Tuesday, October 16, 2007

Darling, I fluffed my policies - Pre-Budget Report and Comprehensive Spending Review

Ken Livingstone explains basic economics to Gordon Brown at the launch of Crossrail

Ken Livingstone explains basic economics to Gordon Brown at the launch of Crossrail

Alistair Darling's first Pre-Budget Report and Comprehensive Spending Review missed so many opportunities to green the economy and carry out the recommendations of the Stern Report commissioned by his own Treasury that even Robin Hood with his bow and arrow, blindfolded, could have missed less.

And far from stealing from the rich to give to the poor (in the case of private equity raiders) or from the fossil fuel lobby to give to the sustainability lobby, his efforts are like a sailor furling a single sail when a hurricane is on the way.

The Low Carbon Kid agrees with the BBC's assessment of the measures announced, more or less, but presents below, as usual in the interests of objectivity, a summary of the relevant policy changes.

He wades through the verbiage so you don't have to.

Rail networks

The largest was already public news - £15 billion of Government funding in the rail network over five years, through a national target to increase the network's capacity, including provision for Crossrail.

A new Public Service Agreement is intended to improve the transport networks that support economic growth by managing urban traffic routes and the strategic road network and on the rail network.

Crossrail, a monumental engineering project that has been a dream for many for 15 years, will be financed one third each by businesses, taxpayers and passengers.

The Government's third is a DfT grant of over £5 billion during Crossrail’s construction.

The Crossrail Hybrid Bill is likely to receive Royal Assent in summer 2008 with construction underway during 2010 and trains running from 2017.

Flood prevention

Mr Darling also announced an increase in funding for flood and coastal erosion risk management from £600 million in 2007-08 to £800 million in 2010-11, which was criticised by insurance companies and local government chief executives as insufficient and too late.

But the Government said it would also spend around £10 million a year introducing a flood adaptation toolkit to help communities adapt to change where constructing defences is not the most appropriate means of managing flood and coastal erosion risk.


£2 billion of funding will be provided through the Private Finance Initiative (PFI) to help local authorities invest in more sustainable waste management options.

PFI credits for local authority waste projects will rise from £280 million in 2007/08 to £700 million in 2010/11.

Fuel poverty

The Warm Front programme, which tackles fuel poverty and energy efficiency, will continue and the related Carbon Emissions Reduction Target obligations on energy suppliers will expand.

Environmental Transformation Fund

A £1.2bn Environmental Transformation Fund, first announced in June 2006, will support the deployment of new energy technologies in the UK and abroad.

An "£800 million international window" for the Fund was already proclaimed in March, "to finance overseas development projects" for "poverty reduction and environmental benefit".

To this has been added £400m from Defra, over three years, to "provide investment in new energy technologies here at home", Mr Darling said.

The idea of the domestic part of the EFT is to "provide the sector with the confidence it needs to invest in innovation," said John Hutton, BERR minister.

He said the EFT would work closely with the Technology Strategy Board and the new Energy Technologies Institute, which has a £1bn budget over ten years.

The latter are engaging in R&D in these technologies.

Promising ones emerging from this process will then be helped to become attractive in the marketplace by the ETF through the Carbon Trust, in programmes such as their work to accelerate cost-effective organic solar photovoltaic cells (see other news item).

The Fund will also finance interest-free energy efficiency loans for small and medium-sized businesses via the Carbon Trust, and through Salix Finance in public sector revolving loan schemes.

Reducing emissions from deforestation is also "a key aim" of the Fund and £50m of it will be used for this purpose in the Congo Basin, by promoting sustainable forestry.

The international side of the Fund is handled by the Department for International Development, and the World Bank will deliver this.

The fund may increase further in the future, for example to encompass support for the UK carbon capture and storage demonstration project, which is not currently included.

Air travel

Air Passenger Duty is to be replaced with a ‘per plane’ tax from 1 November 2009 toencourage airlines to make more efficient use of flights.

The Government will hold a consultation on this in the New Year.

Also, from 1 November 2008, passengers on ‘business class only’ flights will become liable for the standard rate of APD, correcting an anomally.

APD rates will remain at their current level for 2008-09.


Overseas aid as a share of national income (GDP) is to rise from 0.37% in 2007-08 to 0.56% in 2010-11, returning it to levels in earlier years and meeting promises made at the Gleneagles Summit.

A PSA aims to reduce poverty in poorer countries through quicker progress towards the Millennium Development Goals.

Emissions Trading Scheme

Hilary Benn said that the Government will press the EU for a scarcity of allowances and an increase the use of auctioning for EU Emissions Trading Scheme (ETS) permits for Phase III, post-2012, with a "significant" increase in that level for large electricity producers to "tackle windfall profits that have occurred in this sector".

Meanwhile just 7% of allowances in Phase II (2008-12) will be auctioned, plus any from closures or surplus from the New Entrants Reserve.

The European Commission is expected to publish its proposals on the future of the EU ETS post-2012 in December.


A disincentive for business to install solar panels and other renewable energy technologies has been removed.

Currently, this can trigger an increased liability for business rates.

However, the Government will no longer include microgeneration investments in ad hoc re-assessments of business rates liability from 2008.

These will only be taken into account at the five-year re-valuation of business rates, providing up to five years' worth of benefit to ratepayers.

Transport and biofuels

An earlier decision to seek state aid clearance for the inclusion of the cleanest biofuel plant in Enhanced Capital Allowance (ECA) has been reversed, because it's not seen as worth the trouble.

Instead, the Renewable Transport Fuel Obligation will target production of the cleanest and most sustainable biofuels.

Biofuels producers can still seek financial assistance to ensure cleaner fuel production through investing in good quality CHP installations, which are eligible for ECAs.

Also, the current duty incentive for biofuels will be extended to biobutanol on a pilot basis.

Climate change agreements

Over 50 energy intensive sectors can now get an 80% discount on the Climate Change Levy in return for signing climate change agreements (CCAs) under which firms agree to improve energy efficiency and/or reduce emissions.

This scheme will now continue until 2017.


To help deliver the Government’s target of 2 million new homes by 2016, a new Housing and Planning Delivery Grant has been allocated £500m over three years.

Over the same period £1.7bn has been allocated for infrastructure such as schools and transport in Growth Areas, the Thames Gateway, New Growth Points and eco-towns.

The Government announced a new PSA to increase long-term housing supply and affordability, with increases in spending on housing from £8.8bn in 2007-08 to £10bn in 2010-11.

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