MEMORANDUM BY HER MAJESTY'S TREASURY (DSW
The Committee asked Her Majesty's Treasury to
provide written evidence on the following points:
An assessment of how the figure of £1,127
million increased funding over three years for Environmental Protection
and Cultural Services in local government was reached, and whether
the Treasury believes this will be sufficient to deliver the aim
of the Strategy in doubling recycling/composting rates by 2003
(as the Strategy requires), or whether further funds may have
to be made available
The public spending plans set out in Spending
Review 2000 (SR 2000) were set to meet the Government's key objectives
as described in the July 2000 White Paper: increasing opportunity
for all; building responsible and secure communities; raising
productivity and sustainable growth; and securing a modern international
role for Britain.
The Public Service Agreements (PSAs) that accompanied
the new public spending plans in Spending Review 2000 sets out
the outcomes that every part of Government will deliver. The Department
of Environment and Transport Regions PSA included a target to
enable 17 per cent of household waste to be recycled or composted
by 2004, reflecting that in the Waste Strategy. To ensure delivery
of this target, Spending Review 2000 announced £140 million
of new money to give central support to council recycling, in
addition to the increased funding for Environment Protection and
Cultural Services in local government.
What role the Treasury sees for the Private Finance
Initiative in providing waste management facilities
The Private Finance Initiative (PFI) can offer
a cost effective method of procuring waste services. It encourages
the private sector to think innovatively about exploiting waste
resources and to unlock hidden value in the waste, helping to
achieve long term service delivery. Spending Review 2000 has provided
£220 million of support for local authority PFI waste projects.
Since the establishment of the Project Review
Group, eight local authority waste PFI schemes in England have
been endorsed for support by Central Government.
The Government has developed, in line with Waste
Strategy 2000, specific new criteria for waste projects. This
is likely to affect the shape of projects coming forward to Office
of Government Commerce's Project Review Group for endorsement.
The criteria seek to:
(i) reinforce the central place of recycling
and composting in waste PFI applications. Proposals for incinerators
must demonstrate that all opportunities for recycling have been
considered first, and should include proposals for combined heat
and power where possible.
(ii) strengthen the references to different
tiers of authority working together; and
(iii) the need to accord with national policies,
targets and legislation.
The Government expects to see PFI proposals
later this year which will pilot the new policy.
What role the Treasury sees for the Landfill Tax
Credit Scheme in promoting sustainable waste management; and in
particular, the reasons for leaving the scheme under the control
of landfill site operators
The Landfill Tax Credit Scheme (LTCS) encourages
the private sector to help fund environmental projects that promote
sustainable waste management, improve local communities around
landfill sites, and reclaim brownfield land.
The scheme allows landfill site operators who
contribute to approved environmental bodies, to reclaim 90 per
cent of their contribution as a tax credit, up to a ceiling of
20 per cent of their landfill tax liability. The scheme pulls
in additional funds from operators and third parties and some
projects may qualify for matched funding.
Recent examples of projects to promote sustainable
waste management include recycling of waste from supermarkets,
electronic goods and tyres.
The Government has publicly stated that it would
like to see more support for local authority recycling projects.
That is why at the start of this year recycling was explicitly
added to those research projects that can attract funding. The
Government also acknowledged in the Pre Budget Report 2000 that
despite this change, it is disappointed to see that, so far in
2000, the proportion of landfill tax credits being spent on sustainable
waste management has been falling. Hence the Chancellor announced
that the Government would further explore how resources going
through the scheme can be better used to increase recycling rates,
particularly of household waste.
What role the Treasury sees for taxation in promoting
sustainable waste management; and in particular whether they have
plans to introduce a tax on a) incineration, b) virgin materials,
or c) packaging, given the likely failure of the UK to meet Packaging
The Government believes that taxation can be
a useful tool in promoting sustainable waste management. The landfill
tax has provided important financial incentives to waste producers
to consider and develop sustainable alternatives to landfill,
such as minimising the amount of waste produced, and reusing or
recovering value from waste material. However, taxation may not
always be the best tool to meet the Government's objectives and,
where appropriate, other tools such as regulation and public spending
should be considered.
The Government has no plans at present to introduce
a tax on incineration, virgin materials, or packaging.
The Government has consulted recently on proposals
to put the UK on track to meet the targets in the Packaging Directive.
On the basis of consultation paper, and in the light of more recent
data reported in 2000 by obligated businesses, the Government
intends to raise the UK targets to 56 per cent recovery and 18
per cent material specific. Such changes will ensure the Government
meets the 2001 50 per cent recovery and 15 per cent material specific
target under the EC Packaging Waste Directive. The UK targets
are higher than the EU targets because businesses with a turnover
of less than £2 million, and handling less than 50 tonnes
of packaging, are not obligated to meet targets.
Why incineration, being a producer of non-biogenic
greenhouse gases, has been exempted from the climate change levy
Most, if not all, Member States agree that energy
from waste constitutes a renewable form of energy as it displaces
the use of fossil fuels.
The Government's starting point for both the
Climate Change Levy definition of "renewables" and the
definition used for the planned Renewables Obligation is that
all types of renewable generation should be eligible for both,
unless there are strong economic or environmental arguments to
the contrary. For large scale hydro, for example, the Government
has concluded that inclusion in the levy exemption and Obligation
definitions would have very high dead weight costs, and that there
was little scope for building new large scale hydro plants, even
with such significant financial incentives.
For generation from the incineration of municipal
and industrial waste, DTI's analysis suggested that inclusion
within the Renewables Obligation would have high dead weight costs
for any new projects it would bring forward, but that inclusion
within the climate change levy definition could produce a small
but worthwhile stimulation effect, ensuring that if incinerators
are built, markets would be available for the electricity they
The Government's waste strategy focuses on delivering
substantial increases in recycling and composting. But is also
recognises that there will need to be an increase in energy from
waste if we are to divert substantial quantities of waste away
from landfill. Any CCL exemption would help ensure that electricity
generation from incinerated waste is as efficient as possible,
without increasing waste incineration to levels beyond what the
Government believes local authorities may consider necessary to
manage their waste.