UK Report Argues For Radical Green Tax Shift

by Robert Lee, Tax-News.com, London

28 October 2009

A study recently published by the UK's Green Fiscal Commission has argued that a 'polluter pays' tax shift would provide a 'significant boost' for the long-term health of the UK economy without increasing the overall tax burden.

The study, the result of over two years of research by the Commission, attempts to show that higher green taxes could by themselves enable the UK to meet its statutory carbon emission reduction targets, provide a boost to the development of low carbon industries, and create additional employment.

“This is not just about reducing emissions, but helping the UK to develop low-carbon competitiveness,” explained Green Fiscal Commission Director Paul Ekins, Professor of Energy and Environment Policy at the UCL Energy Institute, University College London.

"This work suggests that it is possible to substantially reduce emissions and create jobs, which has to be an important message to policy makers at a time of rising unemployment. We know that a tax shift can be attractive to people, because it is effectively taxing a social evil, i.e: pollution, and people are much more supportive of taxes levied in this way.”

The Green Fiscal Commission, an independent body not affiliated to any political party, was formed in May 2007 and will continue in existence to the next general election, due by June 2010.

Its members come from business, universities, the three main UK political parties, both Houses of Parliament, and consumer and environmental organizations.

One of the main goals of the Commission's study was to find ways in which the tax-take from environmental levies can be doubled from the present level of 7% of total tax revenues, to 14%.

Among the suggestions as to how this could be achieved was a GBP300 tax on new cars, increasing annually to GBP3,300 by 2020, a tripling of fuel duty, and the introduction of a household energy tax.

The measures proposed in the report would raise an estimated GBP150bn in tax revenues although the plan is, in theory, revenue neutral, balanced by commensurate cuts in income tax and national insurance contributions.

Not only will higher environmental taxes help Britain achieve its 2020 greenhouse gas targets, concludes the report, but it will also help to lower other taxes and produce a cleaner environment, and all in a way that would be "broadly neutral" on the economy.

"Environmental taxes do protect the environment and in many cases will produce improvements at lower cost than other measures," the report's authors have argued.

Moreover, they point out that investing just a "small proportion" of the increased revenues from green taxes in energy-efficiency initiatives and renewable energy schemes would "reduce emissions further at effectively no cost".

Speaking just ahead of the launch of the report on October 26, Robert Napier, who chairs both the Green Fiscal and UK Meteorological Office, observed that:

“This report adds the numbers to an issue that has frequently been discussed in more general terms. It shows that Green Fiscal Reform could help put the UK on a low-carbon track and from that many positives will flow: reduced greenhouse gas emissions, extra employment, and new technologies which will help the UK economy all round.”

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