Investment by the People, for the People

Green Party Budget Statement 2002 Prepared by Dr Molly Scott Cato, Economics Spokesperson

Finally Labour has had the courage to challenge the 20-year consensus against taxation, although this may only be in fear that the Tories would beat them to it. In the era of public-private finance have the corporations finally dropped their opposition to government investment now that they know that public investment is likely to inflate private profits? This year's budget comment needs to address the question of where our taxes are likely to go, as well as where they should be coming from.

How Should our Taxes be Spent?

People not Profits

Is it a coincidence that Labour waited until it had made a watertight case for public-private partnerships before it announced its willingness to increase taxation? In the old days BT (Before Thatcher), money raised from taxation was spent in the interests of the people who paid it, building hospitals and schools for them to use. Is it surprising that, with a government so far in hock to the corporations, their priorities are also beginning to dominate public spending?

According to the Guardian, 'Balfour Beatty, a preferred bidder in the Metronet consortium for the London Underground, is hoping to generate equity returns of up to 18% on its private finance initiatives. The company has invested £57m in PFI projects such as the development of North Durham Hospital and figures released yesterday showed it made a £26m operating profit last year from this kind of work.'1 This is attractive business for a company that can only make 3 or 4 per cent from its traditional civil engineering business.

The revenue that the Chancellor will collect from us, and that will be trumpeted as 'increased investment in public services' will in fact operate as a loan to private companies, which will put it together with their own money in order to fund infrastructure projects. But the profits from those projects will all belong to the companies.

A spokesman for the company said that 'We expect our equity return on investment to be between 13% and 17% or 18% but that is where we are putting investment money into projects.' In other words they will also make profits when all the money is invested by the government. Unexpectedly, BB see this as a reason to celebrate. Chief Executive Mike Welton is pleased that the company's 11 existing PFI projects 'will generate stable and growing profits and cash flows over a long period, even if we were never to win another concession'. How can this be good value for taxpayers? Our futures and those of our children are being mortgaged to unscrupulous corporations whose only objective is making a profit. There must also be concerns about the objectives of such investments when the private sector is calling the shots. Will health concerns or profit concerns predominate? How will the private funds affect safety, for example on the London tube? How will the increasing number of joint government-industry funded research projects affect the findings? In the case of the safety of mobile phones, how can we believe the results are independent when half the funding comes from the mobile phone companies themselves? They may be free to carry out research that shows their phones are safe, but we should not be asked to foot the bill, or even half of it.

Prevention is Better than Cure

It has long been understood by the environmental movement that, far from needing to increase the size of our economy in order to pay for better services, as Tony Blair and Gordon Brown are fond of saying, if we had a more human-scale economy there would be less need to invest money. This is best demonstrated in the area of health. It has been estimated that the cost to the health service of diseases directely related to environmental pollution is £85.5bn. every year.2 If we add the costs of stress-related diseases ranging from heart disease and hypertension through to anxiety and depression, directly related to the hectic lifestyles our economy imposes on us, we begin to grasp the scale of the money wasted. The mental health charity Mind reports that 16% of the population suffer from neurotic disorders at any given time, and that two-thirds of them are prescribed anti-depressants. This is a sad indictment of our failing community as well as a tragic waste of money that could valuably be invested elsewhere. We can make a similar case for other public-investment sinks, such as crime. We live in an acquisitive society where personal greed is accorded social respect. How can we be surprised, therefore, when those whose social position or personal skills prevent them from earning enough to buy the goods they see frenetically advertised decide to steal them instead?

Biting the Bullet

Standing shoulder to shoulder with the USA may sound warm and supportive but in reality it means being dragged into a damaging and expensive foreign policy. Worse still it seems that America is unwilling to repair the damage caused by its global misadventures, so that the UK may be left picking up the pieces and "peace-keeping": in reality defending US puppet regimes when the US cannot sell this policy to its own public. Both the aircraft and bombs used in stage one, and the lengthy spells of army duty involved in later phases are a waste of taxpayers' money.

How Should our Taxes be Raised?

Two Cheers for Labour's Environmental Levies

Labour's 1997 Statement of Intent proposing the introduction of ecotaxes was welcomed by environmentalists. The Climate Change Levy, which became effective from April 2001, is a good example of the kinds of taxes Greens would encourage, and there is evidence that it is influencing the behaviour of private companies and local authorities to reduce their energy usage.4 Similarly, the Landfill Levy has encouraged local authorities to extend their recycling schemes, indicating again that taxation can be used effectively to achieve environmental objectives. The Green Party would develop these sorts of policies, extending the CCL to a full-scale carbon tax to be levied at the point of extraction of the various fuels, and doubling the Landfill Levy.

Extending and Defending Environmental Taxes

The Green Party would take a much more radical position on environmental taxes:

- Replacing the Climate Change Levy with a Carbon Tax;
- Doubling the rate of the Landfill Levy;
- Increasing the rate of duty on petrol and incorporating the road-funding charge into this duty;
- Introducing a new tax on aviation fuel, which is currently a tax-free bonus for the unsustainable aviation industry;
- Introducing a pesticide tax to work in conjunction with the government's new sustainable agriculture policy.

Abolishing Distortionary and Regressive Taxes

VAT is a regressive tax and achieves no social or environmental benefits and therefore does not fit with the principles of green taxation. It is also highly bureaucratic and a severe burden on the very sorts of small, locally based businesses that a Green economy would rely on. For these reasons the Green Party would phase out VAT. This saving on consumption tax would also help to balance the regressive nature of the more indirect environmental taxes.

National Insurance is an unfair tax because it is only levied on 'earnings' and not on unearned income and is therefore biased against money earned in exchange for work. A Green government would phase out National Insurance contributions and replace them with higher rates of tax on income beyond the Citizensı Income threshold.

Taxing our Most Important Resource: Land

As a party that respects our total dependence on this planet the Green Party recognises that land is our most important resource. The value of land to the community as a whole should be reflected in a new tax to be paid by those who own it. A system of Land Value Taxation should be introduced to replace the Council Tax and the Unified Business Rate. It should be set at a local level and based on the annual rental value of the land. There should be no reduction of or exemption from LVT for buildings which are left vacant or allowed to fall into a state of disrepair, thus encouraging the full use of existing property and discouraging property speculation.

Notes 1. Balfour boasts big PFI profits, Terry Macalister, Guardian Society, 7 March 2002. 2. Bills of Health, Richard Lawson (Radcliff Medical Press, 1997), p. 178. 3. Total defence budget: £26,000m; annual direct government subsidy of arms exports: £420m; annual government spending on military Research and Defence: over £2,500m; annual cross-departmental budget for conflict resolution: £50m (figures from Oxford Research Group). 4. Using Best Value to Encourage Green Procurement (Green Audit, 2002).