Select Committee on Environmental Audit Minutes of Evidence

Examination of Witnesses (Questions 160-179)


  160. And on the scale of the Department and the task that lies before us.
  (Mr Boateng) I think it is indicative of the levels of yield that are indicated there. But I do think it is important to remember that we are looking there at pilot projects that are designed to inform future decisions; so if, on the basis of that work, certain decisions were to be made then the sums would be considerably more than £5 million. But, as it is, less than £5 million, it is not, within the wider scheme of things, a very, very large amount of money, no, it is not.
  (Mr Maxwell) I would just add, this stage of the Green Fuels Challenge followed an earlier stage at which the Government consulted on different green fuels, rather than new green fuels, and, as a result, in the Budget, announced reductions in duty for various road fuel gases and biodiesel, which did cost significantly more than this.

  Mr Best: That is helpful.

Mr Francois

  161. Minister, a few weeks ago, before we move away from transport, when Stephen Byers appeared before this Committee, some of us expressed a degree of scepticism about the ability of the Government to raise money on the markets to finance transport spending, and there was specific reference made to the tube network and the PPP proposals there. Without going round that entire loop again, it is being suggested, on Teletext this afternoon, that the Secretary of State is appearing before the DTLR Select Committee as we speak, and that, according to Teletext, at least, if he cannot persuade the Committee of the efficacy, as it were, of the Government's proposals, he may then announce that the PPP proposals are being dropped for the tube. I wonder if, from the Treasury point of view, there is anything you can add on that?
  (Mr Boateng) No, Mr Francois, I cannot, it is entirely a matter for the Secretary of State.

Mr Simmonds

  162. Could I pick up a point that was raised earlier. There is talk at the moment that there is going to be some transfer of funds from the roads budget to support the railways, and I wondered what the implications were for the environment, either positively or negatively, of that transfer of funds?
  (Mr Boateng) That, again, is a matter for the Secretary of State and for his Department, and I am not really able to assist in relation to the impact of talk.

  163. So the Treasury have not been involved in those discussions?
  (Mr Boateng) I am not able to assist, in terms of the impact of talk.

  164. Can I ask you about the Climate Change Levy; it is my view that it is a very complex taxation, certainly with regard to renewable exemption certificates, certainly some of the negotiated agreements that have taken place. Have the Treasury made any attempt to calculate the total regulatory costs of the Climate Change Levy?
  (Mr Boateng) Can I say, first of all, in relation to the Climate Change Levy, that it is the result of the Task Force to which I referred you earlier on; no-one would pretend that this is an easy area, it is not, but the package is broadly revenue-neutral for business, and it includes a range of exemptions, it includes a number of measures that are designed specifically to make it business-friendly. And, in terms of progress, in relation to the negotiated agreements, so far, we have 44 such agreements completed with eligible energy-intensive sectors, covering over 13,000 sites, and I think that is an indication that the compliance costs are not such as to dissuade companies, who see the benefit to them of entering into such agreements, from so doing.

  165. Forgive me, Minister, for interrupting your flow. Are you saying you just have an indication, rather than a calculation of the regulatory costs?
  (Mr Boateng) Well—Mr Maxwell.
  (Mr Maxwell) I know that Customs & Excise have published a Regulatory Impact Assessment, and that is available on their website. I am afraid I do not know very much detail about it, but they will have published one as part of the standard budget process.

  166. Thank you for that. Can I change the subject slightly. We are about to have the Renewables Obligation and an Emissions Trading Scheme; are you concerned about the increasing complexity of these instruments in the energy field, and do you think there is scope for simplifying and rationalising them?
  (Mr Boateng) I think it is early days yet. We have got a very good indication that the City of London is likely to become a world leader in emissions trading, they have already taken the lead in this area, and I would be very keen to give it time to bed in before even beginning to contemplate changes to the regime. The last thing the market wants is uncertainty in this area. Business, the City, have welcomed emissions trading, they see it as a profitable area of activity, and I am very keen, and I know colleagues in DEFRA are very keen, that we should take the lead here. It will be launched in the UK in April 2002, we are helping kick-start it, with the equivalent of £30 million after tax, which will be available from 2003-04, in order to provide an incentive for firms to join. So I am optimistic about it, and I think so is the City.

Mr Francois

  167. Can I just follow up on that, because we are talking about emissions trading. What would be the effect on the market and of what you have just said by what was agreed very recently at Marrakech. The agreements at Marrakech, a few days ago, really, largely affected these kinds of areas, when we are talking about emissions trading, and what I would like to know is your ministerial view on how what was agreed at Marrakech will impact on this?
  (Mr Boateng) I have not got one at this stage, because, as you say, such agreements were arrived at only a few days ago, and I do not know what the impact is. Mr Collins?
  (Mr Collins) No.
  (Mr Maxwell) No.
  (Mr Boateng) The impact has not been dramatic; when we are able to ascertain what the impact is, I will certainly give the memorandum.


  168. So the level of impact is not visible in the Treasury?
  (Mr Boateng) No, not yet; not yet.

  169. Have you got anything you want to add?
  (Mr Maxwell) Just to say, I do think those sorts of agreement highlight the need for schemes like emissions trading; obviously, responsibility for emissions trading is primarily the responsibility of DEFRA and for their Secretary of State.

Mr Francois

  170. That was why I asked, because regulation of the City, in some respects, at least, is partly the responsibility of the Treasury.
  (Mr Boateng) I think, if I may say so, it is a perfectly proper question, and it is a very interesting question, and when we have an answer we will certainly let you have it.

  Chairman: Thank you very much indeed.

Joan Walley

  171. Can I apologise for coming late to the Committee, I was detained in the House. Can I just ask, within the context of the Climate Change Levy, whether or not you have had a chance to take account of representations in respect of CHP? Because it seems to me that if we are really going to be looking at the long-term changes that we want to see, and if we are really going to be meeting targets, somehow or other, the Treasury has to balance what is going on, on the one hand, in the DTI, in respect of the New Electricity Trading Arrangements, and also in the efforts to achieve targets for carbon emissions, etc., etc. Do you feel it is right, or the right time, to give a total exemption to CHP, and are you going to be in a position at any stage to make any statement on that?
  (Mr Boateng) We certainly do recognise the difficulties faced by CHP at present, since the introduction of the New Electricity Trading Arrangements, and its impact on price; and we certainly will be, and are, considering the environmental case for more favourable treatment for CHP within the CCL. I think it is important to say that CHP still has relatively favourable treatment, compared with conventional electricity generation, but undoubtedly NETA has made a difference. As to whether or not we will be seeking full exemption under state aid, we have not made any decisions yet, while we are carrying out that evaluation, and we have not made any approaches to the Commission.

Mr Jones

  172. Minister, you referred to pesticides earlier, and I said I would like to return to that. The Government had a view that it was to introduce a Pesticides Tax; following consultation, the Prime Minister, or whomever, decided very rapidly that a voluntary approach might be better. When will you have evaluated the effects of the voluntary package on pesticides?
  (Mr Boateng) We certainly intend that, in the run-up to Budget in 2002, that assessment will need to be made, and I really do want to stress that we have by no means ruled out a Pesticides Tax, it remains an option, and no-one should be under any illusion that if the partnership approach does not work and if we are not satisfied in making that assessment that it is working then we will take the necessary measures. We know that pesticide use is associated with damage to biodiversity, we know that it leads to water contamination; we have said, and I will repeat, that the tax could be a useful tool in addressing those environmental impacts, everybody has to understand that, and we have not changed our view one iota from that. But we have made it clear that we are prepared to give the partnership approach a chance, and that voluntary package of measures has been in place now since April of this year. DETR published some work on a possible design of a tax in 1999, so that design work, as it were, has been done, and we intend to keep that under constant review, so it will not take long to get it off the shelf, the dust will not be allowed to accumulate on it.

  173. Thank you very much, Minister, for the forthright exposition of the view of the Treasury, and your predecessor made similar points, which you have made even more strongly. I think the Committee will be pleased to hear them. What criteria will you be using to evaluate whether this pesticide voluntary package is working or not?
  (Mr Boateng) Mr Maxwell.
  (Mr Maxwell) There is a steering group that has been set up to oversee implementation of the package and to review progress on the package; that involves a number of environmental organisations, so I am sure they will be very rigorous in their—

  174. Yes, that is the process; what are the criteria?
  (Mr Maxwell) I do not have a list in front of me now.
  (Mr Boateng) We will be happy to make the criteria known to the Committee. My own view about this is that we need to be as transparent as we possibly can; everybody has to understand where the goalposts are. And if the assessment, as I say, is not one that demonstrates that the voluntary approach has worked then we will take the necessary steps.

  175. Thank you, again, and also for mentioning the effects of pesticides on water pollution, as well as the effects on biodiversity. This Committee brought up that point, again, with your predecessor, that there are very considerable costs on water consumers, as a result of the water companies having to clean pesticides and fertilisers out of water. Will you be making, or this group, will they be making any assessments of those costs?
  (Mr Boateng) I would be very surprised if that was not a factor that they took into account.

  176. Good. Have you reconsidered the case for taxes on fertilisers, as well as taxes on pesticides?
  (Mr Boateng) No.

  Mr Jones: Thank you.

Mr Simmonds

  177. Can I just ask about Pesticides Tax, please, Minister. This evaluation process, do you have a fixed timescale whereby this will be complete, and you will then have a set of proposals before you to make a decision as to whether you will make a compulsory Pesticides Tax go forward?
  (Mr Boateng) I think the phrase that we have used is that the Tax will be assessed in the run-up to Budget 2002. What I must not do in any way is to anticipate what the Chancellor will do in 2002, in terms of his package; but what I regard it as my duty to ensure is that the Chancellor, in the run-up to making his decisions about Budget 2002 has the product of this assessment.

  178. So do I understand that by saying there is a chance there will be a Pesticides Tax in the 2002 Budget, a chance?
  (Mr Boateng) The Chancellor will have the assessment, and he will then determine what will be in his Budget.

Mr Barker

  179. Minister, the Secretary of State for the Department of Environment, Food and Rural Affairs last month convened a waste summit. Now, given that taxation has a very important part to play in waste policy, can you, first of all, enlighten us as to any input that the Treasury had into that waste summit, and what conclusions you draw?
  (Mr Boateng) I am very anxious to ensure, in relation to landfill,—

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