UK fuel tax earmarked for public transport but automatic fuel tax increases dropped

The UK Chancellor's commitment to annual and automatic fuel tax increases has come to an end, but he has stated that above-inflation revenue from future fuel tax increases will be ring fenced for spending on public transport and roads modernisation.

Environmental groups cited the strength of the UK hauliers’ lobby for Gordon Brown’s retreat from the automatic fuel tax escalator in his Pre-Budget Report. The year-on-year raising of the fuel tax was introduced by the Conservative Government in 1993 and adopted as Labour Government policy in 1997.

Announcing an end to the fuel tax escalator, the Treasury states that “increases in fuel duties since 1996 are estimated to produce carbon savings of between 1 and 2.5 million tonnes of carbon by 2010”.

Although the future of fuel taxation is less certain, and will be decided on a Budget-by-Budget basis, the Chancellor has followed the advice of environmentalists and Deputy Prime Minister John Prescott by announcing that any “real term increases” in fuel duties will be ring fenced for public transport improvements and modernising roads.

UK daily, The Guardian, described Brown’s decision to ring fence fuel duty revenue as a “victory” for John Prescott, whose brief to reduce the environmental and health impacts of the UK transport system by shifting people from cars to public transport has been amongst the least progressed of Labour’s election promises.

Other environment-related changes in the Chancellor’s Pre-Budget Report include a re-worked Climate Change Levy (see story in this edition of edie news) and the possibility that quarrying and pesticides will be taxed.

In the case of quarrying, the Chancellor has stated that the voluntary measures suggested by the Quarry Products Association do not go far enough in addressing the environmental impacts. An aggregates tax will therefore be introduced if negotiation with the quarrying industry does not resolve the issue in advance.

A tax on pesticides is also likely, with the Treasury’s intention to hold further talks with the agrochemical industry prior to the next Budget, announced. The Government is seeking to minimise the environmental impacts of pesticide use and if a tax is introduced it is likely to continue measures to distribute some of the revenue raised toward environmental improvements – as the Landfill Tax has done.

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