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UK population firmly rejects prospect of new green taxes if overall tax burden should increase

- But general public and business would support higher or new green taxes if revenue was seen to be reinvested in environmental projects -

15 March 2007

An overwhelming majority of the general public (82%) and of UK businesses (80%) have resoundingly rejected that the UK tax burden should rise to accommodate possible new green taxes. Moreover, there is widespread cynicism that any new green taxes would be introduced purely to raise revenue rather than to be invested in environmental projects. The findings are part of a new survey released today on UK Environmental Taxation Policy conducted by leading business and financial advisers Grant Thornton.
While there was support for various green tax measures, at least half of respondents (50% of corporates and 58% of individuals) suspect that the Government would introduce new taxes purely to raise revenue rather than invest in environmental projects.

Commenting on the findings, Francesca Lagerberg, tax partner at Grant Thornton, states:

"The Government currently collects an estimated £32 billion from taxes it justifies as being in place to help improve environmental behaviour. Not surprisingly, neither people nor business want to pay any more tax than they need to. However, there is support for green taxes if the revenue generated is not seen to end up in a main 'pot' but to directly benefit environmental measures. What our survey also shows is that if a tax is recognised as having a positive impact on behavioural change, there tends to be stronger backing for such measures - support for the green agenda hangs on getting people on side by demonstrating that their hard-earned cash is directly benefiting the environment."

Interestingly, there was a mismatch in attitudes towards which measures would lead to behavioural change towards the environment. So, who should bear the burden to make change most effective? From the survey's data, both business and individuals are more convinced that higher or new taxes targeted at business rather than individuals would best achieve environmental behavioural change.

The vast majority of individuals (85%) and businesses (87%) in the UK want to see 50% or more raised from environmental taxation re-invested in environmental/sustainable development projects. Of these, 49% of individuals and 43% of businesses would go as far as reinvesting 100% or more of environmental tax receipts.

The survey reinforces the unpopularity of some existing measures which are dubbed environmentally friendly.

Lagerberg continues: "There were strong levels of antipathy towards the expansion of existing green taxes, particularly when they relate to transport. For example:

80% of individuals and 68% of businesses would be against the proposed 'pay as you go' road tax,
69% of individuals and 66% of business are against an increase in fuel duty,
49% of individuals and 50% of businesses would be against any further increases in Air Passenger Duty."

"The only transport-related measure that appears to be more popular would be to tax the so-called 'Chelsea Tractors' or Sports Utility Vehicles (SUVs) more heavily with 69% of individuals and 64% of businesses supporting such an outcome," she continued.

Environmental measures the UK would like to see

Tax measures are not a complete solution to improving the UK's environmental behaviour. Lagerberg says: "There is no silver bullet to solve the global environmental crisis, but the survey reveals an appetite for tax to be a mechanism in the ongoing quest for a solution; at least in the UK".

There were strong positive endorsements for existing and potential new tax measures including:

1) tax reliefs on bio-fuels (84% of individuals, 89% of businesses were in favour),

2) Capital Gains Tax relief on green investments (80% of individuals, 82% of businesses),

3) grants to individuals who install energy saving devices (eg. solar panels or wind turbines) (74% of individuals,73% of business),

4) increased Aggregates Levy/Landfill tax (businesses only - 76%),

5) Landlord Energy Saving Allowance (74% of individuals, 75% of businesses),

Lagerberg adds: "While opposition to fuel duty is clear, it is mirrored by a similar high level of support for tax reliefs on alternative fuels, such as biofuels. There is certainly broad support for the wider availability of grants to offset the costs of striving for and achieving 'carbon-neutral' homes. What's more, the Government could foster support from private investors by creating a 'green ISA'."

Lagerberg concludes: "Under Labour, green taxes as a percentage of total tax yield have fallen markedly, from 8.4% to 6.5%. While taxation in itself is not the answer and is recognised as such, as it affects all our lives on a daily basis, and it will be important for Government to send a coherent message about its green intentions. We can expect to hear more from the Chancellor on Budget Day as he attempts to redress this imbalance. Like the current Prime Minister, he will be seeking to fine tune his own legacy."

TABLE 1: Individual and Corporate views on Environmental Taxation (please note percentages below account for level of support. Remaining percentage of respondents are split between answers of 'no' and 'maybe')