APPENDIX 1
Memorandum from Friends of the Earth
"BLUEPRINT FOR A GREEN BUDGET"
Last year's Budget was one of the most remarkable
ever seen, for three reasons.
First, the Chancellor announced 22 environmental
tax proposals, covering issues as diverse as energy, transport,
chemicals, landfill and aggregates, which made Budget 1999 the
greenest ever by a long shot. Second, he confirmed that hypothecated
revenue spending was here to stay, by extending the principle
of recycling "polluter pays" revenues for related spending
measures to cover energy, transport and, as announced in November's
Pre-Budget Statement, cigarette taxes. In doing so, Mr Brown threw
150 years of unyielding Treasury opposition to hypothecation out
of the window. Third, these profound changes to the tax system
went unnoticed by MPs of all Parties, and were similarly ignored
by the media's Budget pundits.
Budget 2000 is unlikely to be so radical, although
Friends of the Earth (FOE) does expect to see some significant
environmental tax/spending measures included. This will be a mistake,
as extensive polluter pays taxation and respending is essential
for sound economic and environmental policy reasons (see below).
But, again, there seem to be three clear reasons why Budget 2000
will not be as green as Budget 1999.
First, the orchestrated backlash against the
Climate Change levy and Road Fuel Duty escalator by a few energy-hungry
companies and the road haulage lobby has made the Government more
cautious. Second, the General Election looms, and Budgets at this
stage of the Parliamentary cycle tend to be traditional give-aways
to key voter groups. But, third, and most relevant to this FOE's
Sixth Blueprint for a Green Budget, the Treasury has concentrated
too much on pushing environmental taxes as revenue raisers, and
a penalty-driven spur for industry and householders to cut pollution
or conserve resources. As a result, it has fewer allies than should
be the case in industry or across Whitehall/Westminster. The Chancellor
has not done nearly enough to develop green tax incentives and
investments which reward environmentally virtuous companies and
families, or persuade others to change their behaviour. There
have been too many sticks (albeit necessary ones), and not enough
carrots.
Budget 2000 must address this weakness head-on.
Otherwise, critical environmental problems will continue to get
worse. And, vital opportunities to modernise the economy, improve
industrial competitiveness and create large numbers of jobs through
public and private sector investment in clean production technologies,
and environmentally sound infrastructure, services and products,
will be lost.
FOE's Sixth Blueprint for a Green Budget recommends
a package of affordable fiscal incentives and investments to resolve
these problems. Polluter pays taxes are essential, but are often
insufficient on their own to overcome the barriers which prevent
businesses and households from going green. It is difficult for
people to drive less, recycle more or save energy, if the public
transport infrastructure, waste minimisation services or energy
conservation products needed are either unavailable or too expensive
to buy.
Our recommendations below include proposals
to increase public and private sector investments, remove perverse
subsidies and/or tax penalties, and provide new incentives to
industry and individuals. These can and should be paid for with
the revenues from complementary polluter pays taxes.
For example, we continue to argue strongly for
increased spending on public transport, waste minimisation, organic
and other sustainable farming methods, and renewable energy and
energy conservation programmes. We think it a nonsense that individuals
are penalised for buying energy-saving goods and materials, with
these items taxed as luxury products at the ridiculously high
VAT 17.5 per cent, when the Government is spending lots of money
on advertising which urges "everyone to do their bit"
in saving energy to combat climate change. Similarly, if the Government
wants to modernise the economy, there are few better ways to do
so then by extending the tax incentives for industry to invest
in technologies, processes and products which cut pollution and
use environmental resources much more efficiently than at present.
The Chancellor has stated clearly, in Budget
speeches since 1997, that the Government considers the quality
of investment to be as important as the quantity made available.
And, in his Foreword to the Government's Sustainable Development
Strategy, the Prime Minister recognises that unalloyed economic
growth can be detrimental to the quality of life. The Strategy
calls for high quality economic growth and investment, which brings
high and stable levels of employment, makes prudent use of natural
resources, protects the environment effectively and brings social
progress by recognising the needs of all people.
The measures detailed in this Sixth Blueprint
for a Green Budget meet these objectives, and demonstrate how
Gordon Brown can realise the "win-win-win" opportunities
of sustainable development by fulfilling economic, environmental
and social policy goals together. In his Pre-Budget Statement,
the Chancellor appeared to have second thoughts about many of
the key measures in his Budget 1999, including proposals for new
aggregates, pesticides, energy use and transport taxes. He should
have more confidence, and progress these vital measures in this
next Budget. On 21 March, we want to hear him emphasise that the
Government's environmental tax reforms are here to stay, because
they make sense: for the environment, for the economy and for
people.
FOE'S RECOMMENDATIONS
FOR BUDGET 2000
1. REMOVE TAX
BARRIERS TO
QUALITY INVESTMENT
1.1 Extend the restricted cut (from 17.5
per cent to 5 per cent) in VAT on energy saving materials to cover
investments made by all households nationwide so that investing
in energy saving is taxed at the same rate as using energy.
1.2 Announce a series of reforms to VAT
rates on housing development including:
1.2.1 a cut in VAT on renovation and refurbishment
of empty homes to 5 per cent to reduce the disincentive for housing
developmers to bring empty dwellings back into use;
1.2.2 introducing VAT at the full rate on
new build housing, with a discounted rate of 5 per cent where
such developments are in designated regeneration areas to provide
an incentive for house builders to utilise brownfield sites;
1.2.3 committing to seek a zero VAT ruling
from the European Union for social housing developments in order
to increase the supply of good quality, affordable housing for
those who need it most.
2. INTRODUCE
TAX INCENTIVES
FOR QUALITY
INVESTMENT
2.1 Install an enhanced capital allowance
scheme for mainstream industry to invest in innovative environmental
technologies that will increase the environmental productivity
of firms, reduce pollution and provide a boost for the environmental
industries sector in the UK.
2.2 Confirm the reinvestment of £100
million of the Climate Change Levy revenues to finance an enhanced
capital allowance scheme for businesses and energy service companies
investing in energy efficiency.
2.3 Announce a tax free credit scheme to
cover interest and dividend income from green investment funds,
in order to encourage private investment in sustainable development
activities such as organic farming and renewable energy.
2.4 Announce consultation on a further financial
incentives for investment in urban regeneration areas proposed
by the Urban Task Force.
2.5 Provide further incentives for investment
in more energy efficient vehicles by:
2.5.1 continuing to reduce the tax break
for petrol provided free by employers;
2.5.2 announce the promised system for taxing
company car users according to carbon dioxide emissions;
2.5.3 implement, as planned, a system of
variable road tax (Vehicle Excise Duty) based on carbon dioxide
emissions for new cars and engine size for older cars without
CO2 emissions data;
2.5.4 introduce a two pence per litre differential
for cleaner low sulphur petrol to encourage investment by industry
and its use by car drivers in order to reduce air pollution, particularly
in urban areas.
3. CONTINUED
ENVIRONMENTAL MODERNISATION
OF THE
TAX SYSTEM
IN ORDER
TO ENCOURAGE
QUALITY INVESTMENT
3.1 Install the Climate Change Levy with
provisions to:
3.1.1 exempt electricity generated from renewable
sources and combined heat and power plants;
3.1.2 tighten the criteria for which sectors
can negotiate an 80 per cent cut in the levy rate in order to
ensure all energy intensive sites are included and to exclude
the large number of sites that are not energy intensive;
3.1.3 encourage energy intensive sectors
to invest in innovative solutions to cutting CO2 emissions by
including an "innovation factor" in the negotiated agreements.
3.2 Install an Aggregates Tax to increase
environmental protection by reducing the demand for quarrying
and increase the prudent use of quarried materials through reuse,
recycling and building design.
3.3 Announce consultation on a proposal
for a Pesticide Tax package that reinvests the revenues back to
farming through measures to greatly reduce agricultural chemical
use and/or convert to sustainable farming systems, such as organic
methods.
3.4 Increase Road Fuel Duty by 5 per cent
above the rate of inflation, and reinvest all the additional revenues
in public transport and road traffic reduction through a Sustainable
Transport Infrastructure Fund.
3.5 Increase the Landfill Tax escalator
from £1 per year to £2 per year to increase its effectiveness
and remove the perverse incentive to incinerate rather than recycle
by bringing waste disposal by incineration within the tax.
3.6 Announce consultation on the previously
proposed Fertiliser Tax.
4. REINVESTING
THE REVENUES
OF GREEN
TAXATION
4.1 Announce that the hypothecation of revenues
from Road Fuel Duties will go exclusively to a Sustainable Transport
Investment Fund so that under-investment in rail, bus and other
networks, and measures to achieve traffic reduction, are addressed
(details below).
4.2 Make clear that the revenues from any
Pesticide Tax will be recycled back to farmers through programmes
to convert from chemically-intensive farming to low input and
organic methods.
4.3 Announce that the UK will utilise the
full 20 per cent Modulation Option for Common Agriculture Policy
subsidies by 2005, in order to shift from production target subsidies
to spending that enhances the environment and strengthens local
rural economies.
4.4 Establish a nation-wide Home Energy
Conservation programme targeting eight million fuel-poor households
through a comprehensive 15 year programme to insulate 500,000
cold homes each year in order to eradicate fuel-poverty, improve
public health and living standards and reduce polluting emissions.
5. A STRATEGY
FOR QUALITY
GROWTH
5.1 Publish proposals for significantly
improving the assessment of the individual and collective environment
impact of economic, fiscal and monetary policies announced at
the Budget.
5.2 Announce the formation of a high level
and high profile Task Force to examine how the Government's measurement
of economic growth can be modernised to reflect environmental
and social "quality" factors as well as "quantity"
considerations.
DETAILS OF KEY PROPOSALS
1. REMOVE TAX
BARRIERS TO
QUALITY INVESTMENT
1.1 Extend the restricted cut in VAT on
energy saving materials to cover investments made by all households
nationwide so that they are no longer taxed at a higher rate for
investing in energy saving than for using energy.
The vast majority of householders who wish to
invest in energy efficiency, including many of the fuel poor,
pay over three times as much VAT on products and services to do
so as they do on using energy. If ever there was an example of
the stupidities ingrained within the current tax system this is
it. Following extensive criticism by FOE and the Association for
the Conservation of Energy (ACE), the Government has made a limited
and so far feeble attempt to reform this perverse state of affairs
by reducing the rate payable on energy saving materials to 5 per
cent for certain Government backed schemes covering just 40,000
homes.
Customs and Excise argue that European Union
taxation law prevents the Government from going further. FOE and
ACE has taken legal advice which points quite clearly to a provision
within European VAT law which allows for such VAT reductions to
be made on measures fitted by contractors on social policy and
job creation grounds. France, Italy and even the Isle of Man have
taken advantage of this provision, and in all of these countries
consumers now pay a lower rate of VAT on energy saving materials
than they did a year ago. This blows apart the Customs and Excise
argument that the current reduction cannot be expanded.
FOE further believes that the lower 5 per cent
VAT rate can be extended to all energy saving materials including
DIY products—and indeed that a zero rate should be considered.
We would argue that reforming VAT rates in this way amounts to
a cheap home warmth for all programme which is a social and anti-poverty
policy, and which brings clear environmental and employment benefits.
The Government should extend the lower rate, and take up the issue
of a zero rate vigourously in Europe.
1.2 Announce a series of reforms to VAT
rates on housing development including:
1.2.1 a cut in VAT on renovation and refurbishment
of empty homes to 5 per cent to reduce the disincentive for housing
developers to bring empty dwellings back into use;
1.2.2 introducing VAT at the full rate on
new build housing, with a reduced rate of 5 per cent where such
developments are in designated regeneration areas to provide an
incentive for house builders to utilise brownfield sites;
1.2.3 committing to seek a zero VAT ruling
from the European Union for social housing developments in order
to increase the supply of good quality, affordable housing for
those who need it most;
Dealing with the present demand for housing
provides a significant challenge to the Government's sustainable
development strategy. As well as meeting housing needs, the Government
must ensure that investment in housing makes prudent use of natural
resources, protects the environment and delivers social progress
for all. There is serious and widespread concern that its policies
are failing to achieve these objectives.
Land is a precious resource in the UK that needs
to be used wisely. Housing investment is putting considerable
pressure on our countryside and greenbelts as developers continue
to consume greenfield sites for new-build housing. The Government
has acknowledged the need to redirect housing investment with
its target of 60 per cent of new homes to be built on brownfield
sites. Prudent use of the resources used to build homes also demands
that far more is done to encourage the renovation of empty homes:
in England alone there are some 750,000 empty homes.
The current pattern of housing investment also
threatens the environment through the destruction of wildlife
habitats, increased road-building and traffic in some cases the
unsustainable use of water. Shifting a greater proportion of housing
investment toward renovation and new-build on brownfield sites
would reduce these impacts.
Urban decline in the UK has seen exodus from
inner cities, leaving widespread social exclusion with problems
of crime, unhealthy environments and poor housing. As the Deputy
Prime Minister states: this is "bad for our people, bad for
quality of life, bad for our economy and bad for society".
FOE agrees, and we call on the Chancellor to tackle this issue
in the Budget.
The tax system provides no significant incentives
for housing investment to be directed toward renovation and brownfield
sites. In the case of renovation and refurbishment of empty homes
there is a perverse disincentive. Existing VAT policy for housing
absurdly provides an incentive for volume new-build housing through
exemption, and penalises developers wishing to renovate or refurbish
empty homes by charging the full 17.5 per cent rate.
Removing this anomaly would bring environmental,
social and economic benefits. The demand for land and materials
would be reduced. Existing resources invested in existing homes
would be used more efficiently. Pressure on greenfield sites would
be reduced, along with the potential for increased traffic, road-building
and unsustainable water use usually associated with out-of-town
developments. Channelling investment into urban regeneration in
this way would also aid the development of those communities and
their local economies. In previous years, FOE has called upon
the Treasury to harmonise VAT rates on new-build and renovation
at 5 per cent. This proposal has support amongst a wide range
of organisations including many in the housing industry. We believe
that this would bring significant environmental, social and economic
benefits by increasing the amount of housing investment directed
at renovation and refurbishment.
However, harmonising VAT rates in this way would
not provide an incentive for new-build housing investment to be
directed at brownfield sites. In order to install such an incentive
the Chancellor should charge the full rate of 17.5 per cent VAT
on new-build housing. Adding VAT to the first sale of new-build
homes would generate in the order of £1.5 billion per annum.
In areas of high land values the change could be absorbed by the
market, and would become a predictable cost of any intended development
scheme. This measure would also tend to dampen extreme fluctuations
in house prices, by reducing the relative supply of new build
housing when market prices are low and increasing it when they
are high. Most other countries in Europe charge VAT on new build
housing.
Areas of low land value where housing development
needs to be encouraged, such as in urban regeneration areas and
other brownfield sites, will require substantially lower rates
or exemptions. The Chancellor should announce such exemptions
to provide clear incentives to direct new-build housing investment
away from greenfield sites.
The Chancellor should reinvest a proportion
of the revenues by cutting VAT to 5 per cent for investment in
the renovation and refurbishment of empty homes, and setting a
zero VAT rate for investments in social housing as the primary
source of good quality, affordable housing.
The wider package of financial incentives for
investment in urban regeneration proposed by the Urban Task Force
should be the subject of a public consultation, commencing soon
after the Budget.
2. INTRODUCE
TAX INCENTIVES
FOR QUALITY
INVESTMENT
2.1 Install an enhanced capital allowance
scheme for mainstream industry to invest in innovative environmental
technologies that will increase the environmental productivity
of firms, reduce environmental pollution and provide a boost for
the environmental industries sector in the UK.
There were many tax incentives for business
to innovate and invest in new technologies in the Budget `99.
Environmental technologies will benefit from these on the same
basis as any other type. But the Government's sustainable development
strategy demands more than just investment in traditional patterns.
It wants a better quality of investment that will, in particular,
use resources prudently and protect the environment: in other
words, investment of a high environmental productivity, which
is able to get more benefit in terms of quality of life from using
fewer environmental resources.
At Budget 2000 the Chancellor should develop
the next element in his strategy for investment and bring in measures
that increase the quality as well as the quantity of investment.
One measure that exemplifies this approach is to install a scheme
of enhanced capital allowances for innovative environmental technologies.
If the UK is to develop a dynamic and environmentally
sustainable economy there has to be substantial investment in
innovative environmental technologies. Encouraing UK industry
to both develop and adopt such technologies will lead to: increased
industrial competitiveness as inefficiency in the use of raw materials
and energy is reduced; improved environmental performance through
a reduction in pollution and waste; and, positive encouragement
for the environmental technology industry, one of the sunrise
sectors of the global economy. This case has been argued convincingly
by the Environmental Industries Commission (EIC).
But recent research has shown that while firms
accept the commercial benefits of investing in environmental technologies,
many are hesitant to actually do so. To overcome this barrier
the Government needs to provide a financial incentive. FOE agrees
with the EIC and calls for an acceleration in the depreciation
deductible from tax on investments in innovative environmental
technologies, so that British firms can set 100 per cent of the
capital investment in such technologies against their tax bill
in one year.
Doing so greatly increases the incentive for
mainstream businesses—in sectors as diverse as computing,
food and drink manufacture, chemicals and water services—to
invest in technologies that save money on raw materials and energy,
and reduce adverse environmental impacts. A recent survey for
the EIC showed that 94 per cent of business leaders support investment
allowances for clean technology. At the same time, such a measure
would stimulate the home market for British firms selling environmental
technologies and services, and thus provide a vital boost for
the UK to capture an increased share of the global environmental
technology market, which is set to increase from £175 billion
to £400 billion by 2010.
A similar scheme, run since 1991 in the Netherlands,
allows firms that install innovative environmental technologies
to depreciate their investment in one year, instead of over 10
years. Qualifying technologies are placed on a list which is periodically
updated. Listed technologies are emerging ones with less than
30 per cent market penetration, but which are judged to have a
higher environmental performance than the alternatives. In 1995,
there were around 450 technologies on the list. In the first three
years, over 10,000 firms took advantage of the scheme, which has
been reviewed and considered such a success that it will be continued
indefinitely. The Government has moved in this direction with
the announcement in the PBR that it is to establish an enhanced
capital allowance scheme within the Climate Change Levy package
to encourage business investment in energy efficiency technologies.
It should now extend this option to these other areas.
The details of the criteria for selecting which
technologies should attract such favourable tax treatment will
need public consultation. FOE urges the Chancellor to follow the
process used for introducing the Landfill Tax by making a commitment
to introduce a scheme at the next Budget and announcing a consultation
process to determine the details.
2.2 Announce a scheme to make interest and
dividend income from green investment funds tax free in order
to encourage greater private investment in activities that will
help deliver the Government's aim of quality growth, such as organic
farming and renewable energy.
Most decision-makers in the investment community
act on financial criteria to the exclusion of other factors in
deciding their investment strategies. If and when environmental
threats or poverty relief, for example, are considered, it is
usually in the context of liabilities that may arise from damage
to property or health. This means that short-term economic and
financial interests generally override longer-term environmental
priorities.
FOE calls on the Chancellor to provide a tax
break for interest and dividend income earned from green investment
funds that invest in projects meeting strict environmental and
social criteria. We believe that areas of investment that should
be included are those where mainstream funding is more difficult
to obtain but which have a vital role to play in delivering sustainable
development, such as: renewable energy, organic agriculture, public
transport, energy saving, water saving, sustainable forestry,
countryside management and green housing projects and programmes.
This measure would increase the flow of investment
into these vital sectors and promote quality investment and growth.
It would also make citizens who are private investors more aware
of and connected to green investment projects. Businesses in these
sectors would be further encouraged to present well-prepared business
plans in order to fit the criteria which will be more likely to
attract investment from other sources.
The Netherlands has run such a scheme for over
five years. The success of the scheme in encouraging investment
into these important areas has meant that the Dutch Government
has increased the amount available under the scheme fourfold.
At Budget 2000 the Chancellor should announce
his intention to introduce a scheme in April 2001, following a
consultation process.
3. CONTINUED
ENVIRONMENTAL MODERNISATION
OF THE
TAX SYSTEM
IN ORDER
TO ENCOURAGE
QUALITY INVESTMENT
3.1 Install the Climate Change Levy with
provisions to:
3.1.1 exempt electricity generated from renewable
sources and combined heat power plants;
3.1.2 tighten the criteria for which sectors
can negotiate an 80 per cent cut in the rate to include all energy
intensive sites and exclude sites that are not energy intensive;
3.1.3 encourage energy intensive sectors
to invest in innovative solutions to cutting CO2 emissions by
including an "innovation factor" in the negotiated agreements.
New Labour's only new environmental tax shift
measure to date is the Climate Change Levy that is due to be included
in the Finance Bill this year. It is essential that the Chancellor
does not backtrack on this timetable. The Levy will make a significant
contribution to securing the Government's welcome manifesto commitment
of a 20 per cent cut in UK carbon dioxide emissions by 2010.
FOE has worked hard to help achieve three important
changes to the design of the Levy announced in the Pre-Budget
Report (PBR). First, electricity generated from renewable sources
of energy will be exempt from the Levy. This is a crucial improvement,
as the primary purpose of the Levy is to reduce carbon dioxide
emissions. Second, electricity generated by "good quality"
combined heat and power (CHP) plant will be exempt. Investment
in CHP will be a cost-effective and readily available option for
many firms in response to the incentive to increase energy efficiency
installed by the Levy. This exemption will tip the balance for
a large number of schemes, and boost the market for a technology
that is central to achieving Britain's obligations under the Kyoto
Protocol.
Third, a greater proportion of the revenues
from the Levy will now be reinvested in schemes to help firms
invest in energy efficiency and renewable energy. A further £100
million per year will be used to fund a targeted capital allowance
scheme, as called for in previous FOE Budget submissions to Treasury.
The list of technologies proposed is too narrow, and the Chancellor
should release details of a process for both adding and removing
technologies from the list over time as the Levy itself is likely
to stimulate technical innovation in these areas. Despite the
likely increased administrative costs, we also urge the Chancellor
to include energy service (demand management) companies within
the scheme, as they are likely to be key deliverers of energy-efficiency
targets.
Negotiated Agreements
We are extremely concerned that the current
proposals to allow certain business sectors up to 80 per cent
discounts from the Levy, if they enter into legally-binding agreements
to implement energy saving measures, are badly designed. They
are too widespread, too secret, will be difficult to enforce and
crucially, include no incentive for innovation or continuous improvement.
Targeting the right firms
Ensuring the environmental and fiscal efficiency
of the Levy demands that negotiated reductions in the Levy should
be very tightly targeted at truly energy intensive processes.
This is currently not happening.
The Government has chosen to use the EU's Integrated
Pollution Prevention and Control (IPPC) Directive as the basis
for determining eligibility for a rate-cut. However, there is
a wide range of energy intensity amongst the thousands of installations
that will be covered by IPPC. To grant an 80 per cent discount
to all is inefficient both from an environmental and fiscal viewpoint.
In manufacturing industry, energy costs on average
make up only 1.6 per cent of total production costs, compared
to average business expenditure on energy of 1 per cent of costs.
Intensive energy users within manufacturing, for whom energy represents
more than 10 per cent of costs, account for just 2.2 per cent
of manufacturing businesses.
Modelling work conducted for Friends of the
Earth of an industrial energy tax indicates that some sectors
with installations that come under IPPC, such as pharmaceuticals
and general manufacturing, are already likely to be net gainers
from the levy/NICs package. Moreover, these less energy-intensive
installations stand to benefit from the new options announced
in the Pre-Budget Report of switching electricity supply to renewable
energy sources and investing in combined heat and power. The Digest
of UK Energy Statistics identified many of the less energy intensive
sectors currently negotiating agreements with the Government as
having the greatest opportunity to make cost-effective savings
by investing in combined heat and power.
The Government does not have to abandon the
legal certainty of using IPPC as the initial criteria for eligibility
for a negotiated discount, while making these suggested reforms.
The Pollution Prevention and Control Act 1999 includes enabling
powers to force companies to disclose detailed information regarding
their energy consumption. These powers were brought into force
by Government amendments. Ensuring that the Levy discounts are
accurately targeted at those installations most needing and capable
of justly benefiting from the reduction would, in our view, be
an appropriate use of these powers.
Preventing free-riders
It is vital that all firms party to negotiated
agreements act to cut climate change emissions, and improve energy
efficiency. The design of the agreements has to ensure that free-riders
are identified and dealt with in a timely manner. Although each
firm in each sector may not sign an individual agreement with
the Government—as agreements have been negotiated with trade
associations—they must be legally bound by those agreements,
and implement them.
In order to identify free-rider companies, information
on action taken by firms needs to be available on a site by site
basis. This would provide a clear and strong incentive for firms
to comply with the agreement, and would allow the Government to
move quickly to reintroduce the full-rate of the levy where a
firm fails to meet the conditions of the agreement.
In order to reinforce this process, and help
businesses to make cost-effective investments, the agreements
should require that each company pays for an independent site-by-site
audit of its annual emissions, which is submitted to the Government.
Each company should also be required to fund an independent energy
audit of its processes and premises to establish opportunities
for energy saving and the uptake of renewable energy sources.
A progress report on exploiting these opportunities should be
required each year, and a new audit conducted every three years.
Ensure agreements are dynamic
It is vital that the signed agreements provide
a dynamic incentive for firms, and does not lock them into investing
in existing technologies with short payback times. One of the
key attributes of an economic instrument like the Climate Change
Levy is that it shoud provide a dynamic incentive for firms to
reduce emissions through stimulating innovation. It would be ludicrous
if the agreements made with the most energy-hungry sectors failed
to do this. FOE remains concerned that the current negotiations
are locked into business-as-usual options—rather providing
an incentive to innovate, go beyond compliance and change the
pattern of investment.
The Government could learn from BP Amoco on
this issue. In its internal emissions trading scheme, BP Amoco
set a target which took current cost effective opportunities to
reduce emissions and then added a further factor for future innovation,
technologies and better practice ideas. If negotiated agreements
are to genuinely encourage firms to innovate then merely adding
up cost-effective measures, as currently proposed, will not be
enough. The inclusion of an "innovation factor" in the
targets in the agreements would address this oversight.
An alternative approach would be to use a system
of international benchmarking, as adopted in the Netherlands.
The recent Dutch Energy Efficiency Benchmarking agreement requires
processes to be benchmarked against similar processes around the
world in terms of energy efficiency, with the requirement that
firms achieve a top five rating within a certain period of time.
The aim is to move these firms toward making more far-reaching
energy efficiency investments. Such investments have a payback
period of eight to 10 years, rather than the more normal two to
four year payback period, which companies are already putting
in place as part of the normal business cycle.
Making the agreements compatible with emissions
trading
The Government has already announced that it
wants to allow some form of trading within the agreements. This
could create significant barriers to the development of wider
emissions trading schemes. There is general agreement that, once
the practical difficulties surrounding emissions trading are addressed,
these schemes will play an important role in reducing CO2 emissions.
The Government needs to ensure that the design and extent of any
trading provisions included in the agreements do not create barriers
to establishing such trading systems. There are three particular
problems.
First, all agreements are likely to be based
upon improving energy efficiency per unit output. Emissions trading
schemes will rely upon an overall ceiling or cap for emissions,
regardless of output. However, the trading scheme within these
agreements would be "cap-less", and as such directly
incompatible with any domestic emission trading scheme and lacking
credibility on the international stage. We understand that the
Government intends to offer firms the chance to convert from energy
efficiency based agreements to carbon-based agreements, in order
to allow firms within the agreements to trade with firms in trading
systems outside the agreements. The effectiveness of such a system
will depend on both the targets set and the details of the conversion
process.
Second, the negotiated agreements are being
agreed on the basis of what is cost-effective for firms in that
sector alone. They are likely to vary in how accurately they reflect
this cost, given the process of negotiation involved and the unsatisfactory
reliance by the Government on the firms themselves revealing the
necessary full and accurate information in order for targets to
be set. Emission trading systems operate on the basis that trading
occurs between sectors according to a common metric. There is
a real concern that, if the trading market within agreements is
more attractive to the firms involved, they will not engage in
wider emissions trading systems when they are established.
Third, emissions trading systems have to be
transparent to operate properly.The negotiated agreements have
not been transparent to date. Firms wishing to prevent outside
scrutiny would tend to stay inside a less-transparent agreement.
3.2 Install an Aggregates Tax to increase
environmental protection by reducing the demand for quarrying
and increase the prudent use of quarried materials through reuse,
recycling and building design.
There are two ways of looking at the Chancellor's
actions over developing a quarrying tax. He could be seen as dithering
over a tax reform for which the case has been made, or he could
be seen as astute in giving the industry enough rope to ensure
he can progress without being accused of having ignored its proposals.
Either way at Budget 2000, the Chancellor should
conclude the process he started in 1997 and announce the introduction
of a Aggregates Tax, for which Customs and Excise have already
produced a legal draft.
In the Pre-Budget Statement in November 1998,
the Chancellor concluded that there were "significant environmental
costs" of quarrying, which were not already covered by regulation.
As a result, he pledged to consider the case for an aggregates
tax and a set of alternative proposals put forward by the quarrying
industry. In Budget 1999, he accepted the case for an aggregates
tax and asked Customs and Excise to draw up draft legislation
ready for introduction at Budget 2000. At the same time, the Treasury
concluded that the quarrying industry's voluntary package fell
"well short" of what was required, but they would be
given one last chance to come up with a credible alternative.
In the PBR last November, the Government again concluded that
even a revised industry package "continues to fall short
of what is necessary to match the overall environmental and economic
effects of a tax on primary aggregates" (6.95). Since then
the single industry body, the Quarry Products Association (QPA),
which had been presenting the proposals, has split and a rival
body formed in British Aggregates Association.
Attempts by the industry to rise to the Chancellor's
challenge have failed, as the progressive firms have tried in
vain to move the rump of laggard quarrying firms onto best practice
initiatives. Not only has the quarrying industry failed to offer
any significant new measures which convincingly might make an
aggregates tax redundant, but it has also failed to deal with
fundamental weaknesses in its apprach. The proposals contain no
clear quantitiative targets and there is no independent and transparent
verification scheme, either overall or for individual firms. The
motivations for firms to comply with the commitments are either
too weak or will not effect enough firms—resulting in a
significant free-rider problem.
But the hammer blow for the Government's flirtation
with a loose voluntary approach has been the split in the industry's
ranks. At a time when the QPA needed to strengthen its case that
it was the sole representative organisation for the industry,
capable of delivering compliance with agreement across the sector,
the formation of a breakaway body shows that the voluntary approach
is neither deliverable nor credible.FOE has continually warned
the Government that attempting to use a representative organisaton
as an enforcement body would prove unworkable and the arrival
of the British Aggregates Association confirms our fears.
Unless the Chancellor decides to do a complete
U-turn, he must now move to install an aggregates tax, as FOE
has long argued for. This will provide an incentive for innovation
and investment to increase the efficiency with which these important
non-renewable resources are used through greater recycling, reuse
and improved construction design; and, as a consequence, over
time reduce the land take of quarrying. By moving the industry
away from its current "pile it high and sell it cheap"
mentality, the aggregates supply sector will begin to meet the
Government's aim of encouraging economic producitivity that makes
increasingly prudent use of natural resources .
Budget 2000 should include the installation
of an aggregates tax. But the Chancellor needs to make clear that
such a tax will act in concert with the existing regulatory framework.
He should also announce that a proportion of the revenues will
be reinvested into a sustainability fund for the sector that deliver
the main positive proposal put forward by the industry. However,
FOE continues to believe that the majority of the revenues can
be used by the Government to make further progress in shifting
the burden of taxation.
3.3 Announce consultation on a proposal
for a pesticide tax package that reinvests the revenues back to
farming through measures to greatly reduce agricultural chemical
use and convert to sustainable farming, such as organic methods.
The Pesticides Tax has become a political football
since the last Budget, with the Treasury bowing to pressure from
No 10 and deciding to drop, at least temporarily, this proposed
"polluter pays" measure.
After the completion of research on the design
of a tax or charge scheme for pesticides, which was widely well-received,
the Chancellor has concluded that "a tax or charge could
be a useful tool, in conjunction with other measures, in addressing
the environmental impacts of pesticides" (6.108). The Environmental
Audit Committee of the House of Commons in its report on the PBR
also found "in favour of introducing a pesticides tax as
part of a package of measures" (Summary p 1).
Yet in his recent address to the National Farmers
Union, the Prime Minister announced that the pesticide tax proposals
were being dropped. The Treasury similarly announced in January
that the proposals for a voluntary scheme put forward by the pesticide
industry would now take-over from proposals for a pesticide tax
as the method for addressing the failure of existing regulations
to control pesticide pollution. But Treasury also confirmed that
a pesticides tax is still on its long-term agenda.
These events and statements do not send clear
signals about the Government's intention to tackle what Ministers
accept is "increasing evidence that there are significant
environmental impacts associated with pesticide use" (6.106)
under current regulations. The PBR made clear that current regulations
are not enough and further action is required (6.106). Most worryingly,
they seem to indicate that, rather than giving an opportunity
to the pesticide industry to come up with an alternative to a
pesticide tax at the same time as the Government made sure the
design of a tax package was right, the tax is to be shelved while
the industry outline proposals are discussed with no apparent
deadline or timetable.
The Government does not seem to have learnt
the lessons of the aggregates tax. There the twin-track approach
of developing tax proposals and encouraging alternative solutions
highlighted the lack of credibility of a loose voluntary approach.
FOE believes that pesticide pollution is a pressing
issue because of the impact upon wildlife, ecosystems and human
health, and should not be marginalised in this way. We share the
concern of the Environmental Audit Committee, which was "astonished
and disappointed" that the pesticide tax appears to have
been dropped "without even making the industry's alternative
proposals public for consultation and discussion" (summary
p 1). In all likelihood the proposals from the British Agrochemicals
Association will turn out to be little different from existing
approaches, which are failing to curb unnecessary contamination.
What is needed is a new pesticide tax, of the
type long advocated by FOE. A tax on pesticides would, for the
first time in the UK, create a powerful incentive to reduce unnecessary
pesticide use. Experience from other countries, including Sweden,
Austria and Denmark, has shown that a package of measures, including
a pesticide tax and other incentives such as information, advice
and grant-aid schemes, designed to encourage farmers to adopt
less chemically intensive or organic farming systems, are a highly
effective method of reducing pesticide use.
The package can be paid for by recycling revenues
from the tax. In Sweden and Denmark, respective reductions in
total pesticide use of 65 per cent over nine years, and 30 per
cent over seven years, have been achieved. In 1986, Sweden set
a pesticide use reduction target of 75 per cent by 1997, and introduced
a pesticide charge in conjunction with a range of measures aimed
at reducing pesticide use. The Charge has raised between £1.8
million and £3.0 million per year, compared to the cost of
the package of reduction measures of £1.6 million in 1993-94.
The impact of the tax upon farming and rural
economies is a vital consideraton in designing the tax, and deciding
how to use the revenues. Trends in agricultural policy in Europe
are to cut subsidies. This process of reform should mean that
cutting pesticide use will increasingly become both easier and
more attractive for farmers. The rapidly expanding market for
organic produce offers farmers the opportunity to meet consumers'
preferences without paying such a tax. A proportion of the revenues
from a pesticide tax should be used to directly support existing
organic operations, and conversion from chemical intensive systems
to organic. Recently the Government set aside £16 million
to support farmers converting to organic systems over a two year
period, but the demand was so high that within six months the
total amount was accounted for. The research on a pesticide tax
commissioned by the Government suggested that revenues would be
in the range £84-£131 million per year, which could
comfortably support a scheme meeting such high demand from farmers.
In the short-term, the substantial majority
of the revenues from the tax need to be recycled back to farming.
Using the revenues from a pesticide tax to fund policies that
help encourage investment in a dynamic, mixed and environmentally,
socially and economically sustainable farming sector that delivers
real food is vital. In the longer-term revenues may be available
to further cut NICs on farm labour.
3.4 Increase Road Fuel Duty by 5 per cent
above the rate of inflation and reinvest all the additional revenues
in public transport and road traffic reduction through a Sustainable
Transport Infrastructure Fund.
Road transport is responsible for 20 per cent
of the UK emissions of carbon dioxide. Health-threatening vehicle
pollution prematurely kills between 12-24,000 people annually,
and is the prime cause of poor air quality. Congestion reduces
the efficiency of the economy, and the cost to the health service
drains public finances. The present transport system is also deeply
inequitable, and is unable to meet the needs of the one third
of UK households who have no regular access to a car.
The road fuel duty escalator—the pre-announced
annual 6 per cent increase above the rate of inflation—has
been the Government's most effective weapon in the battle to reduce
CO2 from road transport. New incentives to buy more fuel efficient
cars through changes to Vehicle Excise Duty and Company Car Allowances,
and commitments by car manufacturers to produce more fuel efficient
cars, will also play a role. But as the Chancellor noted in his
1998 Pre-Budget Report, "growth in road traffice offsets
the reduction in emissions from individual vehicles". According
to the Commission for Integrated Transport (CIT) traffic will
grow by 35 per cent between 1996 and 2010 without the congestion
charges and parking levies included in the Transport Bill and
27 per cent with these measures in place.
Despite this the Chancellor announced in the
Pre-Budget Report that the escalator is to be replaced by Budget
by Budget decision-making. If the decision is not to increase
road fuel duty between now and 2002 when the escalator was planned
to finish, then the failure to reduce CO2 emissions will be significant.
Treasury estimates that it will lead to a loss of 1-2.5mtC savings,
and DETR a loss of 1.3-3.3mtC savings. This is unacceptable.
Last year FOE called upon the Chancellor to
reinvest the revenues from the escalator through a Sustainable
Transport Infrastructure Fund. This would allow the Government
to make the investments in public transport that are so important
to achieving reduced traffic levels. He responded by announcing
that future revenue from increased road fuel duty would be used
to provide extra transport funding. If the Chancellor does not
increase road fuel duty he will reduce the opportunity to make
key investments in provided integrated public transport networks.
Each 1 per cent will raise £230 million.
We call on the Chancellor to use the flexibility
he granted himself to reduce the increase below 6 per cent when
necessary. The recent rise in crude oil prices does represent
a reason to ease back on the rate of increase, but this has to
be balanced against the damage this will do to the Government's
drive to meet both its legal CO2 reduction target and its own
manifesto 20 per cent target. FOE recommends that at Budget 2000
the Chancellor increases road fuel duty by 5 per cent above the
rate of inflation. We also recommended that he makes clear that
the reinvestment of the revenues from this increase, some £1.1
billion, is directed at public transport and traffic reduction
schemes.
3.5 Increase the Landfill Tax escalator
from £1 per year to £2 per year to increase its effectiveness
and remove the perverse incentive to incinerate rather than recycle
by bringing waste disposal by incineration within the tax.
A comprehensive report into the economics of
recycling has just been completed by ECOTEC Research and Consulting
Ltd. The report was commissioned by FOE and UK Waste Ltd, and
the research project was managed by Waste Watch. The research
looked at the economic costs of recycling, as well as the costs
of landfill and incineration. It looked in detail at external
impacts of these waste management systems and used existing environmental
cost valuations of these impacts to model various scenarios. It
also critically examines the use of environmental cost estimates
in decision making. The report generally supports FOE's position
that the Landfill tax should increase in price and that a tax
on incineration should be introduced.
However, while we do recognise that the existing
annual £1 tonne escalator on the standard rate of the Landfill
Tax will make the tax gradually more effective at encouraging
firms to recycle and minimise waste, we also believe that it needs
to increase faster if it is to have any real deterrent effect.
Only firms with significant waste costs have responded to the
disincentives provided by the tax to date. An FOE survey of more
than 70 companies found that only 31 per cent had either stepped
up or started programmes to reuse or minimise waste. Some firms
and sectors have responded by looking for innovative solutions.
In other cases, waste producers have asked for their waste arisings
to be charged by the tonne to allow them to take a more strategic
approach to waste minimisation and recycling.
FOE maintains that the rate of the escalator
should be £2 per year, because evidence from the waste industry
suggests that a level of £15 per tonne (reached under a £2
per annum escalator by 2004-05) is the minimum required to have
a significant impact on the activities of a wide range of waste
producers. An escalator helps business to adjust in a planned
way. The Government target for recycling 30 per cent of household
rubbish by 2010 will not be reached unless appropriate penalties
and rewards are increased.
It is worth noting that Biffa Waste Services,
in their recent excellent report "Sustainable Waste Management?
It depends which way you look at it", stated that the impact
of the landfill tax has been limited to date, and have also called
for substantial rises in the level of the tax.
If the Landfill Tax is to operate effectively,
it must also be extended to waste disposal by incineration. While
incineration remains an untaxed waste disposal route for materials
that can be reused, recycled or composted, it blocks progress
towards meeting targets and reduces the incentive for investing
in, and innovating for, waste minimisation and recycling. We are
aware that there is concern that extending the tax to cover incineration
may involve most of the additional revenue being spent on collection,
because of the currently small number of incinerators in operation.
To overcome this problem, but still send a clear signal of future
intentions, the rate could be initially set at zero, as in the
Netherlands, allowing it to be raised when appropriate.
The use of the revenues from the Landfill Tax
is important. The additional revenues from the increase in the
standard rate of this tax, announced by the Chancellor in his
last Budget, were not used to cut employers' NIC as was the case
when the Landfill Tax was first introduced. This break from green
tax reform must be resisted in the future—if environmental
taxes are to promote integrated economic, environmental and social
objectives, and not just get a bad name in industry as simply
another cynical revenue raising exercise by the Treasury (as happened
when Norman Lamont tried to deflect criticism of his increase
in VAT on fuel use by subsequently claiming it was an environmental
measure).
The announcement in the 1999 Budget of a change
to the tax credit scheme to direct more of that money at recycling
was welcomed; however, this reform has resulted in little change.
Our position remains that funds should flow to recycling from
either the income received by the Treasury or through a reform
of the landfill tax credit scheme. We do not accept that landfill
tax monies should be spent on non-waste related activities.
4. REINVESTING
THE REVENUES
OF GREEN
TAXATION
4.1 Announce that the hypothecation of revenues
from future increases in road fuel duties will be so exclusively
to a Sustainable Transport Investment Fund rather than to general
transport spending including so that appalling under-investment
in rail, bus and traffic reduction is addressed head-on.
In the Pre-Budget Report the Chancellor announced
that, in-line with Friends of the Earth's recommendations, he
would ring-fence revenues from future rises in Road Fuel Duty
for transport spending. To date increases in Road Fuel Duty under
this Government have brought £3.6 billion in extra revenue
to the Exchequer and will continue to bring in around £1.5
billion per year (according to the Treasury's estimates published
in Budget 1997, Budget 1998 and Budget 1999). Every 1 per cent
increase in Road Fuel Duty announced by the Chancellor at this
Budget will be equivalent to an extra 230 million for transport
spending.
But the Chancellor failed to target this reinvestment
of green tax revenues at reversing years of under investment in
public transport and facilities for cyclists and pedestrians.
If rail, bus, cycling and walking are to play their part in a
modern, efficient, safe, convenient and environmentally sound
integrated transport system, the balance of transport infrastructure
spending has to be shifted substantially. What better example
of joined-up Government could there be than using the revenues
from a tax aimed at reducing traffic, by making motorists pay
more of their environmental costs, to invest in providing people
with attractive alternatives to the car? It would also sharpen
up the impact of what is often criticised as too blunt a tax instrument.
At Budget 2000 the Chancellor should announce
that ring-fenced will be targeted at transport spending which
helps reduce road traffic, with non available for further traffic-generating
road building. This will provide added resources for delivering
on the objectives of the Integrated Transport White Paper, and
should be administered by a Sustainable Transport Investment Fund.
Such a fund could provide finance for major public transport investment
schemes, such as the upgrading of the London Underground and investing
in the safety and efficiency of the national rail network and
selected smaller locally based projects.
4.2 Announce that the UK will utilise the
full 20 per cent modulation option for Common Agricultural Policy
subsidies by 2005 to shift from production target subsidies to
subsidy measures that enhance the environment and strengthen local
rural economies.
The agricultural industry is in its worse recession
since 1939. To make matters worse, farmers are held in low esteem
by consumers, who generally regard them as over-subsidised producers
of inferior qualilty food who damage wildlife and landscapes.
To date the nature of the subsidies handed out
through the Common Agricultural Policy (CAP) for over intensive
production has been the main cause of environmental damage in
this sector. But CAP reforms have now given national governments
a degree of real flexibility in how they pay out subsidies. No
longer do all subsidies have to be direct production payments.
Up to 20 per cent can be redirected through measures such as support
for organic farming and the positive management of wildlife sites,
and others listed in the new Rural Development Regulation (RDR).
Currently, the UK Government plans to redirect
only 2.5 per cent of conventional production payments, rising
to 4.5 per cent by 2005. This is grossly inadequate given the
economic, social and environmental benefits that flow from modulating
subsidies away from Soviet style production targets towards payments
that encourage the environmental modernisation of the farm sector
and crops/food that people want to eat.
Modulation allows for a far fairer distribution
of subsidy between farmers. At present just 20 per cent of farmers
receive some 80 per cent of subsidies. Most of these beneficiaries
are large arable farms in the south and east of England. Yet these
farmers are the least in need of support. Modulation of subsidies
through the RDR offers a real opportunity to target payments to
small, low input farms that are delivering environmental and local
economic benefits.
Modulation also allows for an increase in support
for organic farming, in response to the increasing demand for
organic food from consumers and from farmers to convert to this
sustainable farming practice. At present Government support for
organic farming is only 0.2 per cent of agricultural spending,
and fails to meet these demands by a considerable margin. If the
level of support is not raised, the increased demand for organic
produce will continue to be met by imports from EU nations that
have provided adquate support. Already the UK imports 70 per cent
of organic food consumed here.
Modulation enables farmers to reverse the environmental
damage caused by the intensive farming methods encouraged by conventional
production subsidies. Directing subsidies to farmers through schemes
that deliver environmental protection will enhance our countryside
and wildlife, and boost tourism. Schemes like this operating in
the UK have already been shown to increase farm productivity,
and create jobs both on farms and in the local economy.
Finally modulation can strengthen and diversify
local rural economies through funding for schemes that encourage
production and processing of farm products, such as food and sustainable
timber, back to rural areas; develop the potential for farms to
grow energy crops; and, increase support for training and new
enterprises in rural economies. Small farms tend to have a more
positive impact upon local businesses as they are more likely
to buy inputs locally. Organic farming has also been shown to
both increase on-farm employment, and, crucially, to increase
employment in the local economy through increased preparation,
processing and marketing of food products. Generally, organic
farms employ between 10-30 per cent more people than conventional
farms.
Environmental management schemes increase on-farm
employment through the need for environmental maintenance work
and increased demand for materials and services from the local
economy. Small, mixed farms managed in harmony with the environment
also create and maintain landscapes that are more attractive to
tourism than large-scale, intensive monocultures.
In its Election manifesto, New Labour promised
to "reform the Common Agricultural Policy to save money,
support the rural economy and enhance the environment". Modulation
offers them exactly that opportunity and the Government's refusal
to make more of this provision is incomprehensible. The longer
they stall on these reforms, the worse it will be for farmers,
rural communities and the environment.
FOE therefore calls on the Chancellor to announce
a new programme of shifting public investment in farming and rural
economies away from production subsidies and toward measures included
in the RDR. This programme will see the UK utilising the full
20 per cent modulation limit by 2005 in a strategy that will provide
support to small farmers, strengthen and diversify local rural
economies, increase environmental protection and expand organic
production in the face of increasing demand.
In order to ensure a well-designed strategy,
the Chancellor should consult on how to design the rolling programme
of investment measures that will meet this target of 20 per cent
modulation by 2005. The UK already has schemes in operation that
provide evidence of what works and what does not, and the modulation
programmes in other EU member states also can offer insights.
The consultation should be concluded to allow the Chancellor to
release full details of the strategy no later than the PBR in
November 2000.
4.3 Establish a nation-wide home energy
conservation programme targeting eight million fuel-poor households
through a comprehensive 15 year programme to insulate 500,000
cold homes each year in order to eradicate fuel-poverty, improve
public health and living standards and reduce polluting emissions.
Eradicating Fuel Poverty can help deliver both
sustainability and cost-savings across departments. At present
up to eight million households in the UK are suffering from fuel
poverty—they cannot afford to heat their homes properly.
One effect is that between 30,000 and 60,000 more people die during
the winter than summer months in the UK. This is a national scandal
which will continue every year until fuel poverty is tackled.
By maintaining current spending plans, the problem
of fuel poverty is set to cost the Government:
4.3.1 around £1 billion per year on
the National Health Service in treating cold and damp related
illnesses such as respiratory diseases, heart and cerebro-vascular
complaints
4.3.2 £1.4 billion a year on personal
fuel subsidy payments
4.3.3 over £700 million a year on energy
conservation measures through property improvement programmes.
FOE agrees that the immediate needs of the fuel
poor should be met by cold weather payments, but the Government
should be tough on the cause of the problem to avoid endlessly
paying for the effects. It is the energy efficiency of the home
environment that determines whether a low income family can obtain
adequate warmth and comfort. It is here that the Government can
spend to save; it is here that the Government can make environmental
and social progress towards sustainability.
FOE and the Association for Energy Conservation
(ACE) have helped draft the Warm Homes and Energy Conservation
Bill. This requires the Government to draw up and implement a
national home efficiency strategy aimed at ending fuel poverty.
143 MPs voted for the Bill at Second Reading and the Government
and all Opposition parties signified their support. FOE and ACE
are currently pushing to ensure that the Bill becomes law. Detailed
costings prepared by FOE and ACE suggest that such a programme
would be revenue positive. A 15 year programme of work on 500,000
homes a year would cost £1.25 billion a year. These costs
would be recouped by savings in other areas over the life of the
programme. Areas where savings would be made include: the £1
billion per annum burden on the NHS of coping with cold/damp related
diseases; savings in benefit payments and additional tax revenues
from unemployed taking up the 30,000 new long-term jobs that would
be created; and large savings in the maintenance and management
of public sector houses improved under the programme.
In addition to these benefits, this programme
would make significant contributions to Government efforts to
deliver decent public housing, reduced health inequalities, creating
job opportunities, cutting CO2 emissions, and reducing air pollution.
March 2000
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