Gordon Brown’s last budget, on March 21, could have significant impacts on transport, especially given Mr Brown and Mr Cameron’s recent competition for leadership on climate change. Transport accounts for around a quarter (and growing) of UK carbon emissions, and this excludes international aviation and shipping.
There are a number of measures Mr Brown could take. The most likely – because well-trailed – one is to increase vehicle duty on “gas guzzlers”. Press reports suggest a doubling in the top band G, from the £210 introduced last year (widely criticised as inadequate), to £400 or so.
However, on its own, this is likely to make little difference to people’s car-buying decisions. Transport 2000 and others have been suggesting a “VED escalator”, giving people signals that taxes on the most polluting vehicles will rise over time, while taxes on less polluting ones fall or are frozen. This might, for example, result in reducing band B by £10, freezing band C and escalating bands D to G by 5%, 10%, 15% and 20% respectively per year. Longer term, we have also suggested a revenue-neutral purchase tax might be a more direct way of influencing car buyers.
Company cars are another area for action. Past reforms on company car tax – moving away from giving people more money the more miles they drive, towards rewarding them for driving low-emission vehicles – have been very successful and emissions from this sector have been reduced. But more reforms could give even more incentives to reduce emissions, including changing the tax on car-leasing deals and looking at the tax-free mileage allowances for business use of private cars.
Transport 2000 has argued that these need to change to reflect carbon emissions, and, in the short term, the 40p mileage allowance should be halved from 10,000 miles per year to 5,000. These technical changes are more important than they seem, because they work through the advice that accountants give to clients.
Because the Chancellor increased Air Passenger Duty (APD) in the Pre Budget Statement in December, he may not do any more on aviation in the Budget. However, environmental groups, including Transport 2000, will continue to point out the light tax aviation pays, and the sharp growth in aviation, which will see it become one of the single biggest polluters.
APD does not apply to transfer passengers or airfreight, and the industry is zero-rated for VAT (allowing it to claim back £1bn); action on these would give further signals that aviation should contribute to reducing carbon emissions. Unlike the Chancellor, however, we want to see funding from aviation taxes ringfenced for environment and development projects.
This does not just apply to taxes on aviation. If we want people to reduce their carbon emissions, they have to see that climate change is not just being used by politicians to justify big tax increases. We need to see income from environmental taxes – and road-pricing – ringfenced for measures that give people real transport choices: investment in better and cheaper public transport, and more priority measures for walking and cycling. There also need to be tax incentives for workplace and leisure travel plans that would make it worthwhile for companies to change travel patterns and give their employees and visitors real travel choices.
Gordon Brown should at least signal in the Budget that he understands this, and that his spending review this summer will give people a chance to move away from car dependence.
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