Autumn Budget 2018: Chancellor commits to new plastic tax, rules out 'latte levy'
BREAKING: Chancellor Philip Hammond has today (29 October) pledged to introduce a new tax on plastic packaging in his 2018 Autumn Budget, which also includes a carbon price freeze and multi-million-pound investment for business energy efficiency.
In his 75-minute speech at the House of Commons this afternoon, the Chancellor gave little reference to the green economy, with the much-anticipated plastic tax providing the headline announcement for the green economy.
But the Chancellor's plastics pledge was somewhat undermined by announcements to freeze tax increases on petrol and diesel fuel duty, along with the confirmation of further tax breaks for the North Sea oil and gas industry.
The renewable energy industry, meanwhile, has been quick to express "bitter disappointment" at the fact that there has been no progress on requests for fairer tax treatment around the uptake of solar and battery storage. And calls for a "latte levy" on disposable cups were also rejected.
Read the full green business reaction to the 2018 Budget here.
Budget 2018: The key green policy announcements
Plastic packaging tax
The UK will “lead the world in the crusade to tackle plastic waste", the Chancellor boldly declared towards the end of his speech. To help achieve its aims, the Government will “introduce a new tax on the manufacture and import of plastic packaging which contains less than 30% recycled plastic… transforming the economics of sustainable packaging.” A consultation on the detail and implementation timetable will follow, Hammond confirmed.
Disposable cup levy (ruled out)
The 106-page Budget document pledges to reform the Packaging Producer Responsibility System, but a widely called for levy on disposable cups has been ruled out by the Government, which does not believe it is "effective in encouraging widespread reuse", following a consultation on the issue.
It should be noted that this announcement has been welcomed as positive news by some parts of the industry. Recyclable packaging manufacturer Frugalpac, for instance, has reacted by claiming that a blanket levy "would not have encouraged the widespread use of recyclable packaging and would have been counterproductive in the long-term, leading to the importation of vast quantities of cheaper cups from China".
Carbon price frozen
The Budget confirms that the carbon price rate will remain frozen at £18/tCO2 for 2020-21. From 2021-22, the Government will seek to reduce the CPS rate if the total carbon price (EU ETS + UK Carbon Price) remains high.
In the event of a ‘no deal’ Brexit scenario, the UK would introduce a Carbon Emissions Tax applying to all stationary installations currently participating in the EU ETS from 1 April 2019. A rate of £16 would apply to each tonne of CO2 emitted above an installation’s emissions allowance.
New measures to tackle waste
Hammond's Red Book reveals that £20m will be provided to support measures to tackle plactics and boost recycling. Specifically, £10m will be set aside for more for plastics R&D, and £10m to pioneer innovative approaches to boosting recycling and reducing litter, such as smart bins.
Meanwhile, a Government pilot scheme will make available up to £10m to the Environment Agency to work with partners to clear the worst abandoned waste sites that blight local communities. On the food waste aspect, ministers will give £15m to charities and others to distribute this surplus food.
Climate Change Levy on gas usage raised
Hammond announced that the Government has raised the Climate Change Levy (CCL) that businesses pay on gas usage to match the same rate as the tax rate on electricity. A gas levy will be raised so that it reaches 60% of the electricity main rate by 2021-22, while the electricity rate will be lowered in 2020-21 and 2021-22.
A new business energy efficiency fund
The Government has pledged to introduce an Industrial Energy Transformation Fund to support energy-intensive companies to make the low-carbon shift and to reduce their bills through increased energy efficiency. The Fund will be backed by £315m of investment.
Ministers will also consult on creating a new Business Energy Efficiency Scheme, focused on smaller businesses. Over time, the document claims, "this scheme will reduce business energy bills and carbon emissions".
Fuel duty frozen again
During his Budget speech, Hammon declared: “We will freeze fuel duties for the ninth successive year… bringing the total saving to the average car driver to over £1,000 … and to the average van driver to over £2,500.” Experts point to a 4% rise in traffic since 2011 as a direct result of the failure to increase fuel duty, with emissions growing by an extra 4.5 million tonnes during this period.
Funding for air pollution and flood management
The Budget allocates £13m to tackle risks from floods and climate change, through pilot projects to ensure property owners have the best information on protecting their homes, and expanding the flood warning system to an additional 62,000 at-risk properties. In addition, £20m extra funding will be given support more local authorities to meet their air quality obligations.
Investment in tree-planting
As part of the Tories’ 2015 manifesto pledge to plant 11 million trees in England, Hammond announced today that £60m will be sent on planting millions more trees across the country. This includes a £10m project to plant new street and urban trees, with the leftover £50m being used to purchase credits from landowners who plant woodland, it has been confirmed.
Green campaigners have lamented the size of investment provided in comparison to the £30bn put aside for roads. “Reforesting Britain needs root-and-branch reforms in the way we use land, not just a few million quid for saplings,” said Friends of the Earth campaign director Liz Hutchins shortly after the announcement.
Oil and gas taxes maintained
Hammond pledged to keep tax rates at their current level, reiterating a pledge to make the UK a world-leading export on decommissioning oil rigs. The UK will consult on making Scotland a decommissioning expert hub, according to the document.
Other notable points from the 2018 Budget:
- £1.6bn of new investments will go towards supporting the UK’s Industrial Strategy.
- Enhanced Capital Allowances (ECAs) are being extended for electric vehicle charge points to 2023.
- The Aggregates Levy rates will be frozen for 2019-20.
- A new National Infrastructure Commission (NIC) study on how to improve the climate resilience of the UK’s infrastructure will be published in Spring 2020.
- The Government will invest £2.4bn into the Transforming Cities Fund, with an additional £90m to trial new smart-transport technologies.