Friday 28th October 2016                 Change text size:

Abandoning ‘environmental taxes’ on energy bills will harm your health and wealth

Photo: Graeme Maclean via Flickr

On a typical energy bill of £1,500, environmental taxes add around £70. That £70 invests in the development of clean, limitless and domestically generated energy. It creates jobs in the new economy and reduces our dependence on scarce fossil fuels, with volatile prices from unstable regimes.

There’s been lots of nonsense spouted in the national press and on television about the huge burden to households and industry of surging environmental taxes.

Wholesale prices represent 67% of the gas bill and 58% of the electricity bill. Environmental costs (including the Warm Home Discount, which makes the headline percentage slightly misleading) is 6% and 11% respectively. In reality, ‘environmental taxes’ only contribute 4-5% of the whole bill. It is volatile wholesale prices, rising energy company profits and the massive subsidies to the fossil fuel industry that contribute the greatest cost uncertainty to households.

Energy companies are not simply passing on wholesale costs. The latest Ofgem statistics, from mid-September, show that the average profit margin made on the £1,315 bill is £65. This was £30 higher than September 2011 and September 2012.

In the UK, fossil fuels receive £9-12 billion of taxpayer subsidy compared to the £3 billion for renewables. Fossil fuel subsidies and the tax on bills contribute a far greater proportion of cost to domestic and commercial energy bills (£3-4 to every £1 of renewable ‘subsidy’).

Burning fossil fuels creates poor air quality, estimated to cost the taxpayer and economy £20 billion (a massive underestimate according to parliament) and particular harmful to the young (with immature respiratory systems), those with respiratory illnesses (such as asthma) and the weak. That’s seven times the renewable subsidy.

Relying on scarce fossil fuels, bought at volatile prices from unstable regimes, has meant risking the lives of our brave soldiers to fight wars to protect the supply chain, when we have an abundance of clean domestic wind, solar, tidal, hydro and biomass options. If we were to capture just one third of our offshore renewable potential we would become a net exporter of energy.

Public ‘subsidies’ (a debater’s sleight of hand used as a derogatory term for ‘taxpayer funded’) have created the infrastructure, schools, universities, hospitals and the internet, upon which the private economy and wealth creation is wholly dependent. Public subsidy has built every energy producer in the UK. Some members of parliament, lords, commentators and blokes down the pub have decided that renewable energy subsidies are bad, but the other subsidies are good.

The tailored, pinstriped elephant in the room

The real tax that has been imposed on society has been the banks’ bailout of 2008. Incorrectly deemed too big to fail, the legitimate aims of protecting depositors, maintain liquidity and capital and encourage banks to keep lending has come at a heavy price which eclipses any renewable subsidy or ‘tax’. The outstanding support as of March 31 2013 was £141 billion or £47 for banks for every £1 for renewables.

According to the National Audit Office, “Once the opportunity cost and risks are factored in, the schemes have represented a transfer of at least £5 billion from taxpayers to the financial sector.”

Truly a reverse Robin Hood. The report continues, “It is likely that a substantial proportion of these schemes and investments will be with us for some time and the eventual profit or loss to the taxpayer will not be known until all the support is removed, the loans repaid and the shares sold.”

We know that we cannot depend on fossil fuels for our future energy supply. We need a rapid period of transition from a high-carbon to low-carbon economy and this public good needs to be funded. But the modest charge on household energy bills creates vast volumes of media coverage and outrage in some quarters. Less discussed and outrageous, it seems, is the unprecedented taxpayer subsidy for the wealthiest private organisations in the country that have done more harm to our economy and free markets than any other in the history of modern capitalism.

Providing tiny subsidies to the infant renewable energy industry will provide energy security, economic certainty, new jobs and valuable exports. Providing massive subsidies to banks has impoverished future generations, locked in casino capitalism, done nothing for commercial lending which powers our economy and represents the biggest transfer of wealth from the poor to the rich since the Norman conquest.

Such economic and environmental illiteracy is a disgrace in our national press, broadcasters and in No 11 Downing Street.

Further reading:

The real energy subsidy scandal

What have subsidies ever done for us?

The long goodbye to fossil fuel subsidies

Governments are throwing ‘green money after brown’

Ditch energy subsides for a better world, says IMF report

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