UK pesticides taxation debate moves forward

Report advocates variable tax based on toxicity to reduce drinking water contamination

The UK environment ministry has promised to consult widely on fiscal measures to reduce pesticide use after publishing a consultancy report yesterday that recommends introducing a pesticides tax.

Prepared by Ecotec Research and Consulting, the report recommends introducing a tax based on the weight of active ingredient in a pesticide. It suggests that the tax rate could increase in five "hazard bands" relative to the environmental harmfulness of active ingredients, in order to discourage a move to cheaper but more harmful pesticides.

The idea behind taxing pesticides would be to activate the polluter pays principle in a sector estimated by Ecotec to impose external costs to society estimated of up to euros 447m (UK£300m). The report suggests imposing an average 30% tax rate. It calculates that this would raise revenue of between UK£85m and UK£130m, which it says would "broadly correlate" with available environmental cost damage estimates.

Such a tax would also cause a reduction in overall use of pesticides of between 8% and 21%, Ecotec estimates. This in turn would cause a 20% reduction in exceedences of drinking water quality standards by providing a "dynamic incentive to the development of alternative methods of pest management".

The report also examines the effects of a tax on the farming and pesticide manufacturing sector. In the worst cases, it estimates that up to 20% of farm income could be lost through higher net prices for pesticides, especially in the horticultural and specialist fruit sectors. Around 2% of all businesses could become unprofitable, it suggests.

However, Ecotec claims that negative effects would be "dwarfed" by changes in income caused by exchange rate movements and the value of the "green pound" used to convert EU farm subsidies from euros into sterling. The manufacturing sector would be relatively unscathed, it argues, because 85% of its production is exported and would thus be exempt from the tax.

Yesterday's document appears to contradict a separate report prepared for the UK's agriculture ministry earlier this year, which stated that pesticide taxation would "not necessarily reduce pesticide usage or offer environmental benefits". The earlier report also suggested that farmers would "use the older, cheaper and often less environmentally friendly products" instead of reducing usage.

Follow Up:
UK environment ministry, tel: +44 171 890 3000. References: "Design of Tax/Charge Scheme for Pesticides," available on the web at http://www.environment.detr.gov.uk

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