Budget 2002: Environmental management measures

The Chancellor's ongoing programme of "green" taxation continues with the following developments:

Waste: As for each year since 1999, the standard rate of landfill tax increases by £1 per tonne, although it is anticipated that this will need to be increased significantly in the medium term. In addition, a consultation will take place during 2002 to examine the use of taxation to enhance the competitiveness of recycled oils.

The Aggregates Levy: Under discussion since 1997, this was confirmed as effective from 1 April 2002.

Pesticides: No measures introduced but confirmation that a tax on pesticides remains a real option for the future.

Business energy: To promote efficiency, complete exemption from the climate change levy for good quality combined heat and power or coal mine methane subject to EU state aids approval.

Enhanced capital allowances: Five new technologies to be added to the current eight energy-saving technologies benefiting from enhanced capital allowances and extension of the relief to expenditure on assets used for leasing, letting or hiring.

Vehicles and fuel: A number of other significant measures have been introduced or revised relating to the incentives for cleaner, more efficient vehicles (new reduced band of excise duty), cleaner fuels (fuel duty differential for sulphur free petrol) and the modernising of road haulage taxation (distance-based road user charge for lorries). Green taxation has become a way of life in the UK over the past few years and the Chancellor's enthusiasm for such measures does not seem to be waning. Businesses will therefore need to start factoring in these considerations when planning and budgeting. Since a true green tax is designed to encourage behavioural change, rather than simply to raise revenue, it generally has an in-built avoidance mechanism – i.e., behave in the desired manner and the consequences of the tax will be lessened or negated as per the new exemption for climate change levy above. Of course, this theory can be a fallacy in practice – if your business is aggregates extraction, then the only way to change your "undesirable" behaviour is to close down this activity altogether!

So for many, the only practicable course of action is to make allowances for these new tax charges. At the same time, we can at least be grateful that we do not have to suffer some of the more extreme environmental measures appearing across the EU, such as Ireland's tax on plastic bags.
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