Green taxes would cripple poor households, says report

Published by the Joseph Rowntree Foundation, the study shows that consumption of energy, water and waste disposal services was disproportionately high in households with lower incomes, costing at least 10% of their annual earnings.

Therefore, flat-rate environmental taxes would currently end up charging poorer families an even greater share of their income, while those with a higher income would not feel such a considerable difference in energy costs.

Most unintended social consequences of the taxes could be reversed if a tariff structure was introduced according to each household’s income, or compensation was available to those with lower incomes, according to the PSI.

However, although some poorer households would then benefit from this scheme, the study states that a minority would still end up being “net losers”.

Head of the PSI environment group Professor Paul Ekins stated that, if environmental taxes or charges were to be introduced, the study would help policy makers design them in a way that prevented an unintended financial backlash on poorer families.

“Households will also have the option of responding to the new tax by cutting their consumption of the resource being taxed, further reducing the number of net losers,” he added. “Further targeted compensation measures should be able to prevent unacceptable hardship among those who remain.”

According to the study, further measures to balance the tax paid by each home could include: changes to stamp duty and council tax to reward more energy efficient homes; water meters or variable tariffs depending on the household’s council tax band; the removal of waste expenses from council tax bills, to be replaced with new charges based on the amount of waste thrown away; and increasing petrol taxes, but abolishing vehicle duty excise for poorer households.

Liberal Democrat Shadow Environment Secretary Norman Baker said the report should have a positive affect on policy makers, as he believed there was great value in using economic incentives to reward good environmental behaviour, while punishing bad.

“The report is right to recognise the impact that new of different taxes can have on the poorest in society,” Mr Baker commented. “But in assisting poorer families we must not compromise our environmental goals. Instead we must look at alternative support systems, as well as tackling the underlying causes of fuel poverty by promoting energy efficiency.”

By Jane Kettle