TAX MEASURES TO HELP PROTECT THE ENVIRONMENT
HM TREASURY 13
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 gas;
- 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 to
congestion 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 increase
the duty on diesel by more than petrol, to reflect the
higher 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 landfill
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 is
needed, 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. 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 and
other 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 C&E 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