My Lords, the Government define an environmental tax as one that is designed to meet environmental objectives. Currently, that includes the climate change levy, the aggregates levy and landfill tax. The Government recognise that other taxes, such as fuel duty, can also have an environmental impact and that other measures, such as vehicle excise duty, have been reformed to build in environmental incentives.
My Lords, I thank my noble friend for that reply. Under that definition, will not most of the taxes to which he referred have a pretty marginal effect environmentally? In practice, to have any substantial effect, would not green taxes, if that is what they are called, have to be pretty huge and raise little or no revenue in order to have any impact at all on these serious environmental problems? Does my noble friend accept that there are no serious green taxes at the moment and none is being proposed because they do not have a serious impact on what is really happening to the economy?
My Lords, I cannot quite agree with my noble friend that the present taxation system has no effect. The climate change levy clearly has an effect on reducing carbon emissions. My noble friend needs to bear in mind that in order to condition public behaviour towards environmental objectives, penalties ought perhaps to be second order to incentives and encouragement, which I think is what he suggests the tax system should do.
My Lords, can the Minister give an undertaking that should any new green tax be introduced or should there be an increase in any existing green tax, according to his definition, any yield will be offset, pound for pound, by a reduction in other forms of taxation?
My Lords, that is a most interesting financial theory from a former Chancellor of the Exchequer. I recognise the role that the noble Lord is playing in the climate debate at present. He must recognise that, of course, all Chancellors in their long lines of achievement have always retained a degree of flexibility about the revenue raised and how it is distributed.
My Lords, I think that the Barnett formula has more to do with the Scottish local elections and the Scottish Parliament than anything to do with green taxes. I can be only marginally helpful to my noble friend in saying that whenever my noble friend Lord Barnett speaks in this Chamber, he does so in a way that is most helpful and constructive to all sides of the House.
My Lords, how can we overcome the problems that have been created by the landfill tax in the form of fly tipping? It is costing local authorities and landowners millions of pounds every year to clear up the mess from fly tipping. Anyone travelling by road or train to Birmingham will see what is left on roadsides and railway embankments when people just tip their rubbish over a wall. It never seems to be collected.
My Lords, the noble Countess raises an important point. We should not underestimate the contribution that landfill tax makes towards tackling global warming and climate change. It is an important element in our strategy. She is absolutely right that where evasion of that tax occurs, it has a most detrimental effect on the environment. This is an issue of enforcement rather than any doubt about the value of the tax in achieving its objectives.
My Lords, do the Government believe that they should increase the proportion of tax taken through environmental taxes? The Minister will know that green taxes fell from 9.4 per cent of taxes in 1997 to 7.7 per cent in 2005. Will he say what proportion of such taxes will be taken next year as a result of this year’s Budget?
My Lords, I would be extremely brave to forecast the Budget settlement for next year but I want to emphasise to the noble Baroness that the issue of the definition of environmental taxes is not of the greatest importance. What is important is that we condition and change public behaviour. Our taxation system is designed to reinforce those changes in public behaviour and she will recognise that we are having considerable success. After all, the United Kingdom is only one of two countries on course to reach the Kyoto objectives so we should not minimise the success of our position thus far.
My Lords, would the Minister care to invite the noble Lord, Lord Barnett, to produce a new green Barnett formula encompassing a range of green taxes which would be really effective in the way that he feels current green taxes are not? In the mean time, will he support those local authorities that are using their limited tax-raising power to introduce environmental taxes to change behaviour for the better in terms of environmental pollution?
My Lords, we recognise that local authorities have an important role to play, but again we look to local authorities to follow a strategy of encouraging changes in behaviour rather than imposing penalties because we are all too aware of the fact that seeking to penalise can in fact produce adverse reactions whereas encouragement can achieve the goals that we all subscribe to.
My Lords, I do not think that the Chancellor imposes any tax without anticipating and generally receiving opposition—if not formal opposition from the other side then certainly representations from the interests affected. It is the role of the Chancellor not only to raise the necessary revenue for the benevolent purposes to which he allocates all taxation but also at times to recognise that there can be environmental benefits from the taxation he imposes, something that was recognised in, for example, air passenger duty.