No tax relief for the environment

Governments are notoriously reluctant to change. Some months ago I was talking to a Treasury official about the best ways to incentivise microgeneration and solar thermal in particular. I explained that I thought that a simple income tax allowance of the amount spent on a thermal solar system would be a good idea.

This is what Austria has done and it has led to a massive use of thermal solar and a corresponding gain in environment benefits and in energy security.  His reply was disappointing but not unexpected. The income tax, he pointed out historically had few allowances against it, so asking for an income tax allowance was most unlikely to succeed. To my way of thinking it hardly reflects a sense of urgency in dealing with climate change or energy security. 

 In fact, income tax was first imposed as an emergency measure in desperate circumstances. Britain was at war with Napoleon and the war was costing much more than the government was then raising from taxation. They were very close to losing and in order to raise money to defend the realm the government two hundred or so years ago imposed an income tax. It was a novel and drastic response to drastic circumstances 

We are probably in desperate times now in relation to climate change and traditional energy fuels will become scarcer and more expensive; in twenty years time we will hardly have access to any fuel of our own. In seventy years time natural gas and oil will be much rarer and uranium will have probably run out. We can do quite a lot with solar systems; virtually every country regards them as an essential weapon in energy security and climate change. 

My idea was that as we have now a system of certified products and qualified installers, a purchaser of a solar system would get a certificate from the installer certifying how much had been spent on the solar system. There would be a corresponding increasing in the taxpayers’ PAYE code or, if the taxpayer filed a return, the amount spent would act as an allowance against tax. The plan would cost much less to run than grant schemes like Clear Skies and Low Carbon Building programme, there would be no need for wasteful poor value “frameworks” and a simple system of audit and inspection of a random number of installations would easily prevent abuse. 

 This is too radical for the Treasury; climate change and energy security are too far down the list of priorities and the historical position of the income tax will not be changed. I wonder if the Treasury have factored in the cost to the Revenue of not providing these kinds of allowances. After all, they did commission Sir Nicholas Stern to report on the likely costs, at an overall cost of about the amount of subsidies given in 2007 to householders installing solar thermal systems. Clearly, they do not believe the report that Gordon Brown (then Chancellor now promoted to Prime Minister) commissioned and heralded with as much fanfare as they could muster, and that was quite a lot. 

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