Last year the TaxPayers’ Alliance released ‘The Case Against Green Taxes’. We compared how much we are being asked to pay with estimates of the social cost of Britain’s carbon footprint and found that green taxes were already excessive. Now, we’ve updated the numbers from 2005-06 to 2006-07 and 2007-08, included the increasingly expensive Renewables Obligation and produced estimates showing how every local authority area across the country is affected. These are contained in the new report 'The Burden of Green Taxes' (PDF).
The new report’s results paint a stark picture of the extent of excessive green taxes. In 2007-08 Britons paid between £7.9 billion and £21.8 billion in excess green taxes, between £316 and £872 per household. That is a substantial rise on the between £6.8 billion and £20.4 billion of excess green taxes in 2006-07. Of course, the ranges are large which shows how much uncertainty there still is over the social cost of emitting greenhouse gases, but our results show that no mainstream estimate can provide effective intellectual support for green taxes at the level they are currently set in the UK.
When our last report was released there were criticisms from the Treasury, who accused us of being “doubly dangerous” for having the temerity to question both their logic and their revenue stream. The Liberal Democrats insisted that it is only older estimates of social cost that suggest British green taxes are too high – despite an IPCC principal author having noted that the average estimate across the academic and official literature is falling over time – and that we hadn’t included all the externalities associated with road transport – ignoring that we had already discussed that argument in our study and shown how it meant double-correcting externalities already controlled by regulations. There is a more detailed discussion of this issue in the new report.
Rod Liddle recently wrote about last year’s report in the Spectator and said he has “not seen those figures convincingly rebutted anywhere” and that he suspects “they are impossible to rebut”. Since last year, other organisations have used the same method to study individual taxes. The Department for Transport recently found that tax on flights is now excessive and contributors to the Mirlees Review for the Institute for Fiscal Studies have come to the same conclusion about Fuel Duty and Landfill Tax.
Even at their current level green taxes are set too high, never mind if the political parties carry through on their threats to put them up even more. Those excessive green taxes create a number of harms.
Motorists are being victimised in what Conservative Way Forward called the “war against drivers”. People in rural and suburban areas, who have to drive in the absence of the dense transport networks that only make sense in cities, are particularly hard-hit.
The elderly pay more to heat their homes, pushing more of them into dependence on benefits or fuel poverty. By increasing the price of energy, green taxes may even contribute to excess winter mortality as putting the thermostat up becomes more expensive and some people take greater risks with their health.
Manufacturing industries are put at a huge competitive disadvantage, particularly compared to developing countries, which contributes to job losses and regional inequality. Relocating industry from Britain to China doesn’t help the planet much, either.
Beyond that, if green taxes are excessive but aren’t creating the desired cuts in emissions – which have gone up since Labour came to power - then that suggests they may be fundamentally the wrong way to go about bringing greenhouse gas emissions down. The failure of financial incentives to deliver changes in behaviour suggests that there are not cost-effective substitutes for emitting activities that people can be encouraged to switch to; the elasticities are too low. If people could, practically, avoid the substantial burden of Britain’s green taxes and high market prices for fossil fuels then they would.
Policies aimed at reducing emissions should be directed, instead, at delivering new alternatives to make it more practical for people to respond to the many incentives to use less fossil fuel. That means focussing on assisting the development of new technologies, perhaps through the means of prizes for delivering particular improvements, rather than trying to force people into replacing fossil fuels before alternatives are ready.
British green taxes are too high. They are imposing an unfair burden on motorists, those living outside the cities and manufacturing industries. Ordinary families, struggling with the effects of an economic slowdown, are being made to bear a heavy burden. Despite that, little is being achieved in environmental terms. Excess green taxes should be cut and plans for further increases in green taxation abandoned.
If you want to find out how green taxes are affecting your area, we have also produced local estimates of how much people in each local authority area are paying in green taxes and the extent to which those taxes are excessive. Those estimates can be obtained from an Excel database here.