The Chancellor has failed to adequately address climate change in his previous Budgets. Green taxes have decreased under Gordon Brown, despite a 1997 pledge to shift the burden of taxation from employment onto environmental pollution [1]. In 1997, green taxes stood at 9.5 per cent of all taxes; by 2004 this had slipped to 8.3 per cent [2].
Traffic levels have risen under Labour, despite a promise by Deputy Prime Minister, John Prescott, to reduce them. Traffic levels are now about 11 per cent higher than 1997. Last year Government figures revealed that motoring costs fell by seven per cent in real terms between 1997 and the end of 2004. Over the same period the cost of travelling by bus (11 per cent) and train (4 per cent) rose. According to DfT ?'Transport Trends? emissions by source from road transport rose from 32.1 MtC in 1997 to 32.6 MtC in 2003 [4].
The duty rate of 47.1p/litre following last years Budget (March 2005) is the lowest, in real terms, since June 1997 for both petrol and diesel [5]. Since abandoning the fuel tax escalator in 1999, the Chancellor has not raised fuel duties above inflation in any budget, and has frozen rates in most years. If the Chancellor had even kept fuel duty at the same proportion of total taxes, rather than letting them fall, then ?9bn would have been raised between 2000 and 2004 [6],[7]. Air transport, the fastest growing source of greenhouse gas emissions, has not been considered in the budgetary process.
Faye Page, Birmingham Friends of the Earth campaigner said:
"Gordon Brown must get to grips with the growing climate change impact of civil aviation. Aviation is currently a rogue sector, exempt from international climate agreements. Increasing Air Passenger Duty (APD) in this year's Budget would help to stop greenhouse gas emissions from the air transport sector from continuing to spiral out of control. An increase of just £10 in APD would raise around £900 million. VAT should be charged on all domestic flights, as happens in the USA and in virtually all other EU countries."
Friends of the Earth director, Tony Juniper said:
"Green taxes have fallen under Labour, despite promises to increase them when they came to power. At the same time UK carbon dioxide emissions have risen. A new law is desperately needed to make the Government legally responsible for cutting emissions by three per cent each year, with an annual climate budget to ensure that we are kept on track. The Chancellor must seize the green initiative by putting measures to combat climate change at the heart of his Budget. By encouraging people to save energy he will help tackle climate change and cut fuel bills. The Government must stop dithering and take urgent action now."
Friends of the Earth want Gordon Brown to take a number of measures to encourage people to save energy: [8]
1. Introduce a new zero-rated tax disc (VED) for the most fuel efficient cars, and a higher rate for gas-guzzling vehicles. At present the VED for the most polluting cars is only £100 more expensive than for the least polluting vehicle. Friends of the Earth says that the biggest gas-guzzlers should pay at least £500. [9]
2. Introduce nationwide council tax rebates and cut stamp duty for low-carbon, energy efficient homes. This would provide an extra incentive for householders to be more energy efficient, and install micro-generation systems (such as solar panels, and small wind turbines). [10]
3. End the bizarre tax anomaly whereby householders are charged more than three times as much tax for saving energy as they are for using it. At present consumers only pay five per cent VAT for using energy. But if they want to save it by buying and installing insulation, they are charged 17.5 per cent VAT. Around 40 per cent of heat loss in a typical home is through the walls and loft. The Chancellor should reduce VAT on insulation to five per cent at the next Budget.
4. Introduce tax breaks, grants and other incentives for householders to install micro-generation systems.
Friends of the Earth is also calling on the Government to:
· Make its Code for Sustainable Building stronger and compulsory. The Government's code suggests numerous ways for new buildings to reduce their environmental impact, for example by making them highly energy and water efficient, but the voluntary standards are weak and likely to be ignored by most builders.
· Set an annual carbon budget to ensure that the UK is on target to meet its carbon dioxide reduction targets and take policy steps to ensure that these targets are met. Friends of the Earth and others are also calling for the Government to set legally binding targets for making annual reductions in carbon dioxide emissions. The campaign now has the support of most MPs. More info at www.thebigask.com.
Editor's Notes
[1] See www.hm-treasury.gov.uk/topics/environment/topics_environment_policy.cfm
[2] National Statistics, Environmental Accounts Autumn 05, table 3.1. See www.nationalstatistics.gov.uk
[3] Between 1997 and 2004 the real cost of motoring declined by 7 per cent, bus and coach fares increased by 11 per cent and rail fares increased by 4 per cent (Hansard, 11th October 2005).
[4] See www.dft.gov.uk/stellent/groups/dft_transstats/documents/page/dft_transstats_026311.hcsp
[5] See www.ifs.org.uk/bns/bn55.pdf
[6] Based on www.statistics.gov.uk/pdfdir/ea1105.pdf, table 3.1
[7] If the Chancellor had even kept fuel duty at the same proportion of total taxes, rather than letting them fall, then over 2000-2004 this would have raised £9 billion.
[8] Friends of the Earth's Budget Briefing www.foe.co.uk/resource/briefings/prebudget_oct_05.pdf
[9] The Department for Transport has published research showing that wider VED differentials would persuade people to buy a greener car. They say that 'the current graduated scheme does not offer a large enough incentive to encourage behavioural change', and that wider bands would have an effect: 'A differential between bands of £50, would be enough for 33% [of people about to buy a car] to choose a different car. At a differential of £150, 55% of people would choose a greener car.'
[10] Braintree District Council in Essex offers council tax rebates for home energy efficiency measures.
