PRE-BUDGET 2000: FUELLING THE DEBATE
69. The Pre-Budget Report 1999 reconfirmed the key
principles of the Government's Statement of Intent on Environmental
Taxation. It highlighted the requirement that environmental policies
"must be based on sound economic evidence".
Mr Timms confirmed that the Treasury assesses all budget measures
for their environmental impacts using the guidance which has been
set out by the DETR.
He told the Committee that he knew that the Government had made
available the documentation about environmental appraisal of measures
it had introduced.
The DETR's role in relation to the environmental appraisal of
budget measures is to provide advice to the Treasury. The Treasury
then uses this advice to produce the environmental appraisal of
the tax policy in question.
70. English Nature welcomed "the attempts at
environmental appraisal of measures on the Pre-Budget Report"
but believed that a "more detailed analysis should be provided
including the effects of different options".
They would like to see further explanation of the carbon reduction
resulting from changes to VED and felt that the effect of lowering
overall motoring costs was not clear. The Environment Agency welcomed
the fact that there was an environmental strategy that underlied
the Pre-Budget but wished to see the strategy explained more fully.
71. The AA told us that they had found the introduction
of the FDE "a particularly distressing experience" because
there was no evaluation of what its purpose was by either the
Labour or Conservative Governments.
The AA has previously described the Government's position on the
FDE as "green rhetoric"
and felt that it was "basically a revenue-raising measure
dreamt up by the Treasury without any assessment with some environmental
wording in coverage"
thus creating a "green fog".
They also felt that there was no evaluation of the alternatives
and what might be cheaper and more cost-effective for families
to achieve the same goals such as home insulation.
Ultimately, they told the Committee that they thought the Government
had not made a case for the FDE,
it was "unnecessary" and that the environmental goals
could be achieved through a mixture of regulation, technology
and revenue-neutral tax adjustments.
However, the AA did acknowledge that the Government was now more
engaged with them in the kind of debate they wanted to have.
72. In the Committee's report on the Pre-Budget Report
we made it clear that we considered that the failure of the Government
to publish an environmental impact assessment, on the likely effect
of abandoning the fuel duty escalator, revealed how far Government
had to go to place sustainable development at the heart of policy
making. We urged the Government to rectify matters.
The Government response, pointed to the appraisal table in the
as detailing the environmental effects of all measures
whose primary aim was environmental including an appraisal of
73. This appraisal was presented as an indication
of the amount of carbon that would be saved through the operation
of an escalator by 2002 (2-5 million tonnes). The removal of the
FDE was then shown as a reduction in the additional environmental
benefits of real increases in fuel duties revised for the fact
that the escalator would only be in place up to and including
Budget 1999 (ie savings of 1-2.5 mtC by 2010). However, as we
noted in our report, "The Pre-Budget Report itself did not
set out this decrease in impact, nor did it contain any appraisal
of the relative economic, distributional and environmental merits
of the move".
74. The Committee is still unaware of any appraisal
which has compared and contrasted the environmental, social, and
economic trade-offs which could be associated with the policy
of no longer maintaining an automatic duty escalator. For example,
setting out how far present circumstances in terms of policies,
initiatives or oil prices would compensate for the loss of the
escalator and therefore justify the present policy to abandon
the automatic escalator for a Budget by Budget approach. The Government
"cancelled" the FDE in 1999 and therefore there has
been plenty of time for the Treasury, in conjunction with DETR,
to conduct a thorough analysis of the policy change and make this
reasoning transparent to the public.
75. Mr Timms felt that an automatic annual increase
in fuel duty had a significant environmental effect which could
be discussed but that it was that effect which needed to be assessed.
He thought that leaving duty unchanged in real terms, as in Pre-Budget
2000, was not something that the Treasury would consider as having
a significant environmental impact.
However, Mr Timms did eventually agree that the loss of the FDE
did constitute a change in policy.
He maintained that the Treasury had amply set out the thinking
that it had been through which had led it to the conclusions that
had been announced and published.
76. The Committee reminded Mr Timms that it was Government
policy that policies with significant environmental effects must
be supported by an environmental appraisal.
The Committee has seen no appraisal to support the introduction
of ULSP, VED and company car taxation demonstrating how far the
environmental benefits outweigh any other factors. For example,
the Committee has seen no "well to wheel" appraisal
of the move to ULSP.
77. The PBR concentrates on providing information
regarding the advantages of moving to ULSP in terms of lower sulphur
dioxide emissions and therefore improvements in local air quality.
However, it does not offer any assessment of the likely short
term increase in carbon dioxide emissions of switching to ULSP,
especially in the absence of the fuel duty escalator, and what
policies will be countering this. Mr Timms admitted to the Committee
that he had not received a set of data weighing up the air quality
improvements to be generated from using ULSP and GDI technology
against the additional energy (and associated carbon dioxide emissions)
required to produce it.
He felt it was clear that there would be "significant"
environmental benefits from the introduction of ULSP and that
was the justification for introducing the duty incentive for ULSP.
78. Mr Timms was not sure that it was necessary to
do a point by point calculation about every single measure if
it was clear that it was a beneficial one.
However, the Government's own guidance on policy appraisal states
that even "if the policy you are responsible for is designed
to enhance the environment you need to ensure that it maximises
benefits and minimises costs". 
Such appraisals are intended to demonstrate the nature and magnitude
of such a benefit and the trade-offs involved in attaining the
79. The Green Alliance felt that the PBR provided
a qualitative assessment of the environmental measures proposed
but no quantitative assessment of the implications of the proposals.
For example, the environmental implications of the changes to
the fuel duty arrangements or the degree to which the policies
will tackle the need to reduce traffic growth. Like the Committee,
the Green Alliance, hoped that these figures would have been derived
in the process of changing policies or introducing new policy.
The WWF was concerned that the PBR measures relating to transport
would "do nothing to reduce the amount of road traffic and
may result in an increase in CO2 emissions".
80. The Committee accepts that neither the Pre-Budget
or Budget Report is the primary forum to present full environmental
assessments of policy. However, these reports should refer the
reader to any such assessments that have been carried out and
at least indicate the factors which have been taken into account.
81. The Committee has found no evidence that the
Government has carried out a comprehensive environmental appraisal
of its Pre-Budget measures which would even satisfy its own guidance
in this area. For example, the Pre-Budget Report does not refer
to any assessment of:
effect of the duty cuts on car use;
the local air quality benefits of
Ultra Low Sulphur Petrol (ULSP) against the additional carbon
dioxide emissions generated in its production and how far these
will be counteracted by more fuel efficient engines in the longer
how far the new VED rates for lorries
reflect their environmental costs.
82. Moreover, the Committee is not satisfied that
the Government took its Pre-Budget decisions on fuel duty, Vehicle
Excise Duty (VED), and company car taxation on the basis of a
comprehensive appraisal of the trade-offs between its social,
economic and environmental objectives. It is therefore difficult
for the Committee to be convinced that the Pre-Budget transport
measures will have the overall, positive environmental impact
which the Government assumes.
132 Stability and steady growth for Britain: Pre-Budget
Report, HM Treasury, November 1999 Back
133 Q68 Back
134 Q69 Back
326 (1998-99) Eighth Report of the Environmental Audit Committee,
The Budget 1999: Environmental Implications, Memorandum from the
DETR, Appendix 4, para 6 Back
p75, para 4.1 Back
p76 (b) Back
138 Q144 Back
S and Graham D, The effect of fuel prices on motorists,
AA/UKPIA, September 2000, p1 Back
140 Q155 Back
p26, para (ii) Back
AA commissioned the UK Centre for Economic and Environmental Development
to list and price the various carbon dioxide reduction measures
which were possible and how much they would cost relative to one
another given that carbon dioxide was a uniform pollutant Back
143 Q163 Back
144 Q158 Back
145 Q149 Back
76-I, (1999-2000), Fourth Report of the Environmental Audit Committee,
The Pre-Budget Report 1999: Pesticides, Aggregates and the Climate
Change Levy Back
404 (1999-2000), Sixth Report of the Environmental Audit Committee,
Budget 2000 and the Environment, para 63 (x), pxxx. Back
in HC 404 (1999-2000), Sixth Report of the Environmental Audit
Committee, Budget 2000 and the Environment, pp xxiii-xxxi. Back
76-I (1999-2000), Fourth Report of the Environmental Audit Committee,
The Pre-Budget Report 1999: Pesticides, Aggregates and the Climate
Change Levy, p xl, para 118, Back
150 Q71 Back
151 Q75 Back
152 Q74 Back
153 Q76 Back
154 Q61 Back
155 Q62 Back
156 Q62 Back
appraisal and the environment,
DETR, 8 April 1998, para 5.3 Back
p84, para 8 Back