Motorists and air travellers bore the brunt of a modest package of green tax rises as Gordon Brown countered a Conservative push on the environment with action against polluters.
In the wake of the Stern report on climate change, which called for urgent action to tackle global warming and cut carbon emissions, the chancellor adopted a carrot and stick approach, penalising air travel but offering tax breaks for energy-efficient homes.
His decision to double air passenger duty, which will push up the rate on cheap short-haul flights to £10 and for long-haul premium class travellers to £80 from February, will raise £1bn a year for the Treasury.
Drivers of gas-guzzling vehicles and hauliers were hit as he put up fuel duties for the first time since September 2003, taking his cue from a fall in international oil prices. Petrol duty rose in line with inflation – by 1.25p per litre – at midnight.
But Mr Brown decided against reintroducing the fuel duty escalator, a bigger revenue raiser which would have brought above-inflation rises in duty. And there was an 11th hour reprieve on vehicle excise duty.
Treasury insiders said the chancellor, who just two weeks ago was preparing to raise the highest rate of VED for the most polluting cars including some four-wheel drive vehicles, had deferred a decision on this until the Budget.
The unexpected retreat followed late lobbying by motor manufacturers, who responded angrily when details of the green tax package were leaked to the Financial Times. The industry said the top rate band of VED, introduced in March, was already having an effect and there had been a sharp fall in 4x4 sales in November. “It’s not been closed off,” added one official.
Mr Brown believes action to cut emissions from aviation is essential and is arguing for its swift inclusion in the European Union’s emissions trading scheme. But airlines attacked the increase in air passenger duty, rejecting the Treasury’s calculations that it reduce carbon emissions by 300,000 tonnes a year. Mike Rutler of Flybe questioned whether it would have any effect on the environment.
“Air passenger duty is the poll tax of the skies and will hit ordinary travellers hardest of all” he said. The chancellor should stop “playing political football” with aviation.
Mr Brown sought to offer a balanced package. New homes that did not contribute to global warming would be exempt from stamp duty, he said, to encourage greener design features such as insulation and solar panels.
However, environmental groups criticised the chancellor for failing to take stronger action.
Simon Bullock, economics campaigner at Friends of the Earth, asked: “Where was the help for ordinary people wanting to go green? Where was the vision and the leadership?” He said that the pre-Budget report contained “very little to make it cheaper or easier for people” to adopt environmental technology such as renewable energy or to make their homes more energy efficient.
Though Mr Brown promised that all new homes would have to be carbon-neutral in ten years, this was “unambitious”, said Mr Bullock. Grants for homeowners would be more effective.
And John Sauven, director of Greenpeace, slammed the subsidies announced for a demonstration plant for carbon capture and storage technology, where emissions are collected from power stations and injected into rock formations under the seabed.
“It’s a shamefully expensive, inefficient and outdated technology that wastes two-thirds of the energy generated,” he said.