Archived press release

Darling must deliver on sustainable budget promise... and stand firm on petrol duty

12 March 2008

The Chancellor must put tackling climate change at the heart of tomorrow's Budget Friends of the Earth said today. In December the Chancellor promised that "sustainability will be at the heart of the next Budget. This is not an optional extra. It is essential for all our futures." The environmental group is calling on the Chancellor to keep this pledge by announcing a comprehensive package of measures to make it cheaper and easier for people to go green, and to stick to his plans to increase fuel duty.

Friends of the Earth is calling on the Chancellor to adopt a range of green measures in Wednesday's Budget [1]. And has produced a briefing [2] explaining why the Chancellor should go ahead with his planned rise in fuel duty. Motoring is now cheaper in real terms than it was 10 years ago and urgent action is needed to tackle transport's contribution to climate change.

Friends of the Earth's economics campaigner, Simon Bullock, said:

"Alistair Darling must keep his promise to put sustainability at the heart of tomorrow's Budget. But this means giving people carrots to go green, not just sticks. The Chancellor must announce a wide range of measures to make it cheaper and easier for us all to go green, such as incentives on greening our homes and buying more fuel-efficient vehicles, as well as a windfall tax on energy companies to insulate people's homes and tackle fuel poverty. We need genuine Government action to tackle climate change, not more hot air.

"Abandoning plans to increase fuel duty will seriously undermine the Government's green credentials. Road transport is responsible for nearly a quarter of UK carbon dioxide emissions. The real cost of motoring has fallen under Labour, and traffic levels have risen by more than 10 per cent. The Government must do more to persuade people to drive cleaner cars and use less polluting alternatives, such as public transport."

Friends of the Earth has published a range of measures that the Chancellor should adopt to help cut UK carbon dioxide emissions, including

• A stamp duty rebate for people installing renewable technologies or energy efficiency measures in their homes;

• Funds for councils to give council tax rebates for people installing energy efficiency measures in their homes;

• A feed-in-tariff guaranteeing a premium price for renewable electricity generated in people's homes and by businesses;

• A £1 billion fund for the Low Carbon Buildings Programme, with a 50 per cent grant to help householders with the up-front capital costs of installing renewable technologies;

• Car purchase tax on new cars to accelerate the shift to buying low carbon vehicles;

• A windfall tax on huge energy company profits to tackle fuel poverty.

Press release on Friends of the Earth's blueprint for a green Budget

Briefing on Friends of the Earth's blueprint for a green Budget (PDF† )

Friends of the Earth Briefing

Fuel tax and climate change: why the Government should stand firm

Fuel tax is due to go up by 2 pence per litre in April. Groups representing hauliers and motorists are calling on the Government to abandon the proposed rise, saying it will damage the haulage industry and the wider economy. This briefing explains why Friends of the Earth believes the Government should stand firm.

What is the Government intending to do?

In the 2007 Budget, the then Chancellor Gordon Brown announced slightly above-inflation increases in fuel tax, to be implemented in October 2007 (a rise of 2 pence per litre), April 2008 (2 pence per litre) and April 2009 (1.84 pence per litre). These were the first above-inflation increases in fuel duty since the fuel tax protests in autumn 2000.

Why should the Government stand firm?

Motoring is cheaper in real terms than 10 years ago

The cost of motoring fell by 10% in real terms (after accounting for growth in household income) between 1997 and mid-2007. Despite recent fuel price rises, the cost of motoring will still be cheaper in real terms than when the current Government came to power. Over the same period, rail and bus fares rose in real terms by 6% and 13% respectively.

Urgent action is needed to tackle transport's contribution to climate change

Road transport emissions of carbon dioxide continue to rise and account for nearly 22% of total UK emissions. The Government's Climate Change Programme shows that fuel duty escalator was one of its most effective measures for reducing carbon dioxide emissions in the late 1990s. The latest science shows that the UK must cut its emissions by 80% to play its share in avoiding dangerous climate change. Policies which increase emissions are incompatible with this goal.

Tax as a share of fuel prices has fallen in recent years

The share of fuel prices accounted for by fuel duty and VAT fell between 1997 and 2007 (the last year for which figures are available). In April 1997, fuel duty and VAT accounted for 77% of the pump price of petrol and 76% of the pump price of diesel. In April 2007, these had fallen to 67% and 66% respectively. And, according to the Treasury, fuel duty rates will be 11% lower in real terms in 2010 than in 1999, even after the three planned tax rises.

Hauliers welcomed last year's Budget announcement

Reacting to the 2007 Budget, the Freight Transport Association "welcomed the Chancellor's Budget statement that he will defer an increase in fuel duty on diesel until October 2007, and then increase fuel duty by 2p per litre in 2008 and by 1.8p per litre in 2009. These figures are in line with inflation. Setting these rates for three years will assist the transport industry in budgeting for future operational costs".

Abandoning the proposed fuel tax rise will not solve the haulage industry's problems

The impact of fuel prices is magnified by over-capacity in the industry, which means that firms cut margins to win business, and have less scope to pass on increased costs to clients. The Haulage Industry Task Group, set up by the Department for Transport, and including representatives of the Freight Transport Association and the Road Haulage Association, has concluded that `fierce competition and tight margins are a feature of the UK haulage market' and that `competition between many small suppliers quickly erodes profit margins'^[i].

Abandoning the increase would cost the UK almost £500 million

Friends of the Earth estimates that abandoning April's tax rise would reduce tax revenue by £490 million. This represents:

• The wages of 20,000 police, nurses or teachers; or

• Three-quarters of the Government's fuel poverty programme; or

• More than half the Government's flood protection budget.

It would damage the Government's environmental credentials

The Chancellor announced three year's worth of road duty rates to give businesses certainty - certainty is one of the key requirements for businesses to invest in low carbon technologies. If the new Chancellor was to back-track on this announcement within a year it would strongly signal that the Government flip-flops at the first sign of trouble, and has no long-term commitment to tackling climate change properly. This would be highly damaging to the chances of businesses investing in technologies to cut carbon or use fuel more efficiently.

What should be done?

Make new cars more fuel-efficient

Making new cars more fuel-efficient will save drivers money and also help to tackle climate change. Friends of the Earth's proposals for improving new car fuel efficiency would improve the fuel efficiency of the average car sold in the UK from around 41mpg in 2007 to around 56mpg in 2012 (for petrol cars). This would save the average motorist, travelling 10,000 miles a year over £300 a year in fuel at current costs. The EU will decide new fuel efficiency standards for cars in the next 15 months. Research for the Government shows that improving the fuel efficiency of new cars could make the single biggest contribution to tackling transport's climate change emissions. The car industry should also spend more advertising fuel-efficient cars rather than gas-guzzlers.

Introduce a purchase tax on gas-guzzlers

The Government should play its part in encouraging the shift to fuel-efficient low-carbon cars by introducing a purchase tax on gas-guzzlers in the Budget. The revenue could be used to provide `fee-bates' to encourage drivers to choose the most fuel-efficient vehicles by providing a grant towards the purchase price.

Introduce fuel duty increases as part of a tax shift

The Government should deliver on its 1997 commitment to shift the burden of taxation off people and jobs, and onto pollution. The Government should announce that increases in taxes on fuel duty and other pollution should be matched by cuts in taxes on jobs and income. Opinion polling shows this would be politically popular - one recent poll finding 77 percent support, with only 9 percent opposition^[ii].

Specific help for rural areas

The Government should investigate ways to help poorer households in rural areas who are among the hardest-hit by fuel tax rises, such as targeted council tax rebates. It must also do more to protect vital services in rural areas such as shops, post offices, schools and health centres so that people do not have to travel so far to get to the places they need to go. There must also be more support for public transport in rural areas to help provide an alternative to car use.

More investment in alternatives to car use

More money must be invested in better public transport and making cycling and walking safer and easier to encourage people to use their cars less. Much of this could be found by cutting the Government's road-building programme: it is currently spending £5 billion widening the M1 between Luton and Leeds and intends to spend over £2 billion widening the M6 between the West Midlands and Greater Manchester.

Help companies cut fuel use

The Government should help companies cut their fuel use, including by:

• Substantially increasing support for the DfT's SAFED (Safe and Fuel Efficient Drivers) training course for van and lorry drivers which helps cut fuel use by an average of 14%. SAFED has trained 7,800 drivers to date. DfT announced a further £1.2million of funding last year to train a further 6,500 drivers, but this would still be less than 1% of the total number of van drivers in the UK. At the current rate of funding, training all van drivers in the UK would take over 400 years.

• Increasing funding for the Energy Savings Trust's green fleet consultancy. This provides tailored advice for companies with fleets of over 50 vehicles in England and Wales and 20 vehicles in Scotland. This advice helps businesses save up to 10% in fuel use. The increased funding should also lower the threshold for fleets in England and Wales to 20 vehicles.

Notes

[i] http://www.dft.gov.uk/pgr/freight/road/freightdatarep para 1.5

[ii] http://greenfiscal.pmhclients.com/images/uploads/ ¬
GFCPressReleaseWEB12Nov2007.pdf

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Published by Friends of the Earth Trust