Memorandum from Green Alliance
1. The Pre-Budget Report (PBR) could be
seen to represent a missed opportunity for the Treasury to take
forward the environmental agenda. A considerable proportion of
the PBR is allocated to a section on Protecting the Environment.
Previous Budgets and Pre-Budget Reports have also introduced significant
new packages of environmental taxes and other polices. These are,
of course, to be welcomed, but it is the failure to cross reference
the content of Protecting the Environment to other sections
of the PBR that concerns us. Environmental measures are presented
in this and previous reports mainly as a means of mitigating the
negative environmental impacts of economic activity, restricting
things people would otherwise do, and imposing costs for businesses
2. Raising the cost of "bads"
is only one aspect of environmental taxation. The other, more
positive aspect is stimulating "goods" and creating
opportunities for entirely new ways of doing thingsthings
that protect the environment and cost less. Given the emphasis
placed on improving resource productivity in recent speeches by
the Prime Minster and the Trade and Industry Secretary, Stephen
Byers, and in the DTI Sustainable Development Strategy launched
in October, it might have been expected that the positive, opportunity-creating
aspects of the environment would have been a major focus for the
Pre-Budget Report: stimulating progress towards a modern competitive
and resource-efficient economy.
3. Most disappointing is that there is,
in fact, already a section of the PBR devoted to productivity:
Meeting the Productivity Challenge. This discusses the
factors conventionally considered to affect productivity, namely
competition, enterprise, investment and skills. Implicit in these
factors and the discussion of them is the role that improved resource
productivity could play in reducing costs and stimulating new
processes and technologies, which would improve the competitiveness
of the UK economy. However, no explicit reference is made to this
opportunity. If it were made explicit, it would have significant
implications for the introduction of a new wave of environmental
taxation and other measures to stimulate resource productivity.
4. The accompanying document to the PBR,
Productivity in the UK: The Evidence and the Government's Approach
reinforces the view that that the role that environmental productivity
and taxation could play in a modern competitive economy has been
overlooked by the Treasury.
5. Certain sections of the PBR suggest that
the Treasury has not yet fully accepted, or perhaps been introduced
to the concept of the environment as an integral part of a modern
economya means of reducing costs, compatible with both
increased economic growth and reduced environmental impact. However,
the Climate Change Levy and associated negotiated agreements indicate
a more sophisticated understanding of the potential of policy
packages to improve the environmental productivity which combine
an environmental tax, a means to reduce the tax liability through
commitments to increased efficiency and other measures such as
capital allowances on environmental investment.
6. We believe that stimulating resource
productivity is a challenge that the Treasury must now address.
The importance of resource productivity must be put at the heart
of Treasury thinking. We hope the Environmental Audit Committee
in their questioning of Stephen Timms MP will probe his Department's
understanding of the potential for a resource efficient and competitive
7. Presenting environmental taxation as
a positive tool to increase productivity, competitiveness and
create opportunities and jobs is likely to be easier to present
to the public than environmental taxes, like the fuel duty, that
discourage motor transport without actively stimulating alternatives.
On this issue Treasury must provide leadership and justification
of the need for environmental taxation. This needs to be applied
to both new opportunities and existing measures if the need for
them is to be understood and accepted by the public. In other
policy areas such as education and health, Government will justify
policy and the hard choices that have to be made and this now
needs to be done for environment policy.
8. Finally, in respect to assessing the
environmental impact of the proposals in the PBR a qualitative
assessment is given of environmental measures proposed and the
means by which emissions levels are derived are referred to in
section 6.99-6.101. However, no quantitative assessment of the
implications of the proposals in the PBR is given, for example,
the environmental implications of the changes to fuel duty arrangements.
It would be hoped that these figures would be calculated during
the development of the PBR to assess the environmental impact
of changes and new policy and could therefore easily be incorporated
into the PBR.