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HMT 4: Tax measures to ensure fairness to future and present generations

The UK tax system must be fair to future, as well as to present, generations. Today's Pre-Budget report progresses the environmental measures announced in the July Budget.

The Government has made clear that economic growth should be secured in an environmentally sustainable way. Today's announcements show that the Government is committed to using the tax system to deliver environmental objectives, where it is effective to do so.

The Pre-Budget report includes a range of progress reports and specific announcements relating to environmental taxes:

• a consultation paper on options to control water pollution is being issued on Thursday by the Department of the Environment, Transport and the Regions. One option is a system of water pollution charges, where those discharging to our rivers would have to pay according to the nature and amount of pollutants. The Deputy Prime Minister has commissioned research to test the feasibility of such a scheme. Both the consultation and research will inform the Spring Budget.
• research to assess the environmental costs attached to quarrying, announced in the July Budget, has been commissioned and is already underway. It will report in the New Year and inform consideration of whether there is a case for further measures, which could include new taxes;
• a report will be published tomorrow by HM Customs and Excise on ways of helping the less well-off keep warm. The Spring Budget will cut VAT from 17.5 per cent to 5 per cent on Government funded schemes which help the less-well off insulate their homes. The Government intends to explore with its European partners the possibility of a wider reduced VAT rate for ESMs;
• a document outlining proposals to reduce VED paid by lorries and buses with clean exhausts will be issued shortly. The next Budget will return to this measure;
• the Chancellor intends to return to transport issues in the light of the forthcoming discussions on climate change at Kyoto led by the Deputy Prime Minister, and the domestic review of the National Air Quality Standards.

Notes to editors

1. In the July Budget, the Government released a Statement of Intent on Environmental Taxation, stating its central economic objective as promoting high and environmentally sustainable levels of growth and employment.
2. It was announced in the July Budget that the Department of the Environment, Transport and the Regions would be publishing a consultation document on possible measures to address problems of water pollution. This document will issue on 27 November. A range of options are considered, and views invited. Research has also been commissioned by the Department of the Environment, Transport and the Regions to test the feasibility of a possible scheme of water pollution charging.
3. The July Budget announced that research would be carried out into the valuation of environmental costs ("externalities") attached to various types of minerals extraction, and in particular the quarrying of aggregates - stone, sand and gravel. Research has now been commissioned. Results will be considered alongside a review of the operation and level of landfill tax, which Customs & Excise are carrying out.
4. Details of the Customs & Excise report on helping the less well-off keep warm, and the VAT cut on schemes letting the less well-off insulate their homes, can be found in Customs & Excise Press Notice No.1.
5. The July Budget confirmed an intention to cut vehicle excise duty (VED) by up to 500 Pounds a year for lorries and buses meeting a low emissions standard (for particulates). The aim is to encourage owners to introduce technologies such as "particulate traps" or convert to gas power. Details of how the scheme might operate are now being considered and proposals for the operation of the scheme will be issued shortly.
6. The transport sector is the fastest growing source of carbon dioxide emissions. Targets for reducing emissions of greenhouse gases will be discussed at an international conference at Kyoto in December. The Government strongly endorses the EU negotiating position, to ask for other developed nations to match its proposed cut in emissions by 15 per cent below 1990 levels by 2010. The Government will consult after Kyoto about the measures it intends to take to meet its climate change target. In the light of the outcome of Kyoto, and of the review of the National Air Quality Standards, the Chancellor will return to transport issues in the Spring Budget.

HM Treasury press office

Press enquiries to: 0207 270 5238
Non-media enquiries to: 0207 270 4860/4870/4880

Pre Budget 1997 Press Notices index page

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