Brown attacked over revenue fall from 'green' taxes

Gordon Brown's plan to present an environmentally friendly Budget today was undermined before it was presented when a group of MPs cast doubt on his green credentials.

The MPs fired a shot across the Chancellor's bows by disclosing that revenue from environmental taxes has fallen to its lowest level for more than a decade. Its share of the total tax take dropped from a peak of 9.8 per cent in 1999 to 8.3 per cent in 2004.

In his 10th Budget today, Mr Brown will give an upbeat assessment of Britain's economic prospects and announce measures to "lock in" stability and the country's ability to compete in the global economy.

He will try to scupper the Tory leader David Cameron's attempt to outflank Labour on the environment and is expected to announce plans to encourage drivers to avoid gaz-guzzling cars and four-wheel drive vehicles.

The Chancellor is likely to impose a higher top rate of road tax of about £200 a year, £35 more than the £165 maximum, on new gas-guzzlers. In a revenue-neutral package, that would be balanced by cuts in road tax for vehicles with lower carbon emissions. But he is also expected to anger green campaigners by freezing petrol duties for the fourth year running.

In a hard-hitting report, the all-party Commons Environmental Audit Committee accused the Treasury of "institutional inertia" in the face of scientific evidence of climate change. It urged Mr Brown to be much bolder by overhauling air passenger duty in order to "restrain" demand for more flights and establishing a "green tax commission" to promote environmental taxation.

The MPs dismissed as "inadequate" the measures in Mr Brown's pre-Budget report in December because of rising greenhouse gas emissions. They warned that the proposals would not hint at the kind of changes needed to get the UK back on track to meet its 2010 target for reducing carbon emissions and said the Treasury needed to make the environment a top priority.

Tim Yeo, the committee's Tory chairman, said: "In view of the compelling case for more urgent action to reduce carbon emissions, we are concerned there may be a degree of institutional inertia within the Treasury."

Chris Huhne, the environmental spokesman for the Liberal Democrats, said Mr Brown's green credentials were now "in shreds." He added: "This report is devastating to Gordon Brown's claims to take the environment seriously. It confirms green taxes have fallen year on year as a share of national income since 1999 and that was due to the Chancellor's decison to freeze rates and allow declining tax levels in real terms.

"Fuel duty and vehicle excise duty have been frozen in four of the past six years. The climate change levy has been frozen since it began. Air passenger duty has been frozen for four years. All these duties are declining in real terms."

Mr Huhne urged the Chancellor to tackle rising carbon dioxide emissions through the tax system and ensure that green taxes do not continue to decline. "Simply tinkering with vehicle excise duty is not good enough. Adding £35, as trailed, to the top band is the worth half a petrol tank for a big 4x4 and will do nothing to encourage people to drive less polluting vehicles. As an incentive, it isn't going to make anyone who can afford a Ferrari or a Range Rover buy a Toyota Prius instead. The Liberal Democrats know that green taxes have to rise to change behaviour, while allowing other taxes to fall. Tinkering at the edges won't do."