The Government’s commitment to environmental concerns was called into question yesterday as it emerged that revenue from green taxes would remain close to record lows, despite a Budget that claimed to be environmentally friendly.

The Treasury is to raise the equivalent of 2.8 per cent of GDP next year from environmental taxes, such as fuel, vehicle excise and air passenger duties, the Institute for Fiscal Studies (IFS) said. This is fractionally up from last year’s 2.7 per cent but it is one of the lowest figures since 1987, when green taxes made up 3.1 per cent of GDP.

Fuel duty makes up the bulk of environmental taxes, but it has risen by less than inflation in recent years. Even the 2p per litre addition that Mr Darling delayed by six months is an inflationary rise. The halfpenny above inflation rise announced in Wednesday’s Budget will not kick in until 2010.

Vince Cable, deputy leader of the Liberal Democrats, said: “This does represent a major failure for the Government. What was striking was that Alistair Darling used apocalyptic language about the environment and then the only measures he suggested were minimal and deferred. There is a lack of real will to change.”

Rose-tinted specs fail to offer hope

The obvious justification for Mr Darling’s relatively upbeat scenario is that the outlook is fraught with uncertainty

BACKGROUND

• Darling's first Budget: the main points

• The Chancellor's speech in full

• Darlings first Budget: the reaction

• Chancellor hits the home budget as his debts soar

• Need to know: Budget 2008

The Chancellor delivers a modest Budget

As so often is the case, virtue, in terms of improving public finances, is not now, but at least a year away

Multimedia

• Video sketch: Matthew Parris and Ann Treneman

• Eco-worrier: should we be pleased?

• Green Central: round-up of the green Budget measures

Related Links

• Government accused of ‘running scared’

• Chancellor ready to reveal his green streak

• Darling must raise taxes or make cuts

In the Budget, Mr Darling said: “Our greatest obligation to future generations must be to tackle climate change. There will be catastrophic economic and social consequences if we fail to act.”

Last month, the Commons Treasury Committee said the Government’s use of green taxes had been too “timid”.

Andrew Leicester, of the IFS, said: “Green taxes need to keep pace with the economy to make sure they are having an impact.”

Nick McChesney, of PricewaterhouseCoopers, the accountant, said: “In terms of overall yield there is more talk and not enough action. It is surprising that the Chancellor hasn’t gone farther. He has the chance to shift more taxes on to bad environmental behaviour.”

The IFS pointed out that the Government was introducing other green measures that had no tax implications, such as carbon emissions trading schemes.

It emerged yesterday that Mr Darling may be banking on an £8 billion cut in spending that would take effect after the general election. The IFS said that he would have to find an extra £4 billion to plug the £7.5 billion deterioration in the public finances since the PreBudget Report in October, on top of the £4 billion he has already planned to raise.

Robert Chote, director of the IFS, said: “To make the numbers add up, he is now looking for an £8 billion spending cut over the two years covered by the 2009 spending review . . . [which] will not of course bite until after the next general election.

“If there is a fiscal repair job to be done, Mr Darling and Mr Brown may be leaving it until after polling day.”

A Treasury spokesman said: “The assumptions that underpin our numbers are prudent and cautious and audited by the independent National Audit Office.”

The IFS also said that the Government was in danger of breaching its sustainable investment rule in 2010-11 if the projections set out in the Budget were not met. The sustainable investment rule, which states that public net debt should not exceed 40 per cent of GDP, has a 48 per cent chance of being broken in two years’ time, it said.

Sliding scale

— Revenue from environmental taxes in 2007-08 is set to be £38bn

— This is down from £39.2bn, in today's terms, raised in 1998-99 and £40.2bn in 1990-2000

— The highest proportion of GDP raised by environmental taxes was in 1998, when receipts equalled 3.6% of GDP

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