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Environmental Taxation

Volume 457: debated on Thursday 8 March 2007

10. What recent discussions he has had with the Chancellor of the Exchequer on the level of environmental taxation. (125916)

My ministerial colleagues and I have discussed environmental taxation, and a range of other subjects, in various meetings with my right hon. Friend the Chancellor of the Exchequer and other Treasury colleagues.

The Treasury’s statement of intent on environmental taxation of 2 July said that it would

“shift the burden of tax from ‘goods’ to ‘bads’”.

According to the Office for National Statistics, however, environmental tax as a share of GDP has fallen under the Chancellor’s stewardship from 3.4 per cent. to 2.9 per cent. Does the Minister agree that Brown is not green?

I disagree with the hon. Gentleman on that. I accept that there is a case for doing more on fiscal measures, but one should remember what the Government have done already, such as the climate change levy, the reform of vehicle excise duty to encourage the take-up of low-polluting cars, the introduction of air passenger duty, differentials in fuel duties and the landfill tax. We are a green Government, but one cannot measure environmental performance solely by the amount of money raised in green taxes. We are trying to change behaviour. We would therefore like to see less money coming from green taxes because we have changed behaviour.

In recognising that climate change is probably the major challenge faced by this generation, may I ask my hon. Friend whether there is consensus about environmental taxation on both sides of the House?

The difference between the Government and the Opposition on environmental taxation is that we have a clear and coherent policy framework. In relation to taxation, regulation, carbon trading and other policy instruments, we have a programme designed to ensure that we avoid dangerous climate change and that we show international leadership. As my hon. Friend knows, the climate change Bill will be an important part of that framework. I am delighted that we will get—I hope—cross-party support for the climate change Bill, which will be published, as my right hon. Friend the Secretary of State has said, on Tuesday.

The Minister will be aware that Nordic countries raise a greater proportion of their taxation from green taxes than we do. From his answer, however, he is obviously not aware that those countries have managed to change behaviour through fiscal measures and increase revenue from green taxation at the same time. Will he try to persuade the Chancellor of the Exchequer that if more revenue were to be raised in that way in this country, it would be not a tax grab but offset by reductions in other taxes? That will help to ensure public support for green taxation and defend us against the opponents of green taxation on the Conservative Benches.

The hon. Gentleman is right to say that environmental taxation can help to change behaviour, and it is doing exactly that in the United Kingdom. He is also right to identify the need to offset environmental taxation and to spend the revenue raised from it on environmental goods, and we are doing just that.

The hon. Gentleman will be aware that the climate change levy directly offsets taxation of goods with taxation of bads, recycling it through reduced national insurance contributions and enhanced capital allowances. That is a clear example of our use of environmental taxation in a neutral way to encourage and improve business performance.

Environmental taxation is obviously an important instrument, but, faced with these taxes, how can we ensure that it is not just poor people and ordinary working people who modify their behaviour while very rich people carry on polluting the planet regardless?

My hon. Friend is right to observe that there is a social justice argument when it comes to tackling climate change. It is important for us all to do our bit. Businesses must take action to reduce their carbon dioxide emissions—and a great deal of work is being done in that regard—while individuals at all income levels must take action to reduce their carbon footprints.

As my hon. Friend knows, there is a relationship between carbon dioxide emissions and household income, and it is true that some of the wealthiest households are responsible for the highest emissions. They too must take action, as must we all if we are to have energy-efficient homes that reduce carbon dioxide emissions and help the climate.