The Fairness Instinct: Where the money goes…

The often unspoken factor in the climate change debate is social justice. Curiously, it is often the deniers who have understood that more clearly than the rest. They have seen that acceptance of the fact of climate disruption not only demands a global solution but also, that that solution does not permit a world in which the rich continue to consume and emit so disproportionately. No wonder the equation most hated by US deniers is that America, with only 4 per cent of the world’s population, produces 25 per cent of the world’s emissions. The fundamental concern of the neocons in the US and their camp-followers in theUK, is that combating climate change inevitably removes privilege and enforces greater equity. It is that inevitability that makes it essential that they deny the premise in order to avoid the outcome. So, behind all their rhetoric about economic cost and the need for growth, the real driver is their determination to keep and extend a privileged lifestyle which would otherwise have to be shared.

They are aided in this analysis by the more extreme of green campaigners, whose penchant for misery is unbounded. Their puritan belief that we would all be better off colder and less well fed fuels the proposition that a low-carbon future will mean considerable and extensive self-denial. From both ends, we, who seek to convince of the need for urgent and sustained action to stem climate change, are assaulted by those who believe that it will inevitably lead to a much more restricted lifestyle for the fortunate.`

Such a diagnosis is, of course, entirely unfounded, but it will only remain so if we move fast and effectively to stem the speed of climate change. The measures that we have to take are difficult and will be controversial. We need therefore to consider what will both work and be acceptable. There are some fundamental realities that have to be faced.

First, the concept of fairness is integral to any solution to the problem of climate change. Lifestyles have to change, even if the changes are nothing like as painful as the extremists paint. Change is always hard and usually resented. If it can be presented as unfair then even those actions that are obviously necessary can be opposed. In the current economic crisis, this mechanism is clearly displayed. Protesters don’t often deny the need for fiscal retrenchment; they simply propose that the government’s cuts are unfair and should fall on others. It is the natural human response – legitimate if true, destructive if contrived.

We, therefore, have to learn that measures to reduce emissions will only be acceptable if they are seen to be fair. So it is axiomatic that the rich, who have benefitted from pollution, must pay the price and the poor, who have been denied those benefits, must share in the success. I am not suggesting that the world that emerges will be without its inequalities. It will not be Utopia but it will have shared resources more fairly and it will not have reinforced today’s intolerable injustice.

That, in itself, is a huge challenge to all of us in the developed world – because we are all rich. Our public services, lack of corruption, education, stability, state health and welfare, and pervasive charities all mean that the least well off are rich in the context of the real poor in developing countries. Yet, at home, the concept of fairness is never expressed in that international context. Combating climate change may be set within a global framework but the fairness of individual measures is seen in the context of the nation. I compare the cost of taxation and regulation as it applies to me. I compare it with others in my own society. I don’t jump to reminding myself of how fortunate I am as compared with a rural Bangladeshi. If I feel penalised or unfairly treated as compared with bankers or company directors, then I will not be willing to bear burdens, even if I know them in principle to be necessary burdens and recognise that I am much better off than most people in the world. Some kind of rough equity must be present if I am to co-operate willingly.

This is true even if I resent the whole thing. There are many who object to all sorts of uses of taxation but who continue to pay because, overall, they accept the basis upon which it is levied. The evidence is that – and the Fabian research adds to this – despite the efforts of climate sceptics, the vast majority of people in Britain will accept the need to act on climate change if they feel that the cost is fairly and universally borne.

That is of course the other caveat. Fairness is not just tied to the idea that the burden should be equitably distributed. It is also very much linked with the concept that everyone should be involved. Free-riders are destructive of the desire to see us all in this together. The universality of the threat of climate change is accepted and so therefore is the belief that we should all be doing our bit.

On the international scene, awakening this concern has been a powerful tool in the hands of the sceptics. When Australia’s Julia Gillard introduced her very modest emission taxation measures, the opposition of the populist Liberal-Country party was supported by the very general feeling that no-one else was doing anything. There had to be huge efforts to express the amount that China, the EU, the UK, and many developing countries were achieving before this damaging impression was even partially overcome.

However, such action on the wider international level does not address the internal concerns. People in Britain want to feel that we are all in the same boat. Tuition fees are much more likely to be controversial if taxpayers in England understand that they are supporting students in Scotland who don’t pay them, while their children in English universities are being stung. Similarly, faced with additional costs to counter climate change, British taxpayers want to know that there are no exceptions. It’s not so much the noble ‘we are all in this together’, it’s the resigned ‘we’re all in the same boat’.

This is a real issue for de-regulatory governments. I remember trying to introduce the arrangements for the ‘Packaging Directive’ some fifteen years ago. Its structure had been designed by the British, and I hoped we could get agreement for a voluntary system that would enable us to reach our recycling target. The reaction from business, small and large, was the same: we need regulation, otherwise there will be free-riders. And they hated free-riders. That’s the reason for our present successful structure which, although the lightest in Europe, is compulsory, simply in order that there shall be no free-riders.

So, as the Fabian research highlights, fairness and universality are the necessary preconditions for successful climate change legislation. More difficult to fathom is the public’s attitude to the methods by which that universality should be enforced. Do we drive behaviour by taxation or enforce it by regulation? Although the real answer is ‘both…and’ rather than ‘either…or’, we know that the usual response from the public is to prefer regulation – which they perceive as having a lesser cost implication than taxation. They also see it as fairer because many are too rich to bother about the tax hikes and in any case the poor are affected proportionately more by the extra pressures.

Even more important is that taxation reawakens discussion as to where the money is to go. People assume that green taxes are mere excuses. It’s all to put more money into George Osborne’s coffers. The Treasury’s reactionary opposition to hypothecation makes this even more believable a response. Indeed, it was one of the key successes of the original landfill tax to use hypothecation to justify taxation. People knew that many of the receipts from this tax could go to environmental ends and it was therefore widely accepted as a truly green tax. However, it took the personal determination of Ken Clarke to achieve that end and, sadly, the arrival of Gordon Brown enabled the Treasury largely to reclaim its territory. As a result none of the later ‘green taxes’ have been recognised as such because the receipts have all ended up in the Treasury’s general funds.

Taxation as a means of changing behaviour will only be acceptable if the tax is simple and distinct and its revenues go directly towards a clearly delineated environmental goal. If the commuter pays their £5 congestion charge and sees the tramway being built beside the traffic-ridden road on which they are driving, the point is made and acceptance, and sometimes even support, is achieved.

It is also true that a taxation model can be acceptable if it is seen to be a means of including costs which are proper for the producer and consumer to pay instead of their being left for the general taxpayer or ratepayer to pick up. The producer responsibility levies are a case in point. Charging packagers and retailers to ensure recycling is pretty defensible if people understand that otherwise their local councils would have to use ratepayers money to do it.. Internalising costs, as long as it is properly explained, is accepted as fair. The people who produce, sell, and use packaging, batteries, or electronic goods, are seen to pay the full cost of them and don’t leave it to others to pick up the bill. Again transparency, competitiveness, and probity are essential.

However, failing hypothecation or the internalising of real costs, the public would prefer regulation. The Daily Mail will continue to campaign against it and to blame the EU, usually erroneously, but people remain less opposed to sensible rules than to the idea of taxation driving behavioural change. They think regulation is fairer and more universal. Mandating energy standards, raising building regulations to make new-build carbon neutral, enforcing ever tougher efficiency on the internal combustion engine, phasing out water-wasting loos and white goods – all these are the subject of general acceptance. Even the properly managed levies on fossil fuels to accommodate renewables can be achieved with public consent if seen in the context of energy security as well as climate change.

We need not be downcast at the difficulties of using regulation and even taxation because the evidence, borne out in the work this pamphlet discusses, is that people will accept what is properly explained. If we leave it to UKIP and the Sunday Telegraph’s Christopher Booker to manipulate and distort the truth, then we have only ourselves to blame if the public rebels. Better regulation is vital, but better expressed and better explained regulation is just as important. There is no more effective way of explaining such regulation than the hypothecation of the associated costs, levies, and taxes. Sadly, the Treasury is not yet convinced.

 This article was originally published in the Fabian Pamphlet “The Fairness Instinct“