Tomorrow is a big day in Parliament. The Chancellor, Philip Hammond, is due to give his spring budget. The budget is an opportunity for the government to announce the changes it is making to taxation and government spending. As is customary, the hour-or-so long speech the Chancellor makes will focus on the high-level policy levers that are being pulled to stimulate growth in the economy and balance public spending with income.
Almost as soon as the Chancellor’s speech ends and he sits down, however, the Treasury will release a long document that gives information on that place the Devil so regularly lives in – the Detail. It is here that we may expect to see more precise policy instruments and tax tweaks, and, perhaps, some of these will impact the sources of air pollution.
The associate members of the APPG on Air Pollution have advised the secretariat what they think would be included in a budget that would make an important step towards improving the UK’s air quality. Here’s what we’re hoping the Chancellor will announce:
1. Remove the fuel duty escalator on LPG – LPG canplay a useful role as a transition fuel enabling immediate reduction in vehicle pollution in advance of longer term switches to zero emission vehicles. For example, converting diesel taxis to run on LPG delivers a reduction in NOx of 80%, PM of 99% and CO2 of 7% meeting Euro 6 standards under real world testing and LPG can deliver NOx savings compared to Euro 6 diesel cars. On NOx, LPG is consistently lower than Euro 6 diesel cars. he duty escalator on LPG was introduced in 2003 via the Alternative Fuels Framework (AFF). The AFF provides the basis of the government’s approach to fuel taxation and it is this framework that labels LPG as more environmentally harmful than other alternative fuels. However the AFF is now 13 years old and does not take account current industry data, developments in technology and use of different fuels across different vehicle types. Ending the LPG escalator would result in limited lost revenue to the exchequer while promoting the use of LPG and sending a signal to vehicle manufacturers to aid the supply of forecourt ready LPG models.
2. Vehicle Excise Duty (VED) – VED should factor in NOx and PM emissions when calculating VED bands. In addition no VED should be levied on Ultra Low Emission Vehicles for the first year.
3. Company car taxation – There should be a comprehensive review of the company car tax regime in order to incentivise the cleanest vehicles. If new diesel cars are to benefit from such an approach, the manufacturers must prove the emissions performance of vehicles under real world conditions.
4. Scrappage scheme – There is merit in revisiting the vehicle scrappage concept as a means to accelerate the replacement of polluting vehicles and improve air quality. A scrappage scheme would have a financial cost, but this could be offset by changes to VED and company car tax structures, as well as from the reduced burden on the NHS resulting from improved health outcomes. To maximise the benefit in air quality terms, the scrappage scheme should target the replacement of older, pre-Euro 6c diesel cars and pre-Euro 3 petrol cars. The scheme should be targeted towards the purchase of vehicles with low NOx, PM and CO2 emissions. Consideration would be needed in terms of how the scrappage grants would interact with the existing grants available for electric vehicles (described below).
5. Local authority funding – DEFRA air pollution monitoring guidance should be amended to specify schools as priority sites for monitoring. In order to do this, it is essential that local authorities are properly resourced. A parliamentary question showed that £500,000 was allocated to local authorities to support their air quality improvement work for the 2015-16 period – a reduction of 50% since the previous year. We would therefore urge the Treasury to increase investment in this area so that local authorities are able to take necessary action on air pollution. Funding is also important for clean public transport and promotion of walking and cycling.
6. Enhanced Capital Allowances – The cleanest NRMM (Non-Road Mobile Machinery) generators (especially those using hybrid or zero emission systems thereby reducing their energy usage and therefore emissions) should be listed on the Energy Technology List for Enhanced Capital Allowances.