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Chancellor George Osborne has today left low-carbon businesses disappointed with arguably the least green Budget address in recent memory.
The low-carbon economy and the need to cut carbon emissions barely received a mention as the chancellor’s first Budget address focused almost exclusively on the spending cuts and tax rises required to tackle the UK’s budget deficit.
There were a few bright spots for green businesses as the chancellor confirmed that the coalition government would “bring forward” plans for a green investment bank, although he provided no further detail on how such a bank would operate.
He also said that the Treasury would “explore” proposals to replace Air Passenger Duty with a per-plane levy that would help to cut carbon emissions. However, a report on the proposal will not be delivered until the autumn, despite the reform being included in both the Conservative and Lib Dem manifestos.
Groups campaigning for a carbon tax and an overall increase in green taxation will have been left furious after the chancellor provided no further detail on how the government plans to impose a floor price on carbon and announced that there would be no increase in fuel duty.
There are also likely to be concerns over cuts to the system of capital allowances, which could limit the tax breaks firms enjoy when investing in energy-efficient equipment.
And there were fears government spending on green projects could be slashed as part of Whitehall’s autumn spending review, after Osborne confirmed that budgets at non-protected departments, including DECC and Defra, will fall by an average of 25 per cent over four years.
However, those calling for increased investment in low-carbon infrastructure, such as the Institution of Civil Engineers, were offered some cause for encouragement as Osborne insisted that the new government would not cut capital spending.
He confirmed that the coalition would move forward with plans for a series of rail upgrades, extended metro systems in Manchester and Tyne and Wear, an upgrade to Birmingham New Street, and electric rail links between Sheffield and Liverpool.
There were also elements of good news for green businesses and start-ups after Osborne announced that he would cut corporation tax by four per cent over the next four years.
But overall, green business commentators were left disappointed by the Budget address.
“Sustainability was a major focus in the chancellor’s speech, but from an economic and fiscal perspective, rather than in relation to the environment,” said Richard Gledhill, partner for sustainability and climate change at PricewaterhouseCoopers (PwC). “Climate change has hardly featured.”
His comments were echoed by Rebecca Seabury at energy industry analyst Inenco, who warned that the proposals included in the Budget could seriously hamper plans to invest in new low-carbon energy infrastructure.
“Reducing corporation tax and the subsequent lowering of capital allowances will have a negative impact on organisations with high capital expenditure, most notably utility companies,” she said. “In the short term, the increased cost of capital expenditure projects will have to be paid for by the end user, but the big concern is the potential impact on investment in new power stations and renewable technologies in the UK.”
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