A pre-budget report by UK Finance Minister Gordon Brown proposes a series of tax measures designed, according to the report, to protect the environment and tackle the global challenges of climate change.
Among the measures proposed are an increase in passenger taxes for short-haul flights; an inflation-based increase in the road fuel tax; measures to promote the use of cleaner fuels, including support for the development of biofuels; an inflation-based increase in the climate change levy (energy tax) on business; and a time-limited stamp duty exemption for the vast majority of new zero-carbon homes.
Passengers on short-haul flights originating in the UK will see a doubling of the passenger duty rate from £5 to £10 for the lowest class of travel, and from £10 to £20 for other classes. The increase is scheduled for 1 February 2007.
Increases in the road fuel duty include: 1.25 pence per liter for liquid fuels (including biofuels); 1.81 pence per kg for natural gas; and 3.21 pence per kg for LPG.
On the biofuels side, the government announced that it would extend the 20 pence per liter (ppl) fuel duty differential to enable a pilot involving the use of biomass in conventional fuel production to go ahead. (The fuel duty tax for gasoline and diesel is 47.1 ppl; for biofuels, it is 27.1 ppl.)
The government also will amend the definition of biodiesel to include new second-generation biodiesel produced from biomass and is capable of being blended in excess of 5% blends.
The government said that it will consider the case for an incentive in company car tax to support the adoption of flex-fuel vehicles capable of using high-blend bioethanol E85.
Reaction from industry was fairly swift.
The Chancellor’s announcement of a 1.25 pence per litre fuel duty rise—the first in three years—is yet another revenue-raising exercise by the Government, which will hit industry and all road transport users.
It is also hugely disappointing that—once again—no financial incentives are to be made available to petrol retailers to invest in bio-fuels. This is vital if these new fuels are to be made readily available to consumers at UK forecourts.—Ray Holloway, Director of the RMI Petrol Retailers Association (PRA)