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Low tax on heating is bad for climate, says Harrabin

September 24, 2020
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By Paul Homewood

 

h/t Philip Bratby

 

This totally one-sided by Harrabin shows just how he has become no more than a propagandist for the green agenda:

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The rich benefit most from a de facto subsidy for home heating, a report says.

The paper from the think tank Green Alliance makes the point that heating gas incurs VAT at only 5% instead of the usual 20%.

Because the wealthy own the biggest houses, it says, they gain twice as much as the poorest from low VAT.

The report suggests increasing VAT, then using the proceeds to insulate the homes of the poor.

It also recommends increasing their benefits.

The low VAT level on gas and heating oil is seriously hampering the UK’s ability to cut carbon fast enough to tackle the climate emergency, the authors say.

Their new analysis says the government is still effectively subsidising domestic gas and other heating fuels to the tune of £2.2bn a year through the discounted VAT rate.

The authors write: “At a time when the government is focused on levelling up, this discount is also unfair benefiting the wealthy who use more fuel.”

It challenges the Chancellor to make the changes in this autumn’s budget and its net zero carbon review. Net zero refers to balancing carbon emissions with carbon removal or simply eliminating emissions altogether.

The Green Alliance report dovetails with recent recommendations from the Climate Assembly UK that the principle of fairness is key to public acceptability of net zero policies.

The assembly supported the idea of ring-fencing tax revenues for specific purposes, which suggests that the proposed VAT changes could prove popular with voters.

One author, Libby Peake from Green Alliance, said: “We now have the perfect chance to reconsider what taxes are for, including what is taxed and why.

“For the government to show it is serious about its promises to both green the economy and level up the country, it must end this massive subsidy to the fossil fuel industry and use the funds to ensure those who are less well-off have warm homes that are inexpensive to heat.”

‘Bad economics’

Prof Paul Ekins, a green tax expert, from University College London (UCL), said: The current low VAT rate “dis-incentivises richer households from making their own investments in energy efficiency, at a time when the government is making subsidies available for this“.

He added: “This is bad economics that makes it harder and more expensive for the UK to reach its zero-carbon goal.”

Previous research by Prof Ekins into shifting taxes this way suggested there’s a large benefit to most poorer people – but a few lose out and would need targeted help.

This applied especially to poorer elderly people with big houses.

The Treasury said there were no plans to change VAT on fuel. A spokesperson said: “The reduced rate is important in keeping bills down for families.

“We’re committed to meeting our climate change and wider environmental targets, including our commitment to net zero by 2050.”

https://www.bbc.co.uk/news/science-environment-54271903

 

Let’s start with the opening claim that the rich benefit most. They may do in total terms, but in relative terms, poorer people would be far more badly affected by a rise in energy prices, because energy makes up a much bigger proportion of their income.

Surely even Harrabin has heard about “regressive taxes”?

The second sentence is equally absurd:

“heating gas incurs VAT at only 5% instead of the usual 20%.”

There is no such thing as “usual VAT”. Yes, the standard rate is 20%, but gas and electricity used to be zero-rated, along with other essentials such as food, transport and children’s clothing. It was only introduced on energy at 5%, because the EU objected.

 

The real objection of Ekins and his green cronies is that gas is much cheaper than electricity. Consequently people will be reluctant to switch, just in order to reduce emissions. The gap between gas and electricity prices is in any event so great, that a VAT rate of 20% will have virtually no effect at all. (Electricity is about five times as expensive as gas.)

Ekins suggests that the extra tax revenue is used to fund insulation and benefits for “the poor”. However, such schemes always exclude most of the population, who certainly would not regard themselves as rich. They also create huge anomalies, such as penalising people from owning their house, saving for retirement, or getting a better paid job.

Handouts like those suggested simply promote a benefit culture, which has been hugely damaging in recent decades.

If you want to help the poor, the answer is very simple – keep energy costs low.

If all of this uncritical coverage by Harrabin was not bad enough, he even goes on to mention the Climate Assembly:

 The Green Alliance report dovetails with recent recommendations from the Climate Assembly UK that the principle of fairness is key to public acceptability of net zero policies.

The assembly supported the idea of ring-fencing tax revenues for specific purposes, which suggests that the proposed VAT changes could prove popular with voters.

One author, Libby Peake from Green Alliance, said: “We now have the perfect chance to reconsider what taxes are for, including what is taxed and why.

“For the government to show it is serious about its promises to both green the economy and level up the country, it must end this massive subsidy to the fossil fuel industry and use the funds to ensure those who are less well-off have warm homes that are inexpensive to heat.”

As Harrabin really ought to know, a VAT rate of 5% is not a “subsidy”. And it certainly is not a subsidy to the”fossil fuel industry”, as the same VAT rate applies to all sources of electricity.

And if he got away from his green bubble and talked to real people, he would discover what the public really think about increasing tax on energy.

What Ekins really wants is to see gas prices skyrocket, so as to discourage us plebs from using it. It is a pity Harrabin forgot to mention that.

45 Comments
  1. September 24, 2020 12:17 pm

    Could I intrude a little person question here? I am elderly and fairly poor so was not happy when my old washing machine finally packed up and needed replacing. I was even less happy to discover that all new washing machines are cold fill so using only electricity to heat the water. My old machine was using water from my large tank heated by a gas-fired boiler. When I asked why this was I was told it was to save energy. Not only am I replacing one form of energy with another but the wash takes considerably longer to heat up and seems to be turning most of the time which is also using more energy. So how am I saving energy?

    • Is it just me? permalink
      September 24, 2020 12:36 pm

      Spot on Brenda. I’ve a 20+ year old AEG washing machine that I’m going to have rebuilt soon as it’s simple, only electromechanical and built (in Germany) like a Panzer. It fills via hot and cold. Modern machines are designed for apps, smart meters and lazy plumbers who only ever put in a cold feed – instead of both hot and cold. Bottom line – modern machines don’t save any energy – they are just keeping the appliance industry in jobs and revenue.

      • Duker permalink
        September 25, 2020 3:08 am

        I have a Korean machine which has cold and hot connections, I only use the cold one as it indeed saves electricity- my hot water is heated by electricity too.
        The point that should be made when you take from the cold tap , only that water is heated , but when you take from the hot tap the replacement cold water goes into your storage tank and requires more power to reheat ( normally hot water storage is far hotter than the washing machine water)
        yes the cycle time run longer but no the extra time turning is negligible power use.
        And yes I can tell this from my smart meter as the half hour readings are available the next day, another supplier who requires smart meters gives 1 hr per day free power ( during off peak)
        As for rebuilding an old electro mechanical washer … you are losing all the efficency gains of the last 20 years ….its called cutting off the nose to spite the face.- Who knows how much it would cost

    • Ja Thomas permalink
      September 24, 2020 1:08 pm

      Hi Brenda I’ve just installed a hot and cold washing machine that’s uk made. It’s an Ebac and it works very well.

      • Gerry, England permalink
        September 24, 2020 2:13 pm

        Nice range of machines. I am lucky in that my house still has the hot piping still in place so could reuse it.

      • September 24, 2020 6:55 pm

        Which? review
        Ebac AWM86D2H
        £599.00
        Test score 35%

        verdict: One to avoid
        We’ve waited until Ebac washing machines were widely available in the UK before testing this model and we’re sad to report that the wait hasn’t been worth it. This is a poor washing machine with few redeeming features that did badly in our clothes washing tests. And that’s why we’ve made it a Don’t Buy.
        Pros

        Excellent at spinning
        Not very noisy at all

        Cons

        Poor at washing and very poor at rinsing:
        https://www.which.co.uk/reviews/washing-machines/ebac-awm86d2h

        Shame that UK cant even build a decent washing machine !!

      • Ray Sanders permalink
        September 24, 2020 8:06 pm

        You may well see a reply to you below from “save energy” relating to a “Which?” report on Ebac machines. Personally I regard “Which?” as an exceptionally unreliable source to the point of it being corrupt. I have an Ebac machine and find it excellent. Perhaps Ebac should bribe “Which?” in the same way some other manufacturers do.

    • John Nottingham permalink
      September 24, 2020 2:00 pm

      Been there, done that. My replacement ‘energy efficient’, cold-water-only-input washing machine very noticeably bumped up my electricity bill. Although marginally inconvenient, I bought a <£10 Hoselock tap adaptor gizmo (various types available) which easily screws onto the hot water tap in the kitchen sink and, with a short length of hose, leads to the washing machine (where the soap goes). First fill the washing machine with hot water to the usual level, remove the tap gizmo and let the washing machine do its thing. Far, far less time to heat the (already pre-heated) water, rinses with cold water as normal. (Not sure if this is OK with a mixer tax but I can't see why not.)

      I kid you not, this *immediately* showed up in lower electricity bills and only very marginally higher gas bills. End result: a consistent saving of c. £100pa in energy costs, repeatable over the last 3 years. Capital paycack in only 5-6 weeks. So apart from the v. slight inconvenience of fitting and remving the tap gizmo, once per wash (30 secs?), what's not to like?

      • John Nottingham permalink
        September 25, 2020 7:26 pm

        This is a response to Duker’s comments a few posts above (25 Sep at 3:08am),

        I am sorry to say that you have shot yourself in the foot.. By saying “my hot water is heated by electricity too.”, that does not match what I said and recommended. My suggestion to fill the washing machine from the kitchen sink HOT tap uses water pre-heated BY GAS and fed from the hot water storage tank.

        If your hot water is heated by electricity – *and using typical UK energy prices* – then it has already cost 5 TIMES what it would cost using mains gas. Furthermore (in my case), the replacement water refilling the storage tank has also been pre-heated using the much cheaper GAS heating boiler.

        I agree with your point about “normally hot water storage is far hotter than the washing machine water” (typically up to 60 dregrees C). So for a cool wash (say 30-40 degrees), simply mix the cold water input to the washing machine with pre-heated water from the hot water tank. Seemples. It most certainly works for me, consistently saving £100pa in energy costs.You know it makes sense. HTH.

    • ianprsy permalink
      September 24, 2020 2:08 pm

      Not just washing machines either. Dishwashers now take 3 times as long for an inferior finish c/f my 20-year old one.

      • ThinkingScientist permalink
        September 25, 2020 1:09 pm

        Our replacement eco tumble dryer. We used to be able to take the sheets and pillowcases off our bed, wash them and then if weather bad outside dry them in the tumble dryer. The old one could do the job in 90 minutes. Now, even with all the options turned up, we can barely get the same laundry load of 1 king sheet, 4 pillowcases and a king duvet cover dry in the new “eco” dryer after 9 hours!

    • Adam Gallon permalink
      September 25, 2020 10:42 pm

      They’ve been cold fill for years. No way of calculating their “energy efficiency”, if they’re not.

  2. Harry Passfield permalink
    September 24, 2020 12:38 pm

    I’d love to hear Harrabin explain what subsidies would come from 0%VAT on fuel – as it used to be.
    Also, he bangs on about democratic processes but fails to mention that the ‘Assembly’ is self-selecting and not democratic.

  3. Paul H permalink
    September 24, 2020 12:45 pm

    Trying to rationalise is frustrating isn’t it Brenda. My new-ish washing machine drives me mad with its inefficiencies even though it’s labeled as energy efficient. The answeris to accept that appliancies are designed nowadays to a ‘PC’ formula that leaves no loophole for someone to say; it didn’t spinlong enough’ or similar. Abiding by this principle therefore allows the designers to claim it’s efficient because it caters for the picky, and therefore covers all bases making it ‘efficient’.

  4. ThinkingScientist permalink
    September 24, 2020 12:59 pm

    Meanwhile fossil fuel “subsidies” on petrol and diesel sales run at about 65% of the pump price, gathering £28 billion a year (1.5% of tax revenue) for the exchequer. 57.95p per litre is the fuel duty – on which we also pay 20% VAT!

    So following Harrabin’s logic, what’s the opposite of “subsidy” as applied to petrol and diesel? Subsidy is usually defined as a “grant or contribution of money” (Harrabin’s use is of course completely phoney). Antonym’s are therefore words like: forfeit, hindrance, injury, loss, tax, hurt.

    Why not reduce the government take on petrol and diesel to just the VAT at 20% (or even 5%!) and see what happens to economic growth when you remove such a large tax burden on a fundamental input cost to most sectors of the economy.

    Current pump price average is about 116 p/litre. Removing fuel duty and setting VAT to 5% would make the average price 40.7 p/litre. Even at 20% VAT it would only be £46.5 p/litre

    My wife and I use about 3,000 litres per year so would save about £2,000 a year in tax.

    Not sure what the government would do though – perhaps sack a large tranche of useless civil servants plus all the climate change officers across the country?

    • Harry Passfield permalink
      September 24, 2020 4:54 pm

      Nice one, TS – and then I woke up.

    • September 24, 2020 8:54 pm

      Using 2,2,4 trimethyl pentane as a representative molecule in petrol: mass 114 gmol-1, density 0.7 g/l. That gives about 6 moles per litre making about 2 kg of CO2 on combustion.

      (unless my maths is wrong..)

      If not, then c. 60p per litre in duty = 30p per kg of CO2 which = a carbon tax of c. £300 per tonne of CO2.

      • September 24, 2020 10:00 pm

        Yike. That was meant for the carbon tax thread 😉

      • Tony Drew permalink
        September 24, 2020 11:30 pm

        When we become an electrical economy where will the government get its tax income from when not from oil and gas? Electric cars for one won’t go unscathed for sure and all that electric home heating?

      • September 25, 2020 8:41 am

        The only way to replace the lost revenue from fuel duty and VED is going to be road charging as far as I can see.

      • ThinkingScientist permalink
        September 25, 2020 1:06 pm

        Even on wrong thread, works well here – interesting calculation!

        Regarding road pricing – agree this is the only way if cars electric. Governments will love the excuse to monitor where and when you drive, plus how fast etc. Control and interference in your life via the back door. Think of the speeding fines that can be gathered, as well as the replacement for the current fuel duty.

        Same with Smart meters at home – monitoring of power usage, control. I have noticed the smart meter rhetoric is being upped dramatically – on TV, letters to my home, emails etc.

    • September 24, 2020 10:18 pm

      “perhaps sack a large tranche of useless civil servants plus all the climate change officers across the country”?

      Now that is what I call a good star. The change can only be positive both financial and bureaucratic. A win-win situation!

  5. September 24, 2020 1:21 pm

    “The rich benefit most from a de facto subsidy for home heating, a report says. The paper from the think tank Green Alliance makes the point that heating gas incurs VAT at only 5% instead of the usual 20%. Because the wealthy own the biggest houses, it says, they gain twice as much as the poorest from low VAT. The report suggests increasing VAT, then using the proceeds to insulate the homes of the poor. It also recommends increasing their benefits”

    What the third world has finally learned from the West is that you don’t coddle and take care of the poor and make poverty a good and comfortable thing. What Western development experts taught us is that we must wage war against poverty and provide education and job training to get the poor out of poverty. And so we did and it worked. Thank you. Now it’s your turn. Don’t coddle poverty. Do what you taught us to do.

    • September 24, 2020 10:37 pm

      This is where it goes from plain stupid to insulting. The people like Harraharrabinbin ARE the rich! What is the twerps salary, not less than 100K GBP I will guess and closer to 150K GBP. They are so obsessed with the 2% of the population who are richer than them. They are blinded by shear envy because as we have seen on countless occasions when a leftie lovie makes a mistake and all their money making and tax avoidance ventures are revealed they are exposed for the hypocritical slime that they are. They pay only lip service to the poor and really do not care what happens to them …they are just collateral damage in the Lefts ideological war on the “rich” who they want to join but they cannot so they want to tax them out of existence. The poor? The left despises them because they refuse to be their foot soldiers which is why Teflon and Mandelslime cooked up the insanity of importing a replacement working class. That is how they lost the last election. My constituency Bishop Auckland in Co Durham had been solid labour for 101years until the last election when the voters finally woke up and dumped labour bigtime because they understood that labour had a new pet, a new victim group to play with and promote.

      • September 25, 2020 1:14 am

        Very informative and insightful comment. Learned a lot. Thank you.

      • Michael permalink
        September 25, 2020 10:23 am

        Personally I think people voted Conservative ‘cos they saw what an absolute potato Jeremy Corbin is, they saw his policies and thought, ‘ nope’. Bojo is a wanker too, but but but…

      • Adam Gallon permalink
        September 25, 2020 11:01 pm

        If you look at the GE results, Labour’s vote in Bishop Auckland peaked in 1997. In 2017, a mere 500 votes separated them from victory, compared to 21,000 in 1997.
        A pattern repeated across the so-called “Red Wall”.
        Corbyn just tipped, nay shoved, them over the edge.

    • Phoenix44 permalink
      September 25, 2020 9:18 am

      So why is he not campaigning for the “usual” rate to apply to food?

  6. Dave Gardner permalink
    September 24, 2020 1:26 pm

    To be accurate, I don’t think the EU are responsible for domestic fuel and power being non-zero VAT rated. That was a decision by the Major government in the 1990s. They decided to impose 8% VAT in 1994, but were unable to impose the full VAT rate (17.5% at that time) that they wanted to do in 1995 due to being defeated in a Parliamentary vote.

    https://en.wikipedia.org/wiki/Value-added_tax_in_the_United_Kingdom

    Extract from above:

    “During the 1992 general election the Conservatives promised not to extend the scope of VAT but in March 1993, Lamont announced that domestic fuel and power, which had previously been zero-rated, would have VAT levied at 8% from April 1994 and the full 17.5% from April 1995.[10][14] The planned introduction of VAT on domestic fuel and power went ahead in April 1994, but the increase from 8% to 17.5% in April 1995 was scuppered in December 1994, after the government lost the vote in parliament.[9][14]

    In its 1997 general election manifesto, the Labour Party pledged to reduce VAT on domestic fuel and power to 5%.[15] After gaining power, the new Labour Chancellor Gordon Brown announced in June 1997 that the lower rate of VAT on domestic fuel and power would be reduced from 8% to 5% with effect from 1 September 1997.[16][17]”

    Labour then reduced the VAT rate on domestic fuel and power from 8% to 5% when they got into power in 1997. Under EU rules anything that is non-zero VAT rated cannot go back to being zero VAT rated, it can only have its VAT reduced to the minimum level, which is set at 5%.

    There was a sort of promise in the EU Referendum in 2016 by Leave campaigners that VAT on domestic energy would be scrapped once the UK left the EU:

    https://www.bbc.co.uk/news/uk-politics-eu-referendum-36414761

    The Green Blob will definitely try to stop VAT being scrapped on domestic energy, and Harrabin seems to be doing his bit as part of the lobbying.

    • Gerry, England permalink
      September 24, 2020 2:11 pm

      Yes, the EU are responsible for VAT on gas and electricity as they would not permit their removal.

      The UK will be at liberty to remove it on 1 January (technically 11.01 PM on 31 Dec since it is based on Brussels time).

    • September 24, 2020 2:15 pm

      That vote ‘scuppering’ the increase in VAT on domestic gas effectively put me out of work for three months – on full pay, fortunately 😎

  7. September 24, 2020 1:32 pm

    “Prof Paul Ekins, a green tax expert” Oh no not another “expert”! Green taxes are invented taxes based on an unfounded claim. They are an invention so he is an expert in methods of societal strangulation only!

    “Net zero refers to balancing carbon emissions with carbon removal or simply eliminating emissions altogether”. Eliminating emissions altogether”. How exactly do we do that I wonder in their fantasy marxist utopia? Are they forgetting that each person in the exponentially increasing population ( which they think is wonderful) produce 40,000ppm CO2 with every breath they exhale?

    This progressive (selective) mathematics of the green zealots needs to be called out.

    Finally and most importantly. They, the Green zealots tell us we have a climate emergency caused by runaway global heating/cooking/frying ( whatever tedious shock language they use this week). They keep saying this is a “proven” fact ( with no proof). IF they themselves really believe this then why do any houses need heating or insulation in their future plans……….just saying……

  8. jack broughton permalink
    September 24, 2020 2:17 pm

    So, Horrorbin, having contributed to the wrecking of the UK power industry is now turning on heating. In the Carbon Trust quango today they are saying that china has now vowed to reach its maximum emissions by 2030 and become carbon neutral by 2060: this is a major triumph they howl. If Horrorbin and his BBC idiot / cronies were truly committed to carbon it is China and India that he would be criticising.

    Of course, climate taxes sound ethically good. At the end of the day it is the rich that must be taxed as they have the money, but no Tory government could say that, so stealth-taxes look likely: they must have watched the famous episode of Yes Minister.

  9. Sheri permalink
    September 24, 2020 2:42 pm

    You could do a version of what the USA does. We have whatever price the market will bear, then we spend a fortune setting up welfare programs for the poor so they can get money to pay their heating bills. That way, your government expands and the poor become more dependent. And you can charge the whole 20% VAT tax, then give the poor back the 20% through the program. Here, we subsidize heating, weatherization (some forms of insulation, etc), some food, property taxes for the elderly, etc. That way, we can claim to be “fair” in charging the rich more and still protecting the loser poor people. (Yes, that’s sarcasm. The whole thing is insane, but it does expand government, which seems to be the overall goal of all societies except dictatorships everywhere. Plus, you can use it to claim “fairness”, a completely fictional state that people are drawn to and believe in with zero evidence it exists.)

  10. September 24, 2020 3:18 pm

    Thanks J Thomas but too late for me. Not much choice up here and I’m afraid it was cheapest. Could have had my old one fixed if they still did spare parts – that’s another problem. Mad world.

  11. Harry Passfield permalink
    September 24, 2020 5:14 pm

    I am reminded of a Times OpEd from the great Bernard Levin (he could write a sentence as a paragraph!) in the ’70s where he reported on the case of a Thames Valley hospital who had let it be known to staff that the practise of some staff taking unpaid holiday would no longer be allowed as it could be seen as unfair to those members of staff who could not afford to do so.

    Levin took (satirical) issue with the hospital governors for not stopping staff buying huge TV sets or going on exotic foreign holidays as such activities could be seen as unfair to those members of staff who could not afford it.

    I guess the Greens would like everyone to only have a fixed – and equal – amount of disposable income so that all was fair – until someone decided to save a bit of money and spend it on a bigger TV or school fees.

    • StephenP permalink
      September 24, 2020 6:34 pm

      Going back to equality of outcome instead of equality of opportunity.

  12. tom0mason permalink
    September 24, 2020 9:17 pm

    Roger Harrabin is one of the

  13. Gamecock permalink
    September 24, 2020 10:44 pm

    ‘Low tax on heating is bad for climate, says Harrabin’

    Put him on the gallows, noose around his neck, and demand he define ‘climate.’

    • Phoenix44 permalink
      September 25, 2020 9:17 am

      First he should define “low” in this context. How does he know the correct rate of VAT on energy? It’s high compared with food. What he wants – even though this is a highly political stance which is not what the BBC should be endorsing – is tax high enough to reduce consumption.

  14. September 25, 2020 6:39 am

    “Net Zero” = all pain, zero gain.

  15. Phoenix44 permalink
    September 25, 2020 9:14 am

    Once again the Left/Greens reinventing the meaning of words to “prove,” their claims. A subsidy is a transfer of money. Somebody has to get money (either directly or via a lower price) from somebody else. There must be a gain by one party and a loss by another.

    VAT on energy is simply not that. It’s just a tax. To claim that because VAT on energy is lower than VAT on other items is a subsidy is absurd. To further claim “the wealthy” get the most subsidy because they pay the most tax is beyond absurd. It is like saying someone earning £1 million gets an income tax subsidy because they have more income that’s taxed.

    Increasing VAT is simply increasing tax, not reducing subsidy. It will hurt the poor, particularly those on fixed incomes like the elderly.

    • Gamecock permalink
      September 25, 2020 12:17 pm

      Phoenix, your Argumentum ad Misericordiam does not add to your post.

    • September 25, 2020 2:14 pm

      “It is like saying someone earning £1 million gets an income tax subsidy because they have more income that’s taxed.”

      …or, that the rich are really taxed at a lower rate than the poor?

  16. europeanonion permalink
    September 25, 2020 3:39 pm

    I have chronic lung problems and the general drift of energy policies speak to the young well. Will I ever get on a bicycle? Do I use the lift rather than stairs? Does my house need to be warm constantly? Do I want to stand around in a cold environment waiting for public transport. Does my mode of conveyance need to be a temperature fit for orchids? You bet. The difference is that those of us who are wealthy enough will not notice a difference but energy poverty along with assertions about exercising and using self-propulsion are policies for the fit and woke which, as Harribin casually, blindly professes; He want to ‘woke-up’!

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