Tories bite tax bullet in battle for the green vote

David Cameron will commit the Conservative Party to an increase in environmental taxes as he tries to outflank Gordon Brown in the battle for the green vote.

In a speech today on the role of the market in a modern economy, the Tory leader will promise that the proposed rise in green taxes would be balanced by cuts in taxes on incomes.

Allies said Mr Cameron has decided to "bite the bullet" by adopting radical measures to tax behaviour which damages the environment.

On Thursday he will welcome the publication of an 800-word review of Tory policy on the quality of life, which will propose an array of measures to combat the problem of global warming.

But not all the proposals will win inclusion in the Tories' election manifesto. Mr Cameron is expected to veto a call in the report for a curb on airport growth. That is at odds with another Tory policy review group, chaired by John Redwood, which proposes further expansion at airports.

Thursday's report will recommend measures to deter people from taking domestic flights, possibly by imposing VAT on them. But a controversial "green air miles" scheme, floated by Mr Cameron, is expected to be dropped, after criticism that it would penalise families who took more than one holiday a year.

The Quality of Life policy group, co-chaired by the millionaire environmentalist Zac Goldsmith and the former cabinet minister John Gummer, will propose incentives to encourage people to make their homes more energy efficient.

They would include generous rebates on stamp duty for householders who sell homes after giving them a "green upgrade", and no stamp duty on zero carbon homes. Homes built to the highest environmental standards would enjoy a council tax discount.

The report will also recommend a cap on the electricity used by goods such as plasma televisions, which could be banned from sale after a certain date. Manufacturers would also be told to end the "stand-by" mode, which accounts for more than 2 per cent of electricity usage, by introducing automatic cut-off functions.

On packaging, the Tory group proposes "take-back" schemes under which consumers could return packaging waste to shops, ensuring products were better designed. New laws could force drinks companies to ensure all cans are made of 100 per cent recycled aluminium and that 50 per cent of computers are recycled by manufacturers.

Gross domestic product (GDP) should be replaced by a Happy Planet Index (HPI) as a measure of national progress, said the Tory group. It would be based on people's life expectancy, their impact on the environment and their level of life satisfaction.

Mr Goldsmith said the Tories would use "sticks" as well as "carrots" like tax rebates. He told the BBC yesterday: "There is an absolute commitment from the party to raise more revenue on the back of pollution and use of scarce resources and to offset that with cuts elsewhere in the economy. You can't be serious about climate change or quality of life issues, in my view, unless you address very serious issues to do with short-haul flights and so on."

Friends of the Earth welcomed the Tory plans, but Labour warned the ideas on electrical goods were meaningless since regulations would have to be agreed by the European Union, where the Tories would be isolated.

Andy Burnham, the Chief Secretary to the Treasury, said: "It is misleading for the Tories to tell people this report is about cutting green taxes when they would need to raise green taxes by eye-watering amounts to meet the tax proposals they have been making. To deal with the scale of the budget gap they have created for themselves, they will have to hit drivers, holidaymakers and home-owners harder than anyone has woken up to yet."