Calls for higher domestic energy prices run counter to current government policy. On taking office in 1997 it cut VAT (sales tax) on domestic fuels to the EU legal minimum of 5% in a bid to combat fuel poverty (ENDS Daily 3 July 1997). The Fabian Society argues for an energy efficiency campaign to precede domestic energy taxation to prevent harm to lower-income households. This could be financed by borrowing on eventual tax revenues, it says.
The society's demand for domestic fuel taxation is part of a general review of UK tax policy, which advocates an increase in hypothecation - or earmarking - of tax revenues, especially environmental taxes.
The report goes on to warn that any ecological tax reform to shift the burden of taxation from employment to pollution and energy could have negative knock-on impacts. If employers' social security contributions were reduced substantially to compensate companies for higher environmental taxes, the report argues, then funding for state pensions and other benefits would be hit.
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