Environmental Audit Committee

5 March 2008

Announcement of Publication

Treasury must stop ghettoising environmental issues and start acting with urgency

The Environmental Audit Committee today calls for a rise in green taxes, saying the Treasury must respond to climate change on the scale and with the urgency recommended in the Stern review.

In its report, The 2007 Pre-Budget Report and Comprehensive Spending Review: An environmental analysis, the Committee says there is little sign the Treasury has taken on board the recommendations made in the Stern Review on the Economics of Climate Change in its approach to the environment.

Green taxes have continued to decline, while increases in spending on the environment have fallen far short of the step-change in investment required. In particular, the Treasury is failing to accelerate funding for vital technologies such as Carbon Capture and Storage. Overall, environmental issues appear to be ghettoised, with no clear departmental targets for reducing emissions.

The Chairman of the Committee, Tim Yeo MP, said:

"The Stern Review€”published by the Treasury in late 2006€”helped to change the debate on the economics of climate change. But the Treasury is itself not responding with the scale and urgency that Stern recommended. This is even more remiss, given that since the Stern Review was published the science on climate change has continued to harden, with global emissions rising faster than projected.

"On green taxation, the Treasury has continually demonstrated a lack of ambition and imagination. Green taxes, as a proportion of all taxes, peaked in 1999 at 9.7% and have declined ever since, falling to 7.3% in 2006. The Treasury must be bolder in raising green taxes once again. It should sell these tax rises to the public by linking them to increased spending on the environment and reductions in other taxes.

"The Treasury has increased funding for carbon-reduction technology, including backing a pilot Carbon Capture and Storage power plant. But this still falls painfully short of the scale of investment that is required to decarbonise the economy. The Treasury must introduce a financial mechanism to ensure that Carbon Capture and Storage technology is fitted to all new fossil fuel power stations in the UK."

The Committee also concludes that:

€ The Treasury was right to reform Air Passenger Duty into a levy per flight rather than per passenger (as the Committee has recommended in its last two reports on green taxes). However, tax on aviation should be increased, and a new rate introduced for 'very long-haul' destinations.

€ Given that road transport emissions in England went up by 12% between 1997 and 2006, the forthcoming Budget is a test of the Treasury's environmental credibility: it must not defer its planned rises in fuel duty.

€ The Government's new Shadow Price of Carbon is seriously flawed, and should be raised. By setting a relatively low carbon price, the Government is making it more likely that carbon-intensive policies and projects will be approved.

€ The £370m announced in the Pre-Budget Report for low carbon technology in the UK is very welcome, but only £170m is new money, and the overall funding is being spread very thin. The £800m announced for environmental projects in the developing world is all new money and very impressive€”but needs to be covered by rigorous sustainability criteria.

€ The Government should be more transparent about where UK emissions figures incorporate the purchase of carbon credits, and should do more to verify that the purchase of carbon credits by the UK is funding genuine emissions reductions elsewhere in the world.

€ The new Public Service Agreement on climate change is too diffuse, with no clear departmental targets for reducing emissions, and reduced emphasis overall on reducing emissions from the UK (this is only one of six performance indicators).

Notes for Editors:

The report published today by the Environmental Audit Committee (EAC) is its Third Report of Session 2007-08, The 2007 Pre-Budget Report and Comprehensive Spending Review: An environmental analysis, HC 149. Details of all the Committee's press releases together with its Reports, oral evidence and other publications, are available on the Committee's website at: www.parliament.uk/eacom

The 2007 Pre-Budget Report and Comprehensive Spending Review: An environmental analysis is the eleventh in a series of reports that the Environmental Audit Committee has published on the Treasury's annual Pre-Budget Report. Pre-Budget Reports were introduced in 1997. At the time, the Treasury described their purpose as providing "a progress report on what the Government has achieved so far and the next stage of policy reforms on which the Government will be consulting in the run up to the next Budget. The key objective of the Pre-Budget Report is to launch a national debate on important economic issues, including taxation and spending, seeking the views of people and business in all regions of the country and all sectors of the economy to inform the Government's Budget decisions."

Copies of the report will be available in hard copy from 11am on 5 March 2008; and can be obtained from TSO outlets and from the Parliamentary Bookshop, 12 Bridge Street, Parliament Square, London SW1A 2JX (020 7219 3890) by quoting House of Commons No 149. The text of the Report will also be available from approximately 3.30pm onwards on its publication date, on the Committee's Internet homepage: www.parliament.uk/eacom

For further information on the report, or to bid to interview the Chairman, journalists may phone the Committee's press officer, Laura Kibby, on 020 7219 0718.

Next week, on Monday 10 March, the Committee will publish a major report on one of the Treasury's key green taxes, the Climate Change Levy. Copies of the report, Reducing Carbon Emissions from UK Business: The role of the Climate Change Levy and Agreements, will be available to the press under embargo from Friday 7 March. Further details are available from the Committee's website: www.parliament.uk/eacom