Households energy bills to increase by £800 under green tax proposals

A proposed green tax to cut carbon emissions would lead to an Ł800 increase in the average annual household energy bill over the next decade
By Murray Wardrop and Myra Butterworth, Personal Finance Correspondent

Plans put forward by the Green Fiscal Commission (GFC), a Government-supported think tank, would see the tax on gas and electricity rise every year.

By 2020, the new levy would amount to 80 per cent of the cost of the average gas bill and 30 per cent of the average electricity bill.

The tax forms part of a Ł150 billion package of proposed measures, including a tripling of fuel duty over the next decade and a tax of up to Ł3,300 on new cars.

The GFC says that the scheme is essential to shifting Britain onto a lower carbon lifestyle and meeting international targets on cutting greenhouse gas emissions.

However, critics claim that asking customers to pay even more for energy will push many hard-up families to breaking point.

The planned green tax on new cars was also condemned by motoring groups yesterday.

Susie Squire of the TaxPayers’ Alliance said: “People have seen their household bills skyrocket in recent years and many families are already struggling to make ends meet.

“It is irresponsible and out of touch to ask people to pay even more in green taxes. We are not talking about luxuries here – people need to heat their homes and run their family cars. While we agree that it is important to reduce our carbon emissions, more punitive taxes are not the answer.”

The price of an average annual gas bill is Ł808 while the price of an average annual electricity bill is Ł445, according to the price comparison website uSwitch.com.

It means the tax on gas and electricity bills could reach Ł779.90 a year, more than 60 per cent of the current Ł1,239 annual dual fuel bill.

Will Marples, a spokesman for uSwitch.com, said: “Unprecedented levels of investment will be required in Britain’s energy infrastructure over the next few years, with an estimated Ł230 billion needed to be funded largely through increases to customers bills over the next 15 years.

“A green tax on top of this could push bills to unmanageable levels for consumers.”

Another suggestion in the GFC report was that households should be forced to install insulation and other energy-saving measures when they build extensions or redecorate their homes.

Paul Ekins, a professor at University College London and the author of the report, told The Daily Telegraph: “This tax will go up but we are proposing an enormous programme to insulate homes, which would help households to save up to 50 per cent of their energy use and keep people affordably warm.”

The two-year study by the GFC suggests that eco-taxes targeted at high-carbon activities can protect the environment at a lower cost than other measures, while promoting growth creating employment in low-carbon industries.

By shifting tax onto high-carbon activities like driving and energy use and cutting taxes on low-carbon activities and levies like National Insurance, the Commission argues it is possible to produce a new green tax framework that is neutral overall in terms of the total burden on taxpayers.

"This is not just about reducing emissions, but helping the UK to develop low-carbon competitiveness," Mr Ekins said.

"This work suggests that it is possible to substantially reduce emissions and create jobs, which has to be an important message to policy-makers at a time of rising unemployment.

"We know that a tax shift can be attractive to people, because it is effectively taxing a social evil – pollution – and people are much more supportive of taxes levied in this way."

The report also suggests a Ł300 tax on new cars, increasing annually to Ł3,300 by 2020.

Professor Stephen Glaister, director of the RAC Foundation, said: "The idea that people should pay a levy of up to Ł3,300 on a new car purchase is completely the wrong way to tackle the environmental problem.

"New cars are increasingly fuel efficient and it has been estimated that if all car owners went out tomorrow and bought the leanest model in each class of vehicle, CO2 emissions from private transport would fall by 25%.

“To deter people from replacing their cars with cleaner, and indeed safer, versions seems ludicrous."

He added: "Talk of hiking up fuel duty by 300% will only result in the poorest and most needy people being forced off the roads, often when they have no alternative form of transport to make vital journeys.

"Motorists already pay way over the odds in terms of environmental taxes in comparison to the damage they cause. To penalise them further, when domestic heating, for example, enjoys a reduced rate of VAT, does not make sense. Either you hit all polluters equally or you don't."

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Dave

Posted: Nov 01 2009, 7:09 PM

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