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HM Treasury 4 - 9 November 1999

CHANCELLOR ANNOUNCES FURTHER PROGRESS ON MEETING THE UK'S ENVIRONMENTAL COMMITMENTS

Further measures towards integrating the effective protection of the environment and the prudent use of natural resources into the heart of economic decision making in Government were announced today by the Chancellor Gordon Brown.

The Chancellor said:

"The Government wants to ensure that economic growth takes place in a way which ensures the effective protection of the environment and the prudent use of natural resources. Our strategy is to ensure that the environment is protected for current and future generations."

Climate change levy

The Chancellor announced further details on the design of the climate change levy today, following an extensive consultation exercise.

The environmental effectiveness of the levy will be increased by:

an exemption from the levy for electricity generated from 'new' renewable sources of energy and 'good quality' combined heat and power plants; and

a trebling of support for energy efficiency measures under the levy package to around £150m in 2001-02, to allow for the introduction of a system of enhanced capital allowances for energy saving investments.

To help protect competitiveness, the overall size of the levy will be reduced from £1.75bn to £1bn and there will be an 80 per cent discount for energy intensive sectors that sign energy efficiency agreements. The levy will be revenue neutral for the private sector since all the revenues raised will be recycled to business via a 0.3 percentage point cut in employers' National Insurance Contributions and the additional support for energy efficiency schemes.

Overall, the levy package is expected to deliver bigger carbon savings than those envisaged at Budget time.

Fuel duties

The Chancellor said today that the fuel duty escalator has played an important role. Increases in fuel duties since 1996 are estimated to produce carbon savings of between 1 and 2.5 million tonnes of carbon by 2010.

The Government is committed to meeting its environmental targets. The time has now come to review the way that any increases in the fuel duty are determined. The Chancellor has, therefore, decided that the appropriate level of fuel duties will be set on a Budget by Budget basis, taking account of the Government's economic and social objectives as well as the UK's environmental commitments.

The Chancellor has decided that revenues from any real terms increases in fuel duties will, in future, go straight in to a ring-fenced fund for improving public transport and modernising the road network.

Land use and pesticides

Further progress was announced by the Chancellor:

The Government welcomes the enhanced package of voluntary measures from the Quarry Products Association, but is concerned that it does not go far enough to address the environmental impacts of quarrying. The Government is minded to introduce an aggregates tax unless further negotiation with the quarrying industry can deliver an improved package of voluntary measures;

Further discussions will be held with the agrochemical industry prior to the next Budget, on ways to meet the Government's objectives to minimise the environmental impacts of pesticide use; and

The forthcoming Urban White Paper will consider the 105 recommendations in the Lord Rogers' Urban Task Force report, aimed at reversing the legacy of neglect and decline that has scarred our towns and cities.

NOTES TO EDITORS

1. Budget 99 contained the biggest ever package of tax reforms to help protect the environment. This built on the principles set out in the Statement of Intent on environmental taxation in July 1997, where it was stated that the Government would explore the scope for using the tax system to deliver environmental objectives, and that over time the Government would aim to shift the burden of taxation from 'goods' such as work, saving and investments to 'bads' such as pollution.

2. For further details on the climate change levy see HM Treasury news release 7.

3. Since 1997, the Government has maintained and increased the fuel duty escalator introduced by the previous Government in 1993. This has given a clear signal to motorists and manufacturers to design more fuel efficient vehicles, avoid unnecessary journeys and consider alternatives to the car.

4. In August 1998, DETR commissioned London Economics to carry out research to value the external environmental costs and benefits associated with the supply of aggregates for the UK construction industry using Contingent Valuation surveys and building on the first phase of this project, which was published in April 1998. The second phase report was published in July 1999.

5. It was announced in Budget 99 that the Government accepted that there was a case in principle for a tax on the extraction of aggregates, but that before coming to a final decision, the Government would first pursue the possibility of an enhanced package of voluntary measures with the quarrying industry. The Quarry Products Association submitted a revised package on 21 July 1999.

6. DETR commissioned ECOTEC to conduct a research project to design a possible tax on pesticides, and investigate its potential impact on manufacturers, farmers and the environment. This research was published on 24 March, and was followed by a three month consultation. A summary of the consultation responses has been published today on the Treasury website. Hard copies are available from HM Treasury Public Enquiries Unit on 0171 270 4558.

HM TREASURY PRESS OFFICE

If you have access to the Internet you can find this news release and other Treasury material on http://www.hm-treasury.gov.uk


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