Scanned from a recent copy of the Daily Mail, George Osborne and David Cameron cycle along The Embankment to work.  More people may soon be biking to work if the Shadow Chancellor has his way…

Osborneandcameron_1ConservativeHome predicted it at the beginning of April and a commitment to raise green taxation and reduce other forms of taxation looks set to be formally confirmed by George Osborne during a speech in Tokyo today.  Speaking to today’s Financial Times (subscription required), the Shadow Chancellor says:

“Instead of a tax system that penalises hard work and enterprise, I want to move towards more effective and fair taxes on pollution… I want the proportion of tax revenue raised by green taxes to rise.”

He notes that the contribution of ‘green taxes’ to Britain’s total tax take has fallen from 7.7% in 1997 to 6.2% today.  It is unclear what green taxes Mr Osborne has in mind although his FT interview points towards greater taxation of transport:

“Since more than a quarter of our emissions come from transport, without action on transport, action on emissions is limited… Railways are the most environmentally efficient means of transport – except for the bicycle. And, I hardly need tell you, trains are 20 times more carbon efficient than aeroplanes.”

If Mr Osborne is looking for ideas on green taxation the FT lists some possibilities and he already has two public sources of ideas:

  1. The LibDems’ suggestion of a ‘take-off’ tax that could add £35 to the cost of every airline ticket and a near 1000% increase in vehicle excise duty for ‘gaz-guzzling’ cars.
  2. Steve Norris, head of the Tories’ transport working group, is recommending extra green taxes worth "tens of billions of pounds".  Mr Norris notes that from 1975 to 2004 there was a 11% real terms drop in motoring costs but a 66% to 70% rise in bus and train fares.  He thinks that needs to be reversed and is particularly concerned about airline taxation:

"You do have to avoid creating a culture based on cheap aviation which will be as pernicious as the way of life based on car ownership has been in terms of urban planning. We’ve now got a generation living in France, working three days a week here, [which] thinks nothing of going to Prague for a stag night."

Embracing green taxation will allow Mr Osborne to afford cuts in other forms of taxation – including, for example, his recent idea of abolishing stamp duty on shares.  Labour think green taxation of airlines will hurt poorer families most, however, and deny sunseeking families their Mediterranean break.  One Labour insider recently told The Independent: "[David Cameron] can have his windmill on top of his house and we’ll have Crawley and the north Kent marginals, thank you very much."  We know that Tory voters oppose ‘increasing the cost of motoring to encourage less driving’ by 65% to 33% (Populus).

George Osborne’s intervention does appear to have ended the muddle on Tory tax policy, however.  The contours of policy now appear to be relatively clear:

  1. There is unlikely to be any overall reduction in the level of taxation because, David Cameron says, he will take no risks with economic stability.
  2. There will be a simplification of the tax system (perhaps along the lines recommended by Lord Forsyth’s Tax Commission, which is about to report).
  3. There will be reductions in business taxation (perhaps suggested by John Redwood‘s competitiveness policy group) and these will be paid for by increases in green taxation.
  4. Depending upon the extent of green taxation there may be money for a reduction in Britain’s most unpopular taxes – including the council tax.

In due course ConservativeHome also predicts that the Tories will take action to reduce the England-to-Scotland tax subsidy.

8.30am update:
This pdf
of George Osborne’s Tokyo remarks has just arrived in ConservativeHome’s in-box.

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