This will be fascinating

The call comes ahead of a report to be published tomorrow by the Green Fiscal Commission (GFC), which will call for a dramatic £150bn shake-up in the country\’s fiscal system – including a £3,300 tax on new cars and a tripling of fuel duties over the next decade, to be balanced by a cut in income tax and national insurance.

I wonder how they\’ll make their numbers add up?

We know from the Stern Review that the social cost of carbon dioxide emissions is $80 a tonne. That\’s around 11 p on a litre of petrol. Thus the green tax on a litre of petrol should be 11p. (We can add more for congestion, particularate pollution, the costs of building the roads etc, yes, and just to raise revenue, but the carbon element of the tax should indeed be set at the costs level.) As we\’ve already raised the petrol tax by 23 p a litre since 1993 \”to meet our Rio commitments\” then we\’re already there.

There is no \”carbon\” justification for raising fuel duty further.

Total fuel duty is currently somewhere north of 50 p a litre. Their suggestion is that it should rise to £1.50 within a decade. Fuel duty currently raises about £20 billion (that\’s the right order of magnitude at least). Assume that demand will be static (which of course it won\’t be and of course that\’s the point of taxing it so highly) and this tax rise could raise a further £40 billion: which is enough to raise the income tax allowance to £12,000 and so take all minimum wage payers out of the income tax net.

Now, if that\’s what they are to propose that\’s actually something I would support: the benefits to be had by sorting out our entirely vile method of taxing the poor would be worth just about anything we do to petrol prices.

However, this is insane:

including a £3,300 tax on new cars

We of course want people to junk the old gas guzzlers and embrace the newer less thirsty cars: that VW Polo at 70 mpg for the diesel for example. How making it more expensive to get a less consuming car is going to reduce consumption is, umm, difficult to see.

7 comments on “This will be fascinating

  1. Much sense there ,I am in favour of almost any reduction on taxes on work and jobs and shift to consumption. You have not made the case for lightening the load at the bottom end here .It concerns me that familes for whom a car is a near necessity will be put under further pressurre and I would prefer to see move towards flat tax rates rather than yet more complicatedness at the edges.

    I think iyts also possible

  2. I think its also possible , ( excuse me )..that a new market for slow cheap non petrol family cars might be opened up which would be a good thing for any number of reasons but not tax revenue

  3. “(We can add more for congestion, particularate pollution, the costs of building the roads etc, yes, and just to raise revenue, but the carbon element of the tax should indeed be set at the costs level.)”

    Hurrah! It’s taken a long time to get you to factor in other costs but I think we’ve managed it. Shame you seem to have forgotten it two posts higher.

  4. So let me get this right.

    Having spent the last year and a half subsidising the purchase of new cars to the tune of two thousand pounds because new cars are a GOOD THING, we are now to tax them to the tune of three thousand pounds because new cars are a BAD THING.

  5. They are aware that Britain is one of the most expensive places to run a car in the world already?

    On the other hand, if they genuinely were willing to cut other taxes to some reasonable level (something like 17% income tax and zero VAT as they have in Hong Kong, perhaps), I might be willing to accept this as a quid pro quo.

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