Spending cuts and the green economy - our local thinking

We don't have much time left to prevent catastrophic climate change, so we must invest quickly in energy saving and renewable energy to cut our emissions of carbon dioxide, the main cause of global warming. We have to do this in a way that is socially just. The last government started - very late - to develop a strategy to do this and move towards a green economy. We are concerned that the coalition government is not showing the necessary urgency and is tackling the recession in a way that could endanger our carbon dioxide reduction targets and hit the poor most.

The banking crisis triggered the recession, but the UK's deficit is now mainly the result of falling tax receipts due to the recession, so cutting the deficit requires economic recovery. Therefore the government should be investing in green industry and jobs:

· Green technologies such as renewable electricity and heat will be one of the fastest growing sectors in the UK, and central to securing a strong, diverse, internationally competitive and resilient economy. But they need support if they are to realise their full potential at the pace we need.

· Investments in environmental measures are cost-effective job creators - creating more jobs per pound than money spent on more polluting alternatives. Reducing unemployment is a key way to achieve a fair and green economic recovery (we don't want to just return to the unsustainable economy we had before).

· Increasing energy efficiency is one of the most cost-effective actions households, Government departments and businesses can take. This could save £billions a year, and help tackle climate change.

The recession debate has focussed primarily on public spending cuts - which lead to job losses, as well as causing major suffering to families and communities. Job losses mean a lowered tax take, increased welfare spending, and reduced spending in the economy. Spending cuts therefore have the potential to damage the recovery, reduce the quality of services upon which people rely, and so fail in their aim.

We believe that
a) We don't need to cut the deficit as fast as this government claims.
b) We can cut the deficit by increasing taxation on higher income groups and cutting less; and stimulating green economic recovery.
c) This will reduce unemployment and so increase tax revenue and reduce welfare spending, and help cut the deficit further.
d) Tax rises and spending cuts need to be scrutinised far more carefully for their impacts on poorer households.

How we can raise more tax

1. Aviation
We support the reform of the Air Passenger Duty so that it is a per-plane duty, also covering air freight. Done in the right way this would raise an additional £3 billion. This would still leave aviation undertaxed by at least £5 billion because airlines currently pay neither VAT nor duty on fuel. So a total of £8billion could be raised from fair taxation of aviation.

2. Robin Hood Taxes
International taxes on financial transactions could raise hundreds of billions of pounds. Such taxes, set at very low rates on the huge volumes of financial transactions - which total trillions every year - could be a major component of countries' deficit reduction plans, as well as funding international poverty alleviation and climate change programmes. We urge the Government to work internationally to implement such taxation as a matter of urgency.

However, in the meantime the UK can introduce a unilateral tax on Sterling trades. This would not harm the UK financial sector, as it is a tax on the global trade of Sterling, not the trading of currencies within the UK. Because of the globalised, electronic system for major currency transactions, the UK can capture the tax regardless of where in the world the trade takes place. This would raise at least £3 billion a year, which the Robin Hood campaign advocates should be spent half (£1.5bn) on domestic deficit reduction, and half on international climate change efforts and poverty alleviation. This would also help drive progress internationally on other taxes on other currencies and transactions (see http://robinhoodtax.org.uk/).

3. Progressive taxation
The richest tenth of the population pays a smaller percentage of its income in tax than the poorest tenth - and the UK is one of the developed world's most unequal countries. The government's response to the recession is having the worst effects on poorer people - for example proposals to increase VAT, one of the most regressive taxes. The government should increase progressive taxation instead. The new Economics Foundation has estimated that the Chancellor could raise revenue by £26.4 billion at once without needing to ask Parliament and by much more through deeper reforms.

In addition the Chancellor could take major steps to tackle tax evasion, avoidance and non-payment - estimated to cost the UK over £100 billion a year.

How we can cut and shift spending:

Roads
The eight most expensive road schemes in the previous Government's roads programme will alone cost at least £5 billion. Road building is an ineffective and expensive solution to Britain's congestion problems, and actively makes our contribution to climate change worse: increasing road capacity not only increases reliance upon the car, but can become futile as new roads soon fill up with traffic.

By contrast, schemes like Smarter Travel Choices (packages of 'soft' measures that are proven to cut car trips and increase walking, cycling and public transport use) and investments in public transport are more cost-effective solutions to Britain's transport problems, and create more jobs per pound spent.

Roads spending should be heavily cut, with a fraction of it diverted to support local councils to introduce Smarter Travel Choices and improve public transport in their Local Transport Plans. (We do not believe that highway maintenance budgets should be cut - they are necessary and also create more jobs per pound than road building.)

Defence
The Trident replacement programme will do nothing to tackle the biggest threats to our security, climate change, peak oil and terrorism. It is estimated that it will cost from £76 billion to £90 billion over its 30? year lifetime. It should be critically reviewed now together with the existing Trident submarine fleet.

Haringey
Unless there is a big movement to change government policy, Haringey Council's budget will not match local needs, and it will be forced to make major spending cuts.

We urge the Council to
a) Protect our future by ensuring climate change work is not hit by the cuts.
b) Recognise that energy conservation will save money and renewable energy can indeed become an income-earner using the Clean Energy Cashback scheme, both on its own estate and for the community at large (including schools, NHS, businesses etc). Cutting energy bills will especially help households cope on lower incomes - those in fuel poverty. Investing money in such measures, and levering in private finance in these measures, makes sense in hard times.
c) Examine the scope for other revenue generation to enable investment in carbon cutting - road charging, workplace parking levies, and going further on parking charges etc.

We can all help save local services by, for example, reducing waste - disposing of our waste is an increasing bill for all councils. We can also campaign for a green way out of recession. See more on our website www.foe.co.uk/tottenhamwoodgreen

Tottenham & Wood Green Friends of the Earth: Contact Quentin Given 07946 535656 [email protected]; Muswell Hill and Hornsey Friends of the Earth: Contact Tim Root 07726 793265 [email protected]

see also:

http://www.neweconomics.org/sites/neweconomics.org/files/The_Great_Tax_Parachute.pdf

http://thecutswontwork.co.uk/