Archive for category CO2 and Taxes

Retrospective tax on polluting cars - not just a stick, a ’stealth’ stick

I don’t generally believe in kicking a man when he’s down, but it’s pretty difficult not to when he’s lying there with a great big sign stuck to his back saying KICK ME. And that, to me, is the case with Gordon Brown right now, as he stumbles from one problem to the next. So I’m not going to hold back, and what’s more, I’m going to kick him for an idea aimed at reducing co2 emissions.

‘Stealth tax’ is one of the many expressions coined during the New Labour era, basically referring to taxes that don’t hit the tax payer directly, or immediately. As Chancellor, Gordon Brown became particularly good at one type of stealth tax, the one where he would announce an increase one year, but it was timed to come into effect a year later, by which time many people have forgotten about it. In this case, he has gone one better, and announced a tax rise that would come into effect in a year’s time AND would apply to all cars bought in the last 7 years!

The tax in question is the Vehicule Excise Duty, better known as Road Tax. As of next year, the co2 emissions bands that decide what car owners will pay each year will be increased from 7 to 13, with a sliding scale of costs running from £0 for a car with emissions of under 100 g/km to £440 for one with over 255 g/km of emissions. They will go up again in 2010, with the top-end cost becoming £445, and with a new, additional first year rate being introduced that is even more punitive to gas guzzlers.

In principal this is a good idea, as it encourages us all to pay attention to co2 emissions when purchasing a new car. It is a good example of the ‘carrot and stick’ method, and for once the ‘carrot’ is pretty interesting - only £30 a year for a car with 111-120 g/km of emissions, and a reduction of some form for all cars with 140 g/km or under. The problem, however is with the backdating to 2001.

Let’s say that my car generates only 120 g/km of co2 emissions, and I bought it in 2002. I’m laughing, as my car tax will go down to £30 next year before going back up to £35 the year after. My neighbour’s car on the other hand generates 195 g/km of co2 emissions. He also bought it in 2002, and his tax next year will go up from £170 to £260 - an increase of £90.

It’s all very well saying ’serves him right - he drives a gas guzzler’, but think back to 2002, or 2006 for that matter. How many people bought their cars based on their co2 emissions? Petrol was cheaper then, and car tax was uniform for all. Can my neighbour really be punished for a decision he made as long as 6 years ago, based on information he did not even have at the time?

It could be argued that he will be encouraged to buy a newer, cleaner car, but should he be forced to do this, especially as, if he waits until 2010, he will also have to pay the higher first year rate? To me this isn’t a stealth tax, it’s a stealth ’stick’, and a totally unreasonable one, compounded by a fact I’ve already mentioned on this blog: so-called ‘green taxes’ such as this do not necessarily get used by the government to reduce the UK’s co2 emissions.

I’m all for the government taking serious measures to encourage us to reduce the emissions we generate via transport, but the important word here is ‘encourage’. Pricing people into unhappiness at a time when money is very tight is NEVER going to work, and I sincerely hope Mr Brown goes on doing what he’s also becoming well-known for……. U-TURN. I don’t mind at all if he keeps the proposed approach for all new cars, but punishing people for a decision they didn’t even realise they were taking is not going to solve what we recognise is a huge problem.

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So where do all our Green Taxes go? We could do a lot with £22 billion.

The UK TaxPayers’ Alliance has released a report this week - The Case Against Green Taxes - which claims that the Government is already raising £10 billion more a year in green taxes than is required to cover the social cost of UK CO2 emissions.

According to the report, UK residents paid £21.9 billion in green taxes and charges in 2005, when the social cost of Britain’s output of CO2 was only £11.7 billion, and that this is just an excuse to raise money rather than a genuine attempt to reduce the UK’s CO2 emissions. At this point, I could get into a long-winded explanation on how to define the ’social cost’ of CO2 emissions, whose estimate of the cost of a tonne of CO2 to adopt, etc., but this is not the piece of information that really interests my, seemingly more simplistic, brain.

£21.9 billion in green taxes. That’s a lot of money, and that’s what interests me. How much went towards genuinely reducing the UK’s CO2 output in the future? When we pay green taxes, is the money that is raised actually spent on resolving green issues? Apparently it is difficult, if not impossible to get a straight answer to this question.

We can guess at the likely answer: some of the money goes towards reducing or offsetting CO2 emissions, but much if not most of it goes into a central pot to be spent on whatever is the most important issue of the moment. But what about the most important issue of tomorrow? I think we all know what that is, but we also know that the current UK government is doing way less than it could to address this particular issue.

£21.9 billion, and what do we get in incentives? A fund of around £80 million to ‘encourage’ us to invest in renewable energy sources. Electricity companies that pay us less for the electricity we generate that we pay for the electricity we use. No real encouragement to buy cars that pollute less (in France the government contributes towards the purchase of low co2 cars). No real encouragement to build zero emissions housing. No real incentive for businesses to improve their energy efficiency.

I fully realise that the major problems we have today can only be cured at government and corporate levels, and that to make things happen the ’stick’ is as important as the ‘carrot’. But right now the ‘carrot’ in question is one of those teeny tinned ones that taste of nothing, and isn’t big enough to go around. I am more than happy to pay Green Taxes, but:

  • I want to know what they are being used for
  • I want to see the results
  • I want them to be spent at all levels: government, business and consumer

We have a huge problem on our hands, and it will be fixed if we all work together.

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