Ian Mulheirn

Budget 2008: Green gimmicks?

Ian Mulheirn on the Government's green taxation

Reports abound that a central plank of Alistair Darling’s first Budget will involve increasing Vehicle Excise Duty on the most polluting cars by around £1,000. Squarely aimed at reducing unnecessary vehicle emissions, the gas-guzzler grab forms the latest part of a patchwork of green taxes designed to help the Government make progress on its target to reduce CO2 emissions by 20% on the 1990 level by 2010. Simultaneously we can expect the Chancellor to make an announcement on fuel duty. The 2p increase pencilled in for this year looks set to be postponed in the face of strong opposition from hauliers and motorists already labouring under record oil prices.

But these mixed signals point to the problem with green taxes as a concept. A green motive is a necessary but insufficient condition for government action to raise the price of polluting activities. Political realities mean that those undertaking the activity to be taxed must be politically weaker than alternative targets for taxation. In this latest instalment, for example, anyone who’s been run off the road by a pristine 4×4 hogging the highway won’t be getting their placards out to protest against higher VED; but hauliers could still bring the country to a standstill, as they did in 2000, if further squeezed by fuel duty.

Further, if the speculation is accurate, there is a degree of contradiction in the Budget announcements. The vehicles targeted for higher VED are identified by being the most polluting ones and yet the Government already has a much more efficient mechanism for taxing car emissions: the fuel duty it wants to postpone raising. The upshot is that the patchwork of taxes is only partially green and full of holes.

Even fuel duty itself is not without problems.

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