Chris Huhne wants big shift towards green taxation

By Tim Montgomerie

The Daily Mail and Telegraph both react excitedly this morning to news that Chris Huhne, Secretary of State for Energy and Climate Change, wants to increase the contribution that green taxes make to the total UK tax take.

Environmental taxes currently account for 6.5% of all UK tax revenues but the Liberal Democrats want that to increase to 10%. The Telegraph interprets this as £15 billion of extra taxes on motorists and air travellers, among others. The Mail calculates that it would mean an extra £22 billion! Both newspapers then speculate what this would mean for the motorist if all this extra revenue came from them - which, of course, it would not. "Drivers would be forced to pay an extra 30p for a litre of petrol," suggests The Telegraph. Just as breathlessly, The Mail tells its readers that, "if the entire bill were pushed on to fuel duty it would push petrol prices above £1.50 a litre".

The trouble with many green taxes - including petrol duty - is that they fall equally as heavily on lower income drivers as higher income drivers. Higher petrol duty would also contradict Transport Secretary Philip Hammond's vow to end Labour's war on the motorist.

Early in the last Parliament George Osborne saw green taxes as an ethical way of raising taxes on something that is 'bad' - pollution - in order to cut them on socially beneficial things - such as marriage. Later in the Parliament he and other Tories appeared to switch tack - emphasising encouragement of green behaviour, rather than penalising 'dirty' behaviour. During their green tax phase the Conservatives promised to put all extra revenues from any environmental levies into a ringfenced fund that would be used to afford lower taxation on married couples and other families. The Liberal Democrats have always vehemently opposed the Tory support for marriage tax breaks and the prospects of a cut in tax for married couples are therefore very slim. It is vital that the Tories continue to insist, however, that any new green taxes are replacement taxes. They must not be a backdoor way of increasing the overall burden of taxation.