Thursday, December 07, 2006

Only a slightly greener shade of Brown

The Chancellor's Pre-Budget Report announced a package of environmental measures, but revealed that the greening of Gordon Brown is still a work very much in progress.

It included a doubling of all rates of Air Passenger Duty, an ambition that all new homes to be zero carbon within a decade, with a time-limited stamp duty exemption for the majority of zero-carbon homes, and plans to make the City the hub for a mature global emissions trading market.

But the rise in air passenger duty is unlikely to put enough people off flying, or reverse steeply rising emissions from aviation unless the revenue is reinvested in improving energy efficiency.

The stamp duty waiver will only affect a fraction of the market in new homes.

There was no carrier-bag tax and no VAT relief on carbon-friendly goods and services.

The measures add up to much less than the 1% of GDP on preventive measures advocated by Sir Nicholas Stern.

Gordon has taxed the poor and left the rich alone.

If he really wanted to make his mark as a true socialist, he would have taxed the Chelsea Tractors, multiple car owners, raised the lower threshold for stamp duty and added an extra band at the top.

This would tax the people that could afford it - but he is frightened of upsetting them. Brown as Prime Minister - not something I'm looking forward to.

Why didn't we get lower Council Tax and Stamp Duty for greener houses (apart from new, zero-carbonn ones) and higher ones for wasteful homes, and adjustment of the rates of VAT and Planning Gain Supplement for developers who build homes to high environmental standards, as called for by the cross-party Environmental Audit Committee, led by Tim Yeo?

Levels of R&D expenditure in the UK are among the lowest in Europe for low carbon tech. Much more funding from a revised Renewbales Obligation needs to go into developing and installing renewable technologies, especially in the marine and offshore wind sectors.

APD (aviation tax) is a "blunt instrument" that does not differentiate between the relative carbon-efficiency of different flights.

APD could be levied per flight, rather than per passenger. Differential landing fees could be introduced, which could be used to complement a reformed and increased APD by specifically targeting the fuel efficiency of different models of aircraft.

Part or all of the revenue generated should be put towards investment in improving rail services and to accelerating the development and introduction of more energy efficient aircraft designs.

And why are airport vehicles are allowed to run on [untaxed] "red diesel"? Although it is true that these do not run on public roads, given that airports are major sources of both carbon emissions and air pollution.

Finally, carbon offsetting payments should be a compulsory charge on all airline tickets.

Unbelievably, the Department for Transport does not quantify the carbon emissions resulting from transport as a sector in its PSA.

Yet the Department is able to claim credit for being on course to meet the UK's Kyoto target, even while presiding over the worst performing sector of the economy in terms of trends in emissions.

The existing differentials in VED between different categories of cars should have been widened substantially. Gordon has abandoned the fuel duty escalator even though it has played an important role in helping to reduce the increase in CO2 emissions from road transport.

The Department for Transport does not intend to reinstate the Low Carbon Bus Grant programme. So how is it going to incentivise bus operators to introduce low carbon vehicles on a large scale?

For the record, below is a summary of all the new 'green' initiatives in PBR2006:


From February, air passenger duty on flights to the EU - 75% of all flights - will double from £5 to £10. Duty on long-haul flights for the lowest class of travel will rise from £20 to £40 while business-class trips to destinations outside the EU jump from £40 to £80.

The scope of the European rates of air passenger duty will also be widened to include all of the signatories to the European Common Aviation Area Agreement, from 1 February.

Emissions Trading

In parallel with talks with the French Finance Ministry (on economic instruments around climate change, particularly to improve the EU ETS) and the New Zealand Government (on emissions trading), the Government will bring together leading City and international players to examine the accounting, legal and institutional steps needed to support a mature planet-wide emissions trading market.

Carbon Capture and Storage (CCS)

The Department for Trade and Industry (DTI) is to tender for engineers to evaluate the costs of a CCS demonstration plant, and the best development route - for example a challenge fund. Meanwhile the UK and Norway hope to have completed by July a study into the infrastructure, market framework and value chain are needed to transport and store carbon dioxide below the North Sea.


The Finance Bill 2007 will excuse from income tax any revenue generated by small scale renewable technologies on homes, in order to support wider uptake.

Climate change levy (CCL)

CCL rates will increase in line with inflation from 1 April to maintain the levy's environmental impact. The new rates will be:
• Electricity 0.441p per KWh
• Gas 0.154p per KWh
• LPG 0.985p per kg
• Solid fuels 1.201p per kg

Energy Efficiency Commitment (EEC)

New investment of £7.5 million goes to Warm Front and the Energy Efficiency Commitment to allow 300,000 more households to receive free insulation and central heating.

By the end of 2008, the Chancellor said 2.7m homes would have been insulated through the Warm Front scheme.

The Winter Fuel Allowance for pensioners will also be continued, but not increased. Households with somebody aged over 60 will receive £200 and those aged over 80 will receive £300. But consumer champion energywatch expressed disappointment that there are still many fuel poor who "appear to have been ignored".

Energy efficiency in buildings

The Treasury is still investigating whether an energy services model for delivering greater efficiencies can be achieved. So it is looking into ways of
financing energy audits and other energy-saving measures.

It hopes, via the Code for Sustainable Homes, that by 2016 all new homes will be 'zero-carbon'. Stamp duty will therefore be abolished for most new zero-carbon homes.

For the rented sector, it plans to expand the Landlords Energy Saving Allowance (LESA) to corporate landlords, its sunset clause from 2009 to 2015, and extend its allowance of up to £1,500 for cavity wall and loft insulation to each property rather than each building, including floor insulation in the measures to be compensated for.

In the public sector, higher standards are to be explored for new and refurbished schools to reduce their carbon emissions by up to 60% over existing standards, and in some cases up to carbon neutrality.

Road transport

A 1.25p per litre increase in petrol duty for unleaded fuel, in line with inflation, the first increase since 2003.

Mr Brown ruled out a return to the fuel duty escalator that used to imposed inflation-beating increases each year, much to the dismay of environmentalists and the Environmental Audit Committee. The differential with LPG is reduced by 1p but compressed natural gas (CNG) keeps its differential.

The Treasury is looking at extending the current duty incentive for biogas - equivalent to almost 40p per litre - and will update the position at Budget 2007.

Regulations to ensure the widespread availability of sulphur-free diesel and sulphur-free 'super' grades of petrol will enter into force in late 2007.

The 20p per litre fuel duty differential for biofuels will be extended to enable a pilot involving the use of biomass in conventional fuel production to go ahead. The definition of biofuels will be amended to include biodiesel that is capable of being blended in excess of 5%.

A rate of 7.69p per litre will apply to biofuels used on the railways, as operators are to conduct pilot schemes exploring their use in trains.
On company cars, the government is looking at the case for incentivising the take-up of 'flex-fuel' vehicles, capable of using high-blend bioethanol E85.

Critics complained that the existing differentials in VED between different categories of cars were not widened.

The Environmental Audit Committee pointed out that the Department for Transport does not quantify the carbon emissions resulting from transport as a sector in its PSA.

Yet the Department is able to claim credit for being on course to meet the UK's Kyoto target, even while presiding over the worst performing sector of the economy in terms of trends in emissions.

This was not changed in the PBR, nor was the fact that airport vehicles are allowed to run on [untaxed] "red diesel".

'Chelsea Tractors' escaped the higher tax measures many had expected, in light of falling sales of 4x4 cars, said Mr Brown.


Landfill Tax is to be increased from 1 April by £3 to £24 per tonne, and may increase more steeply from 2008 onwards, or go beyond the £35 per tonne already committed to for the medium to long-term. The Aggregates Levy will be extended for a further year (2007-08).

> Read the Report

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1 comment:

Matt Burge said...

Hello David

An excellent & very useful budget summary. May I copy over to my team blog and reference to yourself your summary; 'Aviation' through to 'Waste'? I would like more people to read it and certainly wouldn't be able to summarise it any better!


Matt Burge