David Gauke (Shadow Minister, Treasury; South West Hertfordshire, Conservative)

It may benefit the Committee if I declare at the outset that it was expected that it was expected that my hon. Friend the Member for Putney, who has done a great deal of work on the clauses that we are debating this afternoon, would speak on behalf of the Opposition and that the Exchequer Secretary would respond. On behalf of myself and the Economic Secretary, I would like to say that we are to some extent performing the role of stand-ins. I know that a successful performance by the understudy in a theatrical performance or opera tends to result in standing ovations. I suspect that we will not receive them today—at least, not in response to my performance. I am grateful for the work of my hon. Friend the Member for Putney on the clauses.

I shall graze one or two matters regarding the landfill levy, which we are considering in relation to clause 16. There is an increase in the level of the landfill levy to £32 this year, which is the biggest jump in landfill tax from year to year since it was introduced in 1996. The levy was the UK’s first environmental tax, and it was introduced by the previous Government. It has been announced that in the following year, it will increase to £40 and the year after that, to £48. I would be grateful if the Minister explained why, given that it is an annual levy, it is necessary to make announcements in advance. I would be grateful for that clarification.

There are two points that I would particularly like to raise with the Minister. First, there has been a reduction in landfill during the years in which the landfill tax had been in place. No doubt, the landfill tax has played a part in incentivising industries, local authorities and individuals to be more efficient, but is the Minister concerned that one reason why there has been a reduction in landfill is fly-tipping? One of the unintended consequences of the significant increase in landfill tax may well be an increase in fly-tipping, which is of concern to all of us. I would grateful for the Minister’s views on that, and if she could tell us what steps will be taken to ensure that that does not happen.

My second concern is that to a large extent the big payers of the landfill tax will be local authorities and the public sector. Essentially, money will be circulated from local authorities, who will be paying more in landfill tax. That will, of course, need to be funded one way or the other—perhaps by increased council tax. The increase in landfill tax will place financial strains on local authorities. The Local Government Association has said that local authorities will face an equivalent of a £1 million rise to cover increased costs in 2008-09. Councils expect total landfill tax costs to be in the region of £2.3 billion over the next three years. That is a substantial additional cost, which will place a strain on local authorities. In my constituency, an attempt to find savings in recycling has resulted in an unpopular proposal to close the Tring recycling centre, which causes alarm to those who know the area well including, I think, the Economic Secretary—although I do not know whether she is aware of that particular issue.

There are concerns that these proposals may result in money being moved around different parts of the public sector and going from local councils to central Government. Local councils may find themselves paying an additional amount as a consequence of the proposals. There has also been a substantial increase in the revenue raised, although originally it was envisaged that it would be a neutral tax and additional environmental tax credits would be used in the circumstances. However, that does not seem comparable in any way with the amount raised in revenue. Is the landfill tax supposed to be revenue neutral? We return to the question, which has been raised a number of times, of whether landfill tax has two motivations: to raise revenue, and to change behaviour. Is it another way of raising revenue, or is it seen as revenue neutral?

Nicholas Winterton (Macclesfield, Conservative)

Order. I have to interrupt the hon. Gentleman. If two Committee members—namely, the two Whips—leave, the Committee will become inquorate, and I will have to suspend the sitting. I say to the Opposition and Government Whips that I have, uniquely, requested a Doorkeeper to bring an additional Member back into the Committee. The hon. Member for Ealing, North has obliged, and I see that two more hon. Members have done so. I suggest to both Whips that they should realise that as the Chair, I must see 11 Members in the Committee. If the number of Committee members drops below 11, I am obliged to suspend the sitting. If both the Whips now wish to leave, they may do so with impunity, but I hope that they will not do so for long.

Brooks Newmark (Whip, Whips; Braintree, Conservative)

I appreciate your guidance, Sir Nicholas. I stepped outside to try to figure out a way to communicate to Conservative Back  Benchers and tell them to come here without calling them on the phone, which I know would be a breach of the rules. That was all I was trying to do.

Nicholas Winterton (Macclesfield, Conservative)

I assure you that I was seeking to be extremely helpful. I requested a Doorkeeper on duty to go into the corridor to ask one or more Committee members to return so that we could remain quorate. We have done so, but I ask both the Whips to take account of the need to remain quorate.

David Gauke (Shadow Minister, Treasury; South West Hertfordshire, Conservative)

I am grateful for your intervention, Sir Nicholas. We would certainly not want to suspend this sitting while addressing such matters, especially as, after looking out the window, I think it unlikely that play has resumed.

Jeremy Browne (Shadow Chief Secretary To the Treasury, Treasury; Taunton, Liberal Democrat)

Thank you, Sir Nicholas, for ensuring that I have at least a small audience for my brief speech. I was wondering whether Committee members were leaving to check whether play had resumed in the test match, and whether it would be helpful for you to inform us if that happens, so that our minds could be focused entirely on proceedings in Committee.

I have a couple of brief points to make about landfill tax, which my party supports for obvious environmental reasons. The hon. Member for South-West Hertfordshire asked a moment ago why the increases had been anticipated for future years. The explanation is simple: it allows companies interested in developing new technology to plan ahead with some reasonable assumptions about their future revenue stream. New Earth Solutions and TEG have campaigned on that basis. Mr. Steve Lee, chief executive of the Chartered Institution of Wastes Management, said:

“Raising the tax by £8 per tonne per year to £48 by 2010 for ‘active’ waste will make a whole range of waste treatment technologies financially viable—for all wastes, not just municipal. The three-year plan for the escalator is good, too. Businesses need time to change and even the anticipation of a £48 per tonne tax—plus steadily increasing landfill gate fees—will be enough to influence many waste and resource management decisions.”

On that basis, the Government’s proposals seem to be eminently sensible.

I will put a fly in the ointment, however, as concerns have been expressed that councils are not managing to get the money recycled—probably the appropriate term—into their coffers. The incentive for the councils to do so is partly because, as the hon. Member for South-West Hertfordshire said, there is a cost to them of meeting their obligations on landfill tax, but also because they might often use, or be able to use, the money for environmentally helpful projects, including new recycling plants and rubbish reduction and collection facilities. I would be grateful if the Minister told us what steps are being taken by the Government to ensure that local councils gain the benefits of the additional revenue.

I will finish by citing an example from my constituency. Last year, Somerset Wildlife Trust—an organisation of which I am pleased to be a member—planted a new woodland just outside Taunton, with £100,000 contributed from revenue raised from the landfill tax. There are clear environmental benefits, both in carbon emissions and the natural environment available for the public to enjoy, if the money can be made available for such projects. I hope that the Minister will be able to say some encouraging words in that regard.

Kitty Ussher (Economic Secretary, HM Treasury; Burnley, Labour)

May I say, Sir Nicholas, that it is an honour to make my Finance Bill debut under your chairmanship. It is true that I know the constituency of my fellow stand-in, the hon. Member for South-West Hertfordshire, although it was in about 1980 that I left the Tring vicinity. I am not sure that the recycling depot that he mentioned was in operation then, but I am deeply perturbed to find that the situation may change.

Turning to the matter in hand, the clause increases the standard rate of landfill tax, which applies to active waste disposed to landfill, by £8 per tonne to £40 per tonne next year, in line with previous commitments. We announced as long ago as the 2002 pre-Budget report that the standard rate would have to increase to encourage investment in alternatives to landfill. That approach has worked well, with the quantities of active waste going to landfill reduced by almost 19 per cent. between 1997/98 and 2006/07, while the economy grew by 28 per cent.

Turning to the points made by the hon. Member for South-West Hertfordshire, we are legislating for next year’s increases this year, because—the hon. Member for Taunton is entirely right—we wish to provide certainty and to achieve a behavioural impact on firms seeking to invest. It is consistent with the approach that we have taken in the Bill on other environmental taxes—the climate change levy and the aggregates levy—and with the approach that we took last year. Pre-announcing something as early as possible has a maximum affect on behaviour. On the issue of rate increases encouraging fly-tipping, we recognise that fly-tipping is a significant antisocial problem affecting communities, landowners and regulators alike. That is why my colleagues at Department for Environment, Food and Rural Affairs have been working with the Environment Agency to develop and implement a waste crime action plan, which aims to improve prevention, detection and enforcement with regards to fly-tipping. I understand that DEFRA will consult on proposals over the summer months this year to strengthen waste controls and to give enforcement authorities greater powers to stop and seize vehicles involved in illegal waste activity. In my constituency, it seems to be the determination and dedication of local authority staff, rather than the standard rate of landfill tax that makes a difference. We provide a programme of education and advice that encourages local authorities to do just that.

Revenue recycling is an important issue, which I am glad that hon. Members have raised. A number of local authorities have claimed that the increases have not been adequately factored in, adding pressure to council tax bills. The hon. Member for South-West Hertfordshire asked about that as well, but the answer is that that is not the case. The cost of landfill tax was taken into account when agreeing the sustainable settlement with local authorities. It is sufficient to ensure that excessive council tax rises are avoided. The local government settlement that provides continued real term increases with an average, annual increase of 1 per cent. above inflation takes into account local government’s landfill tax liability, including the increased costs that we are discussing today.

As for the question of whether the tax is intended to raise revenue, the answer is no. We are not seeking to increase landfill tax to raise revenue, although the initial  introduction helped us to reduce corporation tax at the time. The tax increase is aimed at stimulating a behavioural change to reduce the quantities of waste sent to landfill and to encourage a move to more sustainable waste management practices. It is important to remember that the decision to increase the standard rate by £8 per tonne from 2008-09 was taken as part of the overall package of reform of business taxation.

The corporation tax cut announced in the Budget would not have been possible without increases in landfill tax. That does not mean that we are not investing in ways of improving resource efficiency, particularly among businesses. In the current financial year 2008-09, £155 million is being invested in that way. I hope that, having answered those questions, the Committee will accept the clause.