Centre for Policy Studies

Ministers have done little this week to dispel suggestions that the Government might perform another tax U-turn – this time in relation to fuel duty and car tax.

The Prime Minister has form on this issue. Even in the days when Labour had the wind in its sails, the fuel protests in 2000 led Gordon Brown to freeze fuel duty.

Why has the Government found it so hard to make these taxes stick? Surely, fuel duty and car taxes should have an environmental narrative behind them that gives them a legitimacy that other taxes lack.

Is it simply that we allow ourselves the luxury of being pro-environment when times are good, but when things get tighter we abandon our greenery? Will the Conservatives find it similarly difficult to shift taxes in a green direction in power?

I don’t think we have to conclude that the game is up for green taxes. I think the problem lies in the way the Labour Government has sold its tax changes.

In many of his budgets, Gordon Brown has trumpeted the tax cuts he has produced out of the hat. The 2007 cut in the basic rate from 22p to 20p is a good example. But taxpayers have got wise to the fact that what he gives with one hand he takes away with the other – as evidenced by the simultaneous abolition of the 10p starting rate in 2007.

But, in truth, it’s worse than that. These budgets weren’t fiscally neutral: Gordon Brown took with one hand, and gave back only a small part with the other. Tax as a proportion of GDP has been steadily rising over the course of the Labour years.

And this, I think, is at the heart of the legitimacy problem even of “virtuous” taxes, like green taxes. People view them as just another way to add to what they pay to the Exchequer, rather than as a way of shifting the tax burden from good things (such as earning) to bad things (such as pollution). Gordon Brown’s dishonest attempt to portray even tax-raising budgets as tax-cutting budgets has left voters deeply sceptical.

The Conservatives are trying to be up front. George Osborne explained yesterday: “We believe that any increases in road tax should be focused on the most polluting vehicles and offset by reductions in family taxes so that they are genuine green taxes, not stealth taxes.”

We should be in no doubt how hard the Party will have to work to convince voters any shift to green taxes isn’t a tax grab. Yesterday’s statement will have to be reiterated time and time again if the policy is to be accepted by voters.

Talk of fiscal neutrality, offsetting one tax against another, or the tax take as a proportion of GDP is not headline grabbing. William Hague’s attempt as Party leader to make a policy of reducing tax as a proportion of GDP into a key pledge didn’t do much for his poll ratings. But it was a sensible idea and one which could give legitimacy to changes in the locus of the tax burden. That’s why the Party needs to make sure it does the groundwork on the overall level of tax, as well as keeping the headline tax pledges rolling, if it is to achieve a shift in the tax burden from good things like earning to bad things like polluting.

Comments

written on 29-May-2008

grumpyoldman says:

Maybe even our politicians are beginning to question the poor science and alarmist stance of the Greens. The political ideology of the activists became clear in the London Mayoral elections. A number of blogs were carrying the message, " if you want to be a socialist internationalist, vote Green". In other words, the far left is wearing the sheeps' clothing of environmental concern. I will again take notice of the green lobby when they (a) stop fiddling the science and (b) stop being used as a far left vehicle.
written on 30-May-2008

ATFlynn [http://www.atflynn.co.uk] says:

grumpyoldman, thank you. You have pointed out all one needs to know about this Country and what is wrong. Now, what do you suggest we do to remedy the situation??
I have an answer that I believe solves all the problems of our modern governance at a stroke.
Using a system of "out-sourcing", such as used by "Capita", it is just a simple manoeuvre to place all income payments off-shore and beyond the jurisdiction of any British or EU. court of law. And then you, the people the Taxpayer, is in complete control of all Tax and Spend policy.
There is a great deal more than this to the remedy, but this will do for starters.
Regards ATFlynn. "Norfolk's Mutineer"
written on 06-Jun-2008

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