DTI says business will push government for tighter legislation

Future legislation will be driven by competitive pressures, not simply the desire to protect the environment, said Hicks, Speaking at the Environmental Technology (ET99) exhibition in Birmingham this week. Higher standards will be driven by companies looking for economic advantages, “Companies with high standards will be urging the Government to tighten standards, because they don’t want freeloaders,” he said.

“Businesses have now moved on to considering sustainability, but they don’t yet know how to do it,” says Hicks. They will be turning to the Government for help in the form of market based instruments (MBIs). The current environmental pressures on the Government, particularly related to climate change, will lead to the use of a wide range of MBIs says Hicks.

This means that environmental concerns will dominate tax policy in coming years, although environmental taxes will never account for a significant proportion of tax revenues. For example, the Climate Change Tax is expected to raise some £1.7 billion, but this is still only one twentieth of the amount raised by employment tax. According to Hicks, taxing pollution and resource use will never raise significant revenue, since these are unstable sources of revenue.

Increased hypothecation?

In a debate at ET99, Environment Minister Michael Meacher said that the DETR strongly supports the concept of hypothecation – using revenues raised from environmental taxes to repair environmental damage – but the Treasury is loathe to relinquish control of any tax revenues. This means that despite the relatively small sums of money involved, any scheme that involves removing tax revenue from the Treasure at source involves intensive inter-department wrangling. Meacher told delegates that while this ‘recycling’ of tax revenues is already taking place, for example on the landfill tax, the extension of this principle to other taxes is a matter that is being debated by the Government at the moment “and the jury is still out”.