Saturday, November 5, 2011

Charles Hendry & Me Brill Idea

I met with Charles Hendry (the Minister of State for the Department of Energy) at an eco fair in Forest Row (East Sussex) today.

He was delivering his bombshell - a snap FIT reduction for PV generation, arguing the point in a presentation that the FIT had to be reduced as demand has far outstripped cash supply (from the green tax levy on energy companies). If they did not shut the door hard, they would have had such a rush before April 2012 that the entire budget for the next 3 years for FITs would have been allocated by next April.
Here he is, on the left, being verbally beaten up by an angry audience of commercial solar installers (one farmer had just canned a 40kW install, as it could not be done before the Dec12th FIT deadline) and assorted solar traders (notably Jeremy Leggett, founder of Solar Century, on the right).  The dude in the middle was refereeing the bout.

They were all upset that they could not peddle a guaranteed 10-12% index linked and government backed investment opportunity (they're not selling PV, y'know - judging by the advertising copy that usually reads "MAKE FREE MONEY FOR 25 YEARS!!!").

After the debate officially ended, I talked briefly to the minister about alternatives. I suggested that the government should "do it's bit" in enabling me to "do my bit" by making all energy saving and generating equipment and services zero VAT rated. It's odd that my utility bills attract only 5% VAT but the LED lights I buy to save energy attract 20% VAT.

It's also odd that the more energy I use, the cheaper it gets. The first 900 kWhs are are 24p for me and then it drops to 10.5p. Should be the other way round, if we want to curb excessive use, no? It would also mean that the units I save first with my PV generated ones are the more expensive ones.

I also suggested the government extend the "invest as you earn" (IAYE) scheme that already exists (for buying bicycles to work and pension contributions, for example) to other eco products and services (say PV or ASHP or a new A rated boiler or windows or insulation...).

These IAYE investments are deducted by your employer through the PAYE model from your salary prior to income tax is calculated, making the buying of a bike or a pension (or PV or ASHP, etc) income tax free.

You don't get the cash. You get a voucher to buy the prescribed product or service. That way people can't scam the system to dodge tax and blow it on something else.

Think how much more you could invest in saving your skin (eco investment is about saving yourself) if you didn't have to pay 10-40% income tax and another 5-20% VAT for the pleasure.

Charles rubbed his chin and said "That's an intriguing idea...". He'll probably file it under "cranky ideas that reduce government revenue..." and black Mercedes "G cars" will be parked outside my house from now on.  [sigh].

3 comments:

  1. Allowing conservation/insulation/microgen under IAYE is an interesting idea...

    Rgds

    Damon

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  2. Thanks Damon.

    Yeah, if I spend £100 on retail solar panels (not bought as part of an install), it actually costs me £120 because of VAT. But to earn that £120 of "disposable income" cost me over £168 in gross salary (I pay higher rate 40% income tax). I could have bought more or bigger solar panels for the same amount of hours worked, if the government hadn't taxed me so heavily.

    Of course, if I wanted to blow £100 on an air ticket for a holiday, then I'd be right to pay all the relevant taxes on it.

    It would send a powerful message to people that the government is serious about helping people to spend their money on doing "the right thing". It wouldn't penalise people who wanted to go on holiday (it's not a new tax for being "bad") but it would signal that there are better things you should be spending your money on - like a pension, like renewables, like insulation...

    Some might argue, "Hey, that's a bit unfair... Those who pay higher rates of tax get more benefit to buy eco stuff than those on low pay!". True, but the rich should invest more in eco goods and services than the poor. Rich people tend to consume more fossil fuels (through electricity & gas use) so it would be right that they are given the opportunity to invest more to offset that use.

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  3. Math failure... You'd actually have to have worked £200 gross salary hours. £200 gross salary minus 40% income tax is £120. I'm also ignoring national insurance, but that's a small element.

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