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The trouble with 'green taxes'

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Roger HarrabinRoger Harrabin, BBC Environment Analyst
Roger Harrabin has been looking at the turbulent history of "green taxes".

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Roger's Essay
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Congestion Charging - Transport For London

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Green taxes would "hit poor most" - BBC Online
 
"Most Britons willing to pay green taxes to save the environment"  - The Guardian


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In Mrs Thatcher’s Britain green taxation looked to be an elegant economic solution to a social problem.

No need to make new laws – just tax the things you want to see less of… and leave the rest to the market. So the Tories launched their flagship green tax – the fuel duty escalator, rising 5% year on year

This was arguably the first green stealth tax - the Treasury hadn’t even consulted the environment department in advance. But it did inhibit traffic growth and it also conveniently raised a truckload of cash so Gordon Brown, waiting to take over at No 11, resisted the temptation to condemn it.

In Brown’s first budget he increased the petrol escalator to six per cent, but there was no incentive for the Tories to acquiesce. “This government is anti-motorist”, said William Hague, “anti-car” and the media gleefully echoed the quip in enduring headlines.

The “persecuted motorist” had a parliamentary champion and end of the fuel escalator was nigh, carrying implications for all green taxes in the process.

The green tax crash came in 2000 when with much of the media desperate to sour New Labour’s voter honeymoon, the truckers barricaded refineries in protest against the tax on diesel.

One truckers leader confided to me at the time that their argument was really with the big haulage firms forcing them out of business…. But no-one wanted to hear. The papers re-cast an industrial dispute as the Great Motorists’ Revolt.

Like rabbits in the headlights Brown and Blair first failed to defend their fuel tax – then contradicted each other about whether it was to protect the environment or to make money for hospitals. In a flash the fuel escalator was dumped and politicians close to Mr Brown say he was so seared by the prospect of losing control of the country, that he’s feared green taxes ever since.

Green taxes have now actually dropped as a share of the total tax take – the very opposite of what he promised when he took office. His handling of not just fuel tax but also aviation tax has been widely condemned as incompetent by all sides of the debate.

By now the polls show that much of the public is heartily cynical about environmental taxation – a cynicism fuelled by the propensity of Labour and Tories to condemn each other’s green taxes as stealth taxes.

It’ll be an uphill battle to win back trust from people and courage from politicians.

But we might start with a public debate about what green taxes are for: Should green taxes be ring-fenced for environmental protection (hypothecated) or merely used as a substitute for income tax? Or both?

Hypothecation is anathema to the Treasury but the Environmental Audit Committee believes the public would accept green taxes if they were confident the proceeds would use for green deeds.

Are green taxes the best way to pursue green goals or would it be better to set minimum efficiency standards for things like cars, as the former Shell boss Sir Mark Moody Stuart argued on this programme a few weeks ago?

How can you shield the poor from being disproportionately harmed by green taxes? (This question is not easy to answer). How do green taxes fit in the debate over global environmental responsibility?

For instance, how do you explain to a man from Bangladesh that he shouldn’t worry too much about the rising tide because a Porsche owner in the UK has paid extra fuel tax that’s helped Britain’s education system.

The political arena may be too toxic for such a debate – it’s so easy to whip up the papers with a whiff of stealth tax.

But if the main political parties really aspire to green the tax system they need to get some of this stuff out in the open, to say exactly what they mean to do and how they mean to do it.

If the Treasury teams of the major parties can’t show the public that their policies on green taxation will be considered, consistent and ethical they may find it impossible to raise green taxes from their current level.


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