The TaxPayers' Alliance - Economics 101

++STOP PRESS++ Conservatives will pledge to abolish inheritance tax

The TPA has just been told by a high-level source that George Osborne will commit the Conservatives to abolishing inheritance tax in his speech at the Party Conference on Monday. This is great news. The TPA has long argued that inheritance tax is unfair, unpopular and unecessary and so we warmly welcome its abolition.

The plans as put forward by the Economic Competitiveness policy group and the Tax Reform Commission do envisage inheritance tax being replaced by a short-term capital gains tax, which would taper to zero after ten years and from which the main family home would be exempt. This does mean that some assets held for less than ten years will still face a tax on death, but according to the Tax Reform Commission, far less revenue would be raised under this system than from inheritance tax.

This is a huge step in the right direction and one that has our support. TPA Chief Executive Matthew Elliott said:

“Taxpayers across Britain will now look at David Cameron’s Conservatives in a different light following this announcement. Finally, voters can choose a party which will abolish this iniquitous tax. This is great news for ordinary families who suffer under the shadow of the death tax. Britain’s number one most hated tax is going to be axed.”

Conservatives to abandon green taxes

In a revealing interview with the Telegraph today, Shadow Chancellor George Osborne sought to distance himself from new green tax proposals put forward by the Quality of Life policy group.  He said:

"We're not going to have taxes on parking at supermarkets because I know that families going to the supermarket and doing their weekly shopping do not need to be taxed or given a car parking charge."

The paper reports that he is also preparing to abandon a proposal to issue all passengers with a "green miles" allowance, under which they would be taxed if they took more than one short-haul flight a year, saying:

"A flight tax that is a tax per plane looks like the best way forward."

If this move away from green taxes is a genuine one, George Osborne is doing exactly the right thing:

• Polls show that green taxes are unpopular. A YouGov poll earlier in September found that 63 per cent agreed with the statement: “Politicians are not serious about the environment and are using the issue as an excuse to raise more revenue from green taxes.”
• TPA research, also published earlier this month, showed that green taxes are already more than covering the cost of Britain's carbon footprint.
• Replacing Air Passenger Duty with a per-flight tax, provided revenue does not increase, is a sensible move. It would encourage airlines to run planes as full as possible, which is far better than allowing them to run half-empty.

It is also very pleasing to see the Shadow Chancellor re-affirm his opposition to inheritance tax. Inheritance tax is seen as one of the  most unfair taxes in Britain, as recent polls show.

The Party's conference in Blackpool should prove to be an interesting one. We hope that it will finally abandon green tax plans and concentrate on the job of reducing the high tax burden on hard-pressed families and businesses. The TPA's recent poll shows that 44 per cent of the electorate would like the party they support to reduce taxes, including 61 per cent of Conservative identifiers. This is compared with just 6 per cent who would like their party to increase taxes, which may happen if a 2 per cent annual growth in spending coincides with a slowdown in GDP growth.

With a possible election approaching, cutting taxes is a popular political message.

OECD urges Brown to come clean on tax

From the Telegraph:

"The world's leading economic watchdog has urged Gordon Brown to abandon his decade-long use of stealth taxes.

The Organisation for Economic Co-operation and Development yesterday issued the Government an unprecedented order to be "more transparent" about tax rises.

It said the Government should stop using fiscal drag - whereby it raises tax allowances more slowly than earnings, dragging many more families into the highest tax bracket - or be more open about its use. Anne Marie Brook, the chief author of the OECD report, said: "The Government should be making it clearer to people how they are raising taxes. It's a question of transparency."

Most people are aware that they're paying more in tax.  TaxPayers' Alliance polling shows that 70% know that their taxes have risen under Brown.  However, that doesn't mean that they are aware of just how much more they are paying.  Too much tax is hidden away in stealth taxes like the raid on pensions or in a failure to increase rates in line with growth in earnings and wealth.  Darling should listen to the OECD and fiscally-dragging people into higher taxes.

The right way to harmonise taxes, if you must do it

With the news earlier this week of business support for a common corporate tax base in the EU, it seems little will stop Brussels from getting its way. So if we're going to have tax harmonisation forced upon us, let's at least make sure it's done in the right way. It's time, then, to re-visit a Wall Street Journal article, written in 2004, which still provides the answers:

"There are three ways of providing a common tax base. Two of those systems facilitate jurisdictional competition, while the other would create a cartel for politicians:

Option No. 1: The optional European company charter would give a firm the choice to register -- at least for tax purposes -- as a pan-European company. The rules for this new entity, including the definition of taxable income, would be determined in Brussels. Such a system might even allow a company to file just one tax return, with the money then allocated to individual nations based on a neutral criterion such as the company's sales. This would reduce compliance costs compared to the current system while also containing a built-in safety mechanism to protect against higher tax burdens. Simply stated, if European politicians and bureaucrats got too greedy and adopted a flawed measure of taxable income, companies could stick with -- or return to -- the status quo. This freedom of choice would ensure that a common tax base could not be used as a tool to raise business taxes.

Option No. 2: Optional home-state taxation would give a firm the ability to choose the tax base of its home country (presumably where it is headquartered) and to use that definition of taxable income for all 25 EU nations. This would eliminate the complexities of using 25 different methods of calculating income, and it also would facilitate competition between nations since companies presumably would gravitate to the nations that had the most pro-business tax base.

Even if companies did not want to move their headquarters (assuming this is how "home-state" would be defined), they would have a strong incentive to make sure that their government did not utilize a disadvantageous definition of income. This approach, by giving companies the ability to choose their tax base, ensures that a common tax base could not be used as a tool to raise business taxes.

Option No. 3: A mandatory European tax base would require all companies in all nations to calculate their taxes based on a single definition of income. This monopoly approach would make it easier to file 25 tax returns, but governments would be tempted to increase the aggregate tax burden by selecting the wrong common tax base in the absence of jurisdictional competition. Why exercise fiscal discipline, after all, if they think corporate taxpayers are a captive audience?"

To read the full article, click here.

How much chance Brussels will get it right? Don't bet on it.

A lesson in why corporation tax should be reduced

An interesting new video from the CATO Institute in Washington presents an important lesson on why corporation tax should be reduced. You can watch the video here. It's primarily aimed at a US audience, but CATO are interested in general feedback about the content, before they get it professionally made. Please email comments, both positive and negative, to dmitchell@cato.org.

French budget: tax cuts; public spending frozen in real terms

The French government yesterday unveiled its budget for 2008. Public spending is to be frozen in real terms and taxes will be cut by €9 billion, or £6.3 billion, including €5.1 billion to exempt overtime from tax and social charges.

The ususal critics have been lined up to say that this is fiscally irresponsible because the deficit is projected to remain around the same as this year, but it might be more prudent to wait for the actual results, which are likely to be more favourable than a static forecast would show. Marginal changes don't come much better than exempting all overtime from all taxes. 

If only we had such bold, fresh thinking from our politicians in Westminster.  If they are going to freeze public spending in France and return all the money saved to taxpayers, why can't they do the same here!?

Battle for free-market ideas still to be won

An interesting FT/Harris poll is covered in the Financial Times today (here for questions, here for further write-up). It's worth reading the poll results and analysis in full, but here is a quick summary.

• Around 35 per cent of Britons think that a free-market, capitalist economy is the best economic system. Around 20 per cent think that it is not, while the remaining 45 per cent are unsure. Around 50 per cent of people in Spain, Germany and the US see a capitalist system as the preferred option.
• Only around 25 per cent of Britons are optimistic about the UK's future economic prospects, while only around 25 per cent think the European economy can compete effectively against the Asian economies. Britons are generally more pessimistic than other Europeans, with over 40 per cent of Spaniards and Germans confident that Europe will be able to compete with India and China.
• Only around 20 per cent of Britons, and around 20 per cent of other Europeans (though almost 40 per cent of Italians), think that Europe's economy should be more like that of the US, while over 50 per cent of Britons (similar percentages in other European countries) think that trade unions have an important role in today's work environment.

Overall, the results show that while people generally do not think that Europe is well placed to compete with the emerging Asian economies, they are not yet willing to take the hard decisions that will ensure they remain competitive. There is a hard fight ahead for free-market ideas.

New tax on workplace parking spaces proposed

Today's Times reports:

"Commuters face a £350 tax on workplace parking spaces in an attempt to encourage them out of their cars and on to public transport.

"The tax is being planned as an alternative to congestion charging because it is thought to be much cheaper and easier to collect. Nottingham City Council is the first local authority planning to introduce the tax. Eight other councils, including Devon County Council, are understood to be considering similar schemes.

"Under the Nottingham initiative, employers with more than ten parking spaces will have to pay the tax and most are expected to pass the cost on to staff."

On top of rising council tax, we now have the prospect of another local authority tax that will discourage business growth and raise more revenue. Let there be no illusions that this will replace a portion of council tax.

The experience of the introduction and increase of local authority parking charges in the 1990s suggests that any introduction of workplace parking taxes will not result in an equal and compensatory reduction in council tax:

• In 2005 councils raised a record £1.2 billion from parking charges, an increase of 82 per cent over the amount nine years earlier.
• Over the same period average council tax bills rose by 76 per cent.

The one consolation is that there may be fewer congestion charge schemes. But don't bet on it.

The "rich" are merely those who earn more than MPs

An interesting piece from the Scotsman points out that while the Liberal Democrats plan to hammer "rich" households earning more than £70,000, Liberal Democrat leader Sir Menzies Campbell earns £60,227 as an MP:

"SIR Menzies Campbell yesterday pledged to "hammer" households earning more than £70,000 with higher taxes.

"The Liberal Democrat leader said the rich have done "too well" under Labour and agreed the wealthiest 10 per cent should pay more taxes.

...

"However, the Lib Dem tax proposals - which include scrapping the council tax in favour of a local income tax - would end up penalising relatively middle-class households with two moderate earners rather than just the super rich.

"The Lib Dem leader's salary - the £60,227 paid to any backbench MP - would not make him liable for greater tax."

Coincidence?  Not so likely where politicians are concerned. It is also unsurprising, and slightly depressing, that politicians seem to think that people earning slightly more than they do are rich.  We wonder why politicians of all parties are not rushing to support the Lib Dem plans.

Three possible reasons:
1. Many MPs are likely to have spouses that work, pushing their household income well above £70,000.
2. Many MPs have income from other sources, again pushing their household income well above £70,000
3. A couple of years of pay rises for MPs, and they will all be earning more than £70,000.

So now we know why the Lib Dem plans haven't a chance of actually becoming policy...

Zac Goldsmith responds to his critics

Goldsmith’s response to his critics has more than a whiff of desperation.  He starts out by separating bans and regulations in an attempt to portray the report as containing little of either:

“Reports that we want to ban Plasma screens are wrong. We want to encourage plasmas that are less wasteful. Nor are we proposing to ban the standby. We want to have an automatic switch-off mechanism fitted so that appliances switch off after a set period of time.”

The stand-by button as it exists now is a mechanism designed to allow someone to turn their TV, radio or other electronic device on using the remote control.  If you make it so that the stand-by turns off after a certain amount of time the point is rather lost.  When you go to turn your TV on with the remote you’ll find you can’t.  The stand-by button is banned.

While it might not seem like too great an inconvenience to have to get up and turn the TV on the old-fashioned way the stand-by button doesn’t make much of a difference to global warming either.  A quick calculation suggests that even if all of the power used by devices on stand-by was saved (and under Goldsmith’s recommendations it wouldn’t be – some people would just leave the TV on more, others would use the temporary stand-by he proposes to allow) the saving would be equivalent to less than two days of Chinese emissions growth.  Banning stand-by buttons won’t save the planet; it’s just one more little inconvenience that the Quality of Life report seeks to foist on ordinary Britons.

Equally, while the Quality of Life group would allow Plasma TVs if they were sufficiently efficient it would ban most of the ones currently on sale.  Perhaps this shouldn’t be understood as a ban but if not it should definitely be thought of as a regulation.

Goldsmith then goes on to highlight some regulations that he would like to end.  The problem is that his report takes away some regulations with one hand at the same time as adding a whole load more with the other.  For example, the bans discussed above, other regulations such as a ban on below-cost selling by supermarkets and the cigarette style warnings of a particular size and prominence on car adverts.  Reading the report it is absolutely clear that a big net increase in regulation is planned that would offset any cut in regulatory costs as advanced by, among others, the Competitiveness report.

“Aviation: We are categorically NOT proposing to tax holidays. We are ONLY targeting domestic, short-haul, commuter flights to destinations easily reached by train, and within the same sort of time frame. Much of the proceeds will be used to improve the rail alternatives.”

Goldsmith might regard them as passé but many people do enjoy holidays within the UK.

Also, the proposals are to charge VAT on domestic flights.  This would include flights from London to Scotland that would take a long time if replaced by train journeys.  The proposed taxes are also not hypothecated.  An aspiration to spend the money on reducing the costs of going by train is pretty meaningless when all of the revenue from new or higher green taxes have already been committed by the Conservative leadership to a ‘Families Fund’.

Goldsmith does not mention in his response proposed further increases in tax on holidays, with stepped increases in the reformed Air Passenger duty, and on waste either through council tax or variable charging, a big increase in Landfill Tax.

Goldsmith does little to clear up the fog of confusion surrounding proposed changes to planning law by seemingly contradicting himself:

“We are saying that because of the VAT relief, we would require homeowners to upgrade the energy performance of their homes.

[…]

It has been reported that we would require people to fit their homes with efficient appliances if they want to improve their home. This is plain wrong.”

He then talks about proposed charges for supermarket parking and argues that this is a decision for local government.  That may be the case but it’s still one of the report’s recommendations!  Just because it is for local government to implement is no reason it shouldn't be subject to proper criticism.

Finally, he argues that the report did not advocate the government adopting a Happy Planet Index.  This is a bit tendentious.  The report endorses the Happy Planet Index and recommends that a measure sounding very similar be developed.  While there may not be a direct recommendation to adopt the Index the report clearly wants the anti-growth thinking behind it to be placed at the heart of government decision making.  That is what has really alarmed people; the idea that the Conservative party might adopt this report’s disdain for economic growth.

This is the heart of the problem with Goldsmith’s defence of his report.  He does not address the most serious criticism of it coming from the press.  From the Sun’s response:

“Goldsmith and his sidekick, failed Tory minister John Gummer, devote about 30 pages to why Britain’s economic success isn’t everything.

Try telling that to the millions who rely on a booming British economy for their job and their livelihood.

Who have ambitions for a bigger house, more luxurious car and a better foreign holiday for them and their kids.

Any report which includes a chapter entitled “The Darker Side Of Wealth” has no place on any self-respecting Tory’s bookshelf.”

Or, the Express:

“Billionaire's son Mr Goldsmith and former Cabinet minister Mr Gummer have, on behalf of David Cameron, declared war on economic growth. One ludicrous extract claims: "Beyond a certain point – a point which the UK reached some time ago – ever increasing material gain can become not a gift but a burden. As people, it makes us less happy."

So they have identified what they consider to be Gordon Brown's Achilles heel: incredibly, they believe his greatest sin is to have made the British people too well-off. Presumably they would like the Conservatives to fight the next election on a platform of reversing these sinister "material gains".”

As part of our response to the Quality of Life group report the TaxPayers’ Alliance set out the intellectual case against the anti-growth agenda this report is based upon.  Reinforcing the impression that Conservatives are the selfish wealthy who don’t care about improving the lives of ordinary Britons is also politically disastrous.

Two weeks ago the TaxPayers’ Alliance published a report establishing that green taxes are already too high and a poll showing that the public are extremely sceptical about the motives of politicians proposing green taxes.  The Conservatives should leave this report's recommendations well alone.

TaxPayers' Alliance response to the Quality of Life Policy Group

This document sets out the problems with the "Blueprint for a Green Economy:  Submission to the Shadow Cabinet" report of the Conservative Quality of Life Policy Group.

It details how the report is based upon highly suspect assumptions and proposes increased taxes, increased regulation, new quangos, a curb to vital infrastructure investment and a retreat from free-trade.

Download TaxPayers' Alliance Response:  Quality of Life Policy Group Report (PDF)

Taxing Reading

Our tax code is getting smaller.  Well, sort of.  The BBC reports that Tolley's Yellow Tax Handbook, the complete guide to UK tax law, is going to be printed in a smaller font.

Back in 2001 the tax code 5,942 pages long.  Oh how struggling small businesses must look back to those good old days when they only had to wade through a mere 6000 pages, because this year the tax code has grown to a whooping 10,500 pages.   Well again, sort of.  Actually, the tax code for 2007 is 9,866 pages long, and so can conveniently just about squeeze into four volumes.  However, had the text been printed in the old format it would have run to 10,500 pages and required a fifth volume. 

Apparently part of the explanation for the growth in the tax code has been the need to give space for the explanation required by our new tax laws.  So let’s get this straight: because our tax code is so long and complicated it needs to made even longer and more complicated to explain its complexities…  Furthermore, in an attempt to stamp out tax avoidance more legislation has been passed and added to the tax code.  Whilst this move may conform to some bizarre bureaulogic, the rest of us know that by increasing the tax code they have simply made it more difficult and expensive for small businesses to translate and comply with the law, whilst big businesses will still find the loop holes as they have the resources to devote to this purpose.

The irony is that all of these goals – a tax code with which is easier to understand and harder to avoid - can be achieved with one simple step – flat taxes. 

Liberal Democrats defend their excuse to take your money

Yesterday the Liberal Democrats attacked our study on green taxes.  They make two arguments:

1.    More recent studies, they cite the example of the Stern Review, show a higher cost of carbon.
2.    We haven’t properly accounted for externalities other than CO2 emissions from road transport, their examples of others they give are congestions and congestion.

Do more recent studies show a higher social cost?  Let’s look at the total social cost of UK emissions estimate from the four studies we used – in date order:

Tol – 2005 - £9.1 billion
Stern – 2006 - £30.5 billion
IPCC - 2007 - £4.3 billion
Nordhaus – 2007 - £2.7 billion.

Stern isn’t the most recent.  He’s actually one of the older studies.  The lowest estimate comes from Nordhaus who released his study this July.  Stern’s estimate isn’t significantly higher because he uses more recent science but because his work is (as eminent climate economist Richard Tol described it) “alarmist and incompetent”.  To find out more about the problems with Stern see Box 1.3: “Stern versus the IPCC” in our report.

The second argument assumes the simplistic view that all externalities are the same and should be responded to with increased taxation.  This is not the case and is not accepted in other parts of the economy.  We do not place special taxes on sports classes because someone can injure themselves playing sport, and is almost certain to playing some sports like Rugby.  We don’t place special taxes on nightclubs and factories on the grounds that they are noisy although this is also an externality.

For most local externalities our response has always been regulation to ensure that they do not go beyond safe levels.  We do regulate road transport: we limit speeds, require that people get regular safety checks for older cars, force people to wear seatbelts, test people’s ability to drive, prosecute those who drive unsafely.  All of this is designed to control casualties (we have other rules to control noise and pollution).  There is no reason, beyond political victimisation, why this should not be enough for road transport while it is accepted as sufficient in other activities.

A regulatory approach means that we can avoid penalising ordinary people who drive safely and, barring accidents they don’t deserve to be singled out for any more than the unfortunate who falls down the stairs, impose little burden on anyone.  They are the majority who do not deserve this excessive and regressive tax.

Fuel Duty and Vehicle Excise Duty are entirely unsuitable to correct for congestion.  If you drive on a deserted road in the Scottish highlands during the small hours of the morning you pay exactly the same rate as someone fighting their way to work through an urban rush hour.  This means that the tax doesn’t create an incentive to drive at times and in places where you do not create a cost to other drivers.

The problem of congestion could be solved by building roads.  The number of drivers doesn’t change that much over time so demand for roads is limited by the number of miles they can drive.  Fuel Duty and Vehicle Excise Duty could be cut massively with plenty of room in the budget to get plenty of new roads built.

Huhne finishes his response by setting out Liberal Democrat plans to increase excise duty for some cars and compensate this with a cut in the basic rate of income tax.  We’ll leave aside the fact that if he expects to raise much revenue from this tax then it can’t be doing much for the environment; revenues will only be significant if people don’t stop buying high-emissions cars.  Instead, let’s ask a question.  Do you trust Huhne that this tax will genuinely be revenue neutral?

Sure, in the unlikely event the Liberal Democrats win an election they might introduce a compensating tax cut initially.  However, they have never been a party averse to taking our money and once the new taxes are introduced and as unreformed public services continue to swallow more cash how long before they start using it as a device to increase the burden of tax faced by hard-working businesses and families?

The Case Against Further Green Taxes - Report and Poll

• GOVERNMENT RAISING £10 BILLION MORE FROM GREEN TAXES THAN REQUIRED TO COVER COST OF UK’S CARBON FOOTPRINT
• EVERY UK HOUSEHOLD ALREADY OVER-PAYING GREEN TAXES TO THE TUNE OF MORE THAN £400 A YEAR
• NEW POLL SHOWS BIG MAJORITY BELIEVE POLITICIANS ARE USING GREEN TAXES AS A REVENUE RAISING MEASURE
• FIRST EVER AUDIT OF UK GREEN TAX POLICY REVEALS EXCESSIVE BURDEN OF ENVIRONMENTAL LEVIES THAT FAIL THEIR OBJECTIVES

The TaxPayers’ Alliance has released the first audit of environmental taxation in the UK alongside a new YouGov poll of more than 2,000 adults (double the usual sample) commissioned into public attitudes towards green taxes. 

NEW TPA REPORT – The Case Against Further Green Taxes

Download The Case Against Further Green Taxes (PDF)

The report applies the conclusions of the most prominent experts in the field of climate change research (from the International Panel on Climate Change to academics such as William Nordhaus, “father of climate change economics”, and Sir Nicholas Stern), and compares these studies’ recommendations of the price the UK should be prepared to pay to offset the cost of the UK’s carbon footprint with the actual level of green taxation.  Such a comparison is the only way of knowing whether environmental taxes address root problems or whether they are merely revenue-raising measures.

Covering the main “pollution taxes” of fuel duty; vehicle excise duty (road tax); the Climate Change Levy; Air Passenger Duty; the Landfill Tax and the EU Emissions Trading Scheme, the report investigates each of the green taxes and charges in turn, and reveals that each one has serious flaws:

• Fuel Duty and Vehicle Excise Duty, net of spending on roads, are already between three and forty times higher than the level needed to ensure that drivers cover the official and academic estimates of the social cost of CO2 emissions  This means that each motorist is overpaying by between £548 and £743 each year.
• Under the Climate Change Levy, the North East, England’s poorest region, pays over 35 per cent more as a proportion of regional Gross Value Added, than the South East, England’s richest region outside London.
• The doubling of Air Passenger Duty announced in last year’s Pre-Budget Report is actually likely to have increased total emissions from air travel, incentivising longer flights within the short-haul and long-haul bands.
• The Landfill Tax, which has been increased a number of times by the current government, is already raising up to £620 million more than would be sufficient to meet the social costs of methane emissions from landfill. Planned new bin taxes are likely to represent yet another supplementary charge on stretched household finances.
• The EU’s Emissions Trading Scheme has resulted in a £470 million subsidy from the UK to the majority of EU countries that have not placed strict targets for overall reductions in emissions.

The main conclusions of the report are:

• In many cases, individual green taxes and charges are failing to meet their objectives, are set at a level in excess of that needed to meet the social cost of CO2 emissions, and are causing serious harm to areas of the country and industries least able to cope.
• Taking an average of the most widely quoted official and academic estimates of the social cost of CO2 emissions shows that green taxes in the UK are already well in excess of the level they need to be to meet these social costs.
• The social cost of Britain’s entire output of CO2 was £11.7 billion in 2005 but in the same year, the total net burden of green taxes and charges was £21.9 billion.
• This means that green taxes and charges are already £10.2 billion in excess of the level they need to be to meet the social cost of Britain’s CO2 emissions. This excess is equivalent to over £400 for each household in Britain.
• Green taxes are therefore already too high if they really are a means of internalising environmental externalities rather than simply revenue-raising measures.

NEW YOUGOV POLL – Public distrust politicians on the environment

Most believe politicians are not sincere on green taxes

• When asked what they thought the primary motivation was for new green taxes, 63 per cent agreed with the statement: “Politicians are not serious about the environment and are using the issue as an excuse to raise more revenue from green taxes.”  Only 20 per cent thought that “Politicians are serious about the environment and are bringing in new green taxes to change people’s behaviour to help reduce carbon emissions.” 

Huge number oppose new council recycling charges

• A vast majority (77 per cent) disapprove of local councils placing extra charges for bin collection on top of council tax to encourage recycling, including two thirds (65 per cent) who would “strongly disapprove”.

Fuel Duty and Air Passenger Duty seen as unfair taxes

• 60 per cent think that Fuel Duty is an unfair tax, compared with just 17 per cent who think it is fair.
• 45 per cent believe that Air Passenger Duty is unfair, compared with 23 per cent who think it is fair.

Trebling Air Passenger Duty would not stop people flying

• Concern for the environment will not lead people to change their behaviour unless there are significant tax increases – in the realm that most politicians would be unwilling to advocate.  When asked how much extra air passenger duty would have to cost before they chose not to fly, more than two thirds (71 per cent) would only stop flying if Air Passenger Duty was trebled from its current rate. If politicians only doubled it, 81 per cent of people would still choose to fly.

New green taxes must only ever be used to reduce other taxes

• As a result of this scepticism, there was a very strong view that any new green taxes should not add to the already high tax burden but should be met with reductions in other taxes.  A majority (61 per cent) thought that if extra ‘green’ taxes were raised, “the extra funds should be used to reduce other taxes”. 

Public split on further green taxes

• There is no majority support for moving towards additional green taxes.  When asked whether, “Generally speaking do you approve or disapprove of additional ‘green’ taxes on motoring and air travel?”, 46 per cent disapproved while 45 per cent approved and one in four people “strongly disapproved” against less than one in ten who “strongly approved”.

Most people aware of the high cost they already pay at the pump

• The poll also showed that most people have a fairly accurate assumption about how much tax they pay for driving.  A third thought the proportion of a litre of petrol costing £1 that was made up of tax was less than 60p.  More than a third (38 per cent) thought it was more than 70p. In fact, the cost of Fuel Duty and VAT charged on fuel purchases is equivalent to roughly 65p in the pound – which one in five people (21 per cent) correctly estimated.

Matthew Elliott, Chief Executive of the TaxPayers’ Alliance said: “The public are right to suspect the motives of politicians.  Not only are they split on whether new green taxes are a good idea, but our research proves that politicians have been using green taxes as a revenue-raising measure and are cynically trying to win support for new ones by exploiting concern about climate change.  We need more honesty about the costs of extra green taxes when British taxpayers already pay some of the highest pollution charges in the world.”   

Corin Taylor, Research Director of the TaxPayers' Alliance said: “Green taxes and charges impose substantial costs on, amongst others, Northern manufacturers and the NHS. Green taxes in the UK are already well in excess of the level they need to be to meet the academic estimates of the social costs of carbon emissions.  Every household is paying more than £400 extra in tax every year because green taxes are set too high.  UK taxpayers are already more than doing their bit to pay for the costs of pollution and additional green taxes would be completely unjustified.”