Alistair Darling's first Pre-Budget Report did little to support Gordon Brown's recent pledge to make Britain a world leader in tackling climate change, Friends of the Earth said today.

In his speech to Labour's annual conference last month [1], Gordon said "I want Britain to lead in carbon-free vehicles, carbon-free homes and carbon-free industry." But Alistair Darling's half-hearted tinkering in today's Pre-Budget Report will do little to achieve this vision.

Friends of the Earth director, Tony Juniper said:

"This Pre-Budget Report falls well short of what is required to help tackle climate change. Last month Gordon Brown said that he wanted Britain to lead in developing a low-carbon economy. This was a golden opportunity for the Chancellor to produce a range of green incentives to encourage people to go green. But yet again the Government has not delivered."

This year's PBR comes almost a year after Nicholas Stern's review of the economics of climate change. The report, which was commissioned by Gordon Brown, warned that unless urgent action is taken, global warming would have a devastating economic impact.

The PBR:

did contain a welcome move on reforming Air Passenger Duty. But the current level has been frozen until 2009. This is entirely inadequate to the task of tackling climate change.

raised the prospect of incentives for greener cars - but further action has been postponed until next year;

did nothing to help people cut emissions from their homes, or make the UK a world leader in developing renewable forms of energy.

Friends of the Earth made a number of suggestions to Alistair Darling for a greener PBR:

http://www.foe.co.uk/resource/press_releases/prebudget_report_a_ket_tes_05102007.html

Pre-budget and Spending Review - analysis from Friends of the Earth

Alistair Darling's first PBR and CSR statement contained few positive environmental measures, with inaction across a wide-range of policy. The Government endorsed the findings of the Stern Review on climate change, but its policy response overall was well short of what is required. The Government urgently needs to put in place a comprehensive strategy across the whole economy, rather than rely on a trickle of measures, if it is to turn the UK into a low-carbon economy. The commitment to implement the Stern Review is welcome, but a much broader response is needed at next year's budget.

In detail:

Environment Spending

DEFRA's budget has increased by 1.4 per cent a year in real terms, and will be £452 million higher than now by 2010-11. £200m a year of this is for increased spending on flood defences - ie paying for the damages caused by climate change, rather than preventing it.

A further £190m a year is going on the Government's Environmental Transformation Fund (ETF). Details on the ETF are still sketchy. At the 2006 Budget it later transpired that the money for the international element of this was not new money, but simply money raided from elsewhere in DFID's budget. The 2007 CSR commits to a £370 m fund over three years to a domestic element of the ETF - which the Government said in May 2007 would be used: "to support renewable energy, biofuels and other non-nuclear, low-carbon technologies including carbon capture and storage. Details will be announced in the 2007 comprehensive spending review"[i][i] . This level of funding is far lower than that needed to help the UK become a world leader in these technologies. Given the urgency of climate change, the economic opportunity from these new technologies, and the market failures preventing them coming to market, far more Government support is needed.

Transport Spending

Transport spending has increased, but there was no indication that there would be a shift in the current prioritisation of funding to help greener modes of travel. Worryingly funding on big road schemes was the first item mentioned by the Chancellor. The DfT section makes no mention of the Stern Review, despite the Review's call for major cuts from this sector.

The £200 million spending to fund free off-peak bus travel to all residents in England over the age of 60 and eligible disabled people is welcome, but far more is needed to ensure that all people have access to decent, affordable alternatives to motoring.

Environment and transport taxation

The decision to replace Air Passenger Duty with a tax per plane is welcome if it ensures that aviation taxation as a whole increases. The decision to freeze APD in the interim rather than raise it does not send a strong message that the Government intends to curb aviation's spiralling emissions. There was no action to cut the £9bn in tax breaks the aviation industry receives through not paying VAT on tickets and duty on kerosene.

The intention to press for greater auctioning of permits in the EU Emissions Trading Scheme (ETS) is welcome, as is the continued desire to see aviation included in the EU ETS.

The Chancellor also announced some minor measures - increasing the taxes on company car in line with the retail price index, a consultation on energy efficiency on products, a five year exemption from business rates for increased property values due to micro-generation investments.

There are major holes in the Government's plans - there were no announcements on tax breaks to make it easier for people to go green in their homes - such as Council Tax rebates or Stamp Duty rebates. Lack of basic insulation measures affects over 8 million households. There were no financial incentives for people wanting to install green energy or electricity in their homes - such as announcements on premium payment for any electricity they generate (know as a feed-in tariff), or increases to the grants available to people to install solar panels and other forms of renewable energy. There was almost nothing to help people go green.

On surface transport, possible measures to increase take-up of green cars were deferred to next years Budget, awaiting consideration of today's King report on low carbon vehicles.

Signals to UK business

The business community needs to see clear long term signals if it is to invest time and money in changing business models and installing new energy efficient plant. A recent survey of companies by PricewaterhouseCoopers concluded that just over half (51%) are not confident in making long-term investment decisions in the context of the current environmental tax and regulatory framework. There were few if any long term clear signals to UK Plc that creating a low carbon economy is a priority for the Government.

Summary

Overall, there was not sufficient action on either spending or taxation to adequately address the challenge laid down by Stern, and endorsed by the Prime Minister, to start to turn the UK into a low-carbon economy.

There is progress on aviation taxation, which we welcome, but we urge the Chancellor and Prime Minister to produce a comprehensive strategy for the economy, which makes it easier and cheaper for people and businesses to go green. Without such a strategy, the UK will not lead the transition to a low-carbon economy.