologies themselves have not been identified. And the costs of awarding capital allowances like these are demand-driven, it depends on how many pieces of equipment that qualify for that form of technology are purchased, once the scheme is announced, so it does depend very much on the selection of technology, because it is a demand-driven programme. And without having yet decided on those technologies it has not been possible to have any sort of estimate.


 
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