Low tax on heating is bad for climate, says Harrabin

By Paul Homewood

 

h/t Philip Bratby

 

This totally one-sided by Harrabin shows just how he has become no more than a propagandist for the green agenda:

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The rich benefit most from a de facto subsidy for home heating, a report says.

The paper from the think tank Green Alliance makes the point that heating gas incurs VAT at only 5% instead of the usual 20%.

Because the wealthy own the biggest houses, it says, they gain twice as much as the poorest from low VAT.

The report suggests increasing VAT, then using the proceeds to insulate the homes of the poor.

It also recommends increasing their benefits.

The low VAT level on gas and heating oil is seriously hampering the UK’s ability to cut carbon fast enough to tackle the climate emergency, the authors say.

Their new analysis says the government is still effectively subsidising domestic gas and other heating fuels to the tune of £2.2bn a year through the discounted VAT rate.

The authors write: “At a time when the government is focused on levelling up, this discount is also unfair benefiting the wealthy who use more fuel.”

It challenges the Chancellor to make the changes in this autumn’s budget and its net zero carbon review. Net zero refers to balancing carbon emissions with carbon removal or simply eliminating emissions altogether.

The Green Alliance report dovetails with recent recommendations from the Climate Assembly UK that the principle of fairness is key to public acceptability of net zero policies.

The assembly supported the idea of ring-fencing tax revenues for specific purposes, which suggests that the proposed VAT changes could prove popular with voters.

One author, Libby Peake from Green Alliance, said: “We now have the perfect chance to reconsider what taxes are for, including what is taxed and why.

“For the government to show it is serious about its promises to both green the economy and level up the country, it must end this massive subsidy to the fossil fuel industry and use the funds to ensure those who are less well-off have warm homes that are inexpensive to heat.”

‘Bad economics’

Prof Paul Ekins, a green tax expert, from University College London (UCL), said: The current low VAT rate “dis-incentivises richer households from making their own investments in energy efficiency, at a time when the government is making subsidies available for this“.

He added: “This is bad economics that makes it harder and more expensive for the UK to reach its zero-carbon goal.”

Previous research by Prof Ekins into shifting taxes this way suggested there’s a large benefit to most poorer people – but a few lose out and would need targeted help.

This applied especially to poorer elderly people with big houses.

The Treasury said there were no plans to change VAT on fuel. A spokesperson said: “The reduced rate is important in keeping bills down for families.

“We’re committed to meeting our climate change and wider environmental targets, including our commitment to net zero by 2050.”

https://www.bbc.co.uk/news/science-environment-54271903

 

Let’s start with the opening claim that the rich benefit most. They may do in total terms, but in relative terms, poorer people would be far more badly affected by a rise in energy prices, because energy makes up a much bigger proportion of their income.

Surely even Harrabin has heard about “regressive taxes”?

The second sentence is equally absurd:

“heating gas incurs VAT at only 5% instead of the usual 20%.”

There is no such thing as “usual VAT”. Yes, the standard rate is 20%, but gas and electricity used to be zero-rated, along with other essentials such as food, transport and children’s clothing. It was only introduced on energy at 5%, because the EU objected.

 

The real objection of Ekins and his green cronies is that gas is much cheaper than electricity. Consequently people will be reluctant to switch, just in order to reduce emissions. The gap between gas and electricity prices is in any event so great, that a VAT rate of 20% will have virtually no effect at all. (Electricity is about five times as expensive as gas.)

Ekins suggests that the extra tax revenue is used to fund insulation and benefits for “the poor”. However, such schemes always exclude most of the population, who certainly would not regard themselves as rich. They also create huge anomalies, such as penalising people from owning their house, saving for retirement, or getting a better paid job.

Handouts like those suggested simply promote a benefit culture, which has been hugely damaging in recent decades.

If you want to help the poor, the answer is very simple – keep energy costs low.

If all of this uncritical coverage by Harrabin was not bad enough, he even goes on to mention the Climate Assembly:

 The Green Alliance report dovetails with recent recommendations from the Climate Assembly UK that the principle of fairness is key to public acceptability of net zero policies.

The assembly supported the idea of ring-fencing tax revenues for specific purposes, which suggests that the proposed VAT changes could prove popular with voters.

One author, Libby Peake from Green Alliance, said: “We now have the perfect chance to reconsider what taxes are for, including what is taxed and why.

“For the government to show it is serious about its promises to both green the economy and level up the country, it must end this massive subsidy to the fossil fuel industry and use the funds to ensure those who are less well-off have warm homes that are inexpensive to heat.”

As Harrabin really ought to know, a VAT rate of 5% is not a “subsidy”. And it certainly is not a subsidy to the”fossil fuel industry”, as the same VAT rate applies to all sources of electricity.

And if he got away from his green bubble and talked to real people, he would discover what the public really think about increasing tax on energy.

What Ekins really wants is to see gas prices skyrocket, so as to discourage us plebs from using it. It is a pity Harrabin forgot to mention that.

via NOT A LOT OF PEOPLE KNOW THAT

https://ift.tt/3csGEOQ

September 24, 2020 at 05:57AM

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