DARLING MUST STAND FIRM ON FUEL TAX - Friends of the Earth Scotland

DARLING MUST STAND FIRM ON FUEL TAX

11 March 2008
Topics: Politics

…and deliver on sustainable budget promise

The Chancellor must stand firm on his plans to increase fuel duty next month, Friends of the Earth Scotland said today. The environmental campaign group is also calling on Alistair Darling to put tackling climate change at the heart of Wednesday’s Budget. In December the Chancellor promised that "sustainability will be at the heart of the next Budget. This is not an optional extra. It is essential for all our futures."

FoES Chief Executive, Duncan McLaren, said:

“The Chancellor must stand firm on fuel duty. Motoring is now cheaper than it was ten years ago, traffic levels are rising, and urgent action is needed to tackle transport’s contribution to climate change. Road transport is responsible for nearly a quarter of UK carbon dioxide emissions. The Government must do more to persuade and enable people to drive cleaner cars and use less polluting alternatives, such as public transport, walking and cycling.

“The threat of climate change is real and urgent. It’s time for the Chancellor to put sustainability at the centre of the budget, and begin a major green tax shift to stimulate innovation whilst making it easier for people to go green and cut emissions. If Westminster is not willing to take the lead, they should devolve fiscal powers to Scotland to allow for green tax reform.”

Next … Friends of the Earth proposals for a green budget …

Friends of the Earth has proposed a range of measures that the Chancellor should adopt, including:

Make it easier and cheaper for people to go green. Measures should include:

* A stamp duty rebate for people installing renewable technologies or energy efficiency measures in their homes

* Funds for local tax rebates for people installing energy efficiency measures in their homes

* A feed-in-tariff guaranteeing a premium price for renewable electricity generated in people's homes

* A £1 billion fund for the Low Carbon Buildings Programme, with a 50 per cent grant to help householders with the up-front capital costs of installing renewable technologies

* Car purchase tax on new cars to accelerate the shift to buying low carbon vehicles

* Create an immediate £5 billion Climate Change super-fund to kickstart a much more effective programme to eliminate fuel poverty.

* Announce a £10 billion tax shift programme raising taxes on pollution and cutting taxes on income, jobs and people.

* Set a new 'green' Golden Rule for Government. Monitored at Budget time, the Government should ensure that the sum of all its policies will keep the UK within its carbon budget.

* Boost low-carbon innovation in the UK by toughening up the UK's implementation of the EU Emissions Trading Scheme (EUETS).

Next: briefing – why the Chancellor should stand firm on fuel duty…

Fuel tax and climate change: why the Government should stand firm
Fuel tax is due to go up by 2 pence per litre in April. Groups representing hauliers and motorists are calling on the Government to abandon the proposed rise, saying it will damage the haulage industry and the wider economy. This briefing explains why Friends of the Earth Scotland believes the Government should stand firm.
What is the Government intending to do?

The 2007 Budget announced slightly above-inflation increases in fuel tax, to be implemented in October 2007 (a rise of 2 pence per litre), April 2008 (2 pence per litre) and April 2009 (1.84 pence per litre). These were the first above-inflation increases in fuel duty since the fuel tax protests in autumn 2000.

Why should the Government stand firm?

Motoring is cheaper in real terms than 10 years ago. The cost of motoring fell by 10% in real terms (after accounting for growth in household income) between 1997 and mid-2007. Over the same period, rail and bus fares rose in real terms by 6% and 13% respectively.

Urgent action is needed to tackle transport’s contribution to climate change

Road transport emissions of carbon dioxide continue to rise and account for nearly 22% of total UK emissions. The Government’s Climate Change Programme shows that fuel duty escalator was one of its most effective measures for reducing carbon dioxide emissions in the late 1990s. The latest science shows that the UK must cut its emissions by at least 80% to play its share in avoiding dangerous climate change.

Tax as a share of fuel prices has fallen in recent years

The share of fuel prices accounted for by fuel duty and VAT fell between 1997 and 2007 (the last year for which figures are available). And according to the Treasury, fuel duty rates will be 11% lower in real terms in 2010 than in 1999, even after the three planned tax rises.

Abandoning the proposed fuel tax rise will not solve the haulage industry’s problems

The impact of fuel prices is magnified by over-capacity in the industry, which means that firms cut margins to win business, and have less scope to pass on increased costs to clients.

Abandoning the increase would cost the UK almost £500 million

Friends of the Earth estimates that abandoning April’s tax rise would reduce tax revenue by £490 million. This represents:

·         The wages of 20,000 police, nurses or teachers; or

·         Three-quarters of the Government’s fuel poverty programme; or

·         More than half the Government’s flood protection budget.

It would damage the Government’s environmental credentials

The Chancellor announced three year’s worth of road duty rates to give businesses certainty – certainty is one of the key requirements for businesses to invest in low carbon technologies. If the new Chancellor was to back-track on this announcement within a year it would strongly signal that the Government flip-flops at the first sign of trouble, and has no long-term commitment to tackling climate change properly. This would be highly damaging to the chances of businesses investing in technologies to cut carbon or use fuel more efficiently.

What should be done?

Make new cars more fuel-efficient

UK and EU interventions could improve the fuel efficiency of the average car sold in the UK from around 41mpg in 2007 to around 56mpg in 2012 (for petrol cars), saving the average motorist over £300 a year in fuel at current costs. The car industry should also focus advertising on fuel-efficient cars rather than gas-guzzlers.

Introduce a purchase tax on gas-guzzlers

The Government should encourage the shift to fuel-efficient low-carbon cars by introducing a purchase tax on gas-guzzlers in the Budget. The revenue could be used to provide ‘fee-bates’ to encourage drivers to choose the most fuel-efficient vehicles by providing a grant towards the purchase price.

Introduce fuel duty increases as part of a tax shift

The Government should deliver on its 1997 commitment to shift the burden of taxation off people and jobs, and onto pollution. The Government should announce that increases in taxes on fuel duty and other pollution should be matched by cuts in taxes on jobs and income. Opinion polling shows this would be politically popular – one recent poll finding 77 percent support, with only 9 percent opposition*.

Specific help for rural areas

The Government should investigate and deliver ways to help poorer households in rural areas who are among the hardest-hit by fuel tax rises, such as targeted local tax rebates. It must also do more to protect vital services in rural areas such as shops, post offices, schools and health centres so that people do not have to travel so far to get to the places they need to go. There must also be more support for public transport in rural areas to help provide an alternative to car use.

More investment in alternatives to car use

More money must be invested in better public transport and making cycling and walking safer and easier to encourage people to use their cars less. Much of this could be found by cutting road-building expenditure: for instance the Government is currently spending £5 billion widening the M1 between Luton and Leeds.

Help companies cut fuel use

The Government should help companies cut their fuel use, including by:

·     Substantially increasing support for the DfT’s SAFED (Safe and Fuel Efficient Drivers) training course for van and lorry drivers which helps cut fuel use by an average of 14%. SAFED has trained just 7,800 drivers to date. At the current rate of funding, training all van drivers in the UK would take over 400 years.

·     Increasing funding for the Energy Savings Trust’s green fleet consultancy. This provides tailored advice for companies with fleets of over 50 vehicles in England and Wales and 20 vehicles in Scotland. This advice helps businesses save up to 10% in fuel use.

* greenfiscal.pmhclients.com/images/uploads/GFCPressReleaseWEB12Nov2007.pdf

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