Examination of Witnesses (Questions 1-19)|
WEDNESDAY 14 NOVEMBER 2001
1. Good afternoon to you both, and thank you
very much indeed for sparing us your time. And I am glad we are
able to start on time; indeed, two minutes ahead of time, which
is excellent. Obviously, we have got the Pre-Budget Report coming
up, we think, on November 27, and we shall, of course, be taking
evidence from the Treasury Ministers about that. But the advantage
of this session with yourselves and the two other witnesses is
that we can get some sort of idea of what you feel you would like
to see in the Pre-Budget Report, as well as any comment you might
have on ongoing issues which you have concerns about. Before we
actually start cross-examining youby the way, may I also
thank you for your memorandum, which we are very glad to haveis
there anything by way of a few brief opening remarks which you
would like to add to the memorandum you have sent to us?
(Mr Roberts) Thank you, Chairman. I think
merely to record who we are. I am Michael Roberts, Director of
Business Environment at CBI, which covers a range of policy responsibilities,
environment, transport and energy are some of the chief ones.
2. It sounds rather a lot?
(Mr Roberts) Yes, it is a challenging brief. And on
my left is Richard Jackson, who is Senior Policy Adviser within
my directorate, specifically with responsibility for energy matters,
and has been doing most of the work recently on environmental
taxation that we refer to in our memorandum. I do not propose
to make any further statement, I think the memorandum speaks for
Chairman: Excellent; thank you very much indeed.
Now we would like to start off with just talking about the extent
to which you are engaged in the run-up consultation to the PBR,
and I know Mrs Clark wants to ask you about that.
3. Thank you. I would like to start off by actually
asking you about your members; do they actually put a priority
on a high-quality environment as an economic tool, and do they
see it as being an essential economic asset, rather than just
being a sort of nebulous, jolly good thing? Just to carry on and
develop that. Tourism, as we know, has been really, really badly
hit by the countryside shut-down caused by the tragic foot and
mouth outbreak, and we also know that poor air quality can actually
cause health problems, such as asthma, and, of course, these will
reduce labour productivity and they will increase the bill on
(Mr Roberts) I think the simple answer to your question
is that the extent to which businesses value the environment as
an issue will vary; however, on aggregate, I think, we are seeing
an increasing recognition of the importance of environmental issues.
Currently, something like 80 per cent of companies now report
on their environmental performance, in one way or the other, to
different degrees and in different ways, but I think that is a
signal of the growing importance across the piece. Within that
broad perspective, clearly, there are businesses who have a particular
focus on environmental issues, utilities, for example, in the
energy or the water sector, have a particular focus on that; for
others, environmental issues are not going to be, if you like,
a clear and present item on their radar screen. And, I suppose,
the challenge for much of environmental public policy is to find
ways in which those companies and those businesses can be incentivised
further to improve their environmental performance.
4. My second question is exactly the same as
the first, only I am substituting the word Treasury for CBI. How
far do you think that the Treasury regards a high-quality environment
as an important economic asset?
(Mr Roberts) I am not sure I should be answering on
behalf of the Treasury. I think, increasingly, it is part of their
agenda as well. We mentioned in our memorandum the very basic
fact that in the Pre-Budget Report there is now a specific section
devoted to environmental policy, and particularly how fiscal and
spending policies relate to the environment; so, to that extent,
I think there is an indication of the extent to which they take
it seriously. I suppose, from the point of view of business, our
concern is that a legitimate interest in environmental issues
by the Treasury might be used as an opportunity to raise taxes
from the business community in ways that we might not, frankly,
feel entirely comfortable with; so there is a concern there on
our part about some of the motives behind what is, broadly speaking,
I think, legitimate concern.
5. We know that you regularly do submit proposals
to the Government prior to the Budget and Pre-Budget Report, but
can you develop that and explain your involvement in the development
of Budget measures, Budget thinking, and also the degree of access
which the CBI has actually got to key decision-makers; how much
do the Treasury actually respect you, do they ask for your opinions
and views in advance, and how involved are you, do they really
take any notice of you?
(Mr Roberts) Yes, they do. I think the relationship
is multifaceted, they do ask us for our views, unsolicited, and
we, in turn, also approach them with our views. As part of our
regular public policy cycle, we provide submissions not only to
the Budget in the spring but the Pre-Budget Report in the autumn.
The development of our views on the Pre-Budget Report and on the
Budget is one that engages consultation with our membership in
the round. And, in addition to simply developing positions on
paper and then sending them into the Treasury, we will have meetings
with Ministers at all levels, and also with officials at all levels.
So I would say that there is a full and constructive relationship
with the Treasury on their Budgetary process.
6. Full and frank then?
(Mr Roberts) Yes.
7. Good. How involved are you in the same way
with the Spending Review, particularly with environmental concerns,
(Mr Roberts) We do tend to get engaged in the Comprehensive
Spending Review process.
8. Do you always get engaged in it, or is it
sometimes you will be asked, sometimes they will forget about
(Mr Roberts) We have been engaged certainly over recent
9. So it is increasing then, the involvement?
(Mr Roberts) I think so, and, to be fair, with regard
to your sub-question about our engagement specifically on the
environmental agenda, I would say that it is not the main item
on which we engage in the CSR process, we tend to have what we
regard as a slightly different or more important priority. So,
for example, the role of spending on transport priorities within
the CSR is a key priority area for us and we engage very heavily
and have engaged very heavily in that process, and there may be
other public policy areas, such as education, which are similarly
so. The environment per se is perhaps not as high a priority
as those other ones.
10. So it is fairly low ranking, in terms of
your economic concerns and priorities, would you say?
(Mr Roberts) I think perhaps we are looking at it
in a slightly different way. I think the way we would answer your
question is that in highlighting our priorities for transport
expenditure, for example, we will pay particular attention to
some of the environmental implications of that spending package.
So, for example, in the work that we have done to support the
Government's commitment to the ten-year plan on transport, we
have indicated the desirability of a programme which will deliver
genuine environmental benefit in terms of reducing pollution.
11. Finally, I am rather mystified, how can
you separate environment from transport, are they not holistically
bound in together, and would it not be better if you looked at
them in that way?
(Mr Roberts) I think I suggested in my last answer
that we do not disaggregate the two, that we do actually see them
together. But our main instinct or impetus for being involved
in the CSR process is not one which is explicitly environmentally
driven, or one which is driven by, if you like, the economic concerns
of our members; and, at the end of the day, we are an organisation
that represents the generality of the business community, and
what we hear them saying to us is that their main priorities,
in terms of, for example, public spending, are items such as transport
Mrs Clark: Thank you very much.
12. Can I ask just a quick supplementary. You
have mentioned meetings with Ministers, which I presume are on
a more or less ad hoc, subject by subject basis; could
you tell me if officers of the CBI regularly meet in scheduled
meeting formats with civil servants?
(Mr Roberts) Yes, is the simple answer to your question.
That is not to suggest that at the outset of any year we will
have quarterly meetings set, with dates set against them. I think
what we will do is ensure that we are engaged at the relevant
points in the process, so in the run-up to the Budget, in the
run-up to the PBR; and the meetings are a combination of regulars
and meetings that are called on an ad hoc basis.
13. Chairman, I noted the comment on transport,
and I thought it might be useful to dive in at this point with
one or two questions about transport. You mentioned that you think
there needs to be a more comprehensive review of transport taxation;
what areas do you think are right for review at the moment?
(Mr Roberts) With regard specifically to transport?
(Mr Roberts) There are a number of concerns. I think
the sort of overarching concern is the sense that road users,
who are taxed in a number of ways, and quite significantly, do
not really get a fair deal from the level and the style of taxation
which is levied upon them, in terms of, for example, the quality
of the network, which is paid for in part by that level of tax.
Further to that, I think we would say that there are a number
of initiatives in train in transport policy, the development of
congestion charging, mainly in London though not exclusively,
the possibility of workplace parking levies in a number of other
urban areas in the country; all of these are adding further forms
of charge or tax to road use, against the background of an existing
tax system, which, as I suggested, at a very aggregate level,
we would regard is not entirely fair for the motorist. And before
the Government, or indeed other agents, take forward new forms
of charge, there needs to be a fundamental review of how all of
these constituent bits fit together, to see whether or not they
are delivering, if you like, (a) economic objectives, and (b)
environmental objectives, in the best possible way.
15. What did you mean by `a fundamental review'?
(Mr Roberts) In terms of the extent, for example,
to which the tax mechanisms are the most targeted way of changing
behaviour in a positive manner. Let me be specific. We suggest
in our memorandum that pollution from road use, from use of vehicles,
is sensitive to the conditions on the road at the time, so the
more congested the conditions the heavier the fuel use, the greater
the amount of pollution. If you want to do something about that,
if you want to try to encourage a positive change in behaviour,
our belief is that fuel duty is a rather blunt way of trying to
signal the need for a more effective use of the network at that
time; something like congestion charging would be, on certain
conditions, a more effective way of doing that. So we feel that
there is a need to be looking at how these different instruments
in aggregate work together to the best effect.
16. That is quite interesting. When we are looking
at areas particularly in the South East of England, where we are
really talking about fairly heavily congested areas, how far,
in practical terms, is the CBI thinking about encouraging people,
from its point of view, to switch travel away from the car, in
order to have more effective journeys? And I am thinking about
the problems that employers face in actually bringing people into
work and the problem about the massive amount of travel that takes
place in the South East of England. So that when you are talking
about investing in the network, the network of roads is certainly
finite, have you got anything else you would be wanting to see
(Mr Roberts) Priorities, from the business point of
view, for investment in different parts of the country are clearly
going to vary by mode. With regard to London and the South East,
many of the priorities that we have indicated for investment are
actually not just in road but also in public transport alternatives,
a lot of those investment priorities will be rail-based, for example.
But I think it is important to flag up that the extent to which
changes in behaviour can be promoted do not rely just upon, if
you like, major projects which are financed by the public sector,
there are things which business can and which they are doing off
their own initiative. So there are companies like Pfizer, for
example, in Kent, who have their company travel plans, which are
encouraging employees to car share or to use the bus in order
to get to work. Companies like BAA, not only at Heathrow, are
also adopting similar sorts of initiatives. So there are things
sensibly which companies can do. Those sorts of initiatives will
not necessarily be appropriate for all sorts of companies. I mentioned
a couple of examples there where there are companies with large
sites, obviously with large amounts of employees in a single area,
and those are particularly amenable to the sorts of initiatives
I mentioned; but there is good work under way.
17. And is there more that the Treasury could
do to encourage employers to take this approach?
(Mr Roberts) I am not close to the detail in this
area particularly, but my understanding was that certainly in
the past there were some issues about the tax treatment of, for
example, provision of buses to transport employees to and from
the work site. I believe that there was an issue about this being
treated as a benefit in kind and not being particularly tax efficient
for businesses to provide, and that issue had been raised certainly
in the past with the Treasury, and unfortunately I am not in a
position to know where things got to on that.
18. Yes, this is quite interesting really, if
we are to do that dual thing of carrots and sticks about encouraging
people to change patterns and really to have more effective transport
systems as well?
(Mr Roberts) I think our view is that, whilst there
are certain principles by which one will want to look at whether
it is right to use tax and fiscal measures as a way of encouraging
change, there are examples of where it does work, or it can work.
I think, in general terms, what has happened on the shift to unleaded
petrol is a classic example of how the system can be made to work.
More recently, with the changes which have been announced on company
car taxation, anecdotally, the evidence seems to suggest that
companies are generally starting to think about changing the composition
of their fleet so that it is more environmentally effective, in
response to the signals which have been sent by the fiscal regime.
19. You have already moved on to some of the
territory that I wanted to explore, but, in summation of the answers
you have already given, would it be fair to say that CBI membership
as a whole understand the need to use taxation and agree that
taxation can be used to modify behaviour; where they have problems
is that that taxation is effective in delivering the change in
behaviour that it wants to succeed, wants to encourage?
(Mr Roberts) I think that is a fair summary of our
broad position. I think experience, particularly recent experience,
with the Climate Change Levy, to take one example, which has been
particularly contentious within the business community, highlights
the sensitivity amongst the general business community to the
implementation of taxes, in practice.