Jayne Harrold 30 Oct 2018 09:40am

What the Budget means for the environment

In the Budget today the chancellor repeated his commitment to be the first generation to leave the environment in a better state than we inherited it. So how did he do?

Plastic tax announcements were expected given the scale of public interest and significant response to the consultation undertaken earlier this year. The consultation saw 162,000 individual members of the public write in response as well a petition with 242,000 signatories for the introduction of a visible tax on throwaway (single use) plastic at the point of sale. This is the first tax issue I’ve ever experienced which has such overwhelming public support.

The proposed tax on the manufacture and import of plastic packaging with recycled content under 30% is a welcome move in promoting a change of behaviour to encourage the redesign of packaging and promote the use of recycled material. The requirement for a specified level of recycled content should stimulate demand and increase recycling rates. The 1 April 2022 implementation date gives businesses time to adapt and redesign their products.

Given the broad public support, it’s a surprise to see rejection of visible consumption taxes, the infamous latte levy. This seems like a missed opportunity to lead the pack and stimulate change.

Read all the news, analysis, and comment on this year's Budget here

The chancellor has said that he has carefully considered tax on disposable cups, but concluded that a specific tax would not be effective in changing behaviour, and that he will continue to monitor the voluntary actions of the industry.

With plastic bag tax there was constant pressure on retailers to deal with the problem voluntarily, but it was only when the tax was introduced that large scale reform was achieved, reducing our average use per person from 140 down to 19 plastic bags per year. (That, of course, depends on how you define a plastic bag!)

An incineration tax remains an option in the future if the proposed measures don’t deliver on the government’s ambition for change. However, given the lack of existing plastic recycling infrastructure in the UK, it remains to be seen whether the proposed reform of the Packaging Recovery Note system will be sufficient to promote change.

It was also no surprise to see the consultation on a new carbon emissions tax, to be introduced as a replacement for the EU Emissions Trading Scheme (ETS) in the event of a “no deal” Brexit, but this was status quo rather than any new measure.

Carbon price support also received attention today. Given the recent increases in EU ETS allowance prices, a drop in rate was half expected by the industry. The chancellor has instead chosen to confirm that the rate remains frozen and may be decreased in 2021/22 if EU ETS prices remain high.

Enhanced capital allowances for energy efficient and water efficient technology are to be scrapped from 1 April 2020 and the savings will be used for a new £315m Industrial Energy Transformation Fund, aimed at helping businesses with high energy use to transition to a low carbon future and to cut their bills through increased energy efficiency.

There was investment too for plastic and waste sustainability innovation, clearance of abandoned waste sites, urban tree planting to offset carbon emissions, assistance for local authorities in meeting air quality obligations, money for charities and others to distribute food waste, and investment in flood risk management projects.

Given the slightly unambitious nature of the changes, especially on plastic tax, the chancellor faces a challenge to meet his aim of leaving the environment in a better state than he inherited it.

Jayne Harrold, PwC’s UK environmental tax leader