Press release

June 2010 budget: key announcements for Environment

The Government is committed to playing its part in moving to a low-carbon economy.

The Budget sets out a comprehensive and credible plan to deal with the nation’s debts and significantly accelerate the reduction in the budget deficit over the course of this Parliament.  Deficit reduction and ensuring economic recovery are the most urgent issues facing the UK and the Government’s top priorities.

The Prime Minister has pledged to make this the greenest government ever. The Government believes that climate change is one of the most serious threats that the world faces. This includes reducing the Government’s own emissions by ten per cent between mid-May 2010 and mid-May 2011.

The Government is committed to playing its part in moving to a low-carbon economy. This transition will change the shape of industry, growth and jobs in the future. As part of this, the UK needs £200 billion of investment to 2020 to provide secure low-carbon energy. This will require reform of the energy market and action to attract additional private sector funding.

The Budget sets out key steps towards this goal:

  • assessing how the energy tax framework can provide the right incentives for investment, alongside wider market reforms.  In the autumn, the Government will publish proposals to reform the climate change levy in order to provide more certainty and support to the carbon price. Subject to consultation, the Government intends to bring forward relevant legislation in Finance Bill 2011.
  • putting forward detailed proposals on the creation of a Green Investment Bank, following the Spending Review, to help the UK meet the low-carbon investment challenge.  The Government is considering a range of options for the scope and structure of the Green Investment Bank; and
  • establishing a Green Deal for households through legislation in the Energy Security and Green Economy Bill, to help individuals invest in home energy efficiency improvements that can pay for themselves from the savings in energy bills.  The Government will also continue to progress work on creating green financial products to provide individuals with opportunities to invest in the infrastructure necessary to support the green economy.

The Government will make the tax system fairer. The Budget covers:

  • fair fuel stabiliser.  The Chancellor will ask the Office for Budget Responsibility to undertake an assessment over the summer of the effect of oil price fluctuations on the public finances.  Informed by this assessment, the Government will examine options for the design of a fair fuel stabiliser;
  • remote rural areas.  The Government is considering the case for introducing a fuel duty discount in remote rural areas, including possible pilot schemes in Scotland; and
  • aviation taxation.  The Government will explore changes to the aviation tax system, including switching from a per-passenger to a per-plane duty, which could encourage fuller planes. Major changes will be subject to public consultation.

The Budget confirms some previous announcements, that the Government will:

  • include nitrous oxide gases in the EU Emissions Trading System from 2011;
  • reduce the discount from the climate change levy for industries participating in a climate change agreement from 80 to 65 per cent in April 2011, and increase the climate change levy in line with inflation;
  • increase the standard rate of landfill tax by £8 per tonne on 1 April 2011 until at least 2014, and introduce a floor so that that the rate will not fall below £80 per tonne until at least 2020;
  • increase aggregates levy to £2.10 per tonne in 2011;
  • introduce an enhanced capital allowance for zero-carbon goods vehicles from April 2010;
  • introduce exceptional rates of vehicle excise duty for certain heavy goods vehicles from April 2011; and
  • reform company car tax so that it continues to provide an incentive to purchase the lowest emitting vehicles on the market.

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