April 17 2002
(See
the full text of the Chancellor's speech here!)
WORKING WITH BUSINESS AND CONSUMERS TO PROTECT THE ENVIRONMENT
Chancellor Gordon Brown today announced further important
steps in
the Government's strategy to protect the environment, continuing
to
work with business and consumers.
Commenting on the announcements, the Financial Secretary, Paul
Boateng said:
"We are today showing that environmental protection can be achieved
by working with business and consumers, harnessing the power
of
markets rather than working against them. Economic efficiency
and
environmental protection can go hand in hand. Wherever we can
make
markets and the economy work more effectively and in turn secure
environmental benefits we will do so.
"The launch of the greenhouse gas emissions trading scheme this
April
- the first and only economy-wide scheme in the world - is the
most
graphic example yet. But it is just one of many steps taken
in
recent years towards a more sustainable future - economically,
socially and environmentally. We are using combinations of taxes
and
other economic instruments such as permit trading schemes to
deliver
environmental results more efficiently than extra regulation
would
achieve - and we are today committing ourselves to investigate
where
these approaches can be applied to further environmental issues."
Building on its recent Budgets, the Government today announced
a
series of targeted measures to help to deliver environmental
benefits.
- Business energy efficiency: the Government has announced further
support for business energy efficiency through the climate change
levy (CCL) and business tax system. Complete exemption from
the CCL
will be introduced for electricity generated by good quality
combined
heat and power (CHP) or coal mine methane, subject to EU state
aids
approval. Five new groups of energy-saving technologies will
join
the eight technologies already benefiting from enhanced capital
allowances (ECAs) against tax. Furthermore, the availability
of ECAs
for these environmental technologies will be extended to equipment
for leasing. These steps build on the introduction of the CCL
and
associated measures in April 2001 (forecast to reduce emissions
by 5
million tonnes of carbon a year by 2010) and the launch of the
emissions trading scheme in April 2002 (in which business committed
to save 1.1 million tonnes of carbon a year by 2006). CCL rates
are
frozen;
- Cleaner, more efficient vehicles: as part of its strategy
for
Powering Future Vehicles, the Government has today introduced
a new
reduced band of vehicle excise duty (VED) for the most efficient,
"low-carbon" cars. Taken alongside its announcement that it
will
freeze VED for all other cars, this will mean a difference of
#100 a
year in VED between the most and least polluting cars. The Government
has also today announced further support for the most efficient
cars
in the form of enhanced capital allowances (ECAs), following
the
Green Technology Challenge. These measures complement changes
to VED
introduced in March 2001 and the reform of company car taxation
in
April 2002.
- Cleaner fuels for the future: new support for cleaner fuels
includes an announcement that the Government intends to introduce
a
fuel duty differential for sulphur-free petrol and diesel in
2003 and
the launch of a second competition for pilot projects researching
future fuels to qualify for fuel duty reductions or exemptions
under
the Green Fuel Challenge. Subject to the outcome of a pilot
project
under the first round of that competition, the Government intends
to
exempt hydrogen from fuel duty for a limited period to encourage
its
further development and early take-up. The Government will also
provide enhanced capital allowances (ECAs) for installing compressed
natural gas (CNG) and hydrogen fuel infrastructure. And, as
announced in Budget 2001, in recognition of its environmental
benefits, biodiesel will shortly benefit from a new, lower rate
of
duty, 20 pence per litre less than ultra-low sulphur diesel.
- Modernising road haulage taxation: the Government has today
announced that it aims to introduce a distance-based road-user
charge
for lorries by 2005 or 2006. In recognition that the UK haulage
industry already contributes towards these costs, the Government
will
introduce off-setting tax cuts for the haulage industry when
the new
charge is introduced. More details will be outlined very shortly.
This follows the Government's announcement in the November 2000
Pre-
Budget Report of its interest in lorry road-user charging and
the
wide- ranging simplified and environmentally based reforms to
lorry
VED in December 2001. To provide stability, Budget 2002 freezes
VED
for lorries.
Other progress and measures announced today by the Government
include:
- fuel duty: freezing the rates of duty on road fuels, responding
to the recent high and volatile level of world oil prices;
- oils fraud: announcing a comprehensive strategy to tackle
the
rising problem of oils fraud, including the introduction of
an
approval scheme designed to tighten controls on the distribution
network for rebated fuel;
- motorcycles: announcing reforms to motorcycle VED reflecting
changes to the motorcycle fleet and the benefits of motorcycles
compared with cars, especially for commuting, to take effect
for
licences starting from May 2002, and benefit around 600,000
motorcycle users;
- vans: announcing a new, reduced VED rate for more
environmentally- friendly vans which meet the euro-IV emissions
standard from March 2003, while freezing VED for other vans;
- buses: to ensure that the support of over #1 billion a year
to
buses contributes most effectively to the Government's transport
objectives and improving bus services, the Government will review
existing support mechanisms, and in particular will review the
fuel
duty rebate for buses to assess whether it provides effective
support
for buses in a way that is consistent with the Government's
objectives. This review will take place as part of Spending
Review
2002 and the current review of the 10-Year Transport Plan. VED
for
buses is frozen;
- employer-subsidised bus services: announcing that employees
receiving free or discounted travel on buses subsidised by their
employers will not pay tax on it as a benefit in kind;
- fuel for employees: announcing a revenue-neutral reform of
the
fuel scale charge, under which employees pay tax on fuel received
free from their employers for personal use, to make it reflect
from
2003-04 the environmental efficiency of their car rather than
its
engine size, in line with the company car tax system;
- air passenger duty (APD): freezing the current rates of APD
and,
from 1 November 2002, extending the scope of the reduced rates
that
currently apply to European Economic Area destinations, to include
Switzerland and countries applying to join the European Union.
The
Government will be considering the role of economic instruments
to
deal with the environmental impacts of aviation as part of the
Aviation White Paper;
- waste: building on the annual #1 per tonne increases in landfill
tax, including in April 2002, the Government anticipates that
the
standard rate of landfill tax will need to be increased significantly
in the medium term as part of the mix of future policy measures.
Future decisions on landfill tax and the case for a tax on
incineration will be informed by the Performance and Innovation
Unit
(PIU) waste project findings. The Government has also announced
that
it will consult during 2002 about the tax treatment of waste
oil used
as a fuel, as part of its commitment, outlined in Waste Strategy
2000, to examine ways of enhancing the competitiveness of
regenerated, or recycled, oils;
- aggregates levy: confirming that the aggregates levy was
introduced from 1 April 2002, with all revenues from the introduction
of the levy recycled back to business via a cut in employers'
NICs
and the #35m Sustainability Fund;
- pesticides: reporting back on the progress to date of the
voluntary agreement to reduce the environmental impact of pesticides,
while confirming that a tax on pesticides remains a real option
for
the future;
- improvements in the public space: taking forward changes to
the
operation of VED to ensure that car-owners remain liable for
their
cars, to help crack down on abandoned vehicles and to assist
more
generally in tackling crime.
The Government also announced that it will review the potential
to
extend the use of economic instruments for environmental purposes,
including to:
- address environmental issues, such as nutrient pollution,
associated with agriculture, helping to provide a level playing
field
for less environmentally harmful forms of farming;
- improve household energy efficiency, while tackling fuel poverty
and maintaining its commitment not to introduce new taxes on
the use
of energy by households.
The Government will also develop with stakeholders its strategy
to
tackle environmental issues using economic instruments where
appropriate over the coming months.
DETAILS
Climate change levy
1. The exemption for electricity from good quality combined
heat and
power (CHP) systems will mean that all the energy used and produced
by such systems will now be exempt from the levy. This recognises
the
environmental benefits of CHP and will provide a further incentive
for business to use this technology. Similarly, the exemption
for
electricity produced from coal mine methane will encourage the
beneficial use of this form of energy which otherwise leads
to
damaging emissions of methane gas to the atmosphere. These exemptions
are subject to EU state aid approval.
2. The Government welcomes the European Commission's recent
decision
that the exemption from the levy for fuel used in dual-use processes
is a logical and integral part of the levy. The Government has
considered options for extending relief to certain secondary
processes which compete with processes which benefit from the
dual-use or non-fuel use exemptions, and has taken up this idea
with
the Commission. The Government welcomes the Commission's decision
that such an exemption would be a compatible state aid, and
will now
be evaluating these options further.
Business energy efficiency
3. Enhanced capital allowances (ECAs) for spending on designated
energy-saving plant and machinery were introduced in 2001 as
part of
the climate change package to help businesses reduce their energy
needs. From today, they are extended so that lessors may claim
ECAs
on qualifying energy-saving assets for leasing.
4. Proposals for enhanced capital allowances are announced today
for
five further groups of energy-saving technologies, as part of
the
follow-up to the Green Technology Challenge. The new qualifying
technologies are:
- heat pumps;
- radiant and warm air heaters;
- solar heaters;
- energy-efficient refrigeration equipment, including display
cabinets; and
- compressor equipment.
Work to define precise performance standards is continuing and,
subject to EU state aids approval, the Government anticipates
that
the technology groups will be added to the list of qualifying
technologies during the Summer
Emissions trading scheme
5. The Government's emissions trading scheme was launched on
2 April
2002. Thirty-four organisations successfully bid to join the
scheme
in an auction for permits held on 11-12 March 2002. In addition,
nearly 6,000 companies with targets under the climate change
levy
negotiated agreements will be able to engage in trading to meet
their
targets at the end of their first target periods later this
year.
Approved emissions reduction projects will also be able to sell
credits into the scheme. Further information is available in
DEFRA
news release 99/02, published on 13 March 2002.
Fuel duty
6. The rates of duty on road fuels and non-road fuel oils (such
as
red diesel) are frozen, reducing duty on the main road fuels
in real
terms by around 1 pence per litre.
7. As announced in Budget 2001, the Government will introduce
a new
rate of duty for biodiesel of 25.82 pence per litre, 20 pence
per
litre below the ultra-low sulphur diesel (ULSD) rate, to take
effect
from Royal Assent.
8. In 2003, the Government intends to introduce a duty incentive
to
encourage the production and use of sulphur-free fuels.
9. Subject to the outcome of a pilot project, the Government
intends
to exempt hydrogen used as a road fuel from fuel duty in the
future
for a limited period to encourage its further development and
early
take-up.
Oils fraud
10. Like other forms of indirect tax fraud, the use of illicit
fuel
in road vehicles drains government revenue, funds other forms
of
organised crime, and undermines honest businesses. The abuse
of
rebated fuels, which tend to have higher sulphur contents than
ordinary fuels, also threatens the Government's environmental
objectives and damages vehicle engines.
11. Following consultation in the November 2001 Pre-Budget Report,
the Government today announced a comprehensive strategy to tackle
the
rising problem of oils fraud, comprising:
- the introduction of a new approval scheme designed to tighten
controls on the distribution network for rebated fuels, such
as 'red
diesel' intended for off-road use and kerosene intended for
home
heating, helping Customs to prevent and detect their misuse;
- the introduction of tighter controls on the use of duty-free
oils
in industrial processes (known as 'tied oils');
- the introduction of a new, EU-wide 'Euromarker' to be added
to
rebated fuels, designed to make it easier to detect vehicles
using
rebated fuel purchased abroad for illicit use on the UK's roads;
and
- the release of additional resources this year to enable the
effective enforcement of these new controls, including the deployment
of over increased staff and investment in new technology to
support
the detection and investigation of oils fraud.
Enhanced capital allowances for low emission cars
12. From today, all businesses can claim 100 per cent enhanced
capital allowances on their investments in new cars emitting
up to
120g/km of carbon dioxide; and vehicle refuelling infrastructure
for
compressed natural gas or hydrogen fuel. These allowances will
be
reviewed over time.
Free fuel for employees
13. From April 2003 the new fuel scale charge will be linked
to the
Carbon dioxide emissions of the car, including the same discounts
and
premiums as in the company car tax system. There will also be
a
proportionate reduction if an employee receiving free fuel decides
to
opt out part way through the year.
Employer-subsidised bus services
14. Budget 2002 introduces a benefit-in-kind tax exemption for
employees receiving free or discounted travel on buses subsidised
by
their employers.
VED
15. Budget 2002 freezes VED rates on all vehicles.
16. For new licenses commencing from May 2002, the Government
is
introducing a new 'AA' VED band for low carbon cars emitting
up to
120g/km of carbon dioxide and first registered from March 2001.
This
will reduce the VED rate for these cars by #30 and increases
the
incentive to choose the very cleanest cars to up to #100. Cars
that
will qualify for the new reduced band include the most efficient
versions of the Ford Fiesta, Vauxhall Astra and Peugeot 206,
as well
as the hybrid electric-diesel Honda Insight and Toyota Prius.
17. From March 2003, new vans which meet the new euro IV emissions
standard will qualify for a reduced VED rate of #105.
18. For licences commencing from May 2002, there are new rates
for
motorcycle VED as follows:
Engine size VED rate
Up to 150 cc £15
151 - 400 cc £30
401 - 600 cc £45
Above 600 cc £60
19. VED licences used by the motorcycle trade will be reduced
to #60.
20. For licences commencing from May 2002, the new rates for
tricycle
VED will be #15 for vehicles up to 150 cc, and #60 for all others.
21. For licenses commencing from June 2002, all lorries registered
on
the islands of Harris and Lewis, and Orkney and Shetland and
which
travel only 5 kilometres from their disembarkation point on
the UK
mainland, will have the option to pay the small islands goods
vehicle
VED rate of #165.
22. Finance Bill 2002 will include provisions for a new offence
to
ensure that, in future, the registered keeper is liable for
an
unlicensed vehicle.
23. From Royal Assent of the Finance Bill, the DVLA will be
able to
use information contained on the databases of the Department
of Work
and Pensions and the Ministry of Defence to enable the efficient
licensing for those disabled motorists who qualify for a VED
exemption.
24. Finance Bill 2002 contains provisions to correct an anomaly
in
the Vehicle Excise Registration Act to ensure that the engine
capacity for all vehicles is calculated on the correct basis.
Lorry road-user charging
25. Budget 2002 announces the Government's decision to introduce
a
distance-based lorry road-user charge following its consultation
launched in the Pre-Budget Report. This will make foreign lorry
operators pay towards the costs they impose in the UK and, as
it will
be complemented by offsetting tax reductions when it is introduced,
will not increase costs for the UK haulage industry. The Government
aims to introduce the new charge in 2005 or 2006. Further details
will be outlined shortly.
Air passenger duty
26. From 1 November 2002 the European Economic Area for the
purpose
of setting APD rates will be redefined to include all EU applicant
countries (including Malta) and Switzerland. Flights to the
following
countries (as well as those within the UK) will now qualify
for the
EEA rate: Austria, Belgium, Bulgaria, Cyprus, Czech Republic,
Denmark, Estonia, Finland, France, Germany, Greece, Hungary,
Iceland,
Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherland,
Norway, Poland, Portugal, Romania, Slovakia, Slovenia, Spain,
Sweden,
Switzerland and Turkey.
Aggregates levy
27. The aggregates levy was introduced as planned on 1 April
2002.
Part of the revenue from the levy is being used for the new
#35
million per year Sustainability Fund. DEFRA are responsible
for the
Fund in England, while the Devolved Administrations are responsible
for the Fund in Scotland, Wales and Northern Ireland.
Waste
28. The increase in the standard rate of landfill tax to #13
per
tonne on 1 April 2002 was part of the planned annual increase
in the
tax from 2000 to 2004. The Cabinet Office Performance and Innovation
Unit is currently undertaking a review of waste policy and future
waste taxation will be considered in the light of the PIU's
conclusions.
29. The Government is currently consulting on the future of
the
landfill tax credit scheme (LTCS). The consultation seeks views
both
on options for funding mechanisms and on priorities for support.
Responses to this consultation will be considered in the context
of
Spending Review 2002.
NOTES FOR EDITORS
Further details of the Government's strategy to tackle indirect
tax
fraud are available in press notice C&E 1.Copies of the
PBR paper
Tackling Indirect Tax Fraud are available from the HM Treasury
and HM
Customs and Excise websites (addresses below).
HM TREASURY PRESS OFFICE
Non-media enquiries: 020 7270 4558
INLAND REVENUE PRESS OFFICE
Non-media enquiries: 020 7944 3000
(office hours only)
GOVERNMENT DEPARTMENT INTERNET SITES
Further information and all published documents relating to
Budget
2002 may be found on the Internet at the following addresses:
HM Treasury www.hm-treasury.gov.uk
Inland Revenue www.inlandrevenue.gov.uk
HM Customs and Excise www.hmce.gov.uk
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