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6 Protecting the Environment
WHY THE ENVIRONMENT MATTERS 6.1 The Government is committed to achieving high and sustainable levels of growth and employment. But this alone will not guarantee the improvements in the quality of life that people expect. Everyone should have a fair chance to share in the benefits of growth, and growth should not come at the expense of the environment. The environment affects everyone, directly through the quality of air and water, and also through longer-term influences such as climate change. Climate change 6.2 Climate change is already beginning to affect the environment. Global temperatures are increasing, causing the oceans to become warmer and sea levels to rise (see Chart 6.1). This has led to an increased risk of flooding in some areas and water shortages in others. The 1990s saw four of the five warmest years in England according to records going back 340 years. Average global temperatures rose by 0.6 degrees celsius over the twentieth century. The Intergovernmental Panel on Climate Change (IPCC) has estimated that unless further action is taken to reduce greenhouse gas emissions, temperatures could rise by a further 3 degrees celsius during the twenty-first century. 6.3 It is not possible to attribute extreme weather conditions purely to climate change, but it may be expected to lead to an increase in their intensity. Extreme weather is becoming more frequent, and contributing to increased flooding, which is causing severe hardship, disruption, and loss of life in the UK and around the globe. Local air quality 6.4 Although there is a general downward trend in the average number of days when the level of air pollution in the UK is above acceptable levels, poor air quality still poses risks to human health, the quality of life, and the natural environment. Short-term air pollution episodes are associated with 12,000 to 24,000 premature deaths and 14,000 to 24,000 hospital admissions and re-admissions for respiratory and cardiovascular problems each year. Evidence is beginning to emerge which suggests that long-term exposure to air pollution could have more significant health effects than those associated with short term episodes. Urban air pollution can expose motorists by up to three times as much pollution as pedestrians and cyclists since they effectively travel through a "tunnel" of pollution. The challenges faced by towns and cities 6.5 Although there is increasing pressure for development in the countryside, the National Land Use Database shows that, in England today, 58,000 hectares of brownfield land are either vacant, derelict or available for redevelopment. Failure to make the most of this land and buildings in urban areas wastes a precious resource and continues to create pressure for greenfield development. The Government is committed to regenerating Britain's towns and cities, stimulating enterprise and employment, and making them better places in which to live and work. Pressures on the countryside 6.6 The demands of an increasingly affluent population for new housing and infrastructure have inevitably put pressure on the rural environment, as have the landfilling of waste, modern agricultural methods, and aggregates quarrying. 6.7 Industry and commerce in England and Wales produce around 80 million tonnes of waste each year. Local authorities collect a further 30 million tonnes. Disposing of this waste places further pressure on scarce land due to the UK's heavy reliance on landfill as a means of waste disposal - one of the highest rates in the EU. As the biodegradable element of the waste decomposes, it releases methane, a powerful greenhouse gas. 6.8 While they have improved crop yields, modern agricultural methods have also tended to reduce biodiversity. There has been a 35 per cent decline in the population index for 20 farmland bird species since 1970. There is also increasing evidence that pesticide use is associated with significant environmental impacts on biodiversity and water quality. 6.9 The extraction and transport of aggregates imposes significant environmental costs on local communities. These include noise, dust, visual intrusion, loss of amenity and adverse effects on nature. A STRATEGY FOR PROTECTING THE ENVIRONMENT 6.10 The Government has put in place a clear strategic framework for tackling the environmental costs described above whilst achieving a high and stable level of growth and employment and promoting social justice. This strategy rests on four main pillars:
Identifying the problems and risks 6.11 The Government's climate change programme has taken into account the growing scientific consensus on the potential impacts of increasing concentrations of greenhouse gases in the atmosphere. The Government has also commissioned a number of independent studies to assess the environmental impact of particular economic activities, such as the extraction of aggregates and pesticide use. Setting objectives and targets 6.12 Once environmental problems and risks have been identified, the Government can put in place a corresponding strategy to address the environmental concerns. This strategy must be consistent with the Government's economic and social objectives, to ensure sustainable improvements in the quality of life. The strategy may involve setting objectives, such as reducing the environmental impact of pesticide use and aggregates extraction. In some cases, quantitative targets may be appropriate, as in the case of climate change, where the Government has signed up to legally binding commitments to reduce greenhouse gas emissions by 2008-2012. Other targets include increasing both waste recycling and the amount of energy coming from renewable sources by 2010. The Government's policy instruments 6.13 The Government has a range of policy instruments it can use to meet its environmental objectives. This includes regulation, public spending, information campaigns, voluntary agreements, and economic instruments such as taxes, charges, and permit trading. The use of these measures is assessed on a case-by-case basis, taking into account the wider economic and social consequences. In many cases, a mixed package of policies will be needed, as in the case of the Government's strategy to combat climate change. This includes energy efficiency funding, the climate change levy, the Pollution Prevention Control regulations, and projects aimed at energy improvements in homes. 6.14 Economic instruments such as taxes, charges and trading can offer the scope for tackling environmental costs in the most cost-effective way. By making use of the price mechanism, economic instruments make those involved in environmentally-damaging activities face the true costs of their actions and respond according to their own circumstances. In this way, economic instruments integrate effective protection of the environment and prudent use of natural resources into the heart of economic decision-making. 6.15 The Government first set out its principles on environmental taxation in the July 1997 Budget, indicating that it wanted to shift the burden of tax over time from "goods" like labour, to "bads" like pollution. The November 1999 Pre-Budget Report restated those principles, and made it clear that:
6.16 Economic instruments will not always be the best solution to environmental problems. Regulations are often more appropriate where minimum standards need to be maintained to protect the environment or the public. Public spending can also deliver environmental benefits. Government-funded environmental campaigns can be used to alert business and individuals to the true environmental consequences of their actions, and encouraging them to change their behaviour accordingly. Box 6.1 describes some of the public spending initiatives announced in the 2000 Spending Review which are aimed at protecting the environment.
Evaluating and modifying policies 6.17 An appraisal of all the Government's environmental tax reforms is provided in Table 6.2 at the end of this chapter. This table shows the impact on the environment of each measure, while Table 6.1 shows how these measures complement other policy initiatives. This allows the Government to monitor progress towards its environmental aims, and apply experience from one area of policy to another. For example, the success of duty differentials to encourage the take up of ultra low sulphur diesel informed the decision to introduce a new duty differential for ultra low sulphur petrol, which will generate further local air quality benefits1. IMPLEMENTING THE ENVIRONMENTAL STRATEGY 6.18 The Government's strategic framework for tackling the environmental costs of economic growth, alongside its economic and social objectives, can be described under three broad headings:
6.19 The remainder of this chapter reviews the progress that the Government has already made towards achieving these goals, and the further steps now being considered. TACKLING CLIMATE CHANGE AND IMPROVING AIR QUALITY
Frameworks for action 6.20 The Government's strategic frameworks for tackling climate change and improving air quality are set out fully in the Climate Change draft UK programme and the Air Quality Strategy for England, Scotland, Wales and Northern Ireland. The first of these documents explains how the Government and the devolved administrations aim to ensure that the UK moves towards a low-carbon economy by putting in place policies that give clear signals about the changes that need to be made. The final programme will be published shortly. The Government's Air Quality Strategy sets targets to be achieved between 2003 and 2008 for eight air pollutants that can have significant effects on health. These targets are derived from standards recommended by independent health experts. 6.21 The Government believes that all sectors should play their part in tackling the UK's environmental problems, and has put in place a wide range of policies that will generate environmental improvements across the UK, including the business, domestic, and transport sectors. Business 6.22 The Government has introduced a number of measures to ensure that the business sector contributes to meeting the UK's climate change targets, including:
The climate change levy 6.23 In 1998, the Government asked Lord Marshall to explore how business and industry might play its part in meeting the UK's emission reduction targets. His report, Economic Instruments and the Business Use of Energy, noted considerable scope for cost effective energy saving and greenhouse gas abatement measures in business. He concluded that there was a role for a tax, alongside negotiated agreements and emissions trading, to deliver these savings.
6.24 Acting on the Marshall recommendations, in Budget 99 the Government announced that it would introduce the climate change levy - payable on the business use of energy - in April 2001. All the revenues will be recycled back to business through:
The negotiated agreements 6.25 The Government's aim in designing the climate change levy has been to deliver effective emissions savings while protecting the competitiveness of UK industry. Eligible energy-intensive industrial sectors exposed to international competition will be able to benefit from an 80 per cent reduction in the rate of the climate change levy, in return for agreeing to and meeting challenging energy efficiency or emissions reduction targets. 6.26 More than 40 energy intensive sectors have been in negotiation with the Government to identify and agree energy efficiency or emissions reduction targets. Negotiations with most of the major sectors have now been completed and most others are expected to be concluded within the next few weeks. The process of signing individual site agreements is now well under way.
Capital allowances 6.27 As part of the climate change levy package, firms will qualify for 100 per cent first year capital allowances for making investments in selected low carbon technologies. The technologies eligible are combined heat and power, boilers, motors, variable speed drives, lighting systems, refrigeration equipment, pipe insulation, and thermal screens. Stringent energy saving criteria must be met in order for a specific product or technology to be included on the list - criteria which resulted from detailed consultation with business. The list of qualifying products will be published by the Department for the Environment, Transport and the Regions shortly. The cost will depend on take-up, and is expected to be around £100 million in 2001-02 (the first year of the scheme), and £140 million in 2002-03.
Energy efficiency fund 6.28 The 2000 Spending Review announced a new £50 million a year energy efficiency fund to promote energy saving and reduce greenhouse gas emissions by providing an additional:
The Carbon Trust 6.29 The Government believes that a new, UK-wide independent company limited by guarantee - called the Carbon Trust - is the most effective way of accelerating the take up of low-carbon technologies, both on the timescale for the Kyoto Protocol and into the long term. The Carbon Trust will take the lead on low carbon technology and innovation in the UK. It's main aim will be to run an integrated programme of measures to support organisations paying the Climate Change levy. The Government is currently working with the devolved administrations, the Research Councils, and the Advisory Committee on Business and the Environment to set up the Trust and ensure that it delivers effectively across the UK.
State aids 6.30 Several aspects of the climate change levy package (most notably discounts for those eligible energy-intensive sectors) will require European state aids clearance, and the appropriate applications have been made. The most recent draft of the new EU state aid guidelines for environmental measures was published in early October. The revised draft is encouraging, particularly in extending the timescale allowable for environmental measures to 10 years. The Government is continuing to work with the Commission to ensure a timely approval of its application.
Emissions trading 6.31 The Government sees a key role for emissions trading as part of the long-term solution to reducing greenhouse gas emissions. Lord Marshall recommended that there should be a business-led initiative to design a "dry run pilot" domestic trading scheme for greenhouse gas emissions. The CBI and Advisory Committee on Business and the Environment then set up the UK Emissions Trading Group (ETG) to take forward the design of a domestic trading scheme. 6.32 There are important advantages from making an early start to emissions trading in the UK. Trading will deliver significant reductions in greenhouse gas emissions and provide a long-term signal to help firms move towards a low-carbon economy. Trading will offer UK business and the City of London vital early experience in advance of the schemes expected at an international level. 6.33 The ETG was supported in the first instance by 25 major UK companies. Support from the business sector has subsequently grown to include over 100 major companies and trade associations, together with academics and environmental organisations. The Government is grateful for the work of the ETG. The 2000 Spending Review announced that £30 million in 2003-04 would be available to provide a financial incentive for firms to take on binding emissions reductions targets. 6.34 A DETR consultation paper published alongside the Pre-Budget Report includes outline proposals and options for the basic rules of the Emissions Trading Scheme. The Government is seeking views on proposals for the Scheme so that the broad framework can be in place. This would allow the first group of firms to sign up to emissions reductions targets in 2001 and begin in trading in 2002. Households 6.35 Encouraging greater energy efficiency in the home is a key part of the Government's policies towards reducing fuel poverty and carbon emissions. A number of measures have been introduced to ensure that households play their part in meeting the UK's emission targets whilst protecting the most vulnerable in society. These include:
VAT on energy saving materials 6.36 From April 2000, the rate of VAT on installations of certain energy saving materials in all homes was reduced from 17.5 per cent to 5 per cent. The energy saving materials that qualify for the reduced rate when installed in homes by a contractor are:
Home Energy Efficiency Scheme 6.37 The Government's New Home Energy Efficiency Scheme (New HEES) was launched in England in June 2000. It is designed to provide comprehensive packages of heating and insulation improvements to ensure that the most vulnerable households (those including people over 60, children, people with disabilities, and chronically sick people) need not risk ill-health due to a cold home. Similar schemes operate in the devolved administrations. In addition, all grant funded supplies made under HEES qualify for the reduced rate of VAT.
Affordable Warmth 6.38 The Government's Affordable Warmth programme has been developed in conjunction with Transco. It aims to facilitate the introduction of new, energy-efficient central heating systems in up to 1 million homes by the end of 2005. The programme will benefit social housing, as well as some private sector homes. Many of those helped are likely to be households with members aged 60 and above, who will benefit from warmer homes and lower fuel bills. There will also be an environmental benefit of reducing emissions of greenhouse gases. Budget 2000 announced plans to introduce capital allowances to underpin the programme. Transport 6.39 A safe, clean, convenient, and efficient transport system is crucial to sustaining economic growth, promoting social inclusion, and safeguarding the environment. Increased economic activity and growing incomes have generated higher demand for personal travel and the transport of goods and services over recent decades. Between 1968 and 1998, passenger travel and freight moved almost doubled. Without the measures outlined in the Government's 10 Year Plan for Transport, road traffic in England (in vehicle kilometres) was forecast to increase by over 20 per cent over the next 10 years. The key challenges faced by the Government are the implications that this growth has for congestion, pollution, and social exclusion.
Congestion 6.40 Increased volumes of car and goods vehicle traffic have led to increasing congestion on the road network, particularly in urban areas. Without the measures set out in the Government's 10 Year Plan for Transport, congestion could grow by 15 per cent across the network as a whole, and by 28 per cent on the inter-urban trunk road network, by 2010. Time delays caused by congestion, both on roads and public transport, represent a substantial direct cost to business and an inconvenience to the public.
Pollution 6.41 The transport sector is the third largest source of greenhouse gas emissions in the UK, with emissions of carbon dioxide (CO2) from this sector accounting for over a fifth of total emissions. Road transport also impacts on air quality, especially in urban areas. It is a significant source of particulates and contributes to emissions of nitrogen oxides, a key air pollutant and precursor to ground-level ozone.
Social exclusion 6.42 Rural communities are typically more dependant on the car. Low population densities often make providing public transport in rural areas relatively uneconomic. Only 36 per cent of households in rural areas are within a 10 minute walk of a regular bus service, compared with 94 per cent in urban areas. As a result, those without use of a car may suffer poor access to employment opportunities and basic services.
Ensuring sustainable transport 6.43 The Government has put in place an effective package of measures to make sure that the transport system supports growth and employment, enhances social inclusion, and protects the environment. These measures include:
Fuel duties 6.44 Fuel duties have played an important role in helping the UK meet its Kyoto target for reductions in greenhouse gas emissions. Increased fuel duties between 1996 and 1999 are estimated to produce carbon savings of between 1 and 2.5 million tonnes by 2010. However, the environmental benefits of higher fuel prices must be balanced with the Government's social and economic objectives. Hence in the November 1999 Pre-Budget Report, the Government decided to move away from the fuel duty escalator introduced by the previous Government in 1993, and announced that decisions on future changes in fuel duty would be taken in the light of environmental, economic and social objectives. 6.45 At the time of the November 1999 Pre-Budget Report, the price of oil was around $22 a barrel. By the time of Budget 2000, it had risen to $30 a barrel. As a result, the Chancellor froze duty in real terms in Budget 2000. The price since Budget 2000 has averaged over $28 a barrel. The Department for Trade and Industry will shortly be publishing a paper which will look at the possible impacts of world oil prices on carbon emissions. 6.46 Taking account of these factors, and of the other measures being taken to tackle climate change, the Government has decided to freeze duties on petrol, diesel, other road fuels, and non-road fuel oils (such as red diesel) in cash terms in Budget 2001. This will lower taxes on petrol and diesel in real terms by around 11/2 pence per litre, to the benefit of business and all motorists. This is likely to cost about £560 million in 2001-02, and has been included in the fiscal projections in Annex B.
Ultra-low sulphur fuels 6.47 Duty differentials have an important role to play in encouraging the use of environmentally-friendly fuels. As explained in an HM Customs and Excise paper published immediately before the Pre-Budget Report, ultra-low sulphur fuels offer significant environmental advantages over conventional fuels. 6.48 Between 1997 and 1999, the introduction and widening of the duty differential in favour of Ultra-Low Sulphur Diesel (ULSD) over conventional diesel encouraged oil companies to supply and produce ULSD and achieved an almost complete conversion of the UK diesel market to ULSD. This cleaner fuel is available to all diesel motorists, and has delivered a number of emissions savings, including an 8 per cent reduction in urban particulate emissions, and has stimulated the development of new pollution-reducing technology.
ULSP 6.49 Ultra-Low Sulphur Petrol (ULSP), which can be used in any car that takes unleaded petrol, potentially offers significant environmental advantages over unleaded petrol, by:
6.50 In order to encourage the use of ULSP, in Budget 2000 the Chancellor announced that he intended to introduce a duty differential of 1 penny per litre in favour of this fuel. The duty reduction came into effect on 1 October 2000 and ULSP is now coming on to the market. Given the environmental benefits of this fuel, the Government wants to encourage and speed up its take up. The Government therefore intends to cut the duty on ULSP and widen its differential with standard unleaded petrol by a further 2 pence per litre in Budget 2001. This would be conditional on the oil companies guaranteeing nationwide access to its environmental benefits. In these circumstances, the duty on ULSP would therefore have been cut by a total of 3 pence per litre since Budget 2000. Reducing the duty on ULSP by this further 2 pence per litre would cost around £385 million in 2001-02.
ULSD 6.51 In these circumstances, the Government believes that it would be appropriate to reconsider the level of duty on the fuel that makes up virtually all diesel sold in the UK, ULSD. Taking account of the role of diesel in determining the transport costs of British business and since ultra-low sulphur fuels offer significant environmental benefits over conventional fuels, the Government would bring the duty rate of ULSD down by 3 pence per litre in Budget 2001 to maintain the existing balance between duty rates on the most commonly available petrol and diesel. This would cost £615 million in 2001-02.
Lead-replacement petrol
6.52 Lead-replacement petrol (LRP) was introduced to replace leaded petrol for those older cars unable to run on unleaded. LRP is currently subject to a 2 pence per litre duty The Government has therefore decided, subject to a full and proper assessment of the environmental implications, to remove the duty premium on lead-replacement petrol. This would cost around £40 million a year.
Road fuel gases 6.53 In Budget 99 the Government cut the duty on Road Fuel Gases by 29 per cent and froze the rate of duty on them in Budget 2000. The UK now has the widest duty differential between road fuel gases and other types of fuel of any country in the EU. Individuals and companies continue to have a significant incentive to convert to road fuel gases, and car manufacturers and fuel suppliers are continuing to respond to increasing demand by increasing the production of gas-powered vehicles and the availability of road fuel gases at filling stations.
Green fuel challenge 6.54 In the longer term, the challenge will be to achieve cleaner, greener road transport. Ultimately it will be for industry to rise to the challenge of developing profitable alternative fuels and related technologies. Therefore, in the run up to Budget 2001, the Government will invite British industry to develop proposals for practical alternative fuels. Following consideration of these proposals the Chancellor will announce major reductions in duty rates for the most promising environmentally-friendly alternative fuels.
VED for cars 6.55 As set out in Budget 2000, VED for cars will be subject to significant changes from March 2001. These changes will ensure that VED more closely reflects the environmental impact of cars. 6.56 The introduction of the four banded graduated VED system for all new cars bought from March 2001 will mean that the level of VED payable will be linked to carbon emission levels and the type of fuel used. The least polluting vehicles will pay up to £70 a year less under this system. This measure will encourage the purchase of:
6.57 Budget 99 introduced a reduced rate of VED for cars with engines up to 1,100 cc. This was designed to encourage people to drive smaller, less polluting cars. Budget 2000 announced that this reduction in the rate would be extended to existing cars with engines up to 1,200 cc in March 2001 and owners of cars with engine sizes from 1,100 cc to 1,200 cc would receive a rebate of up to £55. This will mean that a further 2.2 million cars will benefit. 6.58 The Government has now decided to introduce in Budget 2001, subject to consultation with motoring organisations, a further extension of the "small car" engine capacity threshold to 1,500cc. This change would cut VED by £55 for a further 5 million car owners initially, providing further options for cheaper motoring and meaning that around a third of cars in total will benefit from the lower rate of VED. This would cost around £250 million a year over the next three years. It is intended to backdate this arrangement to November 2000, at a further cost of about £100 million.
Company car tax 6.59 Budget 2000 announced a major revenue-neutral reform of company car taxation. From April 2002, the tax charge on a company car will be based on a percentage of the car's list price graduated according to the level of the car's CO2 emissions measured in grams per kilometre (g/km). The charge will build up from 15 per cent of the car's price to a maximum of 35 per cent - in 1 per cent steps for every 5g/km CO2 above a specified level. Diesel cars will pay a supplement of 3 per cent of the car's price compared to petrol (up to a maximum of 35 per cent) to take account of their higher emission of particulates and pollutants which have adverse impacts on local air quality. The Government will shortly introduce regulations to waive this diesel supplement for clean diesel cars achieving Euro 4 emission standards, which is the cleanest available technology. Drivers and their employers will now face an incentive to choose cars with lower emissions both of carbon dioxide and local air pollutants. 6.60 The Government intends to provide further incentives to choose more environmentally-friendly company cars to compensate for the higher cost of new technologies and encourage the take up of environmentally friendly vehicles:
Authorised mileage rates
6.61 To complement these reforms to company car taxation, the Government intends to restructure the administrative system of authorised mileage rates. This two stage reform will cost the Exchequer £45 million per year by 2002-03. To provide an early incentive to use cleaner cars for business trips, drivers of small cars will benefit from an increase in the current two lower bands to 40 pence for the first 4,000 miles and 25 pence for further miles from April 2001. The rates for the two higher bands will be frozen. 6.62 For the second stage of reform, the Government will be consulting with interested parties on the introduction of a new statutory system of mileage rates from April 2002. The proposed statutory system will provide a greater incentive to drive cleaner vehicles for business trips by offering:
Green travel 6.63 Budget 99 introduced a package of measures to promote green travel plans. The Government will build on these reforms in Budget 2001 by :
Reforming car taxation 6.64 The measures that the Government is announcing and consulting on today will further encourage the use of cleaner fuels and technologies as well as more efficient cars. And for those who have no alternative to car ownership there is an option of using cars that qualify for lower rate of VED. If all the measures, including those that the Government is consulting on, are implemented then the tax on motorists will fall by the equivalent of about 4 pence per litre in real terms.
Improving the transport industry 6.65 Efficient freight transport plays a key role in a sustainable economy. The UK economy - from high technology sectors to agriculture - relies on having efficient transport for raw materials, manufactured components and final products. Freight transport itself needs to be environmentally sustainable. As described above, the Government has created incentives for the haulage industry to switch to less environmentally-damaging ULSD and to fit low-emissions technology. Its 10 Year Plan for Transport will also increase the efficiency of freight transport and reduce its environmental impacts compared with those forecast. 6.66 However, the Government has decided to go further in recognising the need for British industry to be competitive while continuing to protect the environment. It therefore intends to consult on and introduce a series of environmentally-principled measures set out below that will increase the competitiveness of British industry. The total cost of these measures will be about £350 million a year, depending on the detailed arrangements. It will develop these measures to be finalised in Budget 2001 in consultation with the haulage industry, including the Road Haulage Forum, and other interested groups.
VED for lorries 6.67 The Government announced in Budget 98 that it would reform VED for lorries. It commissioned a report from independent experts on the environmental and track damage caused by lorries, that was published in April 2000. It can now announce that it will introduce a reformed system of lorry VED in Budget 2001, subject to consultation on the details of the reform, to reflect better the environmental and track costs of different lorries. The reform is intended to reduce by approximately £300 million a year (equivalent to over 50 per cent) the cost of VED on lorries for British industry. The reduction in VED itself is in accordance with the Government's principle of shifting taxes away from vehicle ownership. The new scheme will continue to reward lorries meeting lower emissions and the Government will consider using new Euro emissions standards in the future. It will also be a simpler, more flexible system. The Government is publishing a consultation document alongside the Pre-Budget Report. 6.68 The Government intends to implement transitional arrangements as a first stage of this reform. Up to £265 million will be available to rebate VED fees for this financial year, in keeping with legal constraints. This will mean cuts of fifty per cent for many of the largest vehicles, worth up to £4,000 each. The Department of the Environment, Transport and the Regions will announce, within a few days of the publication of the Pre-Budget Report, the detailed arrangements for this scheme. The Government intends that the first payments will be made before the end of the year and all payments before the end of January 2001. 6.69 Many other European countries operate "vignette" or "user charge" schemes that charge foreign as well as domestic hauliers. The Government intends to introduce such a scheme in the UK, to ensure that foreign hauliers start to contribute towards the costs of maintaining the UK road network and the environmental costs that they impose. The Government would intend that UK hauliers would face no additional costs as a result of introducing such a scheme. The Government will consult on the operational implications of introducing a user charge scheme, such as a vignette. This scheme should mean that typical UK VED rates would be less than in Sweden and broadly the same as in Germany, the Netherlands, Ireland and Belgium. Furthermore, for those lorries that qualify for the reduced pollution discount, the Government would expect typical UK VED rates to be less than in all these countries and comparable with those in France.
Modernising UK road haulage 6.70 Efficiency and environmental improvements can go hand-in-hand. More efficient routes, more careful driving and making more efficient use of lorries (by for example ensuring that lorries are full for return as well as outward journeys) all improve the efficiency of haulage firms and British industry, but also have environmental benefits. Training programmes can help improve many of these aspects of the industry. The Road Haulage Forum has already initiated a review of training and the Government will help develop this scheme with a view to improving the quality of training, especially for small haulage firms. 6.71 The reformed lorry VED system will offer encouragements to drive newer, cleaner, less-damaging lorries. In addition, the Government intends to set up a £100 million ring-fenced fund to offer further incentives or allowances for scrapping older, more-polluting lorries or encouraging cleaner lorries and technology, to secure environmental benefits and help the haulage industry modernise, consulting industry on the detailed arrangements. 6.72 Together with the reduction in duty in ULSD proposed and the freeze in fuel duties, these measures would represent a reduction for freight transport of around £750 million a year in real terms, equivalent to a reduction of about 8 pence per litre for diesel used in road haulage.
VED for tractors 6.73 VED on tractors will be abolished, subject to consultation, especially with the National Farmers' Union and the police about ensuring that controls over insurance, maintenance and theft remain. This will save farmers in total over £9 million a year, or £40 for every agricultural vehicle and comes on top of a number of other measures that the Government has announced in recent months to support farming. This change will be introduced as soon as possible after Budget 2001 and is consistent with the Government's principle of switching tax away from vehicle ownership.
REGENERATING BRITAIN'S TOWNS AND CITIES 6.74 The Government's vision of an urban renaissance is one of ensuring towns and cities build on their potential and become places where people want to live, work, and spend their leisure time. They must also offer attractive locations for business. A comprehensive strategy for achieving this aim will be set out in the forthcoming Urban White Paper. Chapter 3 sets out proposals for encouraging an enterprise and innovation culture. Towns and cities need to provide an attractive physical environment for enterprise to grow, local communities to become vibrant, and to reduce unsustainable development in the countryside. 6.75 The Urban Task Force Report of June 1999 looked at the causes of decline in English towns and cities and recommended solutions to bring people back into urban neighbourhoods. Amongst the issues it addressed was the legacy of derelict and underused urban land in Britain and the need to bring it back into use as a contribution towards an urban renaissance. The Government whole-heartedly supports the vision set out by the Urban Task Force. A full response will be set out in the Urban White Paper. 6.76 The Government is taking steps to encourage more productive use of brownfield land and empty property, building on the recommendations of the Urban Task Force Report:
6.77 The Government is introducing a package of tax measures worth a cumulative £1 billion over five years to contribute to its objective of regenerating Britain's towns and cities. These will build on the proposals for reducing business rates in disadvantaged areas, introducing a supplementary business rate, and introducing a new local tax re-investment programme, as set out in Modernising Local Government Finance: a Green Paper, which are currently under consultation. The package of measures considered below are aimed at bringing empty properties back in to use, developing brownfield land, and bringing life back in to Britain's urban areas by targeting help at our most disadvantaged communities. This package of measures to help regenerate towns and cities will also reduce the pressures for unnecessary development in Britain's rural areas and represents a substantial response to the recommendations made by the Urban Task Force report.
Stamp duty relief for disadvantaged urban areas 6.78 Budget 2000 announced that the Government was attracted to the idea of offering relief from stamp duty for new developments on brownfield land. Since then the Government has consulted with interested parties on how this measure might be best targeted to help meet the Government's objectives and how it could work in practice. In light of the representations made, the Government intends to target the relief at Britain's most disadvantaged wards. Budget 2001 will introduce a complete exemption from stamp duty for all property transactions in Britain's most disadvantaged communities from April 2001 at a cost of around £100 million a year by 2002-03. This will bring benefits to both households and enterprises in these areas and will encourage the refurbishment and return to use of existing properties as well as new developments. This measure will help stimulate this poorly performing segment of the property market, attracting enterprise and business into local communities. The Government will work with the devolved authorities in the run up to Budget 2001 in identifying the communities that will benefit.
Tax relief for cleaning up contaminated land 6.79 Contaminated sites in Britain can have significant negative impacts on households and businesses in the local area. They are also a wasted resource and can and form a significant barrier to regeneration. The Government intends to encourage the clean up of contaminated land by introducing an accelerated payable tax credit for the costs incurred in cleaning up these sites in Budget 2001. This measure is estimated to cost £30 million in 2001/02 and £55 million in 2002/03. 6.80 Too many properties have been vacant for too long. In England alone, approximately 1.3 million residential and commercial buildings are currently empty. Bringing such vacant and under-utilised properties back into use will help relieve pressure on greenfield development and provide a more diversified use of land at the heart of our towns and cities. To help bring back into use derelict and abandoned property, the Government intends to introduce a £80 million package of measures to encourage property conversions in Budget 2001, including:
Tax relief for Urban Regeneration Companies 6.81 The Urban Taskforce recommended that the Government enable 'arms length' Urban Regeneration Companies (URCs) to co-ordinate and deliver area regeneration projects. The Government has been encouraged by the work of the first three URCs - Liverpool Vision, New East Manchester, and Sheffield One - in developing a clear vision and strategy for key areas of these cities. They work with a range of private and public sector partners with the aim of bringing private investment back into the disadvantaged areas within towns and cities. 6.82 The Government is carefully monitoring and evaluating the process of the 3 pilot companies. The results so far show that the URCs have had considerable success in putting together strategies and helping to pull together the many regeneration initiatives operating in their areas. The Urban White Paper will set out the Government's plans for building on these pilots. In areas where URCs exist they will play a key role in taking forward the City Growth Strategies detailed in Chapter 3. The Government will continue to monitor the URCs carefully, and will consider how a tax relief could help to promote their development.
VAT on listed buildings 6.83 The Government is keen to preserve Britain's rich built heritage for both current and future generations. Places of worship can play a focal point in rural and urban communities. The Government is attracted to the idea of offering a reduced rate of VAT for the repair and maintenance of listed buildings which are used as places of worship, and has written to the European Commission today to make clear its position.
State Aids 6.84 Several aspects of the urban regeneration package will require EU state aids clearance, and the appropriate applications will be made to the European Commission in due course. Progress on implementing this package of measures will be considered in Budget 2001. 6.85 This package of measures, worth £1 billion over five years, forms only one part of the Government's vision of an urban renaissance, which will be set out in the forthcoming Urban White Paper. The Government intends to review the contribution that this package of measures has made to Britain's urban renaissance after five years. PROTECTING BRITAIN'S COUNTRYSIDE 6.86 The Government is committed to reducing the pressures that economic growth puts on the rural environment. The forthcoming Rural White Paper will put in place policies which guide the path of change towards a countryside that is sustainable - economically, environmentally and socially - and strengthen the role farmers play as stewards of the traditional rural landscape. Measures aimed at protecting the country-side include:
The aggregates levy and the Sustainability Fund 6.87 Budget 2000 announced that the aggregates levy would be introduced from April 2002 to address the environmental costs of aggregates extraction and encourage the use of recycled materials. This levy will bring about environmental benefits by making the price of aggregates better reflect their true social and environmental costs, and encouraging the use of alternative materials which would otherwise have to be landfilled, thus reducing the amount of extraction. A recent survey undertaken by the Environment Agency, the results of which are to be published later this year, shows that there is still scope for additional use of construction and demolition wastes. There is also significant scope for using more materials such as china clay waste and colliery spoil which scar the landscape. The levy will also encourage the development of a range of other alternatives including the use of waste glass and tyres in aggregate mixes. 6.88 Budget 2000 announced that the revenues raised from the levy would be matched by a 0.1 percentage point cut in employers' NICs and a new Sustainability Fund aimed at delivering local environmental benefits to areas subject to the environmental costs of aggregates extraction. The Government has recently consulted on how this Fund could best be used, and a summary of responses is published alongside the Pre-Budget Report. On the whole, the consultation was well received. The majority of the options set out in the document were supported, but many respondents emphasised that the Fund should not be used to pay for activities which are properly the site operators responsibility. In light of the representations made, the Government has decided to allocate £35 million to the new Sustainability Fund that will be introduced alongside the aggregates levy in April 2002. In the run up to Budget 2001, the Government will hold discussions with the devolved administrations on whether there is scope for setting up a UK-wide Fund with shared objectives that maximise the environmental benefits of the Fund and complements the objectives of the aggregates levy. Waste 6.89 Waste Strategy 2000: England and Wales sets out the Government's vision for delivering a more sustainable use of resources via increases in reuse, recycling and energy recovery. Targets set by the Landfill Directive apply only to biodegradable waste. To deliver further improvements, the Government and the National Assembly for Wales have established targets to recover value from 40 per cent of all municipal waste by 2005, rising to 67 per cent by 2015. Local authorities will play a major role in meeting these goals and have already been set targets which will nearly triple the recycling and composting of household waste by 2005. 6.90 The Governments's Waste Strategy involves using a number of instruments to reduce waste and increase recycling and composting of all waste streams, thereby diverting waste from landfill. These include:
Landfill tax credit scheme 6.91 The landfill tax credit scheme, which has already raised £300 million for approved projects, was extended in January 2000 to include "research and education on market development for recycled waste" and to make explicit that recycling related research and development was eligible for funding under the scheme. 6.92 Waste Strategy 2000 set out the Government's strategy to use the scheme to deliver sustainable waste management. But so far in 2000, the proportion of credits being allocated to sustainable waste management have been falling. In line with the commitments made in the waste strategy, the Government intends to explore how resources going through the scheme could be better used to increase recycling rates, particularly of household waste.
Capital allowances for oil rigs 6.93 In order to further reduce the amount of demolition waste, the Government has announced that capital allowances will be available for the costs of preparing oil rigs and other offshore oil installations for reuse on the same basis as they are currently available for the costs of demolition. Reuse is the more environmentally friendly option, and this will stop the tax system discriminating against it.
Pesticides 6.94 The Government is committed to minimising the adverse environmental impact of pesticides use, consistent with adequate crop protection. The statutory approval system and the activities of the Pesticides Forum have made important contributions to this objective. 6.95 In March 1999, DETR published a report by ECOTEC consultants, Design of a tax or charge scheme for pesticides. This showed that a carefully designed tax or charge scheme could be used to address the environmental impacts of pesticide use. As the Government stated in the November 1999 Pre-Budget Report, it believes that a tax could, in conjunction with other measures, be a useful tool in addressing the environmental impacts of pesticides. 6.96 Since the November 1999 Pre-Budget Report, the Government has been exploring with the agrochemical industry whether its objectives could be better achieved through a partnership approach. As part of this process, the Crop Protection Association (CPA) published a formal set of voluntary proposals in April 2000. The Government invited interested parties to comment on the proposed measures and their effectiveness in tackling the environmental impacts of pesticide use. A summary of the responses are available on the DETR web page www.environment.detr.gov.uk. 6.97 The Government agrees with the concerns raised by respondents to the recent consultation exercise that the measures proposed by the CPA in April were not sufficient. The Government therefore welcomes the revised proposals submitted by the CPA in October and the involvement of other stakeholders, but believes that the proposed measures still fail to meet a number of concerns raised. The Government would like to see further improvements to this package and will be holding discussions with the CPA on developing a more substantial package in the run up to Budget 2001.
Water
6.98 In April 2000, the Government published a consultation paper, seeking views on ENVIRONMENTAL APPRAISAL OF POLICY MEASURES 6.99 The Government is committed to appraising the environmental impact of all proposed Budget measures and evaluating them once they are introduced. The Government has refined its appraisal tables in the light of suggestions from the Environmental Audit Committee (EAC) and others. Table 6.1 shows how the Government's policies fit in to the overall framework of the Government's environmental strategy. Table 6.2 describes the environmental effect of all recent Budget measures which have a significant effect on the environment or which serve an environmental purpose. 6.100 There are large uncertainties involved in trying to estimate behavioural responses to Budget measures. It is not always easy to quantify the individual environmental effects of individual Government policies, especially when they are introduced as part of a package of measures. Wherever possible, an attempt has been made to separate out the effects of individual measures, as in the case of company car tax, but it should be noted that these estimates are subject to large margins of error. Estimates are not included where the precise details of a policy measure are not yet finalised. 6.101 The Government has made available documentation about the environmental appraisal methodology underlying its estimates including those set out in the draft climate change programme, the associated paper on the derivation of carbon savings, the DTI working paper on emissions projections, the memorandum to the EAC on the environmental appraisal of the fuel duty escalator and an Inland Revenue paper providing an "Integrated Impact Assessment" of the company car tax reform.
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