Press Room
Conservative Party environmental measures set to put
environmental taxation for forthcoming pre-budget
Thursday 13 September 2007
Today's Conservative Party policy review on the Environment is set
to propel environmental taxation as a key political battleground
for the months to come with Alistair Darling's maiden pre-budget
speech due next month also likely to heavily focus on green issues,
according to leading business and financial advisers Grant
Thornton.
Whilst there is a concerted effort from all political parties to
gain the upper hand on leading the debate for carbon emission
reduction, Maurice Fitzpatrick, a tax expert at Grant Thornton
points out the anomaly that "green taxes as a percentage of total
tax yield have actually fallen from 8.1% to 7.1%, or £34.7 billion
since the Labour government came to power in 1997".
"To put it in perspective, if just 1% of this amount (£34.7bn) had
been invested directly into building wind farms, enough electricity
would now be generated to power a city the size of Sheffield", says
Nathan Goode a renewable energy expert at Grant Thornton.
The findings of a recent Grant Thornton survey on UK Environmental
Taxation Policy* highlighted that an overwhelming majority of the
general public (82%) and of UK businesses (80%) would
overwhelmingly reject a higher UK tax burden to accommodate
possible new green taxes. However, there is support for green taxes
if the revenue generated is not seen to end up in a main 'pot' but
to directly benefit environmental measures. The vast majority of
individuals (85%) and businesses (87%) in the UK want to see 50% or
more raised from environmental taxation re-invested in
environmental/sustainable development projects. Of these, 49% of
individuals and 43% of businesses would go as far as reinvesting
100% or more of environmental tax receipts.
It is likely that Alistair Darling's first pre-budget report will
ratchet up green taxes on business rather than the consumer
according to Fitzpatrick. "Individual taxes such as Airport
Passenger Duty and Road Fuel Duty are all taxes which are all not
only unwelcome to Joe Public, but are also likely to be less
effective at changing environmental behaviour than taxes on
industry. People will still want to drive and regularly fly to a
place in the sun but it is more likely that a polluting business
will change its ways to avoid paying a bigger tax bill", he
continued.
From Grant Thornton's survey results, the only transport-related
measure supported by the overwhelming majority of respondents (79%
of individuals) was, unsurprisingly, increased tax on so-called
'Chelsea Tractors'. Darling is likely to address this by 'taxing
the polluter' e.g. increasing VAT on vehicles according to their
carbon output, and increasing VAT or other taxes on retailers and
food manufacturers who use excessive packaging.
Commenting on the Conservative Party Environmental policy review,
Fitzpatrick points out: "there is good use of the carrot and stick
of taxation to cut carbon emissions and modify behaviour.
Encouraging carbon efficient homes by offering rebates on council
tax and stamp duty is a great idea that could reduce the average
household tax bill from these taxes by £70 a year. However, the
Tory pledge to match Labour's spending plans for three years from
2008/09 and offset any specific tax cut by recouping it elsewhere
could mean the £70 a year tax saving would need to be matched
elsewhere. A 5% reduction in the overall burden of council tax and
stamp duty on homes, would cost c £1.65bn per annum. To recoup this
from taxes, say on aviation, would involve a hike in aviation taxes
broadly equivalent to raising Airport Passenger Duty( APD) by just
over 3/4 (APD currently yields £2.1bn pa)".
Fitzpatrick believes that the green tax initiatives are laudable
but only time will tell whether these will actually help alter
behaviour:
"The measures proposed by the Conservative Party, as well as the
likely outcome of Darling's pre-budget report, highlight that tax
is now viewed as a key mechanism by both sides of the house to
improve the UK's carbon footprint and that the greatest impact is
likely to be felt by industry rather than the consumer", concludes
Fitzpatrick.
*Grant Thornton UK Environmental Taxation Policy survey of 1,017
respondents in March 2007.