Eco tax 'rescue' a timely one

JUST like a boxer who has taken a beating welcomes the bell ringing, Treasury and Social Security were grateful that a break was called on last week's debate on the Personal tax, pensions and benefits review.

Whichever way you add it up, the proposals on the table now bear little resemblance to the package of measures originally being trumpeted by the departments.

Crucially, where once there was GST, now there are environmental taxes to potentially fill half the £50m. financial hole left by its rejection.

The departments have been forced into a review of a more progressive tax system by a banded withdrawal of personal tax allowances.

Members disagreed with how the old age pension will be increased.

No firm decisions will be made on withdrawing universal benefits such as family allowance.

What is left on the table will no doubt be accepted when the amended report goes back to the States for the debate to be concluded on 8 April.

It will be accepted because members always believe after large pieces of work such as this that having something on the table is better than having nothing at all.

Or, in this case, having something in environmental taxes that was not even near the table or given serious consideration by the two boards from the outset is better than having nothing at all.

Deputy Yvonne Burford's move came at an opportune time.

Members had rejected GST – so they were keen to have another tax or set of taxes to help make up for what had been thrown out.

It is vague too, which is even better to a politician, and puts in train an investigation which will probably allow both sides to shout 'I told you so' once it concludes.

The review has been beset by political missteps, this perhaps exposed another.

The two boards consulted with the public on environmental taxes, as they did on six options for raising additional money from the personal tax system.

A summary ranked them – introducing a GST was the least favoured, environmental taxes ranked fourth.

But while plenty of work was done on a GST, none was done on the green tax idea.

The public can get disillusioned with consultation when they feel they have not been listened to.

There may be genuine reasons why the States goes against the findings of consultation, but to not even bother with investigating the option in these circumstances raises serious questions.

'Notwithstanding the reference to environmental taxes in the original consultation report, the already large scope of this project and the limited resources devoted to it has meant that this review has not been given detailed consideration to the use of any new such taxes,' it stated.

It did offer a few words of warning.

'Carbon taxes such as those outlined in the consultation report would apply a tax to all fuel and energy purchases including electricity, gas, oil, coal and motor fuels, based on the carbon emission of each fuel type.

'Such taxes are designed to discourage energy consumption with the aim of reducing carbon emissions.

'However, while this could result in environmental benefits, provisional analysis suggests that, relative to income, a carbon tax would be mildly regressive, which is of concern as the latest Household Expenditure Survey has

confirmed that lower income households spend a larger proportion of their income on fuel and energy.

'Similarly, the impact of a carbon tax on businesses would also need further investigation as it is estimated that 60% of the burden for an environmental tax would fall on businesses rather than households.'

The board's aversion to mildly regressive taxes strangely did not translate to a GST.

What this shows is how damaging a lack of a plan B can be.

Last week the States should have had enough information on the table to properly size up environmental taxes as they did for GST. They did not.

A proper green paper debate would have flushed out the mood of this Assembly to avoid the wasted hours that have gone into investigating options that have since been ditched, and then having to investigate new options that are now favoured.

Instead it was grasping at straws time.

They may have grasped at the right one, there will be those who not only like the behavioural impact environmental taxes could have, they will also be attracted to the burden it shifts back onto businesses who were the beneficiaries of the corporate tax regime that has partially driven the need for a fresh look at taxes.

But it is all an indication of the muddled thinking and inconsistency that has put this Assembly in such a bad light.

Barely any time has passed since members rejected the use of environmental taxes in the transport strategy – the flip has flopped and flipped and then flopped.

The boxer bouncing back off the canvas and stumbling and lurching in different directions, hoping that one of his punches will finally land.

There is a danger in what happens next.

When the amended report is agreed next month it will set off a series of more detailed reviews with different elements coming back over time.

That piecemeal approach may have made sense if the review had been accepted as proposed, or the complete package with some minor tweaks, and its impacts understood, but it makes less sense now there are so many changes.