Green Fiscal Commission calls for car purchase tax escalator
Mon 26 October 2009
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A leading ‘think tank’ has won support from Lord Turner, Chair of the Committee on Climate Change, and leading politicians in calling for a redesign of the UK’s tax system to better incentivise environmental priorities. Amongst its recommendations, the Green Fiscal Commission (GFC) calls for the introduction of a new car purchase tax starting at £300 and rising annually to £3,300 by 2020.
The proposals for a major reshaping of the tax system to limit greenhouse gas emissions and encourage investment in low-carbon technology are included in a 100-page report produced by the GFC, a body of academics, industrialists and politicians set up to advise government on how to encourage the low carbon transition. The report took three years to compile.
The Commission, which is chaired by Robert Napier, Chairman of the Met Office, suggests that the proportion of green taxes in the overall tax take should be doubled from the current 7%. The rise in green taxes aims to encourage a reduction in activities causing pollution or using natural resources. The tax rises would be offset by cuts to income tax and National Insurance contributions; representing a shift away from taxing ‘goods’ to taxing ‘bads’.
The GFC said that, if adopted, their recommendations would significantly reduce greenhouse gas emissions and create nearly half a million jobs.
Greg Barker, the Tory environment spokesman, Alan Whitehead, a Labour MP on the energy select committee, and Chris Huhne, the Liberal Democrat home affairs spokesman, all spoke at the launch of the report.
Paul Ekins, a professor at University College London and the author of the report, said: “It’s really a question of moving a mindset. We’ve had it as a given that energy is cheap, so we have been wasteful. This has to change and the only way to do that is to make the polluters pay.”
Speaking on Channel 4 news, Sarah McCarthy-Fry, Treasury Minister, said: "We welcome the report … it's an important contribution to how we're going to tackle climate change … our low carbon transition plan is set out to deliver that 34% reduction by 2020 and green taxes are part of it.
"We have (already) got £50bn of investment in low carbon, (have) just created 900,000 jobs and in the Budget this year we've leveraged an additional £10bn into investment in lowcarbon industries. We've set out our plan for the next four years of what we are going to do on fuel duty. It's going to rise by 1p per litre above inflation for the next four years.”
She said: "We'll ... (meet the carbon emissions target), by using a combination of green taxes, consumer incentives and the emissions trading scheme, which will actually put a cap on carbon … we have to take into account the burden on households and the burden on businesses in the recession, but we also have to make sure that we deliver on climate change."
Speaking on the same programme, John Sauven, Executive Director, Greenpeace, said: "What the Commission is talking about is a tax shift …this would actually be revenue neutral. The tabloids this morning were screaming £3,000 tax on new car, what they weren't screaming was you get £3,000 if you buy a fuel efficient car.
”At the moment the problem with green taxes is that they are additional to what people have been taxed already, rather than replacing what people are being taxed.
"If you look at our competitors, they're already doing this. Germany already has half a million jobs in renewable energy, for example. If you look at China, other countries, they're all developing these new technologies and part of this is happening through a green tax shift."
Commenting on the report, the SMMT Chief Executive Paul Everitt said, “We are concerned that the report looks to raise the price of new vehicles at a time when the economy is in recession and the recovery of the new car market remains fragile. Furthermore, the Green Fiscal Commission did not take the opportunity to discuss low carbon technology and performance with industry.”
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