Green taxes

"Green" taxes – designed to protect the environment by cutting consumption of gas, electricity, petrol and other natural resources – are liable to hit the poorest homes hardest, it has been claimed.

But their negative impact on low-income households can be substantially reduced through carefully designed charging regimes or compensation schemes, according to research launched on Wednesday by the Joseph Rowntree Foundation.

Stakeholder Response: Joseph Rowntree Foundation

Professor Ekins, head of the environment group at PSI and co-author of the report, said: "The results from this research can help policy makers ensure that, if environmental taxes and charges are introduced, they are designed in ways that prevent unintended consequences for people who live on low incomes.

"Our research demonstrates that, in general, it is possible to solve the disproportionate impact on poorer households sometimes associated with environmental taxes and charges.

"In theory, any broad but practicable compensation scheme will still create net losers among low-income households as well as a majority who gain.

"But in practice, households will also have the option of responding to the new tax or charge by cutting their consumption of the resource being taxed, further reducing the number of net losers.

"Further targeted compensation measures should be able to prevent unacceptable hardship among those who remain."

Stakeholder Response: Energy Retail Association

Russell Hamblin-Boone head of communications and policy at the ERA, said: "Energy suppliers support the view that vulnerable customers are at most risk from increased taxes. The industry makes every effort to help those who have problems paying their bills.

 

"Suppliers offer a range a range of payment options, special services, tariffs and advice. 

 

"For example two companies British Gas and EDF Energy have set up trust funds for their customers and Powergen has a special tariff for vulnerable customers.

 

"Energy efficiency is a key factor in supporting the fuel poor; although it is not a panacea to all the problems they face. 

 

"Through the energy efficiency commitment suppliers have insulated thousands of homes in the social housing sector.