Peter Young, chair of the Aldersgate Group, questions the wisdom of Treasury's decision to redefine what constitutes as an environment tax
The Treasury’s revision of the definition of environmental tax seems at odds with the government’s previous commitments to grow environmental revenues and be greener than all before. It is another lost opportunity to deliver a clear message about its true intentions on both the environment and growth.
The announcement defines what green taxes do and then contradicts itself by excluding vehicle excise duty (VED) and air passenger duty, which both seem to meet the criterion of being “structured in relation to environmental objectives”.
Why else is VED scaled according to carbon emissions per kilometre?
Even though the effect is a narrowing of the environmental tax list, the promise to escalate environmental taxes is fulfilled partly by ever growing landfill tax revenues.
Given this tax has now achieved its purpose in rising to a rate that makes alternatives to landfill viable, and that it works as waste to landfill is declining sharply, this escalation also raises worries about the Treasury’s grasp of the different purpose and trajectory of environmental tax revenue streams.
If they are to encourage environmentally positive behaviour change and to succeed, taxes will not grow but deliver revenues in cycles as each goal is achieved.
The question is left whether those enormously complex models used to forecast tax-take have missed this rather fundamental point.
The best hope is that this redefinition, and fall in environmental tax-take from business, is a platform to build a robust and ambitious green tax strategy.
A strong environmental fiscal policy could deliver innovation and growth through efficiencies for our economy now and in the future.
How disappointing that no attempt has been made to articulate this, or even to ensure coherence in defining what is and is not an environmental tax.
Peter Young is chair of the Aldersgate Group and strategy director at SKM Enviros
