Examination of Witnesses (Questions 44-59)|
WEDNESDAY 14 NOVEMBER 2001
Chairman: I think you have had the opportunity
of having heard what the CBI have said.
Mr Francois: Chairman, could I say, just very
quickly, for the record, I do have a few shares in CORUS plc,
because of the Climate Change Levy's potential importance for
them, I should probably mention that; it's not a big number, but
just to inform you.
44. Thank you. Okay; well thank you both very
much indeed. I hope you found that as interesting as we did, listening
to what the CBI had to say. Thank you for your memorandum, as
well. Is there anything you would like to add to that, before
we ask you questions about that and other matters?
(Ms Willis) No; just to say that we very
much welcome this inquiry, as a way to take stock of where we
are with environmental taxation and spending, and we think it
is a really important role for your Committee to carry on scrutinising
this. So I think that is all I would say by way of opening remarks.
45. Thank you very much indeed.
(Mr Hewett) Do you want us to introduce ourselves,
as well? I am Chris Hewett, Senior Research Fellow from the Institute
of Public Policy Research, and so this is actually a joint submission
from two organisations.
46. I think we have met before, have we not?
(Ms Willis) That is right, yes.
Chairman: We want to start off by talking about
the overall situation. I know Mr Gerrard wants to come in.
47. In your paper, you made it very clear that
you think there has been a failure to make a sufficient case for
the environment; you also spend, I think, virtually the whole
first page of the paper emphasising very much the role of the
Treasury. Why do you think it is the Treasury that should really
be taking the lead?
(Ms Willis) We think that there is an important role
for the Government overall to set out its environmental agenda
very clearly, and we have seen progress on that front, that the
Prime Minister, over the past year, has made a number of very
public statements about his own environmental views and where
the Government might be going next, in environmental terms, and
we think it is important for each Government Department to set
out its vision, or its views, on the environment. The reason we
see an important role for the Treasury is because it is part of
the centre of Government, and it does have a significant influence
on Government policy across the board. And so we would expect
both the Prime Minister and Cabinet Office and Treasury and all
those parts of the centre of Government really to be the focus
for integrating environmental sustainable development across the
Government's agenda; although, obviously, we would not want the
Department to renege on their own individual responsibilities,
you need both, the Departments doing their bit and central Government
helping that process along, to give clear signals.
48. Do you think the signals have been clear
enough? If we think back, for instance, last year, to the fuel
protests, when it came to the crunch, is it not the fact that
environmental objectives were just not mentioned in that argument;
does that say anything to you?
(Ms Willis) Yes. As far as the Treasury is concerned,
we think that this is something that the Treasury needs to do
now; it would be a really important step forward for the Treasury,
and particularly for the Chancellor, to set out a positive case
for their environmental agenda. Because one of the problems with
the fuel crisis was that the environmental arguments for fuel
tax and the arguments for environmental taxation per se
had not been made in a public way; and, in fact, as you pointed
out, in this Committee's report on this, when the Government was
justifying fuel tax they did it on grounds of public expenditure
for health and education, and they did not make the environmental
case. And I think that was a real missed opportunity.
49. You talked about the need for making views
clear, and in your paper suggested we should have a revised Statement
of Intent on environmental taxation from the Treasury. But then
you went on to talk about extending the statement to cover spending
policy and management of economic policy more generally, and I
wonder if you could perhaps give us a little bit more detail about
what that actually means, what you would expect to see in the
(Mr Hewett) I think the Statement of Intent on environmental
taxation that was published in the first Budget of the first term
of the Labour Government, was a very strong statement of principle,
signalling that the Treasury would take environmental taxation
seriously, and a lot of measures, the Climate Change Levy, the
Aggregates Tax, the extension of the Landfill Levy, all those
measures were, in a sense, tied to that statement of principle
at the beginning of the term. I think there is a question about
whether, as all those measures were implemented, the principle
started to be lost a little bit in the debate around the detail,
the Climate Change Levy is one example, but making that statement
at the beginning at least set the stall out and was a very useful
statement, and, yes, presaged some genuine policy change. What
did not really happen in the last term was integration of environmental
objectives into the Spending Reviews; as this Committee has also
said, the Spending Reviews did not take into account the environment
in the same way as the Budget process did. So what we are saying
is two-fold, really. Firstly, there is a need to restate the political
priorities of environmental tax reform, go back to the beginning,
why do we need to shift the tax base from labour to pollution.
50. It is the Chancellor who should do that,
(Mr Hewett) The Chancellor should do that in his Pre-Budget
Report, we think.
51. Rather than the Prime Minister, or . . .
(Mr Hewett) Yes; this is about Treasury policies,
about the Spending Review as a tool of the Treasury and of taxation
policy. So, first of all, there is a need to restate that political
case for green tax reform at the beginning of this Parliament,
and then extend that to taking the opportunity of the new spending
round and promoting some of the processes which the Treasury are
putting in place to integrate sustainable development into their
Spending Review. That political statement should be extended to
look at all sides of Treasury policy this time round.
52. How much detail would you expect, because
the Committee has said, and you have said, that we will perhaps
want to see how environmental policies were taken into consideration
in the Spending Review; well what more than that would you want
to see put in a Statement of Intent, how much more detail would
you want to see in a Statement of Intent, or are we in danger
of just ending up with a wish list?
(Mr Hewett) What is required is a strong statement
of principle, which then specific measures can be tied to throughout
the Parliament, for example, a much better use of Government procurement
policy to stimulate environmental markets, which may entail more
spending but actually would be there for a purpose, it would be
extra spending through Government procurement to stimulate the
recycled materials markets, renewable energy, whatever those different
markets may be.
53. Do you think there is any possibility that
the opposition there has been to the Climate Change Levy, for
example, is going to make a difference to the Government's attitude?
Do you suspect, or fear, any weakening of the commitments on environmental
(Mr Hewett) There has been opposition, clearly; the
fuel protests, and the way the CBI positioned itself on the Climate
Change Levy, along with other industrial groups, that has affected
the way the tax has been implemented and has made it more difficult
for the Government. But this is always a problem, the loser groups
always shout loudest, and I suspect, if the Government were to
reverse the tax shift and if it were to say, `okay, we will cut
energy taxes and we will increase employers' National Insurance
contributions' then you will get different sectors of business
saying, `actually, we don't want Britain putting more costs on
labour,' and so in a sense the losers will always shout the loudest.
In a sense, the Government has to take that on the chin, if it
genuinely believes that the policy will work, and the evidence
across Europe is that it does work; so I think they should just
stick to their principles.
(Ms Willis) And if I could just add to that, if you
are looking at public opinion then the public opinion we saw last
October came out strongly against fuel tax. But you have to remember
that there is a significant proportion of public opinion that
is very much in favour of environmental improvement, and there
are three million people in this country that are members of environmental
organisations, that is more than any political party, more than
all the political parties; there is a significant body of support,
and the Government is not appealing to those people at the moment,
and there is a lot that it could do to reach those people.
54. Where were they last October, in the fuel
(Ms Willis) Last October, they put on a joint press
conference at the Labour Party Conference, which did not get any
55. But, seriously, do you think it would have
made a great deal of difference at that time if the environmental
argument had been made by the Government, rather than the argument
that `we need this money to pay for health and education'?
(Ms Willis) I think the fuel protests were a symptom,
and that was just one particular example. What we would argue
is that if the Government were making a positive case for environmental
measures and were making arguments clear and setting out their
priorities, and looking at what they were encouraging as well
as what they were discouraging, then you might not get such vocal
opposition in that particular instance. Unfortunately, once these
things hit then it becomes a media story and things just snowball,
at which point it is very hard to influence them.
(Mr Hewett) Mistakes were made on fuel duty but those
mistakes were made when the Fuel Duty Escalator was increased
in the first place. If you look at what the Government did in
its Budget documentation, there was an increase in fuel duty,
there was also a decrease in income tax; if those two things had
been explained, at the time, at the beginning of the Parliament,
if the Government had been honest about what it was doing, then
I think some of the opposition to the fuel tax might have been
tempered, because a lot of people would actually like the income
tax cut. Unfortunately, the Government tried to take credit for
the income tax cut without being honest and saying where that
revenue was actually coming from, which was fuel tax.
56. The conversation, so far, seems to be revolving
around taxes; and I wondered what you personally both felt that
the Chancellor should be doing, other than considering increasing
taxes, for the benefit of the environment?
(Ms Willis) I would argue very strongly that the debate
should not just be about taxes. I think that one of the lessons
that is coming through is that any dependence on fiscal measures
alone will not be enough unless your other policy signals back
that up. So we would argue that you need a tax to be part of a
package of measures, whether that is on energy taxes or waste,
you need all your policy signals going in the same direction.
If you have fuel tax, you also need incentives for research into
alternative fuels, you also need long-term signals for business
so that you can actually promote the innovation which you will
need to get the kind of step change that you need, and innovation,
in order to achieve 60 per cent CO2 cuts; you are not going to
get 60 per cent CO2 cuts through incremental change, there is
going to have to be some real innovation breakthroughs to get
57. And do you think there has been sufficient
emphasis by the Chancellor in the past on, say, research and development,
which I personally think the emphasis should be put on, rather
than increasing taxation?
(Mr Hewett) I think the way the Government needs to
approach it, or the Treasury needs to approach it, is to start
to integrate resource productivityat the moment, the Budget
process and the spending process have been driven by labour productivity.
Closing the productivity gap, has dominated the Treasury's agenda
but, that has been specifically about labour productivity. There
is a whole parallel debate about resource productivity and about
increasing the efficiency of materials used in the economy, reducing
the amount of pollution we create, per unit of GDP. There is work
going on in the Cabinet Office, in the Performance and Innovation
Unit, looking at that topic at the moment; we would hope that
some of the lessons learned from that research can be drawn across
into the Treasury policy machine, if you like, so that some of
these other measures which are currently being targeted at improving
labour productivity also look at how you could stimulate innovation,
targeted tax credits and R&D tax credits to renewable energy,
into other environmental technologies, to improve that aspect
of the efficiency of the economy, as well.
58. I am just wondering, in the pursuit of these
policy objectives, how much influence you have with the Government,
and indeed how much access you have to the Government? We heard
that the CBI have ad hoc meetings with Ministers, and they
appear to have regular scheduled meetings with civil servants;
do the organisations that you represent, the NGOs, and so on,
have similar access?
(Ms Willis) I cannot speak for all environmental NGOs,
but, having said that, we do co-operate, where that is beneficial;
but I think it would be fair to say that we do have very useful
dialogue with the Treasury and other parts of Government. With
the Treasury, we meet on a regular basis with officials and advisers
in advance of the Pre-Budget Report and the Budget, and we are
also meeting on a regular basis over the spending round; so I
would say that is a very useful and constructive process.
59. I think, talking more about liaison with
the Treasury, this Committee has had a lot of concerns about the
apparent lack of research by the Treasury, despite the fact that
they claim that they do a range of research on environmental matters.
From where we are, we do not actually see a lot of output from
that research, and in the past we have recommended the creation
of a Green Tax Commission to promote research into environmental
taxes. From where you are, how are you seeing this problem, in
terms of the effect of Treasury taxation, their knowledge and
understanding of the work that they are doing and the feedback
on the environment; do you feel that the research is adequate,
do you feel that there is any transparency at all in what they
(Mr Hewett) In terms of the Green Tax Commission,
IPPR was one of the organisations that recommended that at the
beginning of the last term of the Labour Government, and there
was a case for having a commission to look at the environmental
tax issue in the round at that point in the process, and I think
once you have started a shift in taxation there is less reason
to create a commission. In terms of research, I think, actually,
despite what a lot of the people who lobbied against the tax said,
the work which went into the Climate Change Levy was pretty detailed,
pretty exhaustive, it was pretty open, between the Task Force
and Lord Marshall and all groups who had an interest in the Levy.
And, I think, unfortunately, despite how much research and how
much thought went into that process, if groups want to lobby against
tax they will keep lobbying anyway. So I think there is quite
good research and quite good transparency, in some instances.