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Drinkers and drivers hit in Budget

By Gavin Cordon, PA Whitehall Editor

Drinkers and drivers of "gas guzzling" cars paid the price as Alistair Darling delivered his first Budget as Chancellor.

Mr Darling set out plans to overhaul the vehicle excise duty system and introduce a new "showroom tax" to hit the drivers of the most polluting vehicles.

At the same time he put up alcohol duties by 6% above inflation - putting 4p on a pint of beer and 55p on a bottle of spirits in a new crackdown on "binge drinking Britain".

There was also a warning that he would legislate next year to impose a charge on disposable plastic bags unless the retailers took action to curb their use.

However, his attempts to establish his "green" credentials were hampered by an announcement that a planned 2p increase in fuel duty due to come in April would be delayed.

Mr Darling said that his "responsible" measures would enable him to take further measures to cut child poverty.

However, he was also forced to slash his forecasts for economic growth and announced a big increase in Government borrowing.

David Cameron dismissed Mr Darling's claims that the UK was well-placed to weather the global financial storm.

The Tory leader said: "As this country enters troubled times it could hardly be worse prepared."

Mr Cameron accused Mr Darling of presiding over the biggest deficit in western Europe and the highest interest rates in the G7.

Mr Darling, in his 50-minute speech, slashed his forecast for economic growth as he warned that global financial turbulence posed a "major risk" to the world economy.

He said growth this year would be between 1.75% and 2.25% - compared with the 2% to 2.5% he was predicting at the time of the Pre-Budget Report last October.

Despite the Northern Rock crisis, which has blown a £25 billion hole in public finances, the Chancellor said the UK was better-placed than other countries to deal with the global economic crisis.

But he said that while borrowing this year had come in lower than expected at £36 billion, it was set to rise to £43 billion next year - an increase of £4.6 billion on his Pre-Budget Report forecast.

However, he insisted he would still meet the "golden rule" of only borrowing to invest and delivering balanced budgets over the course of the economic cycle.

He promised extra help for "hard-working families", including an increase in child benefit for the first child to £20 a week from April 2009 - a year earlier than planned.

He also promised to increase by £50 a year above inflation the child element of the Child Tax Credit for families on low and middle incomes from April next year.

"This means that a family with two children, earning up to £28,000 a year, will be over £130 a year better off," Mr Darling said.

The Chancellor said more action was needed to help vulnerable groups deal with rising energy prices.

And he warned that new legislation would be introduced unless energy companies acted.

He said: "We will work with the companies to take further action on a voluntary and statutory basis - to underpin this as necessary we will legislate.

"Energy companies currently spend around £50 million a year on social tariffs.

"I want to see this rising to at least £150 million a year over the period ahead."

On transport, the Chancellor brought road pricing a step closer, setting aside new funding to develop technology that could underpin a national system.

He also invited tenders to test the system with the results expected next year.

On climate change, Mr Darling said there would be "catastrophic economic and social consequences if we fail to act".

He said he believed Britain should go further than the current target to reduce carbon emissions by at least 60% by 2050.

"I believe that we should go further. That is why we have asked the Climate Change Committee to advise us - whether as part of an international agreement - we should raise our target to 80%."

The Chancellor also confirmed that the Government was poised to impose charges on the use of plastic carrier bags unless supermarkets make "sufficient" progress on a voluntary basis.

He said legislation would come into force in 2009 and could lead to around 12 billion fewer plastic bags in circulation.

He announced plans for a zero rate of car tax in the first year for new, low emission cars but a higher first year rate on the most polluting cars.

He chose No Smoking Day to put 11p on a packet of 20 cigarettes and 4p on the price of five cigars.

He drove up the cost of alcohol. From midnight on Sunday, alcohol duty rates will increase by 6% above the rate of inflation, which means beer up by 4p a pint, cider by 3p a litre, wine by 14p a bottle and spirits by 55p a bottle.

He also said that alcohol duties would increase by 2% above the rate of inflation in each of the next four years.

Chancellor postpones fuel duty rise

By Peter Woodman, PA Transport Correspondent

Chancellor Alistair Darling offered some respite to motorists by postponing April's scheduled 2p-a-litre rise in fuel duty until October.

But he added that fuel duty would increase by 0.5p a litre in real terms from 2010.

Mr Darling said: "For environmental reasons we will increase fuel duty by half a pence per litre in real terms from 2010.

"Fuel duty is due to rise again in April but, because I want to support the economy now and help business and families, I will postpone that increase until October."

AA president Edmund King said: "This temporary relief should quell any panic at the pumps. The Chancellor has listened to us and made a sensible decision.

"The proposed increase would have taken fuel prices to new record levels. Two pence might not sound like much but when it is added to the 20p-a-litre increase in pump prices in the last year it could have been the last straw for many motorists and hauliers.

"If fuel prices remain at records levels in the autumn the increase should be scrapped."

David Frost, director-general of the British Chambers of Commerce, said: "With the price of petrol at the pump rocketing, the Chancellor was right not to introduce the proposed 2p rise in fuel duty.

"However, as the Chancellor reduces his own economic growth forecasts, he should have said that he is scrapping the 2p rise rather than merely deferring it.

"Businesses and motorists are being squeezed by higher fuel costs and the Government is getting an unexpected windfall due to higher duty receipts. There is no justification for a 2p rise in October."

The Freight Transport Association (FTA) welcomed the 2p postponement, saying it would save the industry about £140 million.

But it added that any increase should have been put off for at least a year while the market remained so turbulent.

Motorists will also face an April 2009 fuel duty rise of 1.84p a litre - an increase previously announced.

Mr Darling also announced further transport measures today, saying that if Britain was to remain competitive over the next 20 to 30 years, the Government had to take more radical steps to reduce congestion on our roads.

He announced he was:

Setting aside new funding to develop the technology which could underpin national road pricing, inviting tenders to test this with the results expected next year;

Reforming capital allowances for business cars to increase the incentive to move to lower carbon-emitting cars;

Proposing, from April 2009, a major reform to Vehicle Excise Duty (car tax) to encourage manufacturers to produce cleaner cars and, by introducing new bands, there will be an incentive to encourage drivers to choose the least-polluting car;

Under this new regime, the most-polluting vehicles will face a VED rate of £425, while those emitting 150 grams or less of CO2 per kilometre will pay less;

Introducing from April 2010 for new cars a new first-year VED rate based on carbon dioxide emissions of the car;

Cars which emit less than the proposed 130 grams per kilometre European standard of carbon dioxide emissions will pay no car tax at all in the first year, but a higher first-year rate of £950 will be introduced for the most-polluting cars.

Mr Darling said: "It is right that if people choose to buy a more-polluting car that they should pay more in the first year to reflect the environmental cost.

"The changes will provide a real incentive to manufacturers and motorists."

The Treasury reckons that as a result of the reforms, the majority of motorists will be better or no worse off in 2009.

Mr Darling said Britain's 30 million cars, vans and lorries together accounted for 22% of total carbon emissions.

He said he was publishing Professor Julia King's review of low-carbon cars in which she examined new technologies which could help cut carbon emissions.

Mr Darling said she had found that by simply switching to the cleanest cars on offer, motorists could save 25% of their fuel costs. She also found that manufacturers needed to be encouraged to bring new technology to the market.

AA chief Mr King said: "The increase in vehicle excise duty for high-polluting vehicles will catch out many motorists. Drivers want cleaner, greener cars but we must ensure that the proposals in the King Review are not just a green smokescreen for allowing the Treasury or local authorities to take more cash from the motorist."

He added: "Motorists are being hit with road pricing already due to the record price of fuel so perhaps this 'road pricing funding' would be better spent immediately by getting rid of bottlenecks on motorways and main roads.

"Graduated tax according to emissions sends out the right message but we need to examine the detail to ensure that the system is fair. Manufacturers and motorists need advance warning of changes and we must remember that some larger vehicles are essential for bigger families."

Campaign for Better Transport executive director Stephen Joseph said: "The delay in the increase in fuel duty is a disaster and a broken promise that shows little regard for climate change or for alternatives to the car. A truly green Budget would have taken the extra duty and invested it in better transport, especially local public transport.

"However, we welcome the extra taxes on gas-guzzler cars, incentives for lower carbon vehicles and the extra aviation taxes.

"It is a pity that the failure of courage on fuel duty and the imagination to link it to spending on alternatives will undermine these and other green measures in the Budget."

Doctors welcome alcohol tax rises

By Martha Linden, PA

Doctors gave their strong backing to increases in alcohol duty announced in the Budget saying that "tough action" was needed to tackle the culture of binge drinking.

But the rise in duty on beer was attacked by representatives of the brewing industry who said the move would lead to a fall in beer sales and pub closures.

From midnight on Sunday, alcohol duty rates will increase by 6% above the rate of inflation with beer rising by 4p a pint, cider by 3p a litre, wine by 14p a bottle and spirits by 55p a bottle.

Alcohol duties will increase by 2% above the rate of inflation in each of the next four years, Chancellor Alistair Darling announced.

The rise in duty on spirits come after it was frozen last year for the 10th Budget in a row.

Mr Darling said the rises came in the wake of figures showing that in 1997, the average bottle of wine bought in a supermarket was £4.45 in today's prices.

He said in a supermarket, the average bottle of wine will cost about £4.

Dr Vivienne Nathanson, British Medical Association (BMA) head of science and ethics, said tough action was needed to tackle the UK's binge drinking problem.

She said: "It is very important that tax increases on alcohol are part of a larger plan to reduce problem drinking.

"The evidence tells us that the cheaper and more accessible alcohol is the more people will drink.

"The Government needs to tackle this issue so it's good news that ministers have made a start today.

"These tax increases may be unpopular with some members of the public but we hope that they will look at the wider issue and recognise that the UK has a real problem on its hands regarding alcohol misuse."

But Rob Hayward, chief executive of the British Beer & Pub Association (BBPA) said: "The millions of people who enjoy beer have just been hit by a £50.5 million a month tax raid on their family budgets.

"By aiming a tax hike at beer, the Chancellor is shooting himself in the foot. Treasury revenues will continue to fall, pubs will continue to close and beer sales sink further."

He added that the Government was punishing "all beer drinkers" rather than tackling the "minority" of drunken hooligans.

Lesley King-Lewis, joint chief executive of the organisation Action on Addiction, said she welcomed the increased tax on alcohol.

She said: "In a society where alcohol can be cheaper than water, where is the incentive to cut back on drinking alcohol excessively?

"Research has shown that many young people and dependent drinkers are more likely to binge-drink with cheap and strong alcohol.

"We know these drinkers are just as responsive to price change as moderate drinkers.

"Action on Addiction welcomes the Government's increased tax on alcohol. Measures that encourage us to consume less beverages with alcohol are vital in reducing harm."

The Campaign for Real Ale (Camra) said the duty increase on beer would be a "charter for smugglers and cheap supermarket booze".

Camra chief executive Mike Benner said: "The Chancellor has failed to recognise that well-run community pubs are the solution to Britain's binge drinking problems.

"This Budget will do nothing to stop binge drinking, but it will lead to pub closures on a huge scale, widen the gap between supermarket and pub prices and encourage smuggling and cross-border shopping.

"It's a great big nail whacked ruthlessly into the coffin of the British pub."

Furious Scotch whisky makers denounced the Chancellor's "punitive" increase in duty on their product.

The Scotch Whisky Association said that when VAT was taken into account, the Budget would add 59p to the price of a bottle, taking the tax burden towards 75%.

And the distillers said the increase, the biggest since 1991, meant the Government had "abandoned" moves towards a fairer alcohol tax policy.

They have long argued that on the basis of alcohol content, whisky suffers disproportionately harsh tax treatment compared to wine or beer.

Gavin Hewitt, chief executive of the SWA, said: "Scottish distillers are astonished by the Chancellor's announcement.

"The Government's own figures show that any duty increase on whisky is likely to reduce revenue at a time when public finances are tight.

"A tax rise is a blow to international competitiveness when the industry has been investing significantly to meet growing global demand for Scotch whisky.

"It sets a damaging precedent that export markets may follow."

Anger was also voiced by the gin and vodka industry.

Edwin Atkinson, director general of the Gin and Vodka Association, said: "The Chancellor cannot have it both ways.

"Either he wants more revenue or he wants to reduce consumption.

"For spirits, he cannot have both.

"And given the huge increases in production costs, this increase is even more concerning."

He said the tax rate was now beyond the point of diminishing returns.

"We estimate that this increase in tax rate will reduce revenues by over £40 million a year, not increase them," he said.

Professor Ian Gilmore, president of the Royal College of Physicians and chairman of the UK Alcohol Health Alliance, welcomed the tax increases on alcohol.

He said: "The international evidence suggests that even moderate taxation rises will reduce alcohol-related deaths and this move, although modest, shows that the Government finally recognises the importance of taxation in reducing alcohol-related harm in the UK.

"Alcohol is now 65% more affordable than it was in 1980, and we need to reverse this trend.

"This welcome direction of travel needs to be joined by other public policy measures to reduce availability, limits on advertising and promotion, and the introduction of better measures of screening and treatment for those drinking at levels likely to harm their health."

Alison Rogers, chief executive of the British Liver Trust, says: "With the recognition by the Government that the price of alcohol is a factor in harmful drinking levels, it is time to take it a step further and legislate for a minimum price per unit."

But the Wine & Spirit Trade Association (WSTA) said consumers were set to suffer as a result of the inflation busting rise in duty on wine and spirits.

WSTA chief executive Jeremy Beadles said: "It is no cause for celebration that British consumers will now pay more tax on wine than anyone else in the European Union.

"It is bizarre at a time when the economy is slowing, prices are rising and many families are feeling the pinch that the Government should choose to add to their burden by making the simple pleasure of a glass of wine or spirits considerably more expensive."

Mr Hayward added in a later statement: "Alistair Darling has just launched the £6.50 pint in time for the London Olympics.

"This will escalate pub closures, which are already at record levels, and further depress beer sales which have sunk by one million pints a day over the last 12 months alone."

But Harpal Kumar, chief executive of Cancer Research UK, said they were "very pleased" to see the significant increases on alcohol duty.

"Alcohol increases the risk for a number of cancers, including breast, bowel and mouth cancer," he said.

"These increases in duty may help reinforce the message that people should drink moderately."

Tax too low - anti-smoking groups

By Martha Linden, PA

Anti-smoking campaigners said they were disappointed that tobacco duty rises announced in the Budget were not higher but added that they backed the planned crackdown on tobacco smuggling.

Chancellor Alistair Darling added 11p to the price of a packet of 20 cigarettes and 4p to the price of five cigars.

He said the Government was continuing the 5% reduced rate of VAT on smoking cessation products beyond June 30.

Budget documents also revealed a new crackdown on smugglers of cheap illicit tobacco with the UK Border Agency set to develop a comprehensive strategy to reduce tobacco smuggling.

The group Action on Smoking and Health (Ash) said it welcomed the announcements on smuggling and VAT on smoking cessation products.

Deborah Arnott, Ash director, said: "Substantially reducing tobacco smuggling must be a key plank of any policy to tackle health inequalities as research shows that low income smokers are much more likely to buy smuggled tobacco.

"This announcement is encouraging and we hope that the new strategy will be implemented as quickly as possible."

But she added that Ash was critical of the Government for not "substantially" raising tobacco tax above the inflation rate.

The No Smoking Day charity said smokers with a 20-a-day habit would be paying more than £2,077 a year for their habit after the tax rise announced by the Chancellor.

The announcements by the Chancellor were made on No Smoking Day.

No Smoking Day chief executive Dan Tickle said: "Today's Budget rise, coming on the back of smokefree legislation, is likely to be a decisive factor for many smokers considering quitting.

"A 20-a-day smoker will now be spending well over £2,000 a year, up from under £500 when we launched our first No Smoking Day, 25 years ago."

Simon Clark, director of the smokers' lobby group Forest, said: "We welcome the Chancellor's decision to reject an increase in duty above the rate of inflation, but the increased cost of cigarettes will still hit those who can least afford it, especially the elderly, the low paid and the unemployed.

"The biggest loser is the British taxpayer, because under this Government tobacco taxation has risen to record levels. The knock-on effect is a huge increase in smuggling and a major loss of revenue.

"The problem will only be solved when the Chancellor is brave enough to freeze or reduce tobacco taxation to a sensible level."

Cancer Research UK and the British Heart Foundation (BHF) also expressed disappointment that the Chancellor did not raise the tax on tobacco higher.

BHF public affairs manager Ruairi O'Connor said: "Given that today is No Smoking Day, the BHF is somewhat disappointed that the Chancellor has not increased tax on cigarettes above inflation - this would have provided an obvious further incentive for smokers to quit.

"While we are pleased with the decision to maintain a reduced level of VAT on Nicotine Replacement Therapy (NRT), we expect the Government to now take a thorough approach to tobacco policy.

"This should include an urgent ban on cigarette vending machines which remain easily accessible to children."

Harpal Kumar, chief executive of Cancer Research UK, said: "We are very disappointed that the Government is not significantly increasing tobacco tax above inflation as this is something we've been calling for.

"Price rises have proved to be effective in encouraging people to stop smoking and deterring people from starting to smoke.

"These increases could have been used to help stop young people from taking up smoking and help more smokers to quit.

"We do, however, welcome the decision to maintain the reduced VAT rate on nicotine replacement products such as patches, chewing gum and lozenges."

Moves to fight child poverty hailed

By Andrew Woodcock, PA Chief Political Correspondent

Chancellor Alistair Darling announced welfare reforms which he said would lift up to 250,000 children out of poverty and maintain progress towards the Government's goal of halving child poverty by 2010.

Campaigners welcomed the changes to child benefit and child tax credit, which will cost the Government around £900 million annually once they have come fully into effect.

They also hailed Mr Darling's reaffirmation of the Government's commitment to former Prime Minister Tony Blair's target of ending child poverty in the UK by 2020.

Mr Darling announced funding totalling £125 million over the next three years for pilot projects to help take forward the fight against child poverty in the next decade.

Some 600,000 children have been lifted out of relative poverty since 1999, but experts have warned the Government was drifting off track for the 2010 target of 1.7 million.

Labour left-winger John McDonnell said that, even on the Chancellor's own figures, the plans would leave 2.5 million children in poverty by the end of the decade, missing the target by 800,000.

Under the changes, the rate of Child Benefit paid for a family's first child will increase from £18.80 a week in 2008/09 to £20 from April 2009 - a year earlier than planned. The 6.4% hike, well above the rate of inflation, will cost the Treasury £210 million.

The child element of Child Tax Credit will be increased from April 2009 by £50 a year above inflation, leaving families with two children and a household income below £28,000 more than £130 a year better off at a cost to the Exchequer of £340 million.

And from October next year, parents' income from Child Benefit will be disregarded when calculating Housing and Council Tax Benefits, saving a working family with one child on low incomes £17 a week. Mr Darling said the change, costing £350 million in its first full year of operation, would ensure that parents are better off in work than on benefits.

Mr Darling told the House of Commons: "There is no greater moral imperative than to make sure that every child has the highest aspiration and ambition.

"And the best possible opportunity to go as far as they have the talent to go. Not some children, but every child.

"If we are to build a fairer future for our children then we must eradicate child poverty in Britain."

Launching a report entitled Ending Child Poverty: Everybody's Business, Mr Darling said that getting parents into work would be at the centre of efforts to hit the 2020 target.

Ministers would develop a "contract" with parents, undertaking to provide the support families need to move into work in return for families' commitment to improve their situations where they can.

The director of the End Child Poverty campaign, Hilary Fisher, welcomed the package: "In such a tight spending round, it is reassuring to see the Government is still serious about lifting children out of poverty. We are hopeful that our heightened campaigning and the Government's renewed focus on children and families are starting to get results.

"The Chancellor boldly set out the Government's intention to end child poverty with investments of nearly £1 billion through increasing child benefit and child tax credits. The measures announced today will make a real difference to the lives of 250,000 children."

Campaign chairman Martin Narey, the chief executive of Barnardo's, said the announcements were "very encouraging".

"A lot more needs to be done and we will continue to put pressure on the Government to meet the 2010 commitment but this is dramatically good news for children living in poverty," he said.

The chief executive of Child Poverty Action Group, Kate Green, said: "This is excellent news for Britain's poorest children. It keeps the 2010 target to halve child poverty in reach. It won't take us all the way there, but today the intent is clear and a significant step forward has been taken."

But Mr McDonnell, the chair of the Labour Representation Committee, accused Mr Darling of "admitting defeat" on child poverty.

"We were all led to believe that the Chancellor would make a major announcement today to get the Government back on course to meet its target to halve child poverty by 2010," he said.

"Instead, the Chancellor has admitted defeat in the war against child poverty and has confirmed that the Government will not meet its 2010 target - and will leave over 2.5 million children still living in poverty in one of the richest countries in the world."

And TUC general secretary Brendan Barber said: "While there are welcome measures today, the Chancellor has not done enough to meet the target of halving child poverty by 2010, but neither has he made it impossible."

Save the Children said it was worried that Mr Darling's investment "does not match his ambition".

Child poverty spokesman Jason Strelitz said: "Even with the new investment, the Government will miss its own 2010 target by as many as 450,000 children.

"To keep the promise of lifting these children out of poverty by 2010, the Government should introduce seasonal grants of £100 per child for the poorest families, and an extra £100 per family in winter to help with costs like fuel."

Liberal Democrat leader Nick Clegg said Mr Darling's "piecemeal" reforms to the tax credit system would not get him "anywhere near" meeting the 2010 target on child poverty.

Mr Clegg said: "The reality is that the Government's approach has failed. If we are to abolish child poverty for good we must not only increase income we must increase opportunity too.

"These are the people most in need in our society - yet after 10 years and yet another Budget, they are still no nearer being given the true support they need."

Sir Jeremy Beecham, vice-chairman of the Local Government Association, welcomed moves on Council Tax Benefit, but said more needed to be done.

"One and a half million children in poverty are living in households that pay full council tax," he said. "The whole system desperately needs simplifying and the financial limits on eligibility need to be increased to allow more people to benefit.

"A total of £1.8 billion goes unclaimed every year across the board. One in three households are eligible and many people just don't realise that they can get help with their council tax bills. The benefit is wrongly seen as something just for the very poor."

Kate Bell, head of policy and research at the charity One Parent Families/Gingerbread, said the changes to benefits and tax credits would make "a real difference" to the lives of 1.5 million children in one-parent families struggling to make ends meet.

"These are welcome changes which bring us an important step nearer to meeting the 2010 target, but as a member of the Campaign to End Child Poverty we will be looking to the Chancellor to keep up the pace," she said.

Clare Tickell, chief executive of children's charity NCH, said: "If child poverty is to be eradicated by 2020 the Government needs to invest. But it must also realise that simply throwing money at this issue is not enough.

"To truly end child poverty and the widening social exclusion that it brings, the whole wellbeing of the child and their family needs to be addressed. Families need to be aspirational so their children are aspirational.

"Pledges need to be matched by actions and the Chancellor's cabinet colleagues now need to step up to the mark to really deliver the solutions that match the financial promises."

Green Party principal speaker Caroline Lucas said: "The £20 increase in child benefit is of course welcome, but it falls well short of what is required to meet the Government's laudable targets for cutting child poverty. The £3.4 billion that it would take to halve child poverty by 2010 is instead being spent on occupying Iraq and Afghanistan in 2008 alone."

'Green' Budget targets emissions

By Emily Beament, PA Environment Correspondent

In what had been widely trailed as a "green" budget, Alistair Darling focused on cutting carbon emissions from homes, businesses and transport.

But within minutes of delivering his first Budget Mr Darling came under fire from environmentalists who claimed he was tinkering in the margins and had "dropped the ball" on climate change.

Describing tackling global warming as "our greatest obligation to future generations, the Chancellor announced new targets to make all new non-domestic building zero-carbon by 2019.

The pledge comes on top of the existing goal for all homes to have no net carbon emission by 2016, and Mr Darling said it could save 75 million tonnes of carbon dioxide over the next 30 years.

The Government is also aiming for all new public sector buildings to be zero-carbon by 2018.

Smart meters will also be rolled out to medium and large companies over the next five years in a bid to encourage them to save energy, he said.

On the domestic front, there will be £26 million for the Green Homes Service next year to help people cut carbon and fuel bills, he said.

And the Carbon Emissions Reduction Targets introduced next month will require energy companies to improve efficiency in their customers' properties, with cavity wall insulation for nearly three million homes along with loft insulation, energy efficient appliances and light bulbs.

On transport new bands of vehicle excise duty from 2009 will reward the drivers of the cleanest cars and the new per-plane tax, to come into effect in November 2009, will increase by 10% in the second year of operation, he said.

Environment Secretary Hilary Benn said: "This budget demonstrates how seriously the Government takes the environment, with clear incentives for action, for example the new vehicle excise duty bands and charges for plastic bags, and measures to reduce emissions, for example zero carbon new commercial buildings."

But environmentalists said Mr Darling's decision to delay a 2p rise on fuel duty until October undermined his green credentials.

Greenpeace executive director John Sauven said: "Darling's safe pair of hands have dropped the ball on climate change.

"Suspending the promised increase in fuel duty has fatally undermined his boast that this is a green budget, and tinkering with taxes on planes and cars isn't going to stop new runways and roads being built.

"The Chancellor should have channelled cash into clean technologies, energy efficiency projects and support for the renewables industry. On all these counts, his measures have failed to match the scale of the challenge we face."

Mr Darling said the climate change levy on businesses to encourage them to reduce their energy use will rise in line with inflation from April.

And in order to boost CO2 cuts under the EU Emissions Trading Scheme, in which heavy industry is set limits for the carbon it produces and then is allowed to trade the allowances to meet those obligations, he said he wanted to see auctioning of 100% of credits for energy generators from 2012.

This will mean they will have to pay for all of their allowances, a rise from the 7% auctioned under the current phase.

The Chancellor said the first three five-year carbon budgets, which will set the amount of carbon the economy is allowed to use to 2022, will be announced alongside next year's Budget.

"Few doubt the science. The need to take action is urgent. There will be catastrophic economic and social consequences if we fail to act," he told the House of Commons.

But environmental groups said the measures the Chancellor was taking did not match up with the rhetoric of what he was saying needed to be done about climate change.

Friends of the Earth director Tony Juniper said: "The Chancellor promised to put sustainability at the heart of today's announcement, but he has merely tinkered in the margins.

"Mr Darling should have used this Budget to tackle climate change - the biggest challenge the world faces - by making it cheaper and easier for people to go green, including tax breaks for greening the home, and grants for renewable energy."

Mr Juniper said while a number of welcome green initiatives were introduced, such as an increase in air passenger duty, the overall package fell a long way short of what was required.

"Another freeze in fuel duty will further undermine the Government's already weak green credentials," he said.

Green Alliance's head of policy Russell Marsh said: "Despite all the pre-Budget spinning from Treasury, this was not a green Budget and fell painfully short of what was required.

"The Chancellor says that our greatest obligation to future generations must be to tackle potentially catastrophic climate change, but there is nothing in this Budget to indicate that he means it."

The UK Green Building Council welcomed the zero-carbon targets on new non-domestic properties but said the UK was "running out of time" to deal with emissions from existing building stock.

The council's chief executive Paul King said energy performance certificates, stamp duty rebates, council tax rebates, business rate relief and cuts to Vat for refurbishment could all be used as incentives for radical improvements in energy efficiency, but the Budget had failed to take them up.

The commitment by the Chancellor to encourage sustainable biofuel use was welcomed in some quarters.

But overall, the Liberal Democrats accused the Chancellor of "greenwash", while Christian Aid, WWF, the Royal Society and the World Development Movement all criticised the Budget for failing to deliver measures necessary to address climate change.

Oxfam said the initiatives announced "only scrape the tip of a melting iceberg".

Budget declares war on gas-guzzlers

By Peter Woodman, PA Transport Correspondent

Chancellor Alistair Darling went to war on owners of gas-guzzling cars by imposing swingeing future taxes on the most-polluting vehicles.

He also signalled the Government's long-term road congestion-easing plans by setting aside extra funding "to develop the technology which could underpin national road pricing".

But Mr Darling temporarily eased the burden on hard-pressed motorists by postponing to October the 2p a litre fuel duty rise that had been planned for April.

As widely forecast, the Chancellor announced his intention to crack down hard on the "dirtiest" of road vehicles.

He said Britain's 30 million road vehicles accounted for 22% of the total carbon emissions and that something extra needed to be done.

The amount owners currently pay on annual Vehicle Excise Duty (VED) car tax is based on size and emission levels.

Mr Darling said that from 2009/10 there would be six new VED bands including a top band (band M) for cars emitting more than 255g of carbon dioxide per kilometre. These cars would pay an increased VED rate of £425.

But cars emitting 150g or less per kilometre would pay less.

Mr Darling also said that from 2010/11, the most-polluting new cars would pay a first-year VED rate of £950, while those new cars with a 130g/k or less emission level would pay nothing at all.

Company car owners were not exempt from the Chancellor's war on pollution, as Mr Darling said he was reforming capital allowances for business cars to increase the incentive to move to lower carbon-emitting vehicles.

Mr Darling said: "It is right that if people choose to buy a more-polluting car that they should pay more in the first year to reflect the environmental cost.

"The changes will provide a real incentive to manufacturers and motorists."

The Treasury reckons that as a result of the reforms, the majority of motorists will be better or no worse off in 2009.

Mr Darling said he was postponing April's 2p fuel duty rise "to support the economy and help business and families".

But motorists are already facing a previously-announced 1.84p a litre rise in April 2009, and Mr Darling said that there would also be a 0.5p a litre rise in real terms from 2010.

While motoring groups welcomed the April 2p postponement, green groups attacked the move.

But the RAC said the postponement was "the only bright spot in a Budget seemingly doing nothing positive for the motorist".

The Society of Motor Manufacturers and Traders said that "introducing what is effectively a sales tax for many new cars is a retrograde step".

It added: "Trying to force people out of high-value cars has no environmental merit and will be seen as a smokescreen for revenue raising."

Call to clarify energy customer aid

By Joe Churcher, PA Political Correspondent

Fuel poverty campaigners have challenged the Government to set out how it will enforce a Budget warning to energy firms to do more to help vulnerable customers cope with rising costs.

Chancellor Alistair Darling said he wanted to see firms offer a fairer deal to millions of households on pre-payment meters and treble spending on social tariffs to £150 million a year.

Major hikes in bills are estimated to have plunged 4.5 million people into fuel poverty yet only one in ten benefit from social tariffs.

And pre-payment prices, paid by many of the less-well off customers, have risen twice as fast as those available to people able to pay by direct debit.

"I believe further action is now needed to help vulnerable groups deal with rising energy prices," Mr Darling told MPs in his annual statement.

"We want to see the five million customers on prepayment meters given a fairer deal and energy companies to increase their support to vulnerable customers.

"We will work with the companies to take further action on a voluntary and statutory basis - to underpin this as necessary we will legislate.

"Energy companies currently spend around £50 million a year on social tariffs. I want to see this rising to at least £150 million a year over the period ahead."

Independent gas and electricity watchdog Energywatch welcomed the commitment but called for concrete plans for meeting it to be set out.

Campaigns director Adam Scorer said: "The Chancellor has identified two key targets: unfair prepayment meter charges and inadequate industry provision for social tariffs.

"Identifying the targets is important, but to 'equip Britain for the times ahead' requires a coherent strategy and determined action. We haven't seen much detail on what that action will be.

"But the game is up for suppliers who are all talk and no action."

Minimum standards needed to be set for social tariffs, he suggested, to force firms to take action.

"Companies like EDF Energy and British Gas have made significant efforts. But one thing the Government should have learned by now is that relying on voluntary action by suppliers will not deliver the goods.

Pre-payment meter users paid an average £255 more for the same units of energy as customers on the same companies' online tariffs, he pointed out.

"That amounts to around £400 million extra revenue for energy companies, even after the costs to serve are taken into account.

"These cost differences have escalated over the past three months as companies show their disinterest in competing for this group of consumers.

"In some parts of the country a PPM consumer with the old incumbents will be paying £450 more than their direct debit tariffs."

Mr Darling also announced a one-off rise in the winter fuel payment - from £200 to £250 for the over 60s and from £300 to £400 for the over 80s.

Friends of the Earth campaigner Dave Timms said: "Given the massive rise in gas and electricity prices over the past year the increase in winter fuel payments is vital to help those struggling to heat their homes.

"However the only long-term solution is a massive programme of insulation and energy efficiency measures for the homes of the fuel poor.

"It is very disappointing the Chancellor passed up a golden opportunity to fund this with a windfall tax on the £9 billion unearned profits of energy companies.

"This would have created warm homes and helped cut carbon emissions."

Paul Bettison, chairman of the Local Government Association Environment Board, said: "The Government's move to encourage energy firms to reduce tariffs is a step in the right direction as is the announcement to make all non domestic buildings carbon neutral by 2019.

"However, the LGA believes more needs to be done if we are to encourage householders to cut their carbon footprint and help lift people out of fuel poverty.

"Utility companies are making eye-watering profits at the expense of hard working families. If these firms matched the contribution householders are making and councils were given a more central role to ensure every home is properly insulated, we could make 10 million households more energy efficient, take £2 billion off energy bills and lift 500,000 people out of fuel poverty."

Tax revamp to make flying 'greener'

By Peter Woodman, PA Air Correspondent

Chancellor Alistair Darling has announced an increase in the amount aviation will have to pay to become "greener".

The Government is currently consulting on ending the existing Air Passenger Duty (APD) airport departure tax system and replacing it with a per-flight tax in November 2009.

Mr Darling said aviation had to meet its environmental costs and that emissions from aircraft were forecast to continue to grow.

He was therefore announcing that revenue from plane duty would be increased by 10% in the second year of the new per-flight tax regime.

The news was greeted with dismay by airlines. Paul Charles, communications director at Virgin Atlantic, said: "Air Passenger Duty will already raise around £3 billion for the Treasury this year, more than enough to cover the cost of emissions of the UK aviation industry.

"Further increases look as though they are merely propping up the Government's finances. The whole of Britain wants to know from the Chancellor which environmental projects are actually benefiting from these tax increases, as so far he has been noticeably quiet on the issue."

Greenpeace's senior transport campaigner Anita Goldsmith said: "Increasing the revenue from flight taxes is hypocritical posturing from a Chancellor who wants to see Heathrow and Stansted almost double in size.

"The modest carbon savings that might be achieved by bumping up fares by a few pounds will be wiped out in no time by a third runway at Heathrow.

"A truly green Chancellor would have told the aviation industry their tax subsidies worth billions are being cancelled and the money is being channelled into the railways. Instead Labour is still committed to more runways, more emissions and more climate change."

Mr Darling also announced that Project Iris, an eye-recognition scheme whereby those wishing to beat the queues at passport control can volunteer to have their iris patterns registered and stored, would be extended.

The Chancellor said there would be no measures at Heathrow and other airports "to ensure that a greater use of biometric technology speeds up the time it takes passengers to get through immigration control".

British Airways said: "The new per-plane duty will do nothing to help the environment.

"Already the Government taxes airline passengers by £2 billion a year through APD, with not a penny of the proceeds spent on tackling climate change.

"BA has led the aviation industry in setting targets for fuel efficiency improvement, and is investing in new aircraft that represent a major advance in terms of environmental performance.

"We believe that aviation's impact on climate change is most effectively addressed by the inclusion of airlines within the EU emissions trading scheme. This is due to occur from 2012 and should replace all forms of environmental tax on aviation."

Neil Pakey, chairman of the Airport Operators Association, said: "The Government has announced a 10% hike in tax for the industry which has already realised some £11 billion in taxation since the inception of the APD.

"This rise risks damaging the UK's economic competitiveness, and does little to encourage a reduction in aviation emissions.

"The irony is that so far none of this 'tax' has been reinvested back into environmental improvements in the industry. We need to move towards a genuinely 'green' aviation duty, which would provide incentives for the aviation industry to invest further in methods of carbon reduction."

Darling brings schools plan forward

By Tim Ross, PA Education Correspondent

More than 600 secondary schools have been given three years to improve or face closure as the Government stepped up its drive to raise standards.

Chancellor Alistair Darling brought forward the deadline to meet Gordon Brown's key target for there to be no schools where fewer than 30% of pupils achieve five good GCSEs.

The 638 secondary schools currently in this position - a fifth of the total in England - must meet the target by 2011, a year earlier than previously planned.

The Chancellor said £200 million would be spent on raising standards in weak schools.

Mr Darling told MPs: "If we are to compete in the future it is essential to do even more to drive up standards in education and to improve skills.

"We have cut the number of underperforming schools dramatically in the last decade.

"And building on last year's Spending Review, we will raise standards even further to create greater opportunity for all children.

"The Secretary of State for Children, Schools and Families (Ed Balls) will be investing £200 million to bring forward by a year to 2011 the Government's aim for no schools to have fewer than 30% of its pupils achieving five A*-C GCSEs, including English and maths."

The Treasury said that the Government would expect all schools to have reached this target by 2011 or they would "be subject to formal intervention".

Ministers have suggested that this could include schools being taken over or turned into privately run academies, and in some cases closed.

An initiative that has improved education in London is being expanded across England.

The best headteachers will help turn around weak comprehensives, while top schools will be encouraged to link up with those that are struggling.

Mr Darling said: "As a result, by 2011 we will ensure that every school is an improving school meeting the standards we have set."

He announced £10 million of Government cash over the next five years combined with £20 million from the Wellcome Trust and the private sector for a new "Enthuse Science fund".

"This will give every science teacher in secondary and further education access to high quality professional development helping improve the science offer to today's children," he said.

John Dunford, general secretary of the Association of School and College Leaders, said: "The earlier target will inevitably lead to greater pressure on schools that are already under huge pressure."

Bag charges for 'no-action' shops

By Emily Beament, PA Environment Co