Gummer moots greening of taxes

Environment Secretary John Gummer has become the first UK Minister to voice public support for a shift in the burden of taxation towards pollution and resource use.

The idea of shifting the burden of taxation away from labour and capital and on to pollution and resource consumption has been pushed by the European Commission, notably in a recent White Paper on growth, competitiveness and employment (ENDS Report 227, pp 41-42 ). The UK Government passed not a single comment on that idea in the consultative process which led up to the White Paper, and Mr Gummer has now become the first Minister to pronounce on the issue.

Presenting the NatWest Lecture on 21 April, the Environment Secretary acknowledged that the whole field of fiscal policy and the environment is developing very rapidly in both the USA and EC.

Policy-makers are looking not only at switching taxes onto environmental "bads", he said, but also at "imaginative ways in which revenues raised by environmental taxes, levies or charges could be sensibly recycled in order to stimulate investment and innovation in environmental technologies." The notion that tax revenues could be hypothecated and "sensibly recycled" in this way is currently anathema to the Treasury.

"It has been a proper aim of Conservative policy," he went on, "to shift the burden of taxation from earning to spending. In itself that is a necessary shift if we are to develop sustainably. To cast our taxes on expenditure in such a way that they also bring environmental benefits is clearly another example of the double dividend."

Voicing the customary disclaimer that decisions on taxation are a matter for the Chancellor, the Environment Secretary concluded that "nevertheless, it must be the case that the imposition of taxes whose payment benefits the Exchequer and whose legitimate avoidance benefits the environment must have its attractions." It remains to be seen whether anything comes of Mr Gummer's kite-flying expedition.

Later in his speech, the Environment Secretary observed that few in the financial world are paying attention to companies' environmental performance. "In relation to the environmental pressures a company might be under - how these might affect its profitability, creditworthiness or balance sheet - the financial world is still for the most part flying blind. This means that good performance is not rewarded, or bad punished. It means that opportunities are missed and avoidable losses incurred."

The answer, he suggested, should be a closer linkage between companies' environmental reports and the financial reporting process. At present, he suggested, corporate environmental reports are generally designed for many stakeholders, and "this means there is a real danger that in trying to speak to all audiences they satisfy none." The issue has now been taken up by the Government's Advisory Committee on Business and the Environment.

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