March 2008
Green Budget Darling?
Another year, another budget. But this was a first for Alistair Darling, and a prime opportunity to reveal what kind of Chancellor he is going to be.
Vaunted by his supporters as the country’s first truly "green" Chancellor with big plans for the UK and the environment, expectation was high. Yet minutes after delivering the 2008 Budget, Mr Darling found himself under criticism from business and environmentalists alike. One may consider this to be a rite of passage for any Chancellor, and a refrain as familiar as the need to urgently tackle climate change or face catastrophic consequences. However, this time the critics differed only in the delivery of their attacks, not in the substance. Indeed, that is what many consider the latest budget to be missing: real substance; all the more crucial in the face of an economic downturn and continued business uncertainty over government environmental policy.
KPMG’s analysis of the measures announced made for bleak reading at the Treasury. Emissions reductions would range at about 5% by 2015, which represents not only a failure to make dramatic changes, but does not even put the UK on course to meet it’s obligations under the European Commission’s proposals to cut emissions by 20% in the same timeframe.
Frank Sangster, head of KPMG’s environmental tax and incentives group, noted: "It is still very unclear from a [consumer] and corporate perspective how the vast majority of carbon reduction will be delivered." Nonetheless, the Chancellor must give a "carbon budget" next year, detailing the government’s plans on achieving the UK’s emissions targets and its planned course until 2012, and it is hoped that further details may be elicited from this.
The green targets set by Mr Darling were as follows
- An extension of Britain’s commitment to reduce carbon emissions by 2050. Up from 60% to 80%
- An increase in the number of corporate carbon credits qualifying for public auction. Up from 7% to 100%
- Tripling the use of renewable energy in the next 7 years.
- A 2009 "plastic bag tax" to cut circulation by up to 12billion.
- A £26million boost to the "Green Homes Service" to help people cut carbon and fuel bills.
- Air Travel duty to be levied "per plane", not "per passenger", with a 10% increase next year
- New bands of vehicle excise duty from 2009 to reward drivers of the cleanest cars.
- A 2p-a-litre increase in fuel duty on road vehicles (effective from October).
In spite of these measures raising £1.6bn in extra revenue in the short term, the proportion of tax revenue received through green taxes is set to fall by 0.1% to 6.91% in the fiscal year 2008-2009. Tony Juniper, Director of Friends of the Earth criticised the Chancellor for "promis[ing] to put sustainability at the heart of today’s announcement, but he has merely tinkered in the margins. He should have [made] it cheaper and easier for people to go green." Those in business derided the budget as dealing with "emotive but not really big issue[s]". Retailers and manufacturers called for better leadership from the government over environmental issues, and more certainty so as to enable them to plan for the future – a call that has been repeated numerous times.
The announcement of an "ambition" for all new homes to have zero carbon impact from 2016 evidenced the perceived lack of substance in the 2008 budget, with Mr Darling facing further embarrassment as Greenpeace head, John Sauven, accused him of "dropping the ball on climate change", where he should have "channeled cash into clean technologies, energy efficiency projects and support for the renewables industry."
Yet the Chancellor’s biggest failure as seen by the environmental lobby is his unwillingness to adopt hypothecation as the answer to the UK’s climate change dilemma. This means the dedication of revenues from green taxes for re-investment into green schemes, much as the money generated from TV licensing is ploughed straight back into the BBC. It is this principle that environmentalists are advocating, but to buy into such a scheme would mean a massive loss of power by the Treasury and subject it to the possibility of judicial review regarding the "green money" it generated. It seems to be very much a case of "meet the new boss, same as the old boss."
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