Green Fiscal Commission, banks & markets and QEHS Question Time

The Green Fiscal Commission has produced a substantial paper on the uses of fiscal measures to influence public behaviour in favour of ecological virtue. The points made are extremely close to those that I have made on my website and elsewhere in years gone by. This paper and action on the points made is massively overdue.
It is no surprise to me that the national press, those elements that mentioned it, only took home the message that car and fuel prices would rise.
The difference between the GFC and my own proposals is that I favour both carrot and stick. To take the example of cars: I propose that VAT should be levied in direct proportion to the CO2 figures produced for every model. If a car produced 159g/km then the VAT should be 15.9%, one that produced 396g/km would attract VAT at 39.6% – simple, proportional, explicit – the polluter pays. Every year a multiplier (1.1, 1.2, 1.3 etc.) would be applied to increase the gradient in favour of the lowest emitting cars. Under this scheme the lowest emitting cars would be substantially cheaper than at present.
On the domestic front: I propose, amongst other things, that higher VAT be applied to electricity derived from fossil fuel burning and nuclear fission plant and that all solar, wind and hydro goods and services be zero rated for VAT.
‘Cap and trade’, the emissions reduction mechanism currently in action at an international level is not without its critics – simpler and more manageable measures, closer to the consumer ought to achieve more and more quickly in my judgement.
Key messages from the GFC
Environmental taxes work: numerous studies, including those of the Green Fiscal Commission, have shown that green taxes are effective in reducing the environmental impacts on which they are targeted.
Environmental taxes are efficient: there are good reasons why environmental taxes in many situations will achieve environmental improvement at lower cost than other instruments.
Environmental taxes can raise stable revenues: some environmental taxes, like fuel duty, have been raising sizeable revenues for years. Raising them significantly would therefore both achieve environmental improvements and allow other taxes to be lower than they would otherwise need to be.
The public can be won round to green fiscal reform: a number of polls show majority public support for a green tax shift, which increases when people are persuaded that the green taxes really will be instead of other taxes.
The UK’s 2020 greenhouse gas targets could be met through green fiscal reform: the economic implications of doing so would be broadly neutral, and the green fiscal reform policy approach would increase employment.
Green fiscal reform would stimulate investment in the low-carbon industries of the future: investing a small proportion of the revenues from green fiscal reform in energy-efficient homes and vehicles, and in renewable energy development, would accelerate the growth of new low-carbon industries with real export potential, as well as increasing the environmental benefit of green fiscal reform.
Green fiscal reform can mitigate the impact of high world energy prices: high world energy prices are bad for the UK economy, which is now a net energy importer. Green fiscal reform can drive energy efficiency and make the UK economy less vulnerable to high world energy prices if they rebound once the global economy recovers.
The impacts of green fiscal reform on competitiveness can be mitigated: relatively few economic sectors would face serious challenges to their competitiveness from green fiscal reform, and there are a number of ways in which these concerns can be addressed.
For green fiscal reform to be fair, low-income households would need to be protected from energy price rises while their homes were being made energy efficient: the UK needs a massive programme of energy efficiency improvement to existing homes for social as well as environmental reasons. While this programme is being carried out, special measures would need to reduce the impacts on low-income households of the energy price rises entailed by green fiscal reform.
Green fiscal reform emerges as a crucial policy to get the UK on a low-carbon trajectory; help develop the new industries that will both keep it there and provide competitive advantage for the UK in the future; and contribute to restoring UK fiscal stability after the recession. It is a key to future environmental sustainability and low-carbon prosperity.
Banker’s bonuses did not, of themselves, cause the recession but they are symptomatic of the deficiencies and excesses of our present capitalist model. Perhaps the bonuses should be in the gift of the investors and shareholders of the banks, rather than ‘compensation committees’. After all, the bonuses paid to the bankers are profits not paid to their shareholders and investors.
The other banking issue of the moment is how to minimise the risk of the taxpayer having to bail out the system in the future. The three options most spoken of include: increasing the capital reserves requirements, catastrophe insurance or splitting the banks retail and casino divisions. I do not think governments need to make the decision for the banks because their individual circumstances are so varied but the banks should be required to make their own decision by an early date and show that they have accomplished their action of choice immediately thereafter.
Another factor that I have not seen discussed is the role of volatility in the markets. With assets being traded second by second it is no surprise that enormous swings occur and that speculation is rampant.
The BBC has just broadcast a fascinating programme about Warren Buffet – the world’s richest man from time to time, when not overtaken by Bill Gates. His approach to wealth is diametrically opposed to the general pattern. He takes a considered view, buys an enormous lump, or all, of his chosen target company and then sits on the asset for years. He never engages in leverage funded by debt. His system clearly works. Why don’t others follow suit or better still why don’t governments act to damp out the volatility of markets and thereby reduce the impulse to speculation?
On December 5th at 11.00am in the Queen Elizabeth High School, Hexham there is going to be a Question Time at which all four of the candidates will be presenting their answers to questions submitted by the public. This will be an excellent opportunity for the public to start to form their opinions about which way to vote.
Do come along and join in.

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