Coming up to the next Budget, to be presented on March 21, the Environmental Audit Committee (EAC) criticised the Government for ditching proposals for green taxes on pesticides and aggregates in favour of voluntary agreements, and warned that the growing number of exemptions to the Climate Change Levy could weaken the ability of the tax to alter energy use patterns and carbon emissions.

say that corporate lobbying has led to many sectors that are not genuinely energy intensive being offered reduced Climate Change Levy rates in exchange for a negotiated agreement.

After examining the UK Government’s 1999 Pre-Budget Report, the EAC warns that the shelving of the pesticides tax could herald further changes in the Government’s green tax agenda and recommends the foundation of a Green Tax Commission to ensure that such taxation is developed in a more consistent manner.

The EAC said it was “astonished and disappointed” that the Government had decided to drop plans for a pesticides tax without making the pesticide industry’s reaction to the proposed tax public.

Noting the lack of detailed information about the effects of pesticides, the EAC criticised the Government’s decision to shelve plans to introduce a pesticides tax without allowing interested parties, such as environmental organisations, to criticise or even study the agro-chemical industry’s proposals. “We have severe doubts in the light of this about the extent of the Government’s commitment to transparency, public accountability and a true ‘partnership approach’ involving participation from the wider policy community as well as from Government and industry,” the report says. “We found this action all the more surprising as the Minister had been unable to set out any clear criteria by which he intended to judge the voluntary proposals from the industry, or the balance to be struck between the effects of a tax and the voluntary proposals. This decision also appears to prevent consideration of a mixed package of tax together with negotiated agreements and rebates – the model the Government is pursuing in the case of the Climate Change Levy.”

The EAC also criticises the Government’s handling of a tax on primary aggregates tax and urges the Government to adopt legally-binding agreements with industry sectors – as it has done with the Climate Change Levy.

The Committee suggests that the Government should draw up a framework contract with the Quarry Products Association (QPA) which incorporates its latest voluntary proposals, proposals which have already been rejected twice by the Treasury as failing to be a credible alternative to a tax. Individual companies would be parties to the contract and in return could be granted exemptions from the tax, the report suggests. In this way, the Government could emphasise the importance of environmental taxes to Government policy, the report says.

The EAC also opposes the growing number of exemptions to the Climate Change Levy, saying that the ability of the Levy to alter energy use patterns and carbon emissions will be weakened if too many exemptions and special treatment of individual sectors are granted.

Ultimately, the EAC sees the shelving of the pesticides tax, the move towards voluntary measures on aggregates and exemptions to the Climate Change Levy as part of a trend away from environmental taxation. The report strongly criticises the Government’s decision in 1999 Budget to drop work on charges for sources of water pollution, saying that this could signify the end of a possible tax on fertiliser use and, more broadly, the failure to implement the ‘polluter pays’ principle. “With the dropping of a pesticides tax, dormant proposals for taxing fertiliser use may also fall off the agenda,” the Committee’s report says. “The Government’s plans to implement the ‘polluter pays’ principle in a major area of environmental concern – water resources – seem therefore to have come to nothing. We regard this as a significant failure in its commitment to place the environment at the heart of government and to pursue sustainable development.”

In addition, the report says, the Government’s approach to the taxes has been inconsistent. It therefore recommends the introduction of a ‘Green Tax Commission’ to ensure greater consistency of approach in researching and developing tax proposals and in building consensus between Government, business and industry and environmental advisory bodies and NGOs.

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