Missed Opportunity to Tax Pollution to Pay for Social Care

17th September 2021

Last week, the UK Government has announced new investment in a catch-up programme for the NHS and reform of the adult social care system. From 2023, the programme will be funded by a new, UK-wide 1.25 per cent Health and Social Care Levy, ringfenced for health and social care, and based on National Insurance contributions (NICs).

Chris Sherrington, Eunomia’s Head of Environmental Policy and Economics, thinks the government has missed an opportunity to use environmental fiscal reform – where you raise taxes on things we want less of, such as pollution, and lowering them on things we want more of, such as jobs – to fund increased investment in health and social care.

Tax the polluter not the working person

He said: “In a country where we’re trying to recover economically from a pandemic and decarbonize our society why aren’t we taxing pollution instead of work? I’m sure I’m not alone in thinking about the possible alternative ways in which an extra £12 billion could be found for the NHS and social care.

“This analysis from early 2020 by Simon Evans of Carbon Brief shows that had the fuel duty freeze not been put in place, not only would UK CO2 emissions be up to 5% lower, but the exchequer, according to the Institute For Fiscal Studies, would have gained £11.2 billion in the financial year 2019-20, rising to £13.9 billion in 2022-23 if the freeze continues.

An evidence-based solution

Environmental fiscal reform is a tried and tested way of raising revenue and there is a lot of research being carried out about how it can support decarbonisation. In a research project we are working on for the European Commission on environmental taxation and budgetary reform, we have analysed the cost-effectiveness of various environmental taxes, charges and other market-based instruments that can be used to implement the polluter pay principle to address different environmental issues covering five thematic areas:

  1. Air pollution
  2. Water quality
  3. Water stress and availability
  4. Waste, resources and circular economy
  5. Biodiversity and land use change

“In the project we have designed 54 market-based instruments targeting key environmental problems in the EU-27. Another project in this area brings together 40 case studies of how environmental fiscal reform has been, or is being used, including landfill tax and the aggregates levy (raw materials in relation the construction).

Getting the balance right

The principle is well-established. Some people think such an approach is regressive, but our research has shown that if designed correctly, switching the burden of taxation can support and encourage a socially-just society.