HMT5 9 March 1999 BIGGEST EVER PACKAGE OF ENVIRONMENTAL TAX REFORMS The biggest ever package of tax reforms to help protect the environment was announced today by Chancellor Gordon Brown. Economic Secretary Patricia Hewitt, said: "Today's Budget, which contains the largest and most radical package of environmental tax reforms ever announced in this country, will make a substantial contribution to our aim of protecting the environment, now and for future generations. "These reforms put the principles of sustainable development into practice. The Budget will shift the burden of taxation from "goods" to "bads". We are cutting tax on employment, on smaller cars, on clean fuels and providing incentives for energy efficiency. At the same time we are moving the weight of taxation onto the emission of greenhouse gases which threaten global climate change, local air pollution and the creation of waste." The Budget package includes measures to help: - tackle climate change through reducing emissions of greenhouse gases; - improve local air quality and support integrated transport; and - limit the environmental impact of land use and water pollution. This builds on the Government's pledge, made in July 1997, to explore the scope for using the tax system to deliver environmental objectives. Over time, the Government will aim to shift the burden of taxation from "goods", such as work, saving and investment, to "bads", such as environmental pollution. Climate change levy - Following Lord Marshall's recommendations, the Government will introduce a levy on the business use of energy, with offsetting cuts in employers' national insurance contributions, and additional support for energy efficiency schemes and renewable sources of energy is to be introduced from April 2001. The climate change levy will play a key role in helping meet the UK's targets for reducing greenhouse gas emissions, help promote energy efficiency in business, encourage employment opportunities, and stimulate investment opportunities in new technologies. Transport - A major reform of the company car taxation regime will be introduced, on a revenue neutral basis, in April 2002. Company car drivers will be taxed on a percentage of the car's price varying with the car's carbon dioxide emission rate. The current discounts for business mileage will be abolished. These reforms will benefit the environment by removing the incentives to drive extra business miles and by giving company car drivers incentive to choose more fuel efficient cars. The reductions to business mileage and older car discounts introduced from April 1999 are a first step to this reform. - A reduced rate of Vehicle Excise Duty (VED) of #100 for cars with engines up to 1,100 cc will be introduced from 1 June 1999. From Autumn 2000, a system of VED for new cars, based on emissions of carbon dioxide, will be introduced. - A package of seven tax measures is being introduced to promote non-car commuting, the use of bicycles for business journeys and car-sharing. These measures will promote the development of "green transport plans" and help reduce congestion. - The rural transport fund, introduced in the March 1998 Budget, will benefit by a further #20 million, with #10 million from the Capital Modernisation Fund matched by #10 million for the Department of Environment, Transport and the Regions. This extra funding will provide further support for the Government's Integrated Transport Strategy. The rate of fuel duty rebate paid to operators of local bus services by the Department of Environment, Transport and the Regions will be increased in line with the fuel duty changes announced in the Budget. - The duty on road fuels will increase in line with Government's existing commitment, made in the July 1997 Budget. The increases, of at least 6 per cent in real terms, play an important part in reducing carbon dioxide emissions and meeting our legally binding Kyoto commitment. The structure of road fuel duties will also be altered in line with the commitments made in the last Budget. Land Use and Water Pollution - To send a strong signal to waste producers and to allow waste managers and local authorities to consider alternatives to landfill, the Government will increase the rate of landfill tax. As announced last year in the standard rate of landfill tax will rise from #7 to #10 a tonne on 1 April 1999. The standard rate will increase by #1 a tonne a year from 1 April 2000 until 1 April 2004 when the National Waste Strategy will be subject to further review. - Research results, published today by the Department of the Environment, Transport and the Regions, shows that there are significant environmental costs associated with quarrying, including noise, dust, visual intrusion, loss of amenity and damage to biodiversity. The Government believes that there is a case, in principle, for a tax. Draft legislation will be published shortly for a tax on hard rock, sand and gravel used as aggregates. But, before coming to a final decision, the Government will first explore with the quarrying industry the scope for developing an enhanced package of voluntary measures to reduce the environmental impact of quarrying. Should the industry not be able to agree or deliver a sufficiently tough package, the Government will introduce an aggregates tax. - Research on the design and impact of possible tax on pesticides, commissioned by the Department of Environment Transport and the Regions, will be published shortly. The Government will be seeking views on the issues raised in the report. NOTES FOR EDITORS 1. The Budget Report and press notice HMT 6 contains details of the climate change levy, the methods the Government intends to use to recycle the revenues, and the special treatment for energy intensive industries. A consultation document on the practicalities of the tax is being released by Customs and Excise today. 2. For further details on the reform to company car taxation, see press notice IR 4. 3. For further details on changes to Vehicle Excise Duty, see press notice HMT 7. 4. For further details on the tax measures to promote green transport and "green transport plans", see press notice IR 5. 5. For further details on the changes to duty on road fuels, see press notice C&E 11. 6. For further details on the changes to the landfill tax, see press notice C&E 5. 7. Results from the further on aggregates extraction research are discussed in technical note issued by DETR today. They confirm that there are environmental costs to aggregates extraction not covered by existing regulation. For further details, see press notice HMT 8. HM TREASURY PRESS OFFICE Press Enquiries to: 0171 270 5238 Non-media enquiries to: 0171 270 4558 If you have access to the Internet you can find this news release at http://www.hm-treasury.gov.uk. Other Treasury material can also be found at this address. # = pounds sterling