Militant Moderate: More Environmental Liberalism

Monday, January 16, 2006

More Environmental Liberalism

Chris Huhne wrote the Thunderer column in the Times today, where he turned once again to the topic of environmental liberalism. I know that the format of the column is weak to begin with; it is far too short to develop sustained argument on the level that we should expect from politicians. Nevertheless, it seemed to me to get the principles the wrong way round, and contained a number of things that worried me.

His basic point is that taxes will need to be increased to help save the environment. That may well be true (I don't know); but he certainly won't win the unconvinced over with some of the arguments that he is using.

They work by forcing up prices so that the more trivial uses of fossil fuels stop first; if an activity is essential it continues, but with a higher price tag. People choose whether they are willing to make that car journey or not.

That is all well and good - if there are viable alternatives to the car journey being made. I would like to see some of the politicians who talk about increasing fuel duty come to the North East and try and get about by public transport there. The system is, quite simply appalling - in many areas, there is no alternative except to use the car. Raising fuel taxes will, for example, increase the running costs of businesses, possibly making them unprofitable, and almost certainly making them uncompetitive with areas where the public transport provision is acceptable.

If there was genuine investment to provide efficient and cheap buses, trains, trams and so on, then the system would work (and indeed may well prove popular). However, the only solution proposed here is tax. Hike the prices, with no visible benefit in return. That is a sure way of allowing a populist party advocating lower fuel taxes, 'freedom for the motorist', to get into power.

Then we get the other problem with the plan:

Fuel is a disproportionately large part of the household budget of the poor, so the extra revenue should be recycled back as tax cuts and help for those on the lowest incomes.

If there is going to be an emphasis on the environment, then environmental taxes should be used for environmental projects - giving tax breaks or subsidies to help people make their house more energy efficient. If not, the credibility of talking about environmental taxation will go - it happened in Germany when it became clear the Ökosteuer was used for helping solve German pension problems rather than being used for environmental projects. If there is a need for redistributive taxation on a greater scale, it is only fair to be upfront about it - and not try and use a smokescreen that may be considered easier to sell.

In any case, if the Lib Dems were to believe that such a policy was a vote-winner, I think they would almost certainly be mistaken. People will only accept higher taxes on fuel if they are given cheaper, more efficient, cleaner public transport. Likewise, they will need to be convinced that "environment taxes" are taxes that are being used to save the environment. If not, there will always be room for parties offering considerably lower taxes that will remain far more appealing.