Tuesday, 18 March 2008

Alistair Darling's Budget- a few days later

Wading through the Sunday Times poll at the weekend which including some more detailed data about the Budget, a couple of stats caught my eye. 74% of voters believe that 'green' taxes are just an excuse to raise more money and 85% say that higher alcohol duties will not curb binge drinking.

Alcohol consumption and carbon burning are not necessarily free choices other than at the margins. The reality is that the people who will be dissuaded from drinking or buying Chelsea tractors are those who aren't that bothered either way. There are more people who 'need' alcohol either through addiction or lifestyle than 'need' 4x4s or SUVs so the impact will probably be greater on the purchase of high carbon emitting vehicles than on alcohol consumption. Besides the overall cost of a pint of beer is still relatively low when compared to an SUV. It is easier to stomach a 4p price increase than a price differential of a few hundred pounds!

Applying a differential carbon tax on higher emitting vehicles will have some impact as there are good choices of vehicle that are not so polluting- people who aren't that concerned about whether they have the latest (non-hybrid) Lexus 4x4 will go for something lighter on emissions or maybe even a hybrid. There is a risk though that the people who will be hit are those who do need a bigger vehicle, i.e. those with large families.

But applying higher duty on alcohol will have almost no impact on binge drinking (those that drink less will probably be those that don't drink that much anyway and are more sensitive to price.)

So the suspicion that the changes announced in the Budget will be more successful in raising revenue than preventing harmful behaviour is probably about right. That doesn't make them bad measures necessarily. We do have to raise revenue from somewhere. The congestion charge in London has had some impact. But it's real value is the revenue it has raised to invest in public transport. The overall impact of the charge combined with investment is a reduction in car journeys by a third in the charge zone. Very good policy.

There is a broader point here. In a post last week I discussed the relationship between alcohol and violent crime. The problem with the Budget is that public policy objectives and revenue raising tend to get confused. That is why people are cynical about the motivation behind changes in the Budget. My own view is that this could be made more transparent and more effective by making most decisions about tax and duty in alignment with, for example, the need to break the link between alcohol and violent crime.

The Budget could draw together announcements about public policy decisions that had already been taken. It would become more of an economic statement and strategic statement. Then we could be honest. The Chancellor could say: "I'm putting up alcohol duty because I need to raise some more cash and I'd rather tax booze than raise taxes on income or entrepreneurship."

Post Script: Alan Milburn writes in this week's Sunday Times imploring Gordon Brown to 'trust the people.' The Giddensian analysis is quite familiar. But is the suggestion of introducing vouchers for schooling, health, social care etc the best we can do? What is the point of introducing vouchers without price? If price is not introduced then you just have a system similar to the current system but with a different bureaucracy. And the notion of schools charging different fees or private schools competing for public resources is a step too far that will benefit the well-resourced over the poorer in society. The problem we have is that not everyone can go to the best schools so we have to find a way of rationing places in a fair way. So vouchers aren't the solution: better overall quality, fair admissions, local priority are more important in ensuring choice AND quality.

Mr Milburn also suggests more local direct democracy. Well, why not improve the local representative democracy that we have and empower local authorities with responsibility for health, policing etc? This will be a major area of debate in the coming years and the implications of genuine devolution and democratisation need to be thought through and soon.

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