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Green taxes are inevitable – so let's prepare for them

01 January 2007
Green taxes are inevitable – so let's prepare for them

Bob Cotton, chief executive of the British Hospitality Association, predicts that the short-term pain will be replaced by long-term gains for the sector.

One of the most significant reports to appear in 2006 will have an impact on 2007 and well beyond. The Stern Report on the future of the environment created much publicity when it was published - so much so that it's unlikely that it will be one of those reports that gets shelved and completely forgotten.

For one thing, the environment has reached the top of the political agenda; for another, it's reached the top of the agenda for all the political parties. So Britain appears determined to take note of Stern's cataclysmic findings, even if other countries do not.

What form will this take? In one word: taxes.

Already, the Chancellor has taken some steps to introduce more green taxes through the recent budget increase in fuel duty and airport taxes. These have been derided by some as too little, too late but there is a political dimension here - motorists and air travellers have a vote. However, let's not kid ourselves: more 'green' taxes will be introduced in the future with two objectives in mind:

1. To change behaviour so that carbon emissions are reduced (by putting up prices and increasing both the cost of living and the cost of doing business).

2. To raise more revenue (because they offer a new means of generating income for the Treasury - and all green taxes can be claimed to be in a good cause).

New taxes on petrol and other fuels, air travel, road travel (through road pricing), rubbish collections and on any other item that can be claimed to increase UK carbon emissions, either necessarily or unnecessarily, are currently in the line of fire.

The Lyons Inquiry into funding local authorities is certainly looking at rubbish collection (to say nothing of a possible bed tax).

There's a clear danger in this approach, of course. If Britain takes the lead in making carbon emissions more expensive and other countries do not (particularly those with whom we compete) then British business becomes less and less competitive in a global market place. And as the tourism industry operates in a global market place, British tourism could be badly hit.

Yet, if the Government (and the major political parties) appear determined to take the lead on environmental issues, the hospitality industry had better get accustomed to the thought that it will be faced with higher taxes.

Not only that, British consumers will also be faced with higher costs - particularly travel costs - which may well, if the taxes are to be effective, deter them from certain 'un-green' activities, such as car and air travel.

Introducing these taxes unilaterally will certainly harm British tourism in the short-term. Other countries that do not follow the British lead - and are thus able to offer lower prices - will be in a strong position to grab a portion of Britain's more expensive tourism market.

In the long-term, however, green taxes may work to Britain's benefit. If they encourage new (and cheaper?) sources of energy and lead to ways of cutting energy usage, then the tourism industry will gain.

Carbon emission is a global issue and some control over it is inevitable. If the industry (and British consumers) can become accustomed to new green taxes before other countries are forced to introduce similar measures - as surely they will - then British hospitality will find itself in a good position.

If the short-term pain may be difficult for British tourism to sustain, the long-term gain could make it all worth while. The question, to which no-body knows the answer, is: how short and how severe will be the pain?

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