HMT 2
27 November 2002
AN ECONOMIC STRATEGY FOR DELIVERING ENVIRONMENTAL PROTECTION AND TACKLING WASTE
Chancellor Gordon Brown today announced further important steps in the Government’s strategy to protect the environment, including action to tackle the problem of waste, and expand on the Government’s strategy for using economic measures for delivering environmental benefits.
Economic Secretary to the Treasury, John Healey, said:
“The Government is today publishing its strategy for improving the environment by using economic instruments. Following discussions with business and environmental groups on how best to develop our approach, this strategy sets out how economic instruments can promote a dynamic and innovative economy, improve resource productivity and deliver environmental benefits for all.
“In order to encourage a reduction in the amount of waste going to landfill, and develop greener alternatives such as recycling, the Government intends to consult on the introduction of significant increases in the landfill tax escalator rate. The Government has also announced that it will introduce a new fuel duty incentive to encourage the use of bioethanol. Furthermore, the Government intends to discuss with stakeholders the most effective economic instruments for ensuring that the aviation industry is encouraged to take account of, and where appropriate reduce, its contribution to global warming, local air quality pollution and noise.”
Building on its recent Budgets, the Government today announced a series of targeted measures to help to deliver environmental benefits, including:
- a major package of fiscal measures, aimed at helping the UK to move towards more sustainable waste management. The Government will consult on a revenue-neutral proposal to raise the landfill tax escalator - currently the tax is at £13 per tonne, and is raised by £1 per year until 2004-05 - to £3 per tonne in 2005-06 and to increase the rate of tax by at least £3 per tonne in future years, on the way to a long-term rate of £35 per tonne. The landfill tax credit scheme will be reformed with approximately a third of the funding – nearly £50 million - continuing to be available for spending on community environment projects. The remainder – almost £100 million in 2005-06, rising to £110 million in 2006-07 and 2007-08 - will be allocated to public spending to encourage sustainable waste management;
- responding to the consultation on economic instruments for improving domestic energy efficiency by consulting further on a shortlist of potential fiscal measures;
- following this year’s wide-ranging consultation on the future of air transport, discuss with stakeholders the potential for using economic instruments to ensure that the aviation industry takes more account of its environmental impact and to help deliver a sustainable aviation sector. The Government will set out its plans in next year’s Air Transport White Paper;
- subject to discussion with stakeholders on timing, introducing a new duty rate for bioethanol used as a road fuel, set at 20 pence per litre below the prevailing ULSP duty rate, to offset the additional production costs of bioethanol and allow the UK to benefit from the reduced greenhouse gases and lower levels of pollutants that this fuel can offer; and
- taking forward work to modernise the taxation of road haulage through the introduction of a distance-based lorry road-user charge alongside offsetting tax reductions for the UK industry, by setting up a Road Haulage Forum sub-group and publishing a second progress report early next year outlining the results of work on how to administer and procure the necessary systems.
DETAILS
Waste
Waste Strategy 2000 sets out the Government’s vision of sustainable waste management in England. It sets challenging targets for recycling and composting, recovery of household and municipal waste and reducing the amount of industrial and commercial waste sent to landfill. The Cabinet Office Strategy Unit has conducted a review of waste policy, considering the role of different policy measures, including economic instruments, in achieving the Government’s waste targets. The Strategy Unit’s conclusions are being published alongside the Pre-Budget Report.
Landfill tax
The Government is already committed to increasing the standard rate of landfill tax (which covers active waste) by £1 each year until 2004-05, in line with the landfill tax escalator announced in 1999. The Government also announced in Budget 2002 that it expected that the standard rate would need to be increased significantly in the medium term. Subject to consultation on details, the Government has announced that it will increase the landfill tax escalator to £3 per tonne in 2005-06, and by at least £3 per tonne in future years on the way to a medium- to long-term rate of £35 per tonne. The Government’s intention is that the increases will be introduced in a way that is revenue-neutral to business as a whole. The Government will consult with stakeholders on options for the package, including the recycling of revenue, before making any decisions.
No changes are being made to the lower rate for inactive waste, which remains at £2 per tonne.
Aggregates levy
Following extensive consultation with industry, and failure to secure a voluntary scheme, the Government introduced the aggregates levy on 1 April 2002 to incorporate the environmental costs in the price of virgin aggregates. Following independent research, the levy was set at a rate of £1.60 per tonne on virgin aggregate commercially exploited in the UK.
In the 2001 Pre-Budget Report the Government announced that it would examine proposals to deliver additional environmental benefits through the aggregates levy by encouraging the positive use of aggregates waste. Following informal discussion with the industry, the Government will issue a formal consultation paper shortly in order to gather further information on the issues involved.
Pesticides
A voluntary package of measures to reduce the environmental damage caused by pesticides was entered into by the industry and other stakeholders in April 2001. Implementation of the package has been generally satisfactory, and good progress has been made in assessing the current approach of farmers to the use of pesticides and in the production of good practice guidance. However, the Government believes that more progress is required in other areas, including the agreement of key indicators of performance between DEFRA and the industry, and the introduction of incentives to encourage farmers to take action. The Government will continue to press the signatories to the package to make faster progress and is carrying out further work and analysis on possible tax or other economic instruments, should the voluntary package fail to meet its objectives.
Aviation
The Government recognises both the important economic benefits that aviation offers and the need to ensure that the industry faces an appropriate set of economic incentives to deliver an efficient environmental outcome. Following the Budget announcement on the role of economic instruments to encourage aviation to take more account of its environmental impact, and this year’s wide-ranging consultation on the future development of air transport, the Government will discuss with stakeholders the most effective economic instruments for ensuring that the industry is encouraged to take account of, and where appropriate reduce, its contribution to global warming, local air quality pollution and noise. The Government will set out its plans in the Air Transport White Paper next year.
Fuel duty
The Government has announced that, subject to discussion with stakeholders on timing, it will introduce a new duty rate for bioethanol, set at 20 pence lower than the prevailing rate for ULSP in recognition of the environmental advantages that this fuel offers. The Government will also discuss with oil producers and vehicle manufacturers the potential role of a duty incentive to encourage the use of sulphur-free fuels to maximise environmental benefits.
Modernising road haulage taxation
In Budget 2002, the Government announced plans to modernise the taxation of road haulage by introducing a distance-based lorry road-user charge alongside offsetting tax reductions. Since publishing its first progress report in April, the Government has worked up options for implementing and procuring the necessary systems. The Government will publish a second progress report early next year outlining the results of this work and will discuss it with a new Road Haulage Forum sub-group containing a wide range of stakeholders.
Contacts
HM TREASURY PRESS OFFICE
Press enquiries: 020 7270 5238
Non-media enquiries: 020 7270 4558
INLAND REVENUE PRESS OFFICE
Press enquiries: 020 7438 6692 / 6706 / 7327
(out of hours: 07860 359544)
Non-media enquiries: 020 7944 3000
(office hours only)
HM CUSTOMS AND EXCISE PRESS OFFICE
Press enquiries: 020 7865 4775 / 5472
(out of hours:020 7620 1313)
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