Brown's green tax revolution

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GREEN TAXES are to increase five-fold as a result of last week's Budget, heralding a fundamental shift in the way the Government raises revenue, a new analysis reveals. The report by Friends of the Earth concludes that 22 new green tax measures - the largest number in any single area - are expected to raise some pounds 10bn in tax during the next five years.

The Treasury says that this is the beginning of a permanent shift in the balance of taxation from income and investment to pollution. The FoE analysis, published yesterday, says: "The Chancellor has embarked on an unprecedented and substantive greening of the tax system. As these measures take effect, and are added to, they will lead to the most significant transformation of the economy since the welfare state was created by the post-war Labour government."

The changes announced in the Budget were laboriously worked out by Environment Minister Michael Meacher and Patricia Hewitt, Economic Secretary to the Treasury. They range from increasing taxes on company cars and petrol, to raising charges on dumping rubbish in landfill and a new tax on the use of energy by business. They also include tax relief for commuting to work by subsided public transport, and cuts in vehicle tax costs for small cars.

Ms Hewitt signalled immediately after the Budget that this was the beginning of a long-term process. She said: "The aim is to shift the burden of tax over time from `goods' such as work, savings and investment, to `bads' such as environmental pollution. It is a very important moment in Britain's tax history. The new tax on the business use of energy will be offset by reductions in National Insurance contributions, thus helping to boost employment."

The Chancellor's unveiling of the 22 environmental tax measures has initiated a strategy likely to fundamentally change the way we pay tax, and do more than any previous initiative to "green" Britain.

"It was a complete surprise to us," said Charles Secrett, FoE's Executive Director and one of the harshest critics of Lab- our among members of Britain's environmental groups. "Last week was the one in which the Government showed that it was serious, after all, about putting the environment at the heart of policy making."

Up to half of all taxation is on labour, through income tax and national insurance, for example, and the proportion has been increasing across Europe, while much use of energy has been subsidised. This has helped to increase productivity twentyfold over the past 150 years, while allowing pollution to increase. Now, with both structural unemployment and global warming taking hold, it is looking increasingly out of date.

Study after study has shown that shifting the burden of taxation from jobs to the use of resources would cut pollution and increase employment; a 1996 study by the Institute of Public Policy Research (IPPR), for example, proposed a package that would create 700,000 jobs over eight years. When Gordon Brown took office, he announced his intention increasingly to move the tax burden from work to pollution, but his first two budgets showed little sign of it.

Now almost all the specific taxes proposed by the IPPR study have either been introduced or are on the drawing board. The next budget is likely to see a tax on quarrying and possibly one on pesticides.

Soon after the Chancellor sat down on Tuesday, Ms Hewitt was stressing that this was just the beginning of a permanent shift, hailing "a very important moment in British tax history". It would allow the Chancellor to go on cutting income tax to enthusiastic headlines, while meeting the Government's targets to cut pollution.

If he and his successors follow through, the move will be likely to reshape Britain long after the bitter saga of the fight over the right to roam has entered the history books.

The first green taxes were introduced under the Tory government, with automatic increases in levies on petrol, diesel and dumping rubbish. But Labour has raised these taxes and added a range of new measures. The amount of revenue taken in green taxes will increase from pounds 575m in the next tax year, to nearly three thousand million in three years' time.