Taxing policies

Shadow environment secretary Norman Baker MP speaks to Environment Business about the Liberal Democrats environmental agenda

Norman Baker is an award winning MP – Inquisitor of the Year 2001 according to the Spectator and Channel 4’s Opposition MP of the Year in 2003 – and a formidable one, described by former Tory MP Matthew Parris as someone to be “underestimated at your peril”. He is also a very busy man, and one who speaks earnestly and fluently about the environment. It is clear that Baker has strong convictions regarding environmental responsibility.

Transport for the future

First under the spotlight is transport. Baker is quick to point out that emissions have risen by 44% since 1990, and says: “The government has clearly abandoned its road traffic reduction plan. We need proper investment in public transport. Far more needs to be done to make the alternatives more attractive in terms of safety, reliability, cleanliness and punctuality.”

He identifies a clear need for a centralised approach; integrated bus and train timetables; and closer co-operation between operators. “Town planners must make it attractive to cycle and walk in towns and cities. We need to discourage highly-polluting vehicles, so we would increase vehicle excise duty in the short term for 4x4s and SUVs and cut VED for cleaner and greener vehicles, making it tax neutral overall.” Baker also talks of a need to do far more to invest in the hydrogen economy, which he feels hasn’t been given much attention by the DTI and the Department of Transport.

“In the longer term – as technology allows – we need to look towards road user and distance charging, where we charge different rates for different journeys based on both distance travelled and vehicle type. So if someone travels from one village to another in the Scottish Highlands they pay next to nothing. But if they drive from London to Edinburgh instead of taking the train, then users should pay more, especially if driving a heavily-polluting vehicle.”

The Liberal Democrats would also look at ways to discourage domestic flights and short-haul flights to Europe, and support aviation’s inclusion in the EU emissions trading scheme. “We think air passenger duty is a crude mechanism and would replace it with a plane tax to encourage airlines to fill planes rather than running them half empty.”

The suggestion that additional costs for the airlines would by passed back to the passenger leaves Baker unapologetic. “It is not an attempt to make it cheaper for the passenger, it is an attempt to encourage airlines to make better use of the infrastructure. We are also looking at whether landing slots should be auctioned.”

Baker seems unconcerned at the potentially detrimental effect this could have on business travel, and points to the example Air France has set by placing domestic passengers on high-speed rail links rather than short-haul flights, giving up flying from Paris to Brussels altogether. “Apart from anything else, security and travel times to and from airports is such that domestic flights from say London to Manchester are no longer attractive,” he believes.

Business friendly

Baker is keen to demonstrate that the Liberal Democrats are engaged with British businesses on what he describes as a “co-ordinated basis and at all levels”. Party leader Charles Kennedy often meets CBI director-general Digby Jones. “I think there is a commonality of interest. The idea that the environment is somehow a restriction on business is false.

“When firms improve their environmental performance they are able to save energy and water, reduce waste and therefore save money. They also give themselves a cutting edge because they develop technologies to take them forward, giving them an advantage in the marketplace. Companies can improve their public images by taking environmental concerns seriously.”

Baker sees himself as a champion of business and does not believe his party’s policies are detrimental to it, despite the tax implications of the Lib Dems’ proposals. He also sees a case for “proper environmental reporting”.

Baker says it is a pity that more firms don’t provide adequate environmental performance data, and that if businesses don’t respond voluntarily, a mandatory requirement should be introduced. “I think it is in companies’ best interests to report, because they learn things about themselves which are beneficial to their operations – how to save money, how to improve their image and how to identify where their market is going.”

Boosting the regulator

Baker is also concerned that the Environment Agency is under-resourced and in need of an expanded inspectorate. And the fact that the number of inspections it carries out has dropped significantly hasn’t escaped his attention. “The Agency has gone for the so called ‘light touch’ approach,” he says. “In theory this is difficult to object to, but I suppose the reason they have done so is that they haven’t got the inspectors they need. The other concern I have is that because the Agency is an arm of DEFRA, it is sometimes reluctant to say what it thinks about government policy, when it obviously has an interest and duty to do so.”

Baker would like to see the Agency given the challenge of improving the inspection regime without incurring additional costs. Only if this fails would he want the government to look at the possibility of allocating additional resources.

Changing behaviour

The use of tax instruments feature prominently in the Liberal Democrats’ environmental policies. “We firmly believe we have to change people’s – and business’ – behaviour and that the most effective way to do that is through market mechanisms rather than crude regulation.

“Regulation has its place on occasions, as do absolute bans, but it is much better to appeal to human nature – to give people a financial incentive to do the right thing and a disincentive to do the wrong thing.”

Baker is keen to point out that this is all would be on a tax neutral basis. “We have no intention of raising money through these policies; the intention is to use economic instruments to improve behaviour.”

An example of this is the proposal put forward by the Liberal Democrats for a carbon tax to replace the Climate Change Levy. “The reason the government opted for the levy is that they didn’t want it to impact on motorists, and they wanted to exclude the domestic sector. We would include the domestic sector and some of the money raised would be used for things like improved energy efficiency. The basic premise is that people should pay for the cost of their environmental activity.”

Baker recognises that the EU emissions trading scheme already goes some way to dealing with industry’s carbon emissions and provides assurances that a way would be found to ensure that businesses wouldn’t be hit twice.

Tackling congestion

The Liberal Democrats advocate increasing the number of congestion charge zones around the country, despite the adverse effects the charge has had on businesses, especially retailers, in London.

But is this another instance of increasing the tax burden to pay for their environmental policies? Baker says this would not be the case, reiterating his claim that all the party’s proposals are tax neutral. “We don’t regard congestion charging as tax. It is a matter for local authorities, and it is up to them whether or not they implement schemes, after taking into account the needs of local businesses. We do think it is a good concept, however.”

Renewables and the nuclear debate

And it won’t be of any surprise to discover that the Liberal Democrats are against expansion of the nuclear energy industry and in favour of increasing the number of wind farms. “Leaving nuclear waste lying around for the next few thousand years is simply irresponsible. Nuclear sites also present very attractive terror targets,” Baker says. “There are a lot of renewable sources that have yet to be properly developed – offshore wind, tidal, solar and wave power, geothermal power. My criticism of the government’s energy policy is that it hasn’t diversified the supply of energy to take the range of renewable sources into account.”

Although Baker’s and the Liberal Democrat’s commitment to the environment is beyond doubt, it’s reasonable to question whether they could achieve their proposals and still remain tax neutral. Fundamental changes would be required of businesses and society and it is difficult to imagine these being implemented without incurring significant costs.

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