Brown attacked as revenue from green taxes falls to its lowest level

Click to follow
Indy Politics

Doubt was cast on Gordon Brown's green credentials yesterday after figures showed that environmental taxes had fallen to their lowest level as a share of government revenue for at least 18 years. Environmental campaigners said the figures showed the Government needed to follow up its tough talk about the Stern report on climate change with action.

There was speculation in Whitehall that the Chancellor would use next month's pre-Budget report to unveil a host of taxes on motorists and air travellers - including the first rise in petrol duty for three years.

The environmental accounts for 2005 published by the Office for National Statistics showed green taxes made up 7.7 per cent of government receipts, the lowest since 1987 when relevant information was first recorded. They took just 2.9 per cent out of the economy, another 18-year low.

Revenues peaked in 1999 at 3.6 per cent of GDP or £37.7bn in today's money, but have fallen sharply since the Government abolished the fuel duty escalator, which had raised duty above inflation, in the wake of mass protests by hauliers and motorists. The impact was magnified by the Treasury's decision to freeze duty levels in 2004 following the doubling of oil prices.

Friends of the Earth said the Chancellor had broken a 1997 pledge to shift the burden of taxation from employment to pollution.

"Gordon Brown's record on tackling climate change through the Budget is poor to say the least," said Dave Timms, its economics campaigner. "After Stern there is simply no excuse for the Chancellor to yet again back off properly taxing polluting activities such as aviation and motoring."

Andrew Simms, policy director at the New Economics Foundation, a green think-tank, said: "The Stern Review raised expectations that the Treasury was starting to take the environment seriously but these figures show how far we have got to go merely to regain lost ground. If the gap between rhetoric and reality stays this big, Gordon Brown will hand the political high ground on environmental issues on a plate to the Opposition."

The Institute for Fiscal Studies said the fall in the revenue-raising power of green taxes had been entirely due to the abolition of the road fuel duty escalator.

Fuel duty per litre has fallen by 16.9 per cent while revenues in real terms - excluding the impact of inflation - have fallen by almost £3bn, from £30.4bn in 1999 to £27.4bn in 2005, it said.

It is understood that the Treasury is considering raising road fuel duty, which has been frozen at 47.1p for three years, in line with inflation. But it is thought to have ruled out an inflation-busting increase. It could also raise the new £200 top rate of vehicle excise duty - for gas-guzzlers. Another option is to raise air passenger duty, which is bringing in £1bn. Currently travellers pay £10 for a European flight and £20 for long haul. Business class rates are £20 and £40 respectively.

A Treasury spokesman said: "The key measure of success is overall progress in meeting environmental challenges not the level of revenue from environmental tax. Thanks to the right combination of tax and non-tax measures introduced since 1997, the UK is one of a few countries on course to meet its Kyoto commitments."