This forum is about wrong numbers in science, politics and the media. It respects good science and good English.
Damian Carrington, Environmental Guardian Journalist repeated states that the 5% VAT rate on domestic fuel is a subsidy for fossils fuels?
Could anyone on this forum please enlighten me as to the reasoning processes going on here?
Three key words:
Reminds me of:
Upon a, and
… and you want reasoning?
Energy should be so prohibitively expensive as to preclude its use by any but the elite, (of which Damien Carrington is one,) to use, thus bringing the carbon footprint of the UK into line with North Korea.
They had a good laugh over Carrington's subsidy claim at the Bishop Hill blog a few weeks ago in this post:
"Sometimes you wonder if GuardianEco is taking the mickey. Look at Damian Carrington's article about what he calls "fossil fuel subsidies". He is actually referring to the 5% lower VAT rate for energy. Having called this a fossil fuel subsidy, he goes on to note that it applies to energy from "renewables" too, and then seems to attempt a justification by noting that most of the energy supply comes from fossil fuels."
The Bishop's readers chip in with some good points, which include noting that if you accepted Carrington's claim, then various things like food and books which currently have zero VAT rating could be claimed to be even more subsidised.
To speculate on the 'reasoning processes' that Carrington is using, the history of VAT rates on domestic energy is that it used to be taxed at the standard rate until 1993 when the Major government reduced it to 8%. In 1997 Labour reduced it further to 5%. I would imagine the Greenies think that it should still be taxed at the standard rate (currently 20%) and the lower VAT rate should only be reserved for politically correct goods and services like renewable energy, and are probably lobbying the government to that effect.
My view of what a subsidy is, which I think is the same as that held by the general population, is that it has to involve some money actually being taken off somebody to give to someone else. A situation where people are getting a notional tax break relative to another hypothetical situation that you think should really apply isn't a subsidy.
It is quite amusing to see these devious and not very numerate interpretations of the word 'subsidy' by the Greenies, but there is a serious side to the matter - the Lib Dems have a tendency to adopt these daft interpretations themselves in their pursuance of the Green vote. I remember chuckling to myself after reading a claim in a 2005 report by Jonathon Porritt's now defunct Sustainable Development Commission quango called "Windpower in the UK" that the Renewables Obligation isn't a subsidy as it is taken directly from the electricity consumer rather than the taxpayer. A few years later in 2010 I realised when the UK Coalition government was formed that this must actually be Lib Dem policy, as the Lb Dems insisted in the Coalition agreement that nuclear power should receive no subsidy despite renewable energy being subsidised up to the eyeballs. The only way to rationalise this position is that the Lib Dems don't see the Renewables Obligation as being a subsidy. So if you see the Lib Dems suddenly talking about large fossil fuel subsidies at the next general election, don't be surprised.
Our fine President Obama has recently suggested that "conservatives" should support the Affordable Care Act because letting the Supreme Court declare it unconstitutional would be "legislating from the bench". The lengths these folks will go to twist definitions is amazing. The one thing the courts do have is the right to say "This is not constitutional and here is why we think so!" It is the line item veto they might be able to exercise that would be "legislating" or interpreting the law to match their belief system..
Most of the subsidies that Big Oil Receives are in the form of deductions they are allowed to take. There are a couple of "subsidies" that result in checks being delivered to them.
In reply to Brad regarding your last paragraph:
"Most of the subsidies that Big Oil Receives are in the form of deductions they are allowed to take. There are a couple of "subsidies" that result in checks [cheques] being delivered to them."
I'd say the subsidies referred to in the second sentence definitely are subsidies. The tax breaks or deductions referred to in the first sentence are much more debatable as to whether they are subsidies.
The view that tax breaks aren't subsidies is explained pretty well in this link:
If you take the idea further that paying less tax is a form of subsidy it leads to things that begin to sound absurd, like people who don't earn enough money to pay income tax being described as being subsidised, or people who have put the effort in to reduce their tax bill using various legal tax avoidance measures being described as subsidised.
Going back to the 5% VAT rate on UK domestic energy use, I don't think that even qualifies as a 'tax break' (as Damian Carrington calls it), as the tax rate applies across the board to all householders. I think the idea of a tax break requires some group to be getting preferential treatment, not everybody. It could also be argued that as the UK is not renowned for being a particularly warm country, that domestic energy should be zero VAT rated as part of the government's responsibility to its citizens to keep the excess winter death rate down.
Thanks Dave G for your thorough breakdown (as usual). I'm much wiser.
..I cannot understand why newspapers & in particular motoring magazines, are zero-rated for VAT?
In reply to Edward, I think the current zero VAT rating on newspapers just reflects the power of the UK press. There would probably have to be a cross-party agreement between the three main political parties before you saw an attempt to introduce VAT on newspapers.
I actually got the story about the history of VAT on domestic energy wrong in an earlier post. The Major government didn't reduce VAT from the standard rate to 8%, they actually increased VAT on domestic fuel and power from zero-rated to 8%. (I'd forgotten how incompetent John Major was).
The story is given in this PDF link:
VAT on fuel and power was zero when VAT was first introduced in the 1970s as part of the UK joining the Common Market. It got increased to the standard rate, but only for industry and commerce, in 1990. Then the Major government decided to slap VAT on domestic energy as well, claiming this was needed for Britain's CO2 reduction commitments made at the 1992 Rio Earth summit. The increase was intended to be applied in two stages, an 8% rate introduced in 1994 followed by the full standard rate (of 17.5%) in 1995. However the Labour opposition managed to defeat the attempt to increase it to the full rate. When Labour got into power in 1997 they reduced the VAT rate from 8% to 5%. Apparently a zero VAT rate, once given up, cannot be re-instated under EU rules, and the EU doesn't allow a lower reduced VAT rate than 5%, so we're stuck with 5% VAT for domestic energy.
As I remember it, another thing the Major government introduced after the 1992 Rio Earth summit was the 'fuel price escalator', which eventually resulted in the UK having just about the highest petrol price in Europe at the end of the decade, and led to the fuel protests of 2000. The Major government pretty much introduced Greenery into British mainstream politics, though much of it was probably a cover for shutting the coal mining industry down.