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BUDGET `99: IT WAS GREENER THAN YOU THINK

17 Mar 1999

This year's Budget was Britain's greenest ever, a new analysis by Friends of the Earth reveals (copy attached). Both the Chancellor and media commentators played down the significance of the environmental changes he announced. But in fact there were twenty-two green measures in the Budget, more than for any area of policy - including encouraging enterprise and employment, and supporting the family. The Chancellor can expect to raise at least £8.4 billion net from green tax changes over the next five years.

FOE has described the Budget as strong in taking a long-term environmental view; in shifting taxation from “goods” such as jobs to “bads” such as resource waste and environmental pollution; and in extending the polluter pays principle. However, FOE has criticised the Chancellor for failing to use revenues from green taxation to fund essential environmental infrastructure and services, including public transport and a nationwide energy conservation programme targeted at the fuel poor.

Commenting, FOE Executive Director Charles Secrett said:

“This Budget put the environment at the heart of economic policy-making. This is a vital change in the direction of Britain's economic policy, perhaps the most important since the Second World War. Yet it has not been properly appreciated either by the economics profession or by economics commentators in the media. There is a great deal for the Chancellor still to do - for example, there is little environmental point in taxing cars more heavily if the revenue is not used to invest in public transport.There will be a great deal of opposition. Grossly polluting companies are often wealthy and politically powerful. But green economics is here to stay. It deserves to be at the centre of media coverage of economics, because it is now at the centre of Government policy.”

The 22 measures announced by the Chancellor were:

Energy
*     Industrial energy tax, with cuts in employers' NIC and support for companies investing in environmental technologies and renewable energy (to be introduced 2001/2002)
Landfill
*    Escalator on the Landfill Tax (immediate)
*    Reform Landfill Tax Credit scheme to increase recycling (immediate)
Aggregates
*    Drafting paragraphs for Finance Bill 2000 to introduce an Aggregates tax (immediate)

Chemicals
*    Consulting on the introduction of a Pesticide tax (immediate)
Transport
*    6% real annual road fuel duty escalator (immediate)
*    Increased differential for ultra-low sulphur diesel (immediate)
*    Cut in duty for gaseous road fuels (immediate)
*    Increased differential between leaded and unleaded petrol (immediate)
*    Consultation on uprating bus fuel duty rebate (immediate)
*    Cut in VED for small-engined cars (I June 1999)
*    VED for new cars to be graded by CO2 emission (Autumn 2000)
*    Doubling to £1,000 of VED discount for cleaner-engined lorries and buses (immediate)
*    VED reduction for vehicles for combined road-rail transport (immediate)
*    Increased VED for heaviest (11.5 tonne axle weights) lorries (immediate)
*    Increased funding for rural transport (immediate)
*    Abolish mileage banding for company cars (finished by 2002)
*    Install banding for company cars based on CO2 emissions (finished by 2002)
*    Increase in fuel scale charges for company car drivers' 'tax-free fuel' (immediate)
*    Remove employee tax benefit charges on works buses, subsidised public transport, bikes and safety equipment and workplace bike parking (immediate)
*    Capital and tax free cycling allowances for employees using bike for business (immediate)
*    Employer's tax free provision of alternative transport when car sharing arrangements break down (immediate)

The financial effects of the green tax measures are summarised in the following table:

[*]    revenues from the business energy tax are committed to reduce employers' NIC by 0.5%points and fund schemes to increase energy efficiency and uptake of renewables.
[1]    fuel scale charges will be increased again in 2001/02 and 2002/03 but no rate has yet been set - these figures assume a smaller increase than the previous two years of £75m.
[2]    assuming a further small rise of £50m in 2002/03 and no increase in revenue for 2003/04.
[3]    these figures are for the revenue from the 6% increase in each of these years minus the concessionary rates for cleaner fuels. The five year cumulative total conservatively assumes no further increase in revenue in the following two years.
[4]    annual commitments in Budget'99 that can be collectively called 'green transport' measures are: the VED reduction for small-engined vehicles (£85m p.a.), increased rural transport fund(£20m p.a.) and green commuting/business travel package (£5m p.a.).
[5]    the cumulative figures for the next five years make a number of assumptions including: no extra annual revenues from company car tax, fuel scale charges or the road fuel duty escalator, and no increase in the rate of the business energy tax but a fall in revenues(£250m) in the last year indicating a significant increase in business energy efficiency and uptake of renewable energy.
[6]    introduced at £1 per tonne rising by £1 per tonne per year - the revenue figures are from econometric modelling by Cambridge Econometrics for FOE and FFF: Cambridge Econometrics, 1998. Industrial Benefits from Environmental Tax Reform in the UK. London,Forum for the Future and Friends of the Earth.
[7]    these totals include the committed annual expenditure on 'green transport' measures announced in Budget '99.

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