Green Manifesto 2010 Taxes to Protect The Enviroment

Green Manifesto 2010 Taxes to Protect The Enviroment

We would reform the tax system to put far greater emphasis on taxes that discourage environmentally or other damaging behaviour. If these changes were implemented the share of environmental taxation in total taxes would double from about 7 per cent now to 14 per cent in 2013. Some of these proposals involve raising existing taxes, some are new taxes and some modify existing exemptions and reliefs to achieve environmental purposes. In the long run we would aim to replace VAT by environmental taxes, but the current state of the public finances does not allow this in the short term.

We also recognise that some of these changes, for example on VAT or placing fuel duty on aviation, may involve international negotiation and cannot be introduced immediately.

We would:

• Reintroduce the fuel duty escalator, raising fuel duty by 8% per year.This will raise £2.2bn in 2010 rising to £10bn by 2013. In the longer run we would introduce a system of domestic carbon quotas.
• Modify the regime for Corporation Tax Capital allowances so that the allowances are only available for investment in sustainable technologies, raising £7bn in 2010 rising to £10bn by 2013.
• Introduce VAT and fuel duty on aviation, raising £7bn in 2010 and £10bn by 2013.
• Increase the rates for the Climate Change Levy and for Landfill Tax, raising £300m.
• End the zero-rating of VAT on new dwellings, putting them on a level with conversions and renovations of existing dwellings, raising £5bn in 2010 and £7.5bn by 2013.
•Tax plastic bags and other unnecessary packaging, raising perhaps £1bn by 2013.
• Levy eco-taxes on non-renewables or pollutants, in particular pesticides, organochlorines, nitrogen and artificial fertilisers and phosphates.
• Introduce new taxes on use of water by businesses and waste heat from power stations, raising £3bn by 2013.
• Replace vehicle excise duty by a new graduated purchase tax on vehicles that heavily penalises over-sized or over-powered vehicles. Overall this would be tax neutral.
• Make tax concessions on savings, such as ISAs, only available for investment in sustainable technologies, raising £1.8bn.
• No longer offer zero VAT rating to financial services and betting duties, which are of limited value to the real economy, raising £5.6bn by 2013.
• Gradually increase alcohol and tobacco taxes by about 50% to match anticipated increases in expenditures on the NHS, raising £1.4bn in 2010 rising to £5.6bn by 2013. Taken together, these tax changes are sufficient to pay for the entire programme set out in this manifesto, and also to more than halve the deficit as a proportion of GDP by 2013, setting the economy on a path that will almost eliminate the deficit by the end of the Parliament.The details of how we would pay for our programme are set out in the box opposite.

How we would pay for our programme

There are many spending commitments in this manifesto. And there are proposals for new and increased taxes (see pages 14–16). Does it all add up, and in particular will they in total more than halve the deficit by 2013–14?

In summary terms ,our plans, compared to those of the Labour Government (as announced in the Budget Report 2010), are as follows (all in 2010 real terms):

item 2010 (£ billions) 2013 (£ billions)
1 Labour Government planned public expenditure 704 700
2 Labour Government anticipated tax receipts 541 617
3 Labour Government fiscal deficit to borrow* 163 82
4 Green Party proposed basic public expenditure 704 704
5 Net additions to public expenditure in this manifesto 72 80
6Total Green Party proposed public expenditure** 776 784
7 Green Party anticipated tax receipts on existing Government tax plans 541 603
8 Net additional taxation proposed in this manifesto 73 112
9 Total Green Party proposed taxation† 614 714
10 Green Party proposed fiscal deficit to borrow‡ 162 70

Notes: *Item 1 – item 2. **Item 4 + item 5. †Item 7 + item 8. ‡Item 6 – item 9. Figures might not add up exactly due to rounding. In item 7, the Green Party figure for tax receipts on existing tax policies in 2013 is lower than that for the Labour Government assumption in item 2 as we assume a lower rate of GDP growth. Notice that Green Party borrowing plans in item 10 are lower than the Labour government plans in item 3.

We would freeze basic Government spending at £704bn (item 4 above). Our programme of additional spending and selected cuts (set out below) would add £72bn in 2010 rising to £80bn in 2013 (item 5 above). We believe that the Government’s projections for GDP growth are too high, and that tax receipts on existing policies in 2013 will be only £603bn (item 7 above), £14bn less than the Government’s assumed £617bn (item 2 above).

On Government spending we have first of all a modest programme of savings totalling £20bn in 2010 rising to £28bn in 2013. We would save £8bn on defence in 2010 falling to £6bn in 2013 (including cutting Trident; see page 43), £1bn initially rising to £3bn on road-building (page 38), £2.5bn on ID cards and £0.5bn rising to £1.5bn on prisons (pages 24 and 26). We believe modest cumulative annual efficiency savings of 0.5% on 60% of Government spending are possible, saving £2.3bn in 2010 rising to £9.4bn in 2013. In addition our minimum wage policy would save about £6bn a year on tax credits throughout the period.

Apart from Citizen’s Pension we have a programme of additional expenditure totalling £52bn rising to £64bn in 2013. The major items are a £20pw rise in Child Benefit (£14bn; page 13), investment in public transport (£4bn, rising to £5bn; page 38), social housing and right to rent (£4bn; page 20), elderly care (£3bn in 2010 rising to £8bn by 2013; page 22), renewables and insulation (£5bn rising to £10bn in 2013; pages 20, 35), an increase in the aid budget (£3bn in 2010 rising to £4.5bn; page 48), training and community programmes for the unemployed (£5bn, but unnecessary by 2013; page 10), investment in waste management (£3bn pa; page 26), abolition of higher education fees (£1.8bn in 2010, but £3.6bn in later years; page 21), and about £9bn rising to £12bn for the 14 smaller commitments, all of which involve £1bn or less in 2010.

In terms of public expenditure, Citizen’s Pension will cost an extra £40bn rising to £44bn, so the overall increase in public expenditure will be £40bn (Citizen’s Pension) plus £52bn (gross cost of manifesto) less £20bn (public expenditure savings), or £72bn (as in item 5 above). The comparable figure for 2013 is £80bn.

On taxation our proposals are set out on pages 14 to 16, where it is clear that together with the tax changes on Citizen’s Pension these proposals will add £73bn in 2010 and £112bn in 2013 (item 8 above).