Going for greener but not higher taxes

Written by Chris Huhne MP and published in Daily Mail on Sun 4th Mar 2007

As Gordon Brown prepares his eleventh and possibly last budget, the real test is whether he goes green. So far, the Chancellor has a limited track record of measures to help us burn less gas, coal and oil. He has just piled taxes like the climate change levy onto businesses that do not vote, yet we need to pay as we burn, not pay as we earn.

Where Mr Brown has raised green taxes, it has been so cack-handed that he risks giving them a bad name. For example, the doubling of air passenger duty in October - back to where it was before he cut it - is rightly seen as just another revenue-grabbing stealth tax. The tax was not linked to an aircraft's emissions, which would give airlines the incentive to buy fuel-efficient aircraft and fill them up rather than fly half full.

Most important, the Chancellor made no commitment to hand back the extra revenue in tax cuts on activities we want to encourage, such as work, risk and effort. Until there is a clear green tax guarantee - so that every extra penny in higher green taxes goes back in lower income taxes - the public will be deeply cynical. A Populus poll recently found that 62 per cent thought green taxes were really about raising revenue not helping the environment.

It is only if there is a guarantee that increased revenue goes back in other tax cuts that the public warms to green taxes: another Populus poll found that 71 per cent back green taxes so long as other taxes are cut. This is also the experience from the Nordic countries like Sweden and Denmark that have pioneered green taxes.

That is why a crucial part of the Liberal Democrats' package abolishes the starting 10 pence rate of income tax, cuts the basic rate of income tax by 2 pence, takes 2 million out of paying income tax altogether and 1.3 million out of paying the higher rate of income tax. We must tax pollution not people, which means greener and fairer taxes but not higher taxes.

With the green tax guarantee, people are prepared to use taxes to help shape our collective behaviour and save the planet for our children and grandchildren. It is not too much of a sacrifice, when considering the purchase of a new car, to face a sharply graduated rate of vehicle excise duty. On new cars, gas-guzzlers in Band G would pay £2000 a year but eco-cars in Band A and Band B would pay nothing. Studies show that more than two thirds of us would buy lower-emitting new cars faced with these tax incentives, but it would remain our choice.

Some people say that these green taxes would not yield any revenue if they worked to change behaviour, and therefore we could not cut income tax. This is quite wrong: although higher taxes on alcohol and tobacco change behaviour, they do not change everyone's behaviour. So revenue is substantial. We need a process of gradual change through tax incentives, not a blunderbuss that just prohibits people from driving or buying cars. The one third of people who now buy gas-guzzlers who will want to go on doing so will pay ten times as much road tax each year.

The Liberal Democrats are the first and only national party to put forward plans for green taxes on cars and planes, because any policy to tackle climate change has to start here. Carbon emissions from transport are up 18 per cent since 1990, while every other activity is emitting less. If we are to stop global warming, we have to burn less fossil fuel in getting around. Green taxes - but not higher taxes overall - are the fairest and simplest answer.