Josh Buckland: How a new carbon pricing system can provide a credible path to Net Zero

30 Jul

Josh Buckland is the author of Bright Blue’s Green money: a plan to reform UK carbon pricing and a former energy and environment special adviser to the Prime Minister. 

Beyond simply raising funds for the Treasury, the tax system has long been used by governments of all colours to deliver other political and policy objectives. It has been used as a lever to drive social policy, as well as to stoke economic growth.

More recently, it has been used to improve public health, such as through the introduction of the sugar tax last decade. The tax system has always had to serve many masters.

One such alternative master is to tackle climate change. Despite the recent popular surge in political interest in green issues across the political spectrum, this is nothing new. At his final Budget in 1993, Norman Lamont introduced VAT on domestic energy bills, linking it to honouring the country’s commitment to stabilise emissions by 2000 made at the 1992 Rio Summit.

Ever since, chancellors have seen the potential of putting a price on carbon emissions. A combination of carbon taxes now delivers around £50 billion annually to the Exchequer, around seven per cent of total tax receipts and equivalent to 2.3 per cent of GDP.

While by no means a silver bullet, there is a strong free market case for taxing carbon emissions. The environmental damage done through emitting carbon is not automatically factored into the price of the goods we buy and sell, whether it be a plane ticket or a product online.

Just a small change in the price of a carbon-intensive goods to reflect this true ‘cost’ can potentially have a significant impact, as we have seen through the reduction in plastic bag use driven by the 10p charge on the same. If done well, it can allow market competition to take the lead in finding the green technology solutions needed, avoiding the need for costly public subsidies and continual state intervention. 

However, any tax is fraught with political risk. While there is general support for government taking action to cut emissions across both the right and left, the majority of the public favour being incentivised to do so, rather than government acting to restrict choice or increase prices. Ministers are rightly all too aware of a basic political rule – people never vote for tax rises. 

Notwithstanding this obvious political challenge, since the passage of the Climate Change Act in 2008, government has taken steps to align the tax system with the need to reduce the impact we all have on the natural environment. A tax on carbon emissions in the power sector has driven down the use of coal power to the point that it now meets less than two per cent of annual power demand. Businesses and households also pay a range of carbon taxes across what they buy and sell, incentivising companies to make products that use less energy. 

Despite numerous examples of successfully mobilising private investment through taxing emissions, the Government’s approach to doing so has been piecemeal. There are significant inconsistencies – the tax we all pay for using electricity in our homes is three times what we pay for using gas for heating. Much of the tax system is effectively ‘carbon blind’ and many pro-environmental measures effectively place a flat tax across all consumers, putting the greatest burden on those on the lowest incomes. 

With the UK hosting the climate conference COP26 in November, there is an opportunity to champion a free market approach to tackling climate change. In order to do so, the independent think tank Bright Blue has today published a report, Green money: a plan to reform UK carbon pricing, setting out how government can turn the tax system green. 

The report recommends that the Government should leave no hiding place for carbon by placing a consistent price on all emissions. This would be done through tailored measures across each sector of the economy which ensure the market can adequately respond, rather than simply increasing the prices consumers pay. It also argues that the revenue generated through green taxes should be recycled back into UK green innovation to cut the costs of tackling climate change, as well as reducing the energy bills of those least well off to ease the green transition. 

The political and economic challenges in reaching the UK’s goal of net zero emissions by 2050 are significant and public backing must be achieved to make it possible. While some on the left argue that this means we must revert to an overbearing state, unlocking the power of market competition remains our best hope. We can only do so if we get serious about putting a proper price on carbon emissions.

David Gauke: May should lead the Commons struggle against her successor’s plan to break international law if necessary

12 Sep

David Gauke is a former Justice Secretary, and was an independent candidate in South-West Hertfordshire at the recent general election.

The reputations of Prime Ministers tend to follow much the same trajectory.

First, there is a honeymoon period on the back of a Party leadership or general election victory. Their qualities are compared favourably with their predecessor and the country gives them the benefit of the doubt.

This period is usually as good as it gets. Popularity may fluctuate but eventually the attributes that once seemed refreshing begin to grate. A Prime Minister’s strengths become weaknesses. Disappointments accumulate and enemies become emboldened.

Whether suddenly (think John Major and the exit from the ERM or Gordon Brown and the election that never was) or gradually, they become damaged. A Prime Minister’s term in office usually ends on a low ebb.

At which point, the reputation of an ex-Prime Minister also tends to follow a familiar trajectory. Their qualities are compared unfavourably with their successor, and the country refuses to give them the benefit of the doubt. The troubled last period in office is fresh in the public’s memory. Former allies gravitate to the new powerbase or drift into well-remunerated obscurity. An ex-Prime Minister almost becomes a figure of pity and ridicule – the mighty fallen. Their reputation continues to decline.

And then, at some point, it begins to recover. The comparison with their successor becomes more nuanced. It is appreciated that the problems that beset their time in office were real and complex, and that maybe changing the captain hadn’t solved all the problems aboard the ship.

All of our recent Prime Ministers fit this profile to some extent, but none more so than Theresa May. On assuming office in 2016, her obvious diligence and decency won her the respect of much the nation. Her reserved, unshowy personality was seen as an asset. She was sensible and pragmatic, but also steely and determined. She polled extraordinarily well.

But, as is familiar to all readers of this website, this is all came to end – and very quickly. Over the course of the 2017 general election campaign, her reserved, unshowy personality was seen as uncommunicative and unsympathetic. A strength became a weakness and, when the Conservative majority was lost, she became a loser not a winner.

She then faced the almost impossible task of getting a Brexit deal through with a minority government, a deeply split Parliamentary Party and an increasingly polarised public. Her attempts at compromise failed to satisfy both sides of the arguments.

When she reached a deal with the EU – a compromise that had to address the contradictions and fantasies that had been peddled in previous years – she lacked the shamelessness necessary to persuade a sceptical Party and nation that she had achieved a triumph.

In the critical months that followed, she suffered Parliamentary defeat after defeat. Even those of us in her Cabinet did not know how she would try to find a way of out of the situation. In the end, she would not countenance what she saw as a risk of the return of a hard border between Northern Ireland and the Republic of Ireland with the potential implications for the peace process. Consequently, she did not attempt to force through a No Deal Brexit. The wider Conservative Party neither understood nor accepted her position and she was forced out.

For the next few months, many compared her unfavourably with her successor. Boris Johnson secured a deal which permitted greater regulatory and customs freedom (for Great Britain) and won a majority for it at Second Reading.

Rather than allow the Withdrawal Agreement be subject to extended Parliamentary scrutiny, he pulled the legislation and managed to force the opposition parties into a general election. In contrast to May’s efforts in 2017, he triumphed with a thumping majority. Six weeks later, we had finally left the EU. He had achieved what she had not.

In the 30 months after the start of the 2017 general election campaign, May’s reputation had fallen further and faster than most. But, I would argue, it then began to recover somewhat earlier than happened with her predecessors.

The Covid crisis would have played to her strengths. Her moral seriousness and attention to detail would have been well suited to the circumstances. She would have provided grip. People remembered that these were useful qualities for a Prime Minister.

And when it came to the ‘fabulous, oven-ready Brexit deal’ obtained by her successor, all was not as it was portrayed. The Northern Irish question was always immensely difficult with the Brexit-seeking UK holding contradictory objectives. Boris Johnson had got a deal by selling out the Unionists, but failed to recognise publicly that this is what he had done.

This was either staggeringly incompetent or extraordinarily mendacious (I am afraid either explanation is plausible) but it has come unstuck. Ministers’ explanations for the problems the Government now perceives – ‘it was all done in a hurry and now we must not jeopardise the peace process’ – only make matters worse. They certainly destroy the argument that Johnson had proven to be a masterful and triumphant negotiator.

In order to try to interpret the Northern Ireland Protocol in a manner that is consistent with what the Prime Minister has been saying about it, as opposed to what he actually agreed, he has had to come forward with legislation that gives the Government the power to breach international law.

I am not going to dwell on why this is an appalling course of action that will do immense damage to our international reputation and destroy trust in the EU negotiations (they stagger on, but I wonder if they are now just zombie negotiations). This is not a specifically Brexit issue, or even a No Deal Brexit issue, but it is wider than that. That is why staunch Brexiteers such as Michael Howard, Norman Lamont, Tim Montgomerie and Iain Dale have been so condemnatory.

So has May. All those who worked with her would not be surprised by her principled objections to the proposal, and her concern that future international partners will not trust the UK to ‘abide by the legal obligations of the agreements it signs’.

It would have been inconceivable to May to have brought forward legislation such as this. From my point of view, this is just as well. As her Lord Chancellor, had she done so, I would have felt compelled to resign in order to uphold the rule of law.

In the next few days, the Commons will have to decide whether it is willing to endorse the proposed breach of international law. There is considerable disquiet in the Parliamentary Party about this, but caution about rebelling. It will be a stain upon the reputation of this country and the Conservative Party if the legislation, in its current form, were to pass.

There is only person who might be able to stop this in the House of Commons. If Theresa May were to indicate that she will vote against reneging on our commitments, it would embolden others.

Voting against the Conservative whip is not in her nature. She is not a natural rebel but were she to defy the whip – in a very specific and limited way – it would be immensely to her credit and very clearly in the national interest. History would judge her kindly.