Green taxes can `cut pollution and create jobs'

New "green" taxes which curb pollution could allow pounds 22bn a year to be slashed from other taxes and create up to 700,000 jobs, a think-tank claimed yesterday.

The left-leaning Institute for Public Policy Research proposes an energy tax on commerce and industry, much higher road-fuel duties, increased taxes on dumping waste and a new tax on quarrying.

The money raised should be used to reduce employers' national insurance contributions, value-added tax (VAT) and the rate which businesses pay to help finance local government.

The authors, Stephen Tindale and Gerald Holtham, point out that the Government raises less than 10 per cent of its revenue from taxes which discourage pollution, such as fuel duties.

But half of public spending is financed from income tax and national insurance, which are detrimental to job creation.

Their report suggests gradually increasing green taxes, starting immediately after the next general election and rising to a maximum in 2005.

The energy tax would put about 50 per cent extra on all purchases of fuel and power used by businesses. The tax on dumping solid wastes would be pounds 25 a ton, compared to pounds 7 set by the Government when it enters into force later this year.

Road-fuel duties would rise by 8 per cent a year, after inflation has been accounted for, rather than the 5 per cent the Government is committed to.

And pounds 9 a ton would be imposed on each ton of rock quarried, to encourage efficient use of minerals and recycling of demolition wastes.

Apart from bringing about drastic curbs in pollution and increases in recycling, the new taxes would allow employers' national insurance contributions to be cut by 7 per cent.

According to a computer simulation of the effect of the taxes on the British economy, such a reform would lead to the creation of 700,000 jobs.

The authors chose to apply their biggest tax - on energy - only on businesses and not on households, largely to avoid alienating the Labour Party, whom they hope to influence into taking on board their recommendations.

``That's realpolitik - the introduction of VAT on fuel has queered the pitch in this whole area,'' said Mr Tindale. Furthermore, they believe industry and commerce are more likely to respond to higher fuel prices by economising on their usage than households.

5 Green taxes; available free from the IPPR, 30-32 Southampton St, London WC2E 7RA.