Archived press release

Budget falls a long way short of green action

12 March 2008

The Chancellor has fallen a long way short of his promise to put sustainability at the heart of today's Budget, Friends of the Earth said today. Alistair Darling should have used his speech to announce a wide range of positive measures that would have helped develop a low carbon economy by making it cheaper and easier for people to go green. But despite a few welcome green initiatives, it fell a long way short of what is required.

Friends of the Earth director Tony Juniper said:

"The Chancellor promised to put sustainability at the heart of today's announcement, but he has merely tinkered in the margins. Mr Darling should have used this Budget to tackle climate change - the biggest challenge the world faces - by making it cheaper and easier for people to go green, including tax breaks for greening the home, and grants for renewable energy. He did announce a number of welcome green initiatives, such as a car purchase tax and an increase in aviation duty, but the overall package falls a long way short of what is required. We urgently need real political leadership on this issue."

"Another freeze in fuel duty will further undermine the Government's already weak green credentials. The cost of motoring has fallen over the past 10 years, and carbon emissions from road transport have risen. Raising fuel duty would encourage people to choose greener transport options. And the money raised could have been used to cut taxes on people and jobs, and helped to fund a range of green initiatives, including better sustainable transport options."

Detailed assessment

Overall

Today's announcement fell a long way short of the green budget Mr Darling promised. He backtracked on fuel duty, and huge areas of the economy were not touched at all. There was nothing to insulate the homes of the fuel poor, or make it cheaper and easier for people to go green. The Budget did contain some good measures on car tax, carbon budgets and aviation, and these are very welcome. There were other green measures, but these were minor. Overall though this is not "putting sustainability at the heart of the budget". The net effect of the Budget on carbon emissions is certainly not up to the scale of action required, as set out in the Stern Review.

Road fuel duty

Mr Darling deferred this for 6 months, and announced an above inflation rise in 2010. This backtrack is a bad signal. Gordon Brown announced fuel duty rates for three years in Budget 2007 to give businesses certainty. Less than a year later, he has changed his policy despite saying "continuing stability and certainty to business" is essential. A survey by PriceWaterHouseCoopers found that 51% of businesses are not confident in making long-term investment decisions in the context of the current environmental tax and regulatory framework, and that current environmental incentives in the tax system are seen as unclear, too complex and fail to motivate behavioural change.

Green homes

The Chancellor failed to take any action to tackle the 27% of carbon emissions which come from the UK's homes. There were no tax breaks to encourage people to install energy efficiency measures, no new money for grants to help households install renewable energy on their homes and nothing to insulate the homes of the millions suffering from fuel poverty. The Chancellor did nothing about the scandal of energy companies making an estimated £9bn in unearned profits from the free allocation of carbon emissions permits under the European Emissions Trading Scheme. Having threatened the energy companies with a windfall tax he backed down in return of a feeble promise of increasing the number of people receiving a social tariff. A Windfall Tax could have raised £5bn to insulate the homes of the fuel poor.

The £26m on green homes service is not new money.

There were no increases to the Warm Front programme of grants for energy efficiency measures for those on benefits (the Government having cut it by £250m over next three years in the October Comprehensive Spending Review : they are estimated to be treating 50,000 less homes a year as a result of cuts).

He announced "voluntary and statutory" action on pre-payment meters, phased £100m extra from energy companies for social tariffs, and increases in Winter Fuel Payments. All these are necessary measures to help people in dire need pay their bills but this is a short term solution, and much of this cash will simply be heating our skies - insulating the homes of the fuel poor and investing in energy efficiency is the crucial permanent solution to fuel poverty, and will tackle climate change at the same time.

Carbon Budgets

These have to be delivered as part of the Climate Bill anyway, but the announcement they will be linked to next year's budget, and will set a strategy to deliver these budgets, is positive.

Emissions trading

Phase III of EU ETS UK will auction 100% of allowances to the large electricity producers sector.

This measure is going in the right direction. But is too little too late. Large electricity producers are being gifted over £1 billion a year windfall profit in Phase II of the EU ETS running from 2008-2012 according to Ofgem. The Chancellor is letting them keep it. With this proposal he is waiting until 2013 to make them pay in full for the next batch of allowances. Other countries such as Germany are already pushing for Phase III to allow 100% auctioning for all sectors not just electricity generation. Friends of the Earth called on the Chancellor to introduce a one-off tax on the windfall profits of big energy companies in Phase II to fund investment to help eradicate fuel poverty and also to commit to 100% auctioning for all sectors in Phase III which will bring in more money to tackle climate change.

Green cars

The moves on greener cars are welcome. The number of VED bands will increase from 2009-10 and the top rate (for cars emitting over 255g/km CO2) will be 10% higher than for 2008-09. Rates for cars with emissions around the average of UK new car sales (approximately 165g/km) will rise and rates for more fuel-efficient cars will fall slightly.

From 2010, buyers of cars emitting over 160g/km CO2 will pay more tax in the first year. For the worst gas guzzlers, emitting over 255g/km CO2, the first year tax will be £950. This is an additional tax of £495 over the standard VED rate for these vehicles (which is £455). This is less than needed to drive major changes in car purchasing decisions, but a step in the right direction.

The Government has also slightly firmed up its position for a longer-term carbon dioxide target for new car emissions in current EU negotiations, from calling for 100g/km CO2 by 2020-2025 to 100g/km by 2020. This is a step in the right direction but does not go far enough. Green groups have called for average emissions from new cars sold in 2020 to be no more than 80g/km CO2 - representing a doubling of fuel efficiency from current levels. This target would require manufacturers to substantially speed up progress but it provides the long-term certainty needed for both climate policy and car manufacturers.

Road pricing

The announcement of funding for exploring the use of technology in road pricing is welcome. But what is needed is a firm Government commitment to the use of national road pricing as part of a package of traffic reduction measures to help tackle transport's contribution to climate change.

Feed-in-tariff

The Chancellor failed to signal support. He reaffirmed his existing commitment to include feed-in-tariffs as an option in forthcoming renewable energy consultation.

Plastic bags

Measures that encourage people to avoid disposable bags are a welcome development. But plastic bags are only a small part of the overall waste stream. Given this, we are very disappointed that the Government has cut the budget that goes to promotion of recycling (through WRAP), by 30%, and are instead providing an additional £2 billion of taxpayers money to waste infrastructure, much of which may end up being spent on unsustainable and expensive incinerators. Far more is needed to cut waste and encourage recycling.

New buildings

Announced ambition for all new non-domestic buildings to be zero carbon from 2019, and announced ambition for all new public sector buildings. This ambition is welcome, but 10 years is a long way away in the context of the Stern Review's call for urgent action now.

Stamp Duty exemption for zero carbon new flats, not just homes.

Overall carbon cuts

He re-affirmed previous Government announcements that the target was more likely to be 80% than 60%.

Industry

In line with an inflation rise in climate change levy: this is a bare minimum so it doesn't fall. It has been frozen (ie falling in real terms) in 6 of the last 7 years.

Aviation

Increase of 10% in second full year of operation of replacement to Air Passenger Duty. Aviation gets a tax break of £9 billion from exemptions from fuel duty and VAT. APD currently raises £2 billion.

Renewables technology

He re-announced details of the first projects the Energy Technologies Institute will support.

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Published by Friends of the Earth Trust