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Budget
17 March 1998
The Government today announced a package of tax measures that will help improve local air quality and reduce greenhouse gas emissions. Today's Budget takes forward the Government's commitment to using the tax system, where appropriate, to help reduce environmental damage. This ensures that the tax system is fair both to future generations and to the world in which we live.
Commenting on the package, Financial Secretary Dawn Primarolo said:
"This Government is serious about putting the environment at the heart of policy making, and nowhere is more important than in the Budget. The Financial Statement and Budget Report includes a quantified assessment of the impact of its main environmental measures. It shows that today's Budget will help the Government to reduce emissions of greenhouse gases, and to meet the provisional objectives for air pollution set out in the National Air Quality Strategy. There is also progress to report and measures aimed at reducing the;environmental impact of land use and water pollution."
Greenhouse gases and climate change
-duties on road fuels will go up tonight in line with the Government's existing commitment, as part of the Government's programme to reduce emissions of carbon dioxide, the main greenhouse
-company cars are generally larger and less fuel efficient than privately owned cars, and are responsible for 22 per; cent of commuting mileage, which contributes tocongestion in our urban areas.This Budget puts in place a program of increases in the company car fuel scales to discourage drivers from accepting free fuel from their employers for private use.It will ensure that many more motorists face the correct incentives when deciding whether to make private journeys. Alongside the Integrated Transport White Paper, the Government will further consider the case for replacing the existing business mileage discounts with discounts for driving fewer private miles in company cars to ensure that the right environmental signals are given;
-to help meet the UK's challenging post-Kyoto targets for reducing greenhouse gases cost-effectively, the Government has announced its interest in a possible tax on the industrial and commercial use of energy. There is to be further detailed assessment of the case for a tax and how it could work, including the development of a consultation paper to be issued later in the year;
-Vehicle Excise Duty rates for all vehicles are frozen this year.Later this year, the Government will consult on a new system of environmentally-graduated Vehicle Excise Duty for cars. The Government intends to introduce a rate of 100 pounds for less-polluting cars,while less environmentally-friendly cars will pay more than at present;
-the reduced rate of VAT of 5 per cent for installation of energy saving materials under certain grant-funded scheme will come into effect on 1 July 1998. This measure will allow an extra 40,000 households each full year to improve the energy efficiency of their homes.
Local air quality
The Integrated Transport White Paper, due to be published in the Spring, will set out the Government's overall strategy for transport, which aims to address the mobility needs of all sections of society, while tackling the twin problems of congestion and the environment.
Road transport is the biggest cause of urban air pollution,especially of emissions of "particulates" and nitrogen oxides.Within the overall context of the Integrated Transport Strategy,the Budget contains a package of measures designed to improve air quality, and encourage a shift from the car to public transport.The White Paper will build on these measures.
-in this and future Budgets, the Government will increasethe duty on diesel by more than petrol, to reflect thehigher energy and carbon content of diesel per litre.Duty rates will also be changed to encourage the production and use of ultra-low sulphur diesel, which offers significant improvements in local air quality over ordinary diesel. The Government envisages that, in time, almost all users of diesel will change to ultra low sulphur diesel
-the duty on road fuel gases is frozen again.Taken in conjunction with the increase for other fuels, this further recognises the benefits to local air quality attached to use of road fuel gases
-bus fuel duty rebate, which has been frozen since 1993,is being increased in line with the duty increases on diesel. This will protect bus operators from the duty increase, and will ensure the cost of bus travel rises by less than that of motoring. The Government will shortly begin consultation on how bus fuel duty rebate can be better targeted to provide incentives for operators to run cleaner vehicles, and to support rural services.This complements the extra 50 million pounds spending announced today for rural transport services;
-A scheme to reduce Vehicle Excise Duty by up to 500 pounds for lorries and buses which meet a low emissions standard will come into force in January 1999.Land use and water pollution
-the review of the operation of the landfill tax is being published on 18 March. Following the review's recommendations, the Government is announcing that the standard rate will go up from 7 pounds a tonne to 10 pounds a tonne from 1 April 1999.From October 1999,after consultation on the details, the Government will exempt inert waste used for restoration of and fill sites
-initial research commissioned by Department of the Environment, Transport and the Regions into the environmental costs attached to quarrying has completed. It indicates that there are environmental costs attached to quarrying which a tax might capture. Further work isneeded, however, both to build on the initial research findings, to consider the range of options for addressing; these costs, and to examine how a tax might work;
- research commissioned by the Department of the Environment, Transport and the Regions into how a system of water pollution charges might work is in progress. Early results are promising, but the work is continuing. If the results indicate that water pollution charges could be practicable, and provide an effective way to control pollution in our rivers, the Government will consult on a detailed proposal.
NOTES FOR EDITORS
1.This Budget includes a quantified assessment of the main environmental measures within the FSBR.p; This examines the contribution that the Budget measures could make in helping to reduce emissions of carbon dioxide (the main greenhouse gas) and improve local air quality. This will help the Government to meet its legally-binding post- Kyoto target, and will make a substantial contribution in helping to meet the provisional objectives laid out in
the National Air Quality Strategy.
2.Road transport is the biggest cause of urban air pollution. In 1995, road transport contributed 26 per cent of particulates nationally, and 46 per cent of nitrogen oxides. The Budget contains a package of measures designed to improve air quality. The measures are targeted especially at reducing emissions of "particulates" - minute particles of black smoke andother pollutants - and nitrous oxides. Department of Health figures indicate that "particulates" are thought to lead to the premature deaths of around 8,000 people a; year. (Committee on the Medical Effects of Air Pollutants, Quantification of the Effects of Air Pollution on Health in the United Kingdom, HMSO, 1998)
3. At the UN conference on climate change in Kyoto in December, the EU agreed to reduce its emissions of a basket of 6 greenhouse gases by 8 per cent below 1990 levels by 2008-2012 Other developed nations agreed to similar targets. For further details on the Government's interest in tax on the industrial and commercial use of energy, and the remit for further work, see HMT 14.
4.For further details on the increases in road fuel duties, see C&E PN 17.
5.For further details on bus fuel duty rebate and the new rural transport spending package, see DETR 1.
6.For further details on the measures for company cars, see; IR 6.
7.For further details on the package of measures on energy saving materials, see CE 18.
8.For further details on the package of measures on Vehicle Excise Duty, see HMT 16.
9.For further details on the package of landfill tax measures, see C&E 19.
HM TREASURY PRESS OFFICE
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