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Transport and environment in the Budget

16 April 2009
The Budget this year will have a more than usual impact on transport, given the recession. This briefing looks at the key issues and possible issues in terms of: Greener motoring A fiscal stimulus Future transport spending Transport taxation Carbon budgets


Key issue: Will any support for the motor industry promote low-carbon cars or will it be simple state aid disguised with greenwash?

A promised centrepiece of the budget will be support for the motor industry but supposedly with incentives for greening it. The motor industry has been pushing for support as car sales have fallen. The Government (and opposition parties in fact) have been using the industry as an example of one they want to develop with low-carbon green jobs post-recession, and BERR and DfT have announced their ultra-low carbon vehicles strategy to promote electric vehicle take-up and development.

The industry just wants Government aid and has been demanding a “scrappage” scheme to reward people for scrapping their old car and buying a new one. A similar scheme in Germany is said to have revived car sales there. Green groups are sceptical – the German scheme merely requires the cars sold to meet existing European air quality laws (which all must do anyway), and any scrappage scheme may not save UK jobs since most cars bought here are made in other countries. Support for credit for car purchase has already been offered and may be expanded – it is said to be targeted at lower carbon cars but there are concerns about how real this targeting is in practice. A scrappage scheme without strict criteria about the age of cars to be replaced could well lead to people bringing forward decisions to replace their cars with current carbon emitting models now, rather than waiting for electric cars to come on the market.


Key issue: Will any fiscal stimulus for transport support green transport projects rather than more roads?

Transport is one of the areas touted for any fiscal stimulus. It already had some in last year’s pre-Budget report, paying for several road schemes and new hard shoulder running schemes on motorways as well as 200 new rail carriages. Apart from the new trains it’s hard to see this as a green stimulus (by contrast, the Obama administration is funding new tram and rail lines and local road maintenance).

Mindful of the Governor of the Bank of England’s warning against new borrowing, the Government has been exploring options for transport spending that involve bringing forward already planned schemes or reallocating existing funding. Campaign for Better Transport , with Unison and the Passenger Transport Executive Group, wrote to Gordon Brown last month putting the case for spending on local transport as part of any fiscal stimulus, including:


  • Increased investment in road maintenance, which would improve the road network and stimulate the local economy
  • Local public transport projects, including enhanced bus services and trams in Merseyside and other cities
  • Schemes to enable and promote walking and cycling
  • “Smarter choice” projects such as car clubs and travel plans for employers and schools
  • Streetscape schemes that are part of wider town centre regeneration
  • Local rail projects such as station upgrades and extra capacity schemes (like passing loops)

We argued that spending on such local transport projects would generate significant employment more quickly than national projects such as roads, would have a noticeable impact on the ground within the next 12-18 months and would assist in creating a greener and more sustainable economy and in reviving communities and local economies. For example, Merseytram line 1, which has all necessary powers and contractors in place, would create 1,000 construction jobs on Merseyside and also safeguard skilled engineering jobs at the Bombardier works in Derby where the trams would be made.


We know that the Government is looking at some of these (road maintenance and stations in particular).


Key issue: Will future transport spending give priority to low-carbon transport projects or to big roads and runways?

The Government has been developing longer term transport schemes, including a programme of rail electrification and the development of new high speed lines, but it also is progressing a very expensive widening of the M25 and has continued to support airport expansion (in fact some of the new roads authorised in the fiscal stimulus in November were to support airports). It also has proposals from regional groupings of local authorities in England for transport spending, many of which involve big roads. On the other hand, transport is a big contributor to carbon dioxide and other greenhouse gases. The Budget may refer to this in outline, but the major decisions are expected later in the year. However, the recession adds to transport spending pressures (for example to prop up rail franchises) and given the Government’s financial state there is concern that future transport spending could be cut and that the axe will fall on local transport projects to protect big road schemes like the M25 widening.

Key issue: Will lobbying from the motor and aviation industries trump the Government’s need for revenue and its intentions to move to a low carbon economy?

The Government has to bring in new income and transport taxation is a good way to do it. There have already been rises in fuel duty and more may be announced. New cars now have wider differences in vehicle excise duty to give people incentives to buy greener cars, but the motor industry sees this as another disincentive to people buying cars and is lobbying against any further increases. Restructured and increased air passenger duty is due to come in later this year, amid complaints from the industry already hit by a downturn in business. Campaign for Better Transport has argued for further taxes on aviation, especially fuel tax on domestic flights, with a parallel reduction in rail fares to boost rail demand and make low carbon transport cheaper.

[We wrote to the Chancellor in February with our taxation ideas] 


Key issue: Will transport have to cut its emissions or will other sectors like domestic heating and power stations have to bear the brunt?

Alongside the budget, the Government is due to announce its carbon budgets for the next 15 years. Under the Climate Change Act, the Government is supposed to cut carbon dioxide emissions by 80% by 2050, and the independent Committee on Climate Change, chaired by Lord Turner, has made its recommendations for the first three five-year carbon budgets towards that target. Transport accounts for a quarter of UK CO2 emissions so has to cut its emissions if the budgets and targets are to be met. But transport Ministers argue that cutting transport emissions is more politically difficult and costly than cutting them from other sectors. The budget will announce outline carbon budgets and decisions on how much can be subject to trading – the detailed allocations are promised in June/July, and battles are already starting between departments about where the burden of cuts should fall. Campaign for Better Transport has sponsored detailed work on how to cut carbon emissions from transport.