Budgets, sustainability and green taxes.

image: Volt’s electric concept car 

 Article.

Wednesday 12th March sees Chancellor Alistair Darling present his first full budget. Back in December the chancellor said it “is sustainability that will be at the heart of the next Budget”.

Debate has increased over how best to lock in sustainable measures so that our societies as a whole really begin to transform for the better. The environmental audit committee urged the Treasury to be bolder in its approach to green taxes, saying it must respond to climate change on the scale and with the urgency recommended in the Stern review. Tim Yeo, the committee chairman, attacked “a lack of ambition and imagination” in the Treasury’s approach to green taxation.

The decline in revenues from environmental taxes (from a peak in 1999 of 9.7 per cent to 7.3 per cent in 2006) has been a feature of many industrialised countries, possibly reflecting a recognition they are based on a faulty premise and less effective than more closely-targeted green measures, according to a study published by KPMG, the professional services firm.

The main reason for the declining emphasis on green taxes is a fall, in real terms, in duty on road fuels. Frank Sangster of KPMG said that governments might decide instead to tackle environmental problems through other means such as direct regulation.

Environmental taxes can have undesirable side effects. By raising prices they have a greater impact on the poor than on the rich. They can also be unreliable sources of revenue, because they will raise less tax if they persuade people to change their behaviour.

However, Mr Darling is expected to tweak the tax system on Wednesday in a further attempt to shift consumers away from high-polluting cars, including higher road tax rates for gas guzzlers and changes to company car taxation.

According to a report by Julia King, vice-chancellor of Aston University, electric cars were likely to dominate the roads by 2050, although the medium-term solution would involve “hybrid” petrol-electric vehicles and biofuel. Most of the electric vehicles currently on the road are commercial vehicles such as milk floats and vans. UK sales of hybrid cars doubled in the first half of 2007 but remained low at about 6,500.

The chancellor has various tools at his disposal to shift the public towards more environmentally-friendly transport. Government insiders expect he will increase vehicle excise duty on high- emission vehicles and lower it for green vehicles.

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3 Responses to Budgets, sustainability and green taxes.

  1. inel says:

    Hi matt,

    Three points come to mind:

    Sustainability seems to have been redefined in certain situations by certain people to mean ‘economic sustainability’, which is not the same as the way sustainability is understood in environmental terms. I only have Heathrow experience and knowledge of James Connaughton’s speeches to go on for this, but I do think that there is a disconnect between the way economists and others use that ‘s’ word.

    Personally, I am disappointed that the British government appears to intend to muddle along with this budget, nibbling at the edges of massive problems, like climate change, instead of taking the bull by the horns and showing some real courage with bold initiatives.

    Finally, I’m not sure what environmental taxes are in place at the moment. Are you?

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  3. matt says:

    > I’m not sure what environmental taxes are in place at the moment. Are you?

    The Landfill Tax is one. That has been ratchetted up enough by Brown as chancellor to cause councils to take recycling more seriously.

    Dan at In Balance would know more about this. But I think you’re right that there needs to be more done. The airport charge for passengers for example has only ever been seen as a tax raising measure.

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