As anticipated, Gordon Brown's eleventh and surely final budget simply tinkered round the edges of the government's environmental strategy offering little of real substance in the way of green incentives or penalties for a business community increasingly keen to make the transition to sustainable business models.
Though there was an expansion in tax credits for firms investing in environmental equipment, a small increase in green taxes, and more money for environmentally-sustainable projects in the developing world, it was all of an order of magnitude that is unlikely to have a dramatic impact on businesses' environmental strategies or consumers' behaviour in the near future.
Experts agreed that the budget represented an "opportunity missed" arguing it offered little for firms committed to environmental action. Echoing the sentiments of many business leaders, John Manning of PwC said "it was disappointing not to hear more from the Chancellor about the long-term environmental strategy," adding that instead we got "only a series of small tinkerings to the tax system".
Those firms looking for guidance, support and incentives for their green business projects were left largely disappointed. As Chris Gabriel of IT services firm Logicalis observed: "It is clearly up to us, as business leaders, to implement the necessary changes ourselves [but] a little encouragement - in the form of tax incentives, grants and hand-holding for those feeling understandably daunted by the enormity of the problem – could have gone a long way."
In fact, while the Chancellor's income tax reforms were famously deemed "fiscally neutral" his environmental strategy appeared to lean more towards the stick than the carrot.
As widely touted road tax on the most polluting cars soared to £300 this year with a further rise to £400 scheduled for next year, while the levy on Band B cars was reduced from £50 to just £35 a year.
Brown deserves plaudits for introducing the progressive band-based system in the first place, but it is hard to imagine the £400 levy discouraging many people buying high end cars that cost over £40,000. Patrick King of accountancy firm MacIntyre Hudson said that the move may have some impact on the resale value of gas-guzzling cars, but predicted it would do little to stop people buying them in the first place. "Instead of an effective, behaviour changing 'green' tax, this is a carefully calculated move to raise more revenue without unduly upsetting the majority of the electorate," he said.
Arguably the two most effective green taxes at changing behaviour – fuel duty and the climate change levy (CCL) for businesses – only received increases in line with inflation, prompting renewed criticism that Brown is unwilling to take the tough decisions required to help the UK meet its carbon emission reduction targets.
"Despite Gordon Brown's 'polluter pays' principle, the Budget's inflation-only increase in the Climate Change Levy (CCL) on businesses will fall short of enabling the UK to meet its target of reducing carbon emissions by 60 per cent before 2050," argued David Elwen, director at IT consultancy DMW. "Considering the CCL was introduced to encourage businesses to reduce their contribution to carbon emissions, it is surprising that there is a lack of hard hitting action to encourage businesses to adopt green policies in the budget."
Green tax hikes on landfill and aggregates, however, will exceed inflation with the cost of sending waste to landfill to climb by £8 a year to 2011 and tax on aggregates to climb from £1.60 to £1.95 a tonne. But Frank Sangster of KPMG was unconvinced that such changes would really change businesses' behaviour and stimulate them to limit waste and use more recycled building material.
Taken as whole, these measures increase the proportion of green taxes from 7.3 percent of the total tax burden to around 7.5 percent. It is hardly a revolutionary move for a government that has just proposed setting itself legally binding targets to reduce carbon emissions, particularly when green taxes accounted for nearly 10 percent of the total back in 1999.
However, if the changes to green taxes are miniscule any increases in green incentives, subsidies and grants are equally minute.
The most significant change for businesses was Brown's promise of a "new environmental tax credit worth £40 million a year to business" and a pledge that "advice support and incentives available from Business Links and the Regional Development Agencies to small businesses for environmental improvement, innovation and energy audits will rise from this year's £140 million to, in the coming year, £240 million".
Like the new £50m fund to protect African rainforests, the £800m Environmental Transformation Fund for international development efforts, the news the UK is to build a full scale carbon capture pilot project, the commissioning of a report on innovations in green cars, the increase in money for pensioners insulating their homes, and the extra £6m in grants for domestic renewable energy installations designed to address the funding shortfall at the DTI, these new incentives are to be welcomed. But experts agree that every one of these measures is on a scale that is insufficient to genuinely accelerate our progress towards a low carbon economy.
Looking at the small print some tax experts are also unconvinced about the impact the extra £40m in environmental tax credits will have.
The new scheme is basically an extension of the Enhanced Capital Allowances (ECA) scheme that allows firms to claim back tax based on investments in energy and water efficient plant such as air conditioners or heating systems. Under this scheme firms could only claim back tax if they were making any profits, meaning that loss making firms missed out on the incentive to invest in energy efficient plant.
According a Treasury spokesman the new scheme, starting in 2008, will rectify this and ensure the ECA is also available in a payable version for loss making firms at a rate of 24 percent - meaning that "if you invest £100 in approved equipment you get £24 back". Whether firms making a loss are likely to be embarking on green investment programmes is a moot point.
There was also a promise that there would be a review into the effectiveness of the ECA, which has been roundly criticised for taking too long to get new products qualified as energy efficient, being difficult to claim and poorly publicised. However, given how long such consultation exercises take and how many criticisms there have been of the scheme it is unlikely to be improved any time soon.
Moreover, Patrick King of MacIntyre Hudson is fearful that changes elsewhere in the budget to capital allowances may have undermined the ECA's effectiveness still further. Under new plans small firms will be able to claim 110 percent tax relief for new capital investment up to £50,000. However, as King explains, you could previously only get 100 percent relief on energy efficient investments and as a result of the changes small businesses now have no extra incentive to go for the greener option when looking at any piece of plant costing less than £50,000. "They are more likely to go for the cheapest option," he warned.
So is it time to finally out the prime-minister-in-waiting as the environment's worst enemy? A man who can deliver plenty of green rhetoric but balks at the prospect of real action?
Not just yet. He has certainly done far less than he could, but there are also hints that a more positive environmental regulatory and tax framework is beginning to take shape.
Brown's confirmation that he is pushing for a European-wide reduction in the rate of VAT on energy saving and environmentally friendly products in the home from 17.5 per cent to 5 per cent is a clear sign that he understands he must make it easier for people to buy green technologies.
He could, of course, have reduced the rate to 15 percent yesterday without having to gain the support of his EU counterparts and he could have increased the rate on the most inefficient products, effectively forcing them out of the marketplace without having to resort to bans. But it is a major step in the right direction and a sign the chancellor hasn't completely lost sight of the idea that green perks can work.
Also it is hard to judge anything the government does on the edges of its environmental strategy until we see precisely what it plans for the next incarnation of the European emissions trading scheme.
When and if he makes it to Number 10 this is likely to be one of the first issues in Brown's in-box. If he sticks to his guns and develops an economy-wide, fiercely-policed trading scheme then he may well deliver the price on carbon emissions that many economists argue is the best mechanism for driving green investments.
It'll be a major surprise if he manages to pull it off without the scheme being watered down, but if Brown does succeed in implementing such a trading mechanism then his previous failure to provide a strong framework for environmental action may well be forgotten.
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