Finance Bill

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Mr. Davey: I am pleased to hear how many people in other countries are applauding the change. During a previous Finance Bill, I raised the issue of flights between Penzance and the Isles of Scilly on which APD is charged. Those journeys do not enjoy the zero exemption enjoyed by flights to the Scottish highlands and islands. Has the Economic Secretary had a chance to consider that, and will the Government ensure that the exemption will apply to those other internal UK flights?

John Healey: We always take careful note of the hon. Gentleman's comments in debate, but the clause does not cover what he proposes.

Passengers flying to destinations in northern Cyprus or the rest of the island will pay the new lower rates of either £5 or £10 depending on their class of air travel.

The revenue effect of the measures will be a loss to the Exchequer of about £25 million in the current financial year, which will rise to about £70 million in a full year. Despite that, we have decided not to raise the rates of APD. It has been a difficult year for the airline industry and although there are some signs of recovery we concluded that in the present circumstances increases in the APD rates would not be appropriate. Given that explanation, I invite the Committee to support the clause.

Question put and agreed to.

Clause 118 ordered to stand part of the Bill.

Clause 119

Landfill tax: rate

Question proposed, That the clause stand part of the Bill.

9.45 am

Mr. Chope: I have no quarrel with the increase of £1, which was first announced in 1999. Will the Economic Secretary explain why the explanatory notes state:

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    ''The Government anticipates that the standard rate of landfill tax will need to be increased significantly in the medium term, beyond the current £1 per tonne . . . increase.''?

What is meant by the ''medium term''? Is that beyond 2004? What is meant by ''significantly''? Why do the Government anticipate that requirement?

Mr. Peter Luff (Mid-Worcestershire): I find myself in a conflict of interest. Obviously, I share the Government's aspiration to reduce the use of landfill sites. There is a major landfill site in my constituency and I know that local residents would love to see fewer lorries going to it. Equally, local farmers and landowners have expressed their concerns about an increased rate of fly tipping. At present, the trade-off is about right, but I have concerns, which my hon. Friend has just expressed, about the explanatory note.

Significant increases in the landfill tax rate would produce perverse results if there were an increase in fly tipping and illegal waste disposal, which would be entirely contrary to the Government's objectives for the landfill tax because it would lead to a worse environment rather than a better one. I seek an assurance from the Economic Secretary that, in considering any future increase in landfill tax above that set out in the clause, he will conduct proper research and implement a monitoring operation to establish the level of fly tipping in the British countryside to ensure that the perverse results that I fear do not come to pass.

Dr. John Pugh (Southport): I want to make some similar comments. As with all environmental taxation, the question is not whether it is a good thing but whether it actually works and does the job that it is intended to do. I wonder what assessments have been made of the expected yield from the tax. It seems to me that the increase in landfill tax will simply be passed on to the council tax payer, which has already happened in many cases. If it not passed on and people recycle, as they are expected to do, and landfill diminishes, as it is expected to do, the Treasury's statistics should show a reduction in projected tax yield. Do they show such a reduction?

John Healey: The clause will increase the standard rate of landfill tax from £12 to £13 with effect from 1 April 2002. The increase is designed, as is the tax itself, to encourage waste producers to seek more environmentally friendly alternatives to landfill. Waste producers and the waste management industry will therefore be encouraged to switch away from landfill towards waste minimisation, re-use and recycling. By setting out a long-term strategy of rate increases, in which this clause plays a part, the environmental effectiveness of the tax will be reinforced and waste producers and managers will be able to plan ahead.

As the hon. Member for Christchurch has pointed out, the explanatory notes make it clear that we anticipate that the standard rate of landfill tax will need to be increased significantly in the medium term beyond the current £1 per year escalator increase. That will need to be done as part of a mix of policies designed to deliver what are increasingly challenging commitments on sustainable waste management.

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Mr. John Bercow (Buckingham): Will the Economic Secretary give way?

John Healey: If the hon. Gentleman will allow me, I shall first finish responding to his hon. Friend's point.

The hon. Member for Christchurch should see the explanatory notes as a clear declaration of the analyses and serious policy work that we are undertaking on the problems of waste production, waste management and waste disposal. It also signals our serious policy intent, but at this stage I am not in a position to pre-empt the decisions that we will take on the matter. However, it is only fair to signal that the Government are giving close attention to it.

Mr. Bercow: I am extremely grateful to the Economic Secretary for giving way, not least because it enables me for the first time to congratulate him warmly on his promotion, which is well deserved. That said, however, a cloud of ambiguity has now descended on the Committee.

I put it to the Economic Secretary that the Committee deserves somewhat better than the tautology that he has just offered. It is not good enough to say that ''significant'' means significant. It would be helpful if he were to give us a ballpark figure, or a range of figures being considered by the Government. Failing that, could he abandon his reticence, and at least tell us, without the need for further private study, what constitutes ''medium term''?

John Healey: I appreciate the hon. Gentleman's kind comments, but I knew they were too good to last. Let me simply say that the clause that we are considering this morning is clear and unambiguous. It is a continuation of a tax escalator that has been in place for a few years. When we are in a position to clarify the sort of decisions and measures that we propose to take, we will of course do so. We will be extremely interested in the views of a range of parties, including the Conservatives, but it would be wrong to pre-empt those decisions because we have further policy analysis to undertake before we can do so.

If the hon. Gentleman will allow me, I shall move on to the point raised by his hon. Friend the Member for Mid-Worcestershire (Mr. Luff), who I am aware has quite a long standing interest in fly tipping.

Mr. Luff: My specialist subject.

John Healey: I have to say to the hon. Gentleman that most fly tipping is a problem produced by householders. Because householders do not directly pay the landfill tax, it is highly unlikely that the landfill tax has a direct impact on fly tipping by householders.

Mr. Luff: I was thinking particularly of the waste generated by small gardening contractors and cowboy builders, who are definitely avoiding landfill tax and dumping their waste on farmland, rather than going to—in my case—the Hill and Moor landfill site as they should.

John Healey: All Committee members will have some experience in their constituencies, albeit on a restricted scale, of that sort of problem, but the fact remains that the majority of fly-tipped waste is generated by householders. There is no hard

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evidence to support the contention that the hon. Gentleman makes. The Tidy Britain group is probably one of the UK's authorities in this area.

Mr. Bercow: A very respectable organisation.

John Healey: As the hon. Gentleman has kindly confirmed, it is a very respectable organisation. Its 1999 survey showed that the majority of waste fly tipped comes from households. The Government take the illegal tipping of waste seriously. Penalties are severe, including unlimited fines or up to two years in prison. To reassure the hon. Member for Southport (Dr. Pugh), in considering any new proposals for taxation and in constantly keeping under review existing measures in this field, we shall consider all the issues in the round, including the points that he has made.

Mr. Chope: The Minister says that he will consider the matter in the round. There is a three-year spending review coming up later in the summer. For local authorities, the additional cost of a substantial increase in landfill tax would be a major burden. They will receive a settlement during the next three years. How can the Government assure us that they have a proper strategy if they are raising the prospect that in 2004 there will be a substantial increase in landfill tax that will not have been taken account of in the spending review covering that period, which will be decided in July?

John Healey: With all due respect, the hon. Gentleman underestimates the thoroughness and comprehensiveness with which officials treat such issues. The matter will be taken into account, and he is right to point to the spending review. He may be aware that the Cabinet Office's performance and innovation unit is conducting a significant study into waste management and the sort of instruments that we may use, including economic instruments, to deal with the challenges that we face. Once it has reported, the Government will consider all the instruments that may be available to help tackle the problem and will report later this year.

Mr. Luff: I did not hear the Economic Secretary promise an ongoing review. If he did, I missed it and apologise. While he was speaking, I recalled a very serious incident involving criminal activity on a large scale. A company called Ivory Plant Hire was bidding to take away waste from sites of reputable companies, such as the major Tesco development in my constituency, and was dumping it illegally on a massive scale all over the county. Thanks to a co-ordinated exercise involving Customs and Excise, the police, the district council, the county council and so on, we cracked down on the company. I believe that it is no longer operating.

My fear is that a company such as that, which deliberately wreaked massive environmental damage in my constituency to avoid the landfill tax, might be encouraged to resuscitate itself, or that other companies might follow its dreadful example. I urge the Economic Secretary not to be too cavalier about the matter. It may be that at present household waste

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is causing most of the problem but, as a direct result of the landfill tax, people in my constituency were terrorised for two or three years by Ivory Plant Hire's activities. It may have been a one-off, but if increases are planned, the Government must watch out for that danger.

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