Select Committee on Environmental Audit Second Report


SECOND REPORT

The Environmental Audit Committee has agreed to the following Report:—

PRE-BUDGET 2000: FUELLING THE DEBATE

Summary of recommendations and conclusions[1]


(a)The Committee has found no evidence that the Government has carried out a comprehensive environmental appraisal of its Pre-Budget measures which would even satisfy its own guidance in this area. For example, the Pre-Budget Report does not refer to any assessment of:
  
—  the expected effect of the duty cuts on car use;
  
—  the local air quality benefits of Ultra Low Sulphur Petrol (ULSP) against the additional carbon dioxide emissions generated in its production and how far these will be counteracted by more fuel efficient engines in the longer term;
  
—  how far the new VED rates for lorries reflect their environmental costs. (Paragraph 81)
  
(b)Moreover, the Committee is not satisfied that the Government took its Pre-Budget decisions on fuel duty, Vehicle Excise Duty (VED), and company car taxation on the basis of a comprehensive appraisal of the trade-offs between its social, economic and environmental objectives. It is therefore difficult for the Committee to be convinced that the Pre-Budget transport measures will have the overall, positive environmental impact which the Government assumes. (Paragraph 82)
  
(c)With so little evidence presented, we can only rest on the Government's earlier views that higher fuel prices have curbed demand for fuel, helped decouple levels of traffic and economic growth and are the best way known to encourage fuel efficiency. The relevant Pre-Budget press notice states that "the environmental benefits of higher fuel prices must be balanced with the Government's social and economic objectives".[2] However, this balance has never been set out. (Paragraph 24)
  
(d)The Committee is disappointed that the Government only highlighted the revenue-raising aspects of fuel duty during the recent fuel crisis and neglected to make the link to its role in meeting the Government's environmental objectives. (Paragraph 31)
  
(e)The Committee welcomes the Financial Secretary's assurance that the Treasury would reconsider the need for a fuel duty escalator in the light of a future sharp fall in the price of crude oil. If this assurance were formalised it would salvage some form of long-term pricing signal. This should be coupled with a commitment to developing public transport and alternative fuels. (Paragraph 38)
  
(f)The Committee is unconvinced by the Government's justification for further reducing the duty on ULSD ie to maintain the differential between diesel and petrol. The Committee can therefore only conclude that this move was politically motivated to address the concerns of the hauliers. Our impression is strengthened by the Government's recent decision to match any reduction in duty on ULSP that is announced in the Budget with a reduction in duty on unleaded petrol for a temporary period until 14 June 2001. (Paragraph 54)
  
(g)The Committee concludes that the Government's approach to Vehicle Excise Duty needs further work. The proposals for VED for lorries will better gear the tax to the relative environmental costs of different lorries. However, the total environmental impact of the tax will be greatly reduced if, as announced, it is cut by half overall. The economic rationale for this seems obscure in the light of the Environment, Transport and Regional Affairs Committee report and the DTI's evidence to the Trade and Industry Committee. In environmental terms, the move flies in the face of the estimates of the National Economic Research Associates (NERA) report and, therefore, the Polluter Pays Principle. (Paragraph 62)
  
(h)The Committee welcomes the changes to company car taxation and the arrangements for the business use of private cars which will reduce the incentive for unnecessary motoring. The Committee recommends that the impacts of these new incentives (social, environmental and economic) are regularly monitored and reviewed to assess how far they are changing behaviour in line with the Government's policy objectives. (Paragraph 68)
  
(i)Most witnesses agreed on the key stages of evolution that the motor car will undergo in the future: ultra clean vehicles by 2005, breaking the 100 mile per gallon barrier, and then to carbon-free emission—with hydrogen as the front runner. The oil and motor industry seems to be agreed that hydrogen is likely to be the fuel of the future.[3] However, there is no real consensus on how the UK might get to a hydrogen economy, what type of hydrogen systems should be used (and therefore the supply infrastructures that will be required), and what, if any, interim steps are necessary. (Paragraph 86)
  
(j)The Committee welcomes the Chancellor's Green Fuel Challenge as positive, fiscal incentive to bring new fuels to market. The "well to wheel" approach should help to ensure that the environmental and social trade-offs are clear for whichever fuels are chosen. (Paragraph 98)
  
(k)The Committee notes the Environment Minister's assurance that the Green Fuel Challenge is not formally restricted to fuels relying on existing infrastructures. However, the Committee recommends that the Government seeks a suitable forum to debate and develop a long-term strategy for alternatives to fossil fuels in road transport and the policy changes which would be needed to realise such a strategy. (Paragraph 103)
  
(l)The Committee recommends that the Government encourages the Advisory Committee on Business and the Environment (ACBE) to consider how the work of bodies such as the Cleaner Vehicles Task Force, Foresight Vehicle Programme and Carbon Trust, supported by the assessments resulting from the Green Fuels Challenge, could be co-ordinated to this end in the course of its work to develop a new framework for promoting the low carbon economy. This framework needs to take account of tax and spending decisions designed to encourage the use of hydrogen and other forms of transport with lower carbon emissions. (Paragraph 104)
  
(m)The Government's response to us on VAT and energy efficiency is not persuasive nor even credible. Having accepted the principle of a reduced rate of VAT on the installation of energy saving materials, the Government should now extend the rather limited list of eligible technologies to include materials and equipment with significant energy-saving features—as is the case with such installations under its own schemes. (Paragraph 125)
  
(n)We recommend that the Chancellor allows reference to this Report—a 'tag'—to appear on the Order Paper on Budget Day. (Paragraph 106)
  
(o)We regret the decision not to accept Lord Rogers' recommendation for the harmonisation of VAT on new build and residential conversions and we recommend that the Government looks at this again. (Paragraph 130)
  
(p)The Treasury's environmental appraisal of its budget measures appears to be little more than a summary list of the impacts of its environmental measures—even at that there are some significant presentational flaws. (Paragraph 138)
  
(q)The Treasury should improve the presentation of its environmental appraisals as set out below:
  
—  setting out a clear protocol for when and how measures are included and assessed to avoid accusations of data manipulation;
  
—  drawing distinctions between overall impact and changes made (ie where benefits remain but have been reduced);
  
—  setting out full and clear references to supporting data and analyses; and
  
—  distinguishing between measures in terms of the stage of policy development that they have reached (consultation, announcement or implementation). (Paragraph 139)
  
(r)We have seen no evidence of any action on the commitment to evaluate environmental measures annually. We recommend that the Treasury's list of green budget measures start to include information on what has been achieved (outturn against estimate) for those measures that have been implemented. At the very least reference should be made to where such data is published. (Paragraph 140)
  
(s)The Treasury should demonstrate, perhaps initially as a one-off exercise for the next Pre-Budget Report, how it appraised the environmental implications of all its proposals. This would increase the confidence of outside observers, including Parliament, in this process. (Paragraph 141)




1  This is a summary only and does not replicate all of the recommendation and conclusions, or their full text which are contained in the main body of the report Back

2  HM Treasury/DETR Press Notice 1, A fair deal for transport and the Environment, 8 November 2000 Back

3  Q283 Back


 
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