Signal failure

Brown disappoints on green tax

Not much sign of Gordon Brown getting with the programme of the Stern Review [see ‘Stern Stuff ’ ]. His pre-budget report does precious little to mobilise the tax system in the battle with climate change.

He has doubled air passenger duty, netting £1 billion a year for the Treasury at the expense of the UK’s fastest growing source of greenhouse gases. Cheap short haul tickets will be taxed at £10, and premier class long haul passengers will pay an £80 levy. But this blunt instrument is no incentive to airlines to improve efficiency. Nor are the proceeds earmarked to fund alternative travel options.

Road fuel tax went up - but only by 1.25p, in line with inflation. So no return to the “escalator”, Brown’s once bold plan to ratchet it up in real terms. No top rate hike in vehicle excise duty, either - or at least no decision until the actual budget in March.

On the home front, one welcome but modest initiative - a stamp duty exemption if you buy a new house with a zero carbon rating. There’s money to help lift another 300,000 households out of fuel poverty, by funding free insulation and central heating. No new grants or incentives for microgen or energy efficiency, however - and no VAT cuts for green DIY or refurbishments.

The wild card? Carbon capture - a demonstration project gets a subsidy, and there’s money for joint research with Norway on sequestering CO2 underground.

The verdict? On a scale from feeble to heroic, not far up. The tax system is still less ‘green’ than it was after Brown’s first-ever budget… in 1997.  - Roger East

12 January 2007

Roger East