Pre-Budget Report 2002: Taxes to Protect the Environment

The Chancellor's Pre-Budget Report on 27 November confirmed the Government's commitment to protect the environment for future generations. A detailed paper, Tax and the Environment: Using Economic Instruments, was published setting out the approach and proposed strategy to help tackle environmental problems. A brief summary of the details is set out below.

- A consultation is to be held on a proposal to increase landfill tax on a new tax escalator starting in 2005-06 by £3 per tonne in each year, up to a medium to long-term maximum rate of £35 per tonne. The current rate of the tax is £13 per tonne and increases are by £1 per tonne per year.

The aim of this measure is to discourage disposal of waste by way of landfill and encourage recycling.

- Reform of the Landfill Tax Credit Scheme to ensure that funds raised under the scheme are used to promote effective waste management and yet continue to support local community environmental projects. The reform will address the problems in the current scheme of administrative complexity, and increase the efforts made to improve waste management.

- New proposals to allow local authorities to keep extra funds gained from new business rates. This will allow authorities to spend on their priorities.

- Promotion of "cleaner" fuels - for example, a new lower rate of duty on bioethanol and biodiesel, at 20p per litre lower than low-sulphur petrol and diesel. This is to encourage use and help support the additional cost of producing such fuels.

- Further moves to introduce a lorry road-user charge - which will apply to all lorry operators who use UK roads, whatever their nationality.

- Consultation with the aviation industry about the use of taxes and other economic measures to encourage the industry to take greater account of the impact of aviation on global warming, air and noise pollution.

- Further use of tax incentives to promote household energy efficiency products.

- Further moves to address the impact on the environment of agriculture, for example, the adverse effects of pesticides.

- Investigation into the possibility of  a tax on waste incineration.

- More investment into aiming to reduce the volume of waste, recycling and waste management.

It is hoped that these measures will contribute to the UK reducing greenhouse gas emissions to the Government's target level of 20% below 1990 levels by 2010. This is a higher target than the levels set by the Kyoto Protocol, which was 12.5% lower to be achieved between 2008-2012.
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