New environmental measures
7. Pre-Budget 2004 recognised the scale of the environmental
challenges facing the Government in various areas such as waste,
road use, and climate change. It also reviewed progress on reducing
carbon emissions and the opportunities afforded by the UK's presidency
of the G8 and EU during 2005. However, it contained relatively
few new specific environmental measures:
- an Energy Efficiency Innovation
Review to be conducted jointly with DEFRA, and a related £20
million R&D fund to be administered by the Carbon Trust and
designed to accelerate the take-up of energy efficient technology;
- a consultation and feasibility study on a possible
Renewable Transport Fuel Obligation. This would operate similarly
to the Renewables Obligation - as an obligation on suppliers to
provide an increasing percentage of biofuels in petrol (up to
5%);
- some minor measures relating to rebated fuel
oils, the fuel scale charge, and company car taxation.
8. The 2005 Budget Report added little in terms of
practical measures. It included confirmation of a reduced rate
of VAT for micro-CHP, the extension of a reduced VAT rate for
the installation of air source heat pumps, and an extension of
the Landlord's Energy Savings Allowance to cover solid wall insulation.
In the memoranda we received, there was limited positive feedback.
The Environment Agency, for example, welcomed the recycling of
landfill tax revenues into the Business Resource Efficiency and
Waste (BREW) fund and the commitment to funding its fight against
fly tipping.[4] We also
noted some relief that the Treasury had finally decided to support
micro-CHP without waiting for the end of the field trials which
are currently being conducted.
9. However, what was more apparent in both PBR 2004
and Budget 2005 was the absence of anything more radical. Fuel
duties were only valorised (increased in line with inflation)
and even this increase has been deferred to September 2005. Rates
for other taxes or duties, such as the Climate Change Levy and
Vehicle Excise Duty, were frozen or only nominally increased.
And there were no proposals in a range of other areas such as
pesticides, diffuse water pollution, and incineration. Friends
of the Earth commented that:
"There were almost no new measures in PBR
2004. … PBR 2004 was wholly inadequate, for several reasons.
Most significantly, despite naming climate change as one of six
long term global economic challenges, PBR 2004 fails to present
a plan (or even a process to develop a plan) to manage carbon
emissions strategically across the economy. Given the urgent
need to get to a low carbon economy, the key role HMT has to play
and, as PBR 2004 notes, the importance of this year's climate
change programme review, this is extremely worrying."
[5]
10. Pre-Budget 2004 and Budget 2005 contained
few new environmental measures and those which were included were
relatively minor. We should perhaps not have expected too much
at this stage of the electoral cycle. But if that is the reason
for the failure to adopt a more radical approach, it represents
a dismal reflection on the extent to which politicians of all
parties can pursue the environmental policies we need if we are
to move towards a truly sustainable society.
Appraisal tables
11. For the last 7 years, in response to an early
recommendation of ours, both the Pre-Budget and Budget Reports
have contained a chapter on environmental measures, together with
two appraisal tables which aim to summarise their impacts.[6]
While we initially welcomed the introduction of these tables,
we have subsequently expressed two main concerns about them.
Firstly, they sometimes fail to quantify meaningfully the impacts
of specific measures—or indeed the absence of any measures
(eg when taxes or duties are frozen). Secondly, they ignore the
environmental impacts of other primarily economic initiatives
set out elsewhere in budget reports.
12. Some witnesses shared our concern. Indeed,
in its memorandum, the CPRE comment that: "It is CPRE's
contention that this appraisal activity [of mainstream budgetary
measures] has, in fact, not been undertaken in many cases. CPRE
will shortly be writing to the HM Treasury requesting, under the
Freedom of Information Act 2000, the environmental appraisal of
principally economic measures included in the Pre Budget Report
2004." [7] This
is a topic which we have ourselves pursued in the past. On the
basis of the responses we received, it appears that the Treasury
has its own internal processes for assessing measures to be included
in PBR and Budget reports, and that it considers budgetary processes
to fall outside the conventional screening mechanisms and integrated
policy appraisals which other departments are obliged to undertake.[8]
13. Indeed, on a number of occasions more recently,
we have written to the Treasury to ask whether an environmental
appraisal was undertaken to underpin certain specific budget decisions.
Their responses have not always been clear, but it is illuminating
that - in the case of the decision not to introduce more radical
differentials in VED—the Treasury admitted that no environmental
appraisal had been carried out.[9]
We also note that some other countries are rather more ambitious
in this respect. The Danish Government, for example, has on a
number of occasions carried out an environmental appraisal of
the impact of all budgetary measures—not just those which
are environmental.[10]
14. We continue to feel that the appraisal tables
included in the PBR and Budget reports could play a useful role,
but we consider that the Treasury needs to give more consideration
to them in the context of the need to develop an environmental
tax strategy which would involve, inter alia, a more systematic
approach to monitoring progress against the Statement of Intent.
4 Ev100 Back
5
Ev104 Back
6
EAC, Third Report of Session 1997-98, The Pre-Budget Report:
Government Response and follow-up, HC 985 Back
7
Ev43 para 7 Back
8
See, for example, EAC Fourth Report of Session 2002-03, Pre-Budget
Report 2002, HC 167, Ev29 Back
9
Ev87 Back
10
Other governments have also commissioned academic research in
this area. See, for example, European Environment, vol
15 no 1 (January-February 2005), page 27ff for Denmark Back
