Two weeks ago ConservativeHome exclusively revealed that the Conservatives were unlikely to renew the pledge to match Labour on spending. A senior frontbencher has now told us that, as part of an ongoing review of economic policy, higher green taxation is very unlikely to feature in the next Conservative manifesto.
The Tory plan up had been to reduce taxation of families from the proceeds of higher green taxation. Lower taxation of families is now expected to be financed by stricter control of spending. The overall priority, however, will be a reduction in borrowing.
Speeches by David Cameron and George Osborne at the Birmingham Party
Conference will warn of very difficult economic times ahead. The Tory leadership believes that the deterioration in the economic situation has vindicated their opposition to calls for a lower overall burden of taxation but they also fear that any moves to increase green taxation (even if offset by lower taxes elsewhere) will worsen an already precarious landscape for British business. There is a particular fear that green taxes will discourage urgently needed investment in new energy generating capacity.
The "Green Shift" (higher taxation of pollution and lower taxation of families) will nonetheless be restated as a medium term goal. Canada’s Conservatives have used opposition plans to raise green taxes to devastating electoral effect.
Tory economic traditionalists will be disappointed that George Osborne will continue to resist calls for a pro-growth package of tax reliefs. They have taken heart, however, from this week’s warnings from the party leadership against panic re-regulation of the financial sector and against protectionist sentiment.