House of Commons - Environmental Audit

Select Committee on Environmental Audit Fourth Report

Pre-Budget Report 2005

Overview in the context of rising concerns over climate change

6. This year's Pre-Budget Report ("Britain meeting the global challenge: Enterprise, fairness and responsibility", published on 5 December 2005) contained relatively little in the way of tangible new environmental measures (be that in the form of taxes, incentives, grants, or regulations). What new measures were announced were mostly concentrated within the following three areas:

Energy efficiency: An extra £35 million was announced for the Carbon Trust to provide interest-free loans for the introduction of energy-saving measures to Small and Medium-sized Enterprises (SMEs) and the public sector. Under the existing Green Landlord Scheme, the PBR also announced the Government's intention to reform the existing Wear and Tear Allowance by making it conditional on the energy efficiency level of rental property. In addition, the PBR welcomed the findings of the Energy Efficiency Innovation Review, published simultaneously, which found that the uptake of energy efficiency measures could be enhanced by a number of actions, including raising awareness and support for innovative technologies.

Alternative fuels and energy: The PBR promised the introduction (envisaged to be from April 2008) of a Renewable Transport Fuel Obligation, to require transport fuel suppliers to ensure that a percentage of their sales (targeted to be 5% by 2010-11) is made up by biofuels; accompanying this was the announcement of a new Enhanced Capital Allowance for the cleanest biofuels production plant. In terms of energy production, the PBR announced that reduced VAT rates would be extended to wood-fuelled boilers, bringing them into line with other microrenewable energy sources (such as air source and ground source heat pumps, and micro-combined heat and power).

Carbon abatement technologies: Additional funding of £10 million was announced for technology demonstrations (for instance, relating to carbon capture and storage) under the Department of Trade and Industry's Carbon Abatement Technologies Strategy.

7. Aside from these announcements, two themes dominated the PBR's chapter on the environment. The first was the announcement of a variety of dialogues—from talks with other governments about taking forward the Gleneagles Plan of Action,[6] to an announced intention to work collaboratively with Norway on carbon capture and storage, to an individual seminar held with energy companies to discuss ways to create a market for energy efficiency services. These announcements could perhaps best be characterised as encouraging, but lacking any major substance to date. The second major theme of this year's PBR was a lack of movement in terms of revaluing existing environmental taxes. For instance, the PBR confirmed that the annual rise in landfill tax would again be £3 per tonne, that the freeze on vehicle fuel duty would continue, and that, as for Vehicle Excise Duty (VED), the Government would merely "continue to consider the case for improving VED incentives for fuel-efficient vehicles."[7]

8. This Pre-Budget Report was, indeed, more striking for what was not in it than for what it did contain. A number of significant policy proposals, made repeatedly in the past by this Committee, as well as by a variety of other stakeholders, were conspicuous by their absence. We were disappointed, for instance, not to see even a reference to such measures as targeted rebates on council tax or stamp duty to incentivise household energy efficiency, a reduction in VAT rates on building refurbishments (something we are recommending, for example, in our forthcoming Report on Sustainable Housing),[8] or the introduction of taxes on more wasteful products (such as incandescent light bulbs), as set out, for instance, in the recent "Green Living Initiative" paper submitted to the Treasury by the Policy Studies Institute. (Some of these measures will be discussed in greater detail below.)[9]

9. In all, we were deeply disappointed by the Pre-Budget Report. This was a view widely shared by those from whom we took evidence. In the opinion of Friends of the Earth, "it was not a great Pre-Budget Report. There was very little actual movement on the environmental issues";[10] while in the words of the Environment Agency: "The Pre-Budget Report itself announced little new environmental policy [….] We believe that HMT could be more ambitious in the use of economic instruments".[11] WWF told us they felt that the PBR "offered another set of minor adjustments",[12] while for the RSPB it highlighted "the Government's lack of major plans to address and resource its environmental priorities".[13] Green Alliance commented that, "Although we were led to believe that climate change would be a strong theme throughout the Pre-Budget Report this turned out not to be the case",[14] while Natural England commented on the "sense of 'slowing down' and that the momentum around environmental taxation of past years is slipping."[15]

10. Our disappointment is all the more marked in view of the rising concerns over climate change. In 2004 it was announced that the UK is not on target to meet its objective of reducing CO₂ emissions by 20% of 1990 levels by 2010. In September 2004, the Government initiated a Review of its Climate Change Programme, to examine the policy options which could move the UK back towards this target. This Review was scheduled to be published last year, but (according to Defra's website) will now be published in early 2006, "which will allow the outcome of the Pre-Budget Report to be taken into account".[16] More recently, the Government has published the findings of the 2005 Exeter conference on Avoiding Dangerous Climate Change (Figure 1). More recently still, the Prime Minister has remarked on the need for urgency in acting on climate change, even declaring that the world has only seven years to forge an agreement to stave off the worse case scenarios of climate change.[17]

Figure 1: Avoiding Dangerous Climate Change - key findings of the Exeter Conference

Assessment of impacts

In many cases the risks are more serious than previously thought.
The impacts of climate change are already being observed. Changes to polar ice and glaciers and rainfall regimes have already occurred.
A number of new impacts were identified that are potentially disturbing. One example is the recent change that is occurring in the acidity of the ocean. This is likely to reduce the capacity to absorb CO₂ from the atmosphere and affect the entire marine food chain.
Serious risk of large scale, irreversible system disruption, such as reversal of the land carbon sink and possible destabilisation of the Antarctic ice sheets is more likely above 3^oC. Such levels are well within the range of climate change projections for the century.

Climate sensitivity and emission pathways

To have a relatively high certainty of limiting global warming to 2⁰C above pre-industrial levels requires concentrations of CO₂ equivalent to stay below 400 ppm. If concentrations were to rise to 550ppm CO₂equivalent then it is unlikely that the global mean temperature increase would stay below 2⁰C.
Different models suggest that delaying action would require greater action later for the same temperature target and that even a delay of 5 years could be significant. If action to reduce emissions is delayed by 20 years, rates of emission reduction may need to be 3 to 7 times greater to meet the same temperature target.

Technological options

Technological options for significantly reducing emissions over the long term already exist. But there are no magic bullets: a portfolio of options is needed and excluding any options will increase costs. Multi-gas strategies, emission trading, optimal timing and strong technology development, diffusion and trading are all required to keep costs of low-level stabilisation relatively low.
Demonstrated energy efficiency improvements under the present market system in industrialised countries are not enough to offset increases in demand caused by economic growth in developing countries. Efficiency improvements and alternative energy supply such as nuclear and renewables are of priority for developing countries to contribute their share to the effort of stabilisation.
Major investment is needed now in both mitigation and adaptation. The first is essential to minimise future impacts and the latter is essential to cope with impacts which cannot be avoided in the near to medium term.

Source: Executive Summary of Avoiding Dangerous Climate Change (2006),

http://www.defra.gov.uk/environment/climatechange/internat/pdf/avoid-dangercc-execsumm.pdf

11. In the context of rising concerns over the dangers of climate change, and of the fact that UK CO2 emissions are actually increasing once more, this year's Pre-Budget Report was inadequate. This is all the more so considering that the Government's Climate Change Programme Review was delayed to take this Pre-Budget Report into account: the PBR does not hint at the kind of measures that could put the nation back on track to meet its 2010 target for reducing CO2 emissions. Compared to the scale of response we might have expected to such a serious situation, the measures announced in this Pre-Budget Report fell short of what might reasonably have been expected.

The Treasury's momentum on environmental action

12. As we analyse in greater detail in a later section,[18] the latest figures show that once again the proportion of tax revenue collected from environmental taxes has gone down, indicating that, far from shifting the burden of taxation from "goods" to "bads", the Treasury is doing the reverse (and has been doing so since 2000). This is not the only indicator of a slowing of the Treasury's momentum in "Protecting the Environment" (as Chapter 7 of its Pre-Budget Report is titled): the Treasury appears to be becoming progressively less bold and imaginative in terms of its specific announcements of new policies. Professor Ekins observed to us:

"Very quickly [after the new Government was elected in 1997] they produced a very short document called the Statement of Intent on Environmental Taxation […] and we had very significant initiatives on environmental taxation over the subsequent years. In 2002 we had a much longer document on environmental taxation, which essentially restated some of the objectives […] and that document did much less work over the subsequent years in terms of significant new initiatives. Now, it seems, we have no new statement at all, but we do have a PBR with practically nothing environmentally significant in the environmental chapter."[19]

13. The Financial Secretary was pressed on this broad point when he gave evidence to us. Having defended the Treasury's record by drawing attention to its introduction of such measures as the Climate Change Levy (CCL) and the UK Emissions Trading Scheme (ETS),[20] he was pressed again:

Mr Hurd: Minister, I understand your point completely about the initiative taken by the Government at the beginning of the programme. The point is that there is considerable frustration about the amount of activity untaken since 2001/2002 against a background in which the biggest environmental priority of all, which is the reduction in CO₂ emissions, is quite clearly being failed. Do you understand that point, the frustration in terms of activity since 2001/2?

John Healey: I am not sure if you are arguing for the introduction of policy instruments of the significance and weight of the Climate Change Levy every year, but I do not accept it entirely. If you look at some of the initiatives that were set out in the Pre-Budget Report, they were designed to reinforce some of the measures we have got in place. They were designed also to try and take us into some of the new areas, like further support for carbon capture and storage […] and the road fuels obligation […][21]

14. We might observe that every one of the most significant new measures introduced by this Government—including the CCL, UK ETS, Aggregates Levy, Renewables Obligation, and Energy Efficiency Commitment—was initiated during the Government's first term, and implemented in its second. Given the lead times necessary to implement important economic and policy instruments, we would have expected more progress in initiating new measures during the last term, in order to be implemented in this. At the very least, we would have expected signs of renewed ambition now, at the very start of a new term in office.

15. PBR 2005 signifies a continued slowing down of the Treasury's momentum in turning its rhetoric on the environment into action. No really significant new measures were announced, despite the fact that this was the first Pre-Budget Report of a new electoral cycle, and the even more important fact that UK CO2 emissions are currently rising, not falling. In order to reassure Parliament that it is taking its environmental responsibilities seriously, it is vital that the Treasury publishes a high profile restatement of its environmental strategy, and starts to back it up at once with serious action.

16. In view of the compelling case for more urgent action to reduce carbon emissions, we are concerned that there may be a degree of institutional inertia within the Treasury in the face of the scientific evidence on climate change. We urge the Treasury to give greater priority to climate change; and hope that the Stern Review will lead to a profound and consistent impact in the seriousness with which the Treasury responds to this issue.

Specific environmental tax areas

AVIATION

17. Air Passenger Duty (APD) is levied, with some minor exceptions,[22] on each passenger on flights taking off from UK airports. Between 2000 and 2004, the annual number of chargeable passengers rose by some 25 million, or 35%. Annual greenhouse gas (GHG) emissions from UK aviation rose alongside this increase, by some 0.8 million tonnes of carbon equivalent, or 10%.[23] Despite this, receipts from APD actually fell by 8%, from £931 million to £856 million (Figure 2). The reason for this fall in revenue, even during a significant expansion in the numbers paying the charge, was essentially the impact of the Chancellor's decision, in Budget 2000, to "introduce a new, fairer and lower Air Passenger Duty".[24] Where there had been two rates (£10 for short-haul, and £20 for long-haul flights), this was changed (from April 2001) to four rates, ranging from a new lower rate of £5 for economy short-haul to a new higher rate of £40 for first/business class long-haul flights. The net impact of this reform has been revenue-negative: as the recent expansion in aviation has overwhelmingly been in short-haul budget flights, so the introduction of the new lower rate has more than cancelled out the revenue gained from the extra 25 million passengers.

Figure 2 Air Passenger Duty: flights up, emissions up, revenue down

Sources: HM Customs & Revenue APD Bulletin March 2005, November 2004

Defra, e-Digest of Environmental Statistics, January 2006, http://www.defra.gov.uk/environment/statistics/globatmos/download/xls/gafg20int.xls

18. We expressed our concern about the functioning of this tax to the Minister, but received a very confusing and unsatisfactory answer:

David Howarth: Finally, I mention one particular levy which seems not to be working at all and seems to require some change of direction, the Air Passenger Duty, where the yield seems to be falling but the number of passengers seems to be rising. Are we taxing the wrong thing?

John Healey: The air passenger duty in many ways is not an entirely satisfactory tax. It was introduced, you may remember, in the early 1990s. It has never been an environmental tax. It has certain sorts of perverse aspects built into the design. In other words, a more fuel-efficient plane filled with the same number of passengers pays the same rate of air passenger duty as an airline using a much less fuel-efficient plane, and actually a half-empty plane is rather less than a full plane, even though it is more efficient in terms of passengers per air miles travelled. First of all, it is not an environmental tax. Second, it does, however, contribute to the recognition that we have been very clear about, that the aviation industry has to pay the costs, the externalities if you like, that it imposes on society and on the environment. It is a significant contribution to that, but it is not an instrument that is well designed to achieving environmental ends.[25]

19. We consider the Minister's response to be incoherent. On the one hand, he argues that APD is "not an environmental tax", but on the other, he states that it contributes significantly to the recognition "that the aviation industry has to pay the costs […] that it imposes on the environment." We are tempted to ask: which is it? The impression that the Treasury is attempting to have its cake and eat it, in claiming credit for whatever environmental impacts APD does have, while disclaiming its status as an environmental tax lest it be evaluated as such, is reinforced by the entry for APD in Table 7.2 of the Pre-Budget Report. Under the heading "Environmental Impacts", this reads: "Levying APD has resulted in a reduction in emissions of CO2 and local air pollutants from aviation."[26]

20. The Treasury's rationale for arguing that APD is not an environmental tax appears to be that, as it is levied on passengers and not on fuel, it does not directly incentivise fuel efficiency. However, this ignores the fact that it could clearly incentivise people simply to take fewer flights. Given that the Office of National Statistics classifies APD as an environmental tax,[27] and that air travel has a "proven specific negative impact on the environment" (the wording at the heart of the ONS's definition), it is hard for us to see how the Treasury can claim that a tax which works to restrict demand for air travel is "not an environmental tax". As a further point, it is interesting to note the language of the Prime Minister at the recent Liaison Committee session: "if you really want to impede air travel, to cut it back significantly, for example, through some taxation mechanism, it would have to be a fairly hefty whack".[28] While the Prime Minister was here doubting the desirability of imposing such a measure, and questioning the level at which it would have to be set in order to have a significant impact, he was clearly accepting the principle that taxation could be levied on air travel simply to reduce demand for it, in order to reduce its environmental impacts.

21. Following our session with the Minister, we wrote to him to ask, if it is not an environmental tax, what is the purpose of Air Passenger Duty? He replied that "It was announced in November 1993 as a measure to extend the tax base, based on a recognition that aviation was under taxed as a sector, due to its zero rating for VAT and exemption from fuel duty for all international and the majority of domestic flights."[29] We might observe that even on these terms the Government's record on APD is questionable, given that the changes which came into force in 2001 reduced the mean average rate of Air Passenger Duty from £13.06 per passenger flight in 2000 to £8.88 in 2004, thereby reducing the total revenue to the Treasury even during a period of pronounced growth.

22. We believe that the Treasury should redefine Air Passenger Duty as an environmental tax. At the current rates at which it is charged, it clearly seems to be ineffective—as can be seen from the fact that, since the rate of APD for budget flights was cut in 2001, passenger numbers and CO₂ emissions have risen steeply, while APD receipts have actually fallen. We urge the Treasury to ensure that Air Passenger Duty rates more accurately reflect the carbon emissions of the flights to which they apply, to restrain demand for more flights and curb the growth in carbon emissions from UK aviation. The Treasury should consider changing the basis of APD, from taxing individual passengers to taxing flights, so as to incentivise more efficient use of aviation fuel and airport infrastructure. The overall aim should be to ensure that this tax reflects the environmental externalities of aviation.

23. In our evidence session, the Minister gave the Treasury's view that working to include aviation within the second phase of the EU Emissions Trading Scheme (EU ETS) is the best way to tackle the emissions from air travel, given that these "are international in nature and unilateral action from one country really does not hit the mark".[30] We applaud the leadership the Government has shown in seeking agreement to include aviation within the EU Emissions Trading Scheme. However, we would argue that the UK can still take action in advance of this, and to supplement it—not just by raising Air Passenger Duty but, for instance, by seeking bilateral agreements with other countries to impose aviation fuel duty on flights between them. Furthermore, as the Environment Agency argued in their evidence, simply including aviation within the EU ETS is not enough—what counts is the level of carbon credits it is assigned as a sector.

BIOFUELS

24. The Pre-Budget Report announced the introduction of a Renewable Transport Fuel Obligation (RTFO), requiring fuel suppliers to ensure that a percentage of their sales (expected to be 5% by 2010-11) is made up by biofuels. Accompanying this was the announcement of a new Enhanced Capital Allowance for the cleanest biofuels production plant. These measures will complement the 20 pence per litre duty differential for biodiesel (dating from 2002) and for bioethanol (2005).

25. We echo the Environment Agency's support for the Renewable Transport Fuel Obligation, but also its concern that expansion in the use of biofuels should not result in environmentally valuable habitats, such as rainforests, being cleared in order to grow the relevant crops. In the case both of transport fuel and electricity generation it is important that only biofuels which are from sustainable sources should be rewarded with Renewables Obligation Certificates. We were heartened to hear the Minister take such concerns seriously, and to refer to work by the Department for Transport on assessing the environmental impacts of biofuel sources. We may choose to monitor such impacts ourselves as UK consumption of biofuels rises.

26. We welcome the discount in duty to support the growth in biofuels, and acknowledge the significant impact that such duty differentials have played in the past, for instance in incentivising the uptake of unleaded petrol and ultra low sulphur petrol and diesel. Moreover, given that fossil fuels will form a significant source of potential tax revenues for some decades to come, but that we need to wean ourselves off them in advance of their depletion and in order to avert dangerous climate change, we believe that there is a strong case for consistent increases of fossil fuel taxes.

VEHICLE EXCISE DUTY

27. Regarding Vehicle Excise Duty (VED), we are disappointed that the PBR merely stated that the Government would "continue to consider the case for improving VED incentives for fuel-efficient vehicles." This is especially the case, given the evidence we received from the Energy Saving Trust (EST), who said they felt car energy efficiency was increasingly a problem. As they told us: "It is very clear that we are not on track to get close to the European Union target of 140 grammes [CO₂ emissions] per kilometre average for new vehicles in 2008. We are over 170 at the moment, and indeed the situation is getting worse. The efficiency of new cars bought last year was worse than in the previous year where they were bought by private individuals."[31] EST praised the effectiveness of the more stringent company car regime, but warned that increasingly this was being evaded through executives receiving cash bonuses to buy cars privately. They called for VED to be increased for less efficient cars, with a new special rate for "gas-guzzlers" at the top end of the spectrum; just one of the effects of this should be to reduce the evasion of company car tax.

28. We are concerned that the UK is drifting away from the EU target on car energy efficiency. The Government should increase the differentials within Vehicle Excise Duty between the most and least efficient cars, and create a special new band at the top of the spectrum for the worst "gas-guzzlers". The Treasury should also raise consumer awareness by making vehicle tax discs prominently colour-coded, to reflect their energy efficiency banding.

FUEL DUTY

29. The Pre-Budget Report announced that the freeze on main fuel duty rates would continue until Budget 2006. This means that 2005-06 is the fourth out of the last five years in which the Government has frozen these rates. This is somewhat surprising given that, as the PBR states, "It is the Government's policy that fuel duty rates should rise each year at least in line with inflation, as the UK seeks to meet its targets of reducing polluting emissions and funding public services."[32] Indeed, the section on fuel duty in PBR 2005 contains something of a non-sequitur. Paragraph 7.46 acknowledges that the costs of motoring relative to household disposable income have markedly decreased in recent years, and that this trend is likely to continue in future years, while paragraph 7.47 states that fuel duty will continue to be frozen because of the ongoing volatility of the oil market.

Figure 3 Motoring has become progressively more affordable in recent years

Source: Office for National Statistics, Department for Transport (Transport Trends, 26 January 2006)

30. In his evidence, the Minister said about this:

"We were set to raise, by revalorizing fuel duty at the Budget, fuel duty for the main pure rate by 1.22 pence per litre. By the time we came to the Pre-Budget Report, the pump price paid for road fuels was ten pence per litre for last year higher than what we had projected at the Budget. […] For those concerned about the environment, clearly the ten pence per litre price rise at the pumps would have a much greater impact on demand and, therefore, emissions from road transport than the planned increase that we had in the duty rates […]"[33]

We acknowledge this point. However, it does tend to suggest to us, given that the PBR stresses the essential resilience of the UK economy in the face of oil price volatility, that the Government could have been more ambitious in setting fuel duty rates in the years since 2000. We might also observe that fuel duty was frozen in Budgets 2001 and 2002 even though the price of petrol, excluding taxes, fell between Budget 2001 and Budget 2002, and then again between Budget 2002 and Budget 2003.[34] Indeed, it appears to us that the main reason for the Treasury's decisions not even to revalorise (raise in line with inflation) fuel duty since 2000 has been not so much its concerns for the competitiveness of the UK economy, but more a question of political expediency. We do not make light of such concerns; however, this would strengthen our calls for the Treasury to develop a proper communications strategy to help sell the need for environmental taxes to the public, and for it to consider ways to put the formulation of environmental taxes to some degree outside the arena of electoral politics.[35]

31. Our final point on fuel duty relates to the price, availability, and environmental impacts of oil as we move towards and then past world peak production. The Treasury gives as its reason for freezing fuel duty the recent volatility in the oil markets. This is surely going to be a long-term phenomenon, in the context of declining reserves of oil. In this context, there would appear to be a further argument for a policy of consistent fuel tax rises, in that this would send a long-term signal to the economy that it needs to wean itself off oil (and would also expand the potential for tax differentials to incentivise alternative fuels, as has recently been done in London, for instance, where exemptions to the London Congestion Charge are offered to low carbon vehicles). In the light of the announcement by the Swedish government, of plans to make Sweden oil-free by 2020, we asked the Financial Secretary whether he agreed that we have to start weaning the UK economy off oil in advance of depletion leading to unaffordable market prices. He agreed, and pointed to the encouragement being given by the Government to renewable energy technologies such as tide, wind, and solar.[36] We would simply note that these relate to the generation of electricity, in which oil does not figure in the UK. Indeed, when we asked the Minister for the Government's forecast of UK consumption of oil by 2020, the data he referred us to (Figure 4) show that, far from being on a path towards becoming oil-free, UK consumption is set to rise by 9% over 2005 levels.

Figure 4 UK oil consumption - actual and forecast

1990 1995 2000 2005 2010 2015 2020

Oil demand in mtoe* 91.1 91.7 89.2 88.6 91.6 94.5 96.8

Source: UK Energy and CO2 Emissions Projections, DTI, February 2006

Notes: *Millions of tonnes oil equivalent

Total includes bunkers and non-energy use

32. In view of the need to cut carbon emissions, and of the likely long-term rises in oil prices as we approach and pass global peak production, the Treasury should develop a strategy for weaning the UK economy off oil, and should publish updates on progress in each Pre-Budget Report. In addition, each PBR should assess the nature and level of economic and national security risks posed to the United Kingdom from the depletion of world oil and gas reserves.

ENERGY EFFICIENCY

33. We welcome the measures announced in the PBR, such as the extension of the Green Landlord Scheme. However, overall we were, again, disappointed with the lack of imagination and ambition shown in this year's Pre-Budget Report. Two things stood out for us by their absence. The first was any mention of the possibility of introducing targeted council tax or stamp duty rebates, for households which implement energy saving measures. Council tax rebates in particular were recommended to us by the Energy Saving Trust. While local authorities are free to establish such schemes themselves, and some have successfully done so—notably Braintree—EST stressed that it is currently a long and drawn out process, requiring a duplication of effort for each council, and that guidance and funding from central government was vital to allow this to take off.[37]

34. The second thing that disappointed us was the continued sense of a failure by the Treasury to integrate energy efficiency into other policies. For instance, we observed that there was not a single mention of energy efficiency within Chapter 3 of the PBR, "Meeting the Productivity Challenge", despite the obvious potential overlap between improving business competitiveness and energy efficiency. Equally, once again we were concerned at the apparent total disconnection between the Treasury's approach to energy efficiency and its approach to fuel poverty (something that will surely only become more of an issue in the context of higher gas prices). As EST remarked to us:

"[T]here are opportunities to link energy efficiency into the winter fuel payments, in particular, for instance, you could incentivise investment in energy efficiency by actually raising the level of the winter fuel payment, say by £100, in return for, say, £200 or whatever being spent on energy efficiency measures. That would have a long-term benefit moving forward as well to those individuals who do invest."[38]

35. On energy efficiency, we recommend that the Treasury considers reducing both Stamp Duty and Council Tax for those homes built or refurbished to high environmental standards. At the very least the Government should give local authorities the support to allow them to introduce their own Council Tax rebate schemes, designed to incentivise household energy efficiency improvements. The reform of Council Tax along these lines should also be addressed in the Lyons Inquiry into Local Government Funding, as the Lyons Inquiry is due to report in late 2006, a resulting policy announcement could be co-ordinated with Pre-Budget 2006. Equally, the Treasury should do far more to join up its policies on energy efficiency with those relating to improving the productivity of British industry, and those relating to fuel poverty.

6 HM Treasury, Pre-Budget Report 2005 - Britain meeting the global challenge: Enterprise, fairness and responsibility, Cm 6701, December 2005, p 152. Back

7 Cm 6701, p 162. Back

8 Environmental Audit Committee, Sustainable Housing: A follow-up report, due to be published March 2006. Back

9 See paras 17-35. Back

10 Q 1 [Mr Bullock]. Back

11 Ev44. Back

12 Ev110. Back

13 Ev108. Back

14 Ev100. Back

15 Ev107. Back

16 The UK Climate Change Programme - Review, Defra, December 2005, http://www.defra.gov.uk/environment/climatechange/uk/ukccp/review.htm Back

17 Uncorrected transcript of oral evidence taken before the Liaison Committee on 7 February 2006, HC (2005-06) 709-ii, Q 182 Back