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Picking up the pieces: tackling littering and fly-tipping in England

By Centre Write, Clean environment, Education, Energy & Environment, Joshua Marks, Law & Justice, Patrick Hall, Politics, Rebecca Foster, Towns & Devolution

Introduction

England is heavily littered, resulting in many detrimental economic, environmental, and social consequences.

In 2021, Bright Blue published our report Nature positive? examining in detail the UK public’s attitudes towards the state of and responsibility for the natural environment. We revealed that fly-tipping and littering is seen by the UK public as the third largest threat to the UK’s natural environment (25%), behind plastic pollution (41%) and climate change (37%).[1] A significant majority (76%) of the UK public felt that fines for littering should be higher.[2] This reflected a policy recommendation in our 2020 report, Global green giant, which called for an increase in the maximum amount for fixed penalty notices (FPNs) for littering from the current £150 to £500, with higher fines for repeat offenders, following the lead of places such as Singapore and Calgary.[3] Bright Blue then launched a petition to increase the maximum FPN for littering, backed by the Daily Express, RSPB, Clean Up Britain, and Sea Shepherd UK.[4]

This analysis builds on Bright Blue’s existing work and offers an in-depth explanation of the drivers and policies that attempt to tackle fly-tipping and littering, as defined in Box 1 below.

Box 1. Definitions of fly tipping and littering

Fly-tipping is the illegal disposal of household, industrial, commercial or other ‘controlled’   (waste that is subject to legislative control in either its handling or its disposal) waste.[5][6] Common examples of fly-tipped items include household waste, white goods, and construction materials which are usually disposed of in large quantities.

Littering, meanwhile, does not have a statutory definition but is commonly regarded as the improper discarding of materials, such as cigarette butts or drinks containers,  amounting to less than a black bag’s worth of rubbish.[7]

The analysis first identifies the leading impacts and drivers of fly-tipping and littering, and provides an overview of current government policy towards both. This analysis then looks overseas to identify effective measures used in other countries to reduce fly-tipping and littering. Finally, the analysis puts forward original policy recommendations to reduce fly-tipping and littering in England.

Since fly-tipping and litter is a devolved issue in the UK, the scope of this analysis is limited to England.

Methodology

We conducted an extensive literature review of relevant reports and surveys conducted by government, universities, and civil society organisations to identify the broad trends and drivers of the littering and fly-tipping problem in the UK. The literature review also helped us gain insights into how other countries have tackled the problem with a variety of policy approaches. 

Our thinking has also been informed by a meeting of Bright Blue’s Conservation Advisory Board and an invite-only private roundtable attended by leading decision makers from the  public, private, and third sectors.

What is the impact of fly-tipping and littering? 

Fly-tipping and littering have adverse impacts on our environment, our economy and our society.

Many commonly littered items – particularly plastics and cigarette butts – decompose very slowly, polluting soils if improperly discarded.[8] Dangerous chemicals can then be released into the surrounding soil, potentially making their way into groundwater and from there, into waterways and ecosystems.[9] This poses a significant risk to wildlife: the ingestion of discarded items can cause serious harm or death to animals, including aquatic wildlife. The Royal Society for the Prevention of Cruelty to Animals (RSPCA) receives on average 14 calls a day in relation to animals affected by litter, with wild birds being a particularly common victim.[10] Additionally, plastic pollution from littering can disrupt the life cycle of microbes such as Prochlorococcus, a bacteria responsible for the production of 10% of global oxygen and critical for the marine food web.[11]

Fly-tipping and littering bring with them economic consequences as well. The cost to the taxpayer of cleaning up our streets is estimated to be almost £700 million a year in terms of spending by local authorities.[12] For fly-tipping specifically, the most recent figures show the cost of clearance to local authorities in England for large incidents[13] is £11.6 million a year.[14]

Research by Keep Britain Tidy, a UK environmental charity, has also found that litter is most prevalent in more deprived areas and can negatively influence local tourism and the local economy.[15] Unpleasantly, certain types of litter, particularly food waste, can attract rodents, creating pest problems for residential areas.[16] But perhaps more powerfully, litter can actually generate and reinforce negative perceptions of an area, reducing people’s enjoyment of the towns, villages, and countryside which may be their home.[17]

Indeed, the restoration of civic pride and activity in so-called left-behind areas is one of the core objectives of the Government’s Levelling Up agenda, as stated in Levelling up the United Kingdom white paper.[18] Tackling littering could well be an underestimated important step in improving civic activity and pride.

The state of fly-tipping and littering in England 

The prevalence of fly-tipping and littering in England is difficult to establish definitively. We can only illustrate the severity of fly-tipping and littering using the data that is available. This includes: the number and location of reported incidents; data from ‘sample sites’ specially selected to be geographically representative; and public perceptions.

Unlike littering, it is easier to report and track incidents of fly-tipping since it involves larger items being improperly discarded. However, there are still challenges with sourcing accurate data on its prevalence.

Incidents of fly-tipping are reported to local authorities, community organisations such as Crimestoppers and the police. Chart 1 below shows the total number of reported fly-tipping incidents to local authorities in England from 2018-19 to 2020-21, and where they occurred. Comparisons of data from the years predating 2018-19 cannot be made owing to methodological changes by Defra which took place from 2018-19 onwards. Of course, these are only incidents of fly-tipping which have been reported to local authorities and the actual number of incidents is likely to be higher than is indicated in Chart 1 below.[19]

Chart 1. Total reported incidences to local councils and land type of fly-tipping in England from 2018-19 to 2020-21[20]

Source: Department for Environment, Food and Rural Affairs, “ENV24 – Fly tipping incidents and actions taken in England”, 2021.

In the past three years, we have witnessed the number of reported fly-tipping incidents in England increase from 957,157 in 2018-19 to well over one million in 2020-21.[21] The trend in where people most commonly fly-tip their waste has not changed: highways, footpaths/bridleways, and council land are consistently the most common types of land where fly-tipping occurs.

According to the latest 2020-2021 figures, a majority of 65% of all fly-tipping incidents (equivalent to 736,686 cases) comprise household waste. This includes, but is not limited to, house clearances, old furniture, carpets, and ‘black bag’ garbage. Similarly, commercial waste, which includes cardboards, foam, and plastic discards contribute to nearly 6% of fly-tipping incidents. The remaining 29% of fly-tipping incidents consist of miscellaneous waste such as construction material from demolitions, white goods, electrical waste, tyres, animal carcasses, and chemical drums among others.[22]

While individually dropped items of litter cannot be reported in the same way as incidents of fly-tipping, each year Keep Britain Tidy conducts the Local Environmental Quality Survey of England to assess the state of litter across the country.[23] Using a geographically representative sampling framework of 4,200 different sites across England, the survey applies a grade from A (no issues present) to D (heavily littered) to each site to reflect the severity of litter.

In the latest survey conducted in 2019-2020, 91% of sites were deemed to be at or above the acceptable standard of grade B (predominantly free of litter but with some issues).[24] While this may sound encouraging, Keep Britain Tidy also estimates that two million pieces of rubbish are being dropped every day across the country, meaning some 23 items are improperly discarded every second.[25] The most commonly littered items are smoking-related litter (77%), confectionery packets (45%), and non-alcoholic drinking vessels (40%).[26]

BOX 2. Cigarette litter

Available data tells us that smoking-related litter is the most prevalent form of litter in England, making up 68% of all littered items and found at almost 80% of sites surveyed by Keep Britain Tidy.[27] The vast majority of cigarette butts are single-use plastic and contain toxic chemicals once smoked.[28]

Research by Clean Up Britain surveyed 412 smokers to better understand their disposal habits regarding cigarette butts.[29] The study found that 41% of surveyed smokers admitted to ‘often’ or ‘always’ dropping butts on the ground.[30] 48% of those surveyed admitted to ‘occasionally’ or ‘rarely’ dropping butts and only 11% never littered their cigarette butts.

The Local Environmental Quality Survey of England also examined the types of land where people most commonly litter. These were industry and warehousing sites with 33% not meeting the acceptable standard for litter, high obstruction housing with 15% of sites not meeting the acceptable standard, and other retail and commercial areas with 14% of sites not meeting the acceptable standard. Other areas including highways, main roads, recreation areas, low obstruction housing, and main retail and commercial areas ranged from 2% to 12% of sites not meeting the acceptable standard.[31]

The blight of litter across England does not go unnoticed by the public. Since the beginning of the Covid-19 pandemic in 2020, 38% of people reported having seen more litter near where they live and a significant majority of people (76%) noticed an increase in personal protective equipment (PPE), such as face masks being littered.[32] Furthermore, as Bright Blue’s recent report showed, the public consider fly-tipping and littering to be the third most significant threat to the country’s natural environment (25%), behind climate change (36%) and plastic pollution (40%).[33]

The key drivers of fly-tipping and littering 

There are of course many reasons why people fly-tip and litter. The factors most commonly cited in existing evidence include: social influences, such as how others have treated an area; lack of education; insufficient disposal infrastructure; the cost of legitimate disposal, particularly in the case of fly-tipping; and a lack of law enforcement, such as a low rate of fines being issued.[34]

On social influences, individuals are more likely to litter in dirty environments compared to cleaner environments. In a study where participants were given a flyer on the windscreens of their cars, they littered the flyer the most when they observed someone littering in an already dirty environment, and they littered the least when they observed someone littering in a clean environment.[35] This indicates that the state of the surrounding area can influence the decision-making of individuals. In addition, behavioural research shows that only 49% of litterers strongly agreed that they take pride in where they live, compared to 69% of non-litterers.[36]

Lack of education about litter is also suggested as a key reason for littering behaviour, with focus group research in Wales indicating that littering can result in part from never having been taught to not litter.[37]

Similarly, the direct link between the lack of public receptacles and the increase in littering suggests that insufficient disposal infrastructure is another reason for why people litter. If people are unable to locate a receptacle or the bins are not regularly cleared, overloading of receptacles can occur which leads to increase in littering.[38]

Furthermore, fly-tipping in particular may be carried out to avoid disposal costs. The cost for collection of bulky items which do not fit into a wheeled bin varies based on the type and quantity of items, as well as the local authority’s fee. For example, Fenland District Council offers the collection of four items per visit for £30[39], Medway Council offers collection of three items for £22,[40] and Blackpool Council the same for £20.[41]

Historically, charging at waste disposal sites may also have an impact on fly-tipping rates. For example, Buckinghamshire Council charged in excess of £20 to dispose of items such as boilers, and over £10 for other items such as shower screens/doors, windows or a fireplace.[42] At Brent’s Household Re-use and Recycling Centre, disposing of one tonne of waste cost £165 with a minimum charge of £16 for waste up to 100 kilograms.[43]

To assess the link between fly-tipping and disposal costs, Bright Blue previously recommended ​​carrying out a government-backed study on the cost of fly-tipping enforcement and clean up compared to the cost of running free waste disposal sites where building/domestic waste can be disposed of responsibly. [44] In April 2022, the Government removed the ability for local authorities to charge households for the disposal of DIY waste at waste disposal sites, but its impact on fly-tipping remains to be seen.[45]

Finally, turning to consider law enforcement, failure by local authorities to issue fines for littering has meant that their efficacy as a deterrent has been hindered. In England, litterers can receive a FPN ranging from £65 to a maximum of £150. However, data obtained by Freedom of Information rules has revealed that of the 169 councils which responded to the request, the majority (56%) issued less than one FPN a week and 16% issued none for the 2018-19 period.[46]

Current responsibility for fly-tipping and littering

First, on littering, the Environmental Protection Act (EPA) 1990, Section 89, establishes where the duty to keep land and highways clear of litter lies. The Secretary of State for Transport is responsible for the network of motorways and strategic roads managed by National Highways in England. All other roads fall under the responsibility of the local authority where they are located.

Local authorities are also responsible for land under their direct control and which the public has access to. Section 89 of the EPA 1990 also states that the ‘designated statutory undertaker’ is responsible for keeping their relevant land clear of litter. This is in reference to organisations such as those permitted to operate railways, airports, canals, docks, and harbours. For educational institutions, including schools and universities, the governing body of each institution is responsible for keeping land which is open to the air free of litter.

Section 87 and 88 of the EPA 1990 establishes littering to be an offence in any place open to the air, including private property and bodies of water. Those found guilty can be fined by a court up to £2,500, or more commonly, be issued with a FPN of up to £150 by a local authority. Although National Highways are responsible for keeping motorways under their management free of litter, they cannot directly issue FPNs to those who litter. Instead, they must apply to the relevant local authority – the one in which the incident occurred – to issue an FPN.

For some roads, National Highways contracts out responsibility for keeping roads and verges free of litter. However, this has been ineffectual in the past and drawn criticism, as Box 3 below explains further.

Box 3. An example of private contracting from National Highways: Connect Plus Ltd

National Highways has contracted out the management and operation of the M25 network to Connect Plus, including the responsibility for ensuring it is free of litter. In 2009 Connect Plus received a 30-year contract worth £8 billion of taxpayer funding from National Highways to deliver these services.

However, criticism has been levelled at Connect Plus for failing to ensure the M25 is kept free of litter, as is required by law under the EPA 1990. Ample amounts of photographic evidence, as well as an investigation by Channel Four news, has revealed that swathes of the M25 remain heavily littered.[47]

Further criticism comes from the return shareholders have gained. A report by the National Audit Office revealed that over an eight year period, equity holders in Connect Plus have benefitted from a 31% return per annum.[48]

 

Community Protection Notices (CPNs) are another tool available to local authorities and police for dealing with ongoing nuisances affecting a community’s quality of life. The Anti-Social Behaviour Crime and Policing Act 2014 introduced CPNs, repealing several other anti-littering measures in the process – including Street Litter Control Notices, Litter Clearing Notices, and, Litter Abatement Notices[49] – and placing them under CPNs.[50] The UK Government’s rationale for this move was the confusing nature of a system using several different notices.

As for fly-tipping, section 33 of the EPA 1990 establishes the unlawful depositing of waste as an offence, but does not stipulate a maximum fine.[51] Defendants are sentenced on a case by case basis with penalties ranging from the issuance of a FPN to vehicle seizure and jail time.[52]

Local authorities are responsible for investigating and clearing fly-tipping incidents, and enforcing penalties on those committing small-scale offences such as those on public land.

For larger scale offences, defined as quantities of waste which are a tipper lorry load or more in size, the enforcement responsibility lies with the Environment Agency.[53]

On private property, it is the responsibility of the property owner to remove waste, which they can be directed to do by local authorities or the Environment Agency.

Public policies to reduce fly-tipping and littering

There are broadly five types of public policies to address fly-tipping and littering: regulatory; punishments; behavioural; incentives; and educational. These can apply to both individuals and organisations, and to both producers and consumers of waste.

Regulatory policy uses regulations and laws to direct or control the behaviour of individuals and organisations.

Policies that are punishments seek to deter individuals or organisations from behaving in a certain way that violates an existing law or regulation. In this sense, they are a branch of regulatory policy.

Behavioural policy uses behavioural science to influence the behaviour of individuals or organisations through ‘nudges’. It is also a branch of regulatory policy since it uses rules to shift attitudes and behaviours.

Policies that are incentives seek to encourage individuals or organisations to behave in a certain way which delivers a desired outcome – for example, by offering a financial benefit for desired behaviour such as recycling.

Education policy engages the public, especially young people, through schools, civil society organisations, and national campaigns.

We now identify the leading and current public policies in England under these five types of policies to reduce fly-tipping and littering. Those detailed below are the leading measures; they are not meant to be exhaustive.

Regulatory

  • Plastic bag charge. By law, retailers of all sizes are required to charge at least ten pence for a single-use carrier bag. This is not a tax and the proceeds of the scheme are donated to good causes chosen on a case by case basis by the retailer.[54] To avoid the additional charge, consumers are thereby incentivised to use reusable bags, reducing the use of single-use carrier bags and the litter they can cause. Since its introduction the scheme has cut plastic bag use down by more than 95% and raised over £180 million.[55]
  • Plastic Packaging Tax. This new tax, which came into force on the 1st April 2022, charges manufacturers £200 per metric tonne of plastic packaging used in their product unless at least 30% has been made from recycled plastic. This tax is applied to plastic manufactured or imported into the UK but does not apply to packaging used for the purpose of importing goods. The aim of this tax is to provide an incentive for businesses to buy and use recycled plastic. In a previous report, Global Green Giant, Bright Blue recommended that the UK’s plastic packaging tax threshold should be set at 35% from 30% as soon as feasible, and this threshold should increase if viable on an annual basis thereafter.[56]
  • Ban on certain single-use plastic items. Common single-use plastic items including straws, stirrers, cotton buds, disposable plastic plates, single-use plastic cutlery, balloon sticks, food and drink containers, expanded polystyrene containers, and oxo-degradable products are banned.[57] If found to be breaking the law, individuals and businesses will be issued a fine based at the discretion of their local authority.[58] The Government has recently concluded a public consultation which looked to extend bans and is expected to publish the outcome in the near future.[59] However, studies have found that just banning single-use plastics is often insufficient and does very little to reduce the total amount of waste without also banning single-use non-plastic alternatives.[60]
  • Extended Producer Responsibility (EPR) Scheme. In 2024 the UK Government is set to introduce an Extended Producer Responsibility (EPR) scheme for packaging. This will require producers to cover the costs of managing packaging once it becomes waste and producers will pay more for less sustainable packaging, incentivising packaging that uses less material and is easier to recycle. Defra has finished consulting on the design of the EPR scheme and a full Government response is expected to be published in 2022.[61]
  • Electronic waste tracking. The Government’s flagship Environment Act 2021 will allow for the introduction of mandatory electronic waste tracking to begin between 2023 and 2024. The policy is aimed at collecting data to better understand how waste is processed and increase compliance by businesses.[62] Currently, the Government is deciding between two waste tracking systems: Anthesis and Topolytics. Anthesis relies on workers within the waste management system scanning QR codes on waste consignments and uploading the identity of the consignments to their database. Should waste go missing at any point, it can be traced back to when it was last scanned. Topolytics gathers data through multiple different sources including electronic invoices, weighbridges at refuse stations, bin weighing systems, vehicle tracking systems such as GPS, and smart labelling systems. The latter works by using printable radio frequency identification (RFID) tags which can be scanned. Topolytics then uses a tracking system built from all different data sources to produce a waste map showing where waste has been and will go. This data allows authorities to pinpoint where waste goes missing at any stage. The type of system to be adopted and its implementation date is yet to be confirmed.

Punishments

  • Fixed Penalty Notices (FPNs). Dropping litter is a criminal offence under Section 87(1) of the EPA 1990 in England and Wales. Litterers could face a fine of up to £2,500 if prosecuted in court.[63] More commonly issued to the litterer is a FPN, issued by local authorities or the police.[64] As mentioned previously, FPNs are set by the local authority and range from a minimum of £65 to a maximum of £150[65]. If litter is thrown from a vehicle, the owner of the vehicle can be fined, irrespective of whether they committed the offence themselves. The rationale is for FPNs to deter people from littering. However, many organisations, including Bright Blue, believe that a maximum FPN of £150 is inadequate to deter litterers from offending and have called for FPNs to be set at a much higher level[66]. Furthermore, very few local authorities have actually been enforcing the law – of those who responded to a relatively recent Freedom of Information (FOI) request, 56% of local authorities issued less than one FPN per week and 16% issued none at all – thereby undermining the efficacy of FPNs as a deterrent for littering.[67] A report by Keep Britain Tidy found that the majority of people who had been issued an FPN had altered their behaviour in the short term but it did not change their attitudes in the long term .[68]
  • Community Protection Notices (CPNs). CPNs, described earlier, are designed to deal with ongoing nuisances which affect communities’ quality of life. They may be used to tackle littering on specific premises, whether it is private or commercial. Before local authorities can issue a CPN, they must first issue a written warning to the individual or organisation undertaking the anti-social behaviour. Failure to comply with a CPN can result in a fine of up to £2,500 for individuals and up to £20,000 for business. Additionally, the magistrates court can order forfeiture and destruction of any item used in the commission of the offence[69].
  • Prosecution for fly-tipping. If found guilty of fly-tipping, individuals can be prosecuted with consequences ranging from unlimited fines and seizure of the vehicle used to commit the offence to imprisonment. Additionally, households can be fined up to £400 if they pass their waste to an unlicensed waste carrier which is subsequently fly-tipped. As Chart 1 showed earlier, the total number of fly-tipping incidents between 2018-19 and 2020-21 reported to local authorities increased by 18% from approximately 957,000 to 1,134,000. During the same time, the total number of actions taken against the offences decreased by 9% from nearly 501,000 actions in 2018-19 to 456,000 actions in 2020-2021.[70] Both fixed penalty notices and prosecutions decreased by approximately 40% and 25% during these years.[71]

Behavioural

  • Litter innovation fund. Defra and the Department for Levelling Up, Housing and Communities (LUHC) set aside £450,000 for two years from 2018 to provide match funding grants of up to £10,000 for local authorities and communities to come up with creative solutions for tackling litter. For example, in 2019, Keep Britain Tidy received a grant of £9,900 to pilot a ‘reflective litter’ campaign across the City of London.[72] It involved strategically placing mirrors in areas where people often intentionally placed litter, rather than carelessly discarding it, so that those who litter would then see themselves carrying out an act of littering. The mirrors were inscribed with text slogans such as “Mirror, mirror on the wall, litter reflects badly on us all”. Monitoring of the three sites where the pilot was carried out revealed a 19.5% reduction in litter.[73] Another example was £10,000 granted to Medway Council to deliver interventions to reduce littering at Chatham Waterfront Bus Station. They nudged people to dispose of their litter properly through interventions such as having a cigarette butt disposal bin which allow smokers to place their butts in a particular bin. They also painted footsteps on the pavement which led to a rubbish and recycling bin, encouraging people to use the receptacles. The interventions delivered a 71% improvement in the public’s perception of cleanliness of the bus station.[74]

Incentives

  • Deposit Return Scheme (DRS). The Government is set to introduce a Deposit Return Scheme (DRS), where consumers will be charged a deposit on drinks containers that are refunded upon the drink container being deposited in designated recycling bins. The scheme will be run by a new body, the Deposit Management Organisation (DMO), and is designed in such a way as to provide a financial incentive for consumers to dispose of their containers in an environmentally sustainable way as opposed to littering or disposing of the containers in a regular bin to be sent to landfill.[75] Defra has finished consulting on the design of the DRS and expects to publish a full response in 2022, outlining key policy decisions, such as what rate the deposit charge will be set at, who is responsible for collecting the returns and how widely the scheme will apply for example, the different types of items included and their sizes.
  • Free Waste Disposal: In April 2022, the Government announced plans to remove the ability for local authorities to charge for the removal of DIY waste from households including plasterboards, bricks, and bath units. The Government did in fact ban charges on local residents disposing of household rubbish at household waste centres in 2015, but now guidance has made clear that this includes DIY household waste. Around a third of local authorities still charged for certain types of DIY waste prior to the most recent announcement. The announced change in regulation could save households up to £10 for each individual item being disposed of and removes a barrier to the legal disposal of DIY waste: incentivising responsible disposal and reducing the likelihood of DIY waste fly-tipping.[76]

Educational

  • National anti-litter campaign. The ‘Keep it. Bin it.’ campaign, jointly led by Defra and Keep Britain Tidy, has reached 3.3 million 16 to 24 year olds, aiming to challenge public perceptions about whether it is acceptable to litter.[77] The campaign includes videos with anti-littering messaging, such as showing the impact it has on animals, which are displayed at various locations across the country, including online, in cinemas’ pre-show adverts, at Network Rail stations and digital billboards at motorway service stations.[78] It was launched in November 2018 and has been backed by commercial partners, including McDonalds, Greggs, PepsiCo UK, Network Rail, and others.[79] Historically, other anti-littering campaigns have been very effective both within the UK and internationally. The Love Essex campaign combined education with enforcement warnings by putting up posters on billboards and buses, and messages on fast food packaging, which highlighted the risk of a fine for littering. Additionally, there were regular ‘litter-picks’ with local businesses to showcase the extent of the problem. In its third year, from August to October 2016, the campaign reported a 41% reduction in litter. The Don’t Mess With Texas campaign was launched in 1985 by the Texas Department of Transportation and for the last thirty years has aimed to teach Texans the true cost of littering. Its billboard, radio, and TV adverts contain local and national celebrities who highlight the difference a single person can make by disposing of their litter responsibly and show how much litter cleanup costs the state.[80] Since 2009, the campaign has shown a 34% reduction in visible roadside litter.[81]

Figure 1. The leading UK policy approaches and measures to fly-tipping and littering

Littering policies overseas

Elsewhere around the world, cities and countries are kept clean thanks to unique and additional policies beyond those which have been enacted in England. Here, we focus on examples of effective regulatory, punishment, behavioural, incentives, and educational policies from different countries.

Regulatory

European countries such as Malta, Ireland, Portugal and Czechia have recently introduced ‘smart bins’ to tackle overflowing receptacles in public areas.[82] The bins are attached with solar panels which power a small compactor to crush waste, thereby increasing capacity, decreasing the likelihood of overflowing receptacles, and reducing the frequency of waste collection by 85%.[83]

The bins are connected to an app which can be accessed by both city management authorities and citizens. City management can monitor the bins which are nearing capacity and target them specifically for waste collection, increasing the efficiency of rubbish truck trips. Similarly, citizens can also access data on waste collection and locate nearby empty litter and recycling bins.

Malta saw an increased recycling rate of 51% since the bin’s introduction and the central district in Prague is expected to make over £10,000 in savings a year.[84][85]

Punishments

Although punishments for fly-tipping and littering are common across the world, some are notably stricter than those in force in England. Singapore, widely regarded as one of the cleanest countries in the world, has a set of strict laws to keep its streets clean[86]. Litterers caught dropping small items such as cigarette butts or wrappers face a fine of S$300 (£180) for their first offence and subsequent offences attract increasingly higher fines of up to £10,000 for the third conviction.[87] For larger items that are littered, such as drinking vessels, the litterers are required to appear before the courts and carry out a Corrective Work Order, a form of community service where offenders must wear high visibility jackets which identify them as litterers and pick up litter.[88] Additionally, plain clothed officers enforce these laws, making them difficult to evade and over 3,000 surveillance cameras have been installed to catch litterers since 2012.[89][90] High-rise littering, where litter is thrown out of the windows of high rise apartments, has even stricter penalties, with first-time offenders facing a fine of up to S$2,000 (£1200).[91] Due to the significantly higher fines, there are less repeat high-rise littering offenders compared to general littering offenders.[92]

In addition, chewing gum is banned in Singapore. Its importation into the country is illegal for both commercial purposes or personal use.[93] If people are caught improperly disposing of chewing gum or carrying large quantities of it, they are fined S$1,000 (£600) for their first offence with increased fines for subsequent offences.[94] This ban is widely regarded as effective, significantly reducing the amount of gum stuck to sidewalks, making the streets easier to clean.[95]

Behavioural

Denmark’s capital Copenhagen ran a campaign called ‘Pure Love’ between 2012 and 2015, which encouraged residents to keep their city clean.[96] Measures included making bins bright green so they are easily identifiable, painting green footsteps on the pavement leading towards bins, and displaying heart-shaped symbols across the city with messages to reinforce the campaign.

An evaluation indicated an increase in awareness about cleanliness.[97] As a result of the campaign, Copenhagen was able to claim the title of being the cleanest city in Europe.[98]

Incentives

In Australia, the Sustainable Communities Tidy Towns Awards, given out by Keep Australia Beautiful, rewards projects and initiatives with a focus on environmental sustainability and resource management.[99] The awards include the category ‘Dame Phyllis Frost Litter Prevention’, which directly awards communities for successful litter reduction.[100] Although it is difficult to measure the success of running competitions for reducing littering and fly-tipping, the award encourages communities to keep their local area clean and increases awareness of community-led environmental action.

Educational

Sustainable Coastlines, a charity funded by the Ministry for the Environment, leads New Zealand’s ‘Litter Intelligence Programme’. The programme is built on standardised beach litter monitoring, which is New Zealand’s adaptation of the United Nations Environment Programme/Intergovernmental Oceanographic Commission methodology. [101]

This programme has two main components. The first is where each school adopts a beach in their neighbourhood. The charity provides professional development training to teachers, and students are trained on how to collect data on marine litter to identify local issues in their community and tackle them. Through the programme, students are provided with training, equipment and technology to become ‘Citizen Scientists.’[102]

After successful completion of the first component, the second component integrates Citizen Scientists within a national network of monitoring groups. Schools are allowed to contribute their data to a national litter database which is used to track littering trends in the country as well as monitor and evaluate interventions to curb littering.

The success of this programme is reflected in the high quality of the database which is being used to inform government policies such as tracking plastics and single use plastic products. The data has also been used in official government reports.[103]

Recommendations 

In the past, Bright Blue has proposed a number of policy recommendations to reduce fly-tipping and littering. These include: higher fines through FPNs for littering; ring-fencing revenue from FPNs for local environmental purposes; and totally waiving the costs for DIY waste disposal at household waste centres, a policy which was adopted by the Government in April 2022.[104]

Here we recommend new policies, based on the different types of policy approaches and from adapting examples overseas. The list of policies is not exhaustive; other organisations have proposed credible ideas which the Government should seriously consider. And there is no one single type of policy that will stop littering and fly-tipping. Instead a blend of approaches opens the possibility of finding and executing the most effective interventions to reduce both littering and fly-tipping.

The policies we recommend are guided by four key principles:

  • Fiscally responsible. Policies must be fiscally realistic and not place too great a demand on public money.
  • Be led by evidence. Policy suggestions should be supported by evidence of efficacy from either domestic trials or overseas implementation where possible.
  • Politically realistic. Suggestions should be realistic and not significantly change the workload of any government organisation or department.
  • Publicly acceptable. Policies should be likely to have the support of the majority of the public and not be too burdensome or restrictive on individuals.

Regulatory

Recommendation one: Task the Office of Environmental Protection with inspecting local authorities to ensure they are enforcing the law on litter and mandate the use of third-party enforcement services when they fail to do so.

Fines for littering – notably FPNs – could be a powerful tool to dissuade people from littering. However, many local authorities are failing to enforce the law on litter, or are doing so very lightly.[105] As mentioned previously, when local authorities were questioned via a Freedom of Information request about how many FPNs they had issued on a weekly basis, 56% of those who responded had issued less than one FPN per week and 16% issued none at all. If FPNs are not being issued, it hinders their efficacy as a deterrent for littering.

Currently, there are no official inspections into whether local authorities are enforcing the law on litter, nor are there repercussions for failing to do so. The Office of Environmental Protection (OEP), the new independent regulator designed to hold government and other public bodies to account on environmental protection, should be tasked with inspecting local authorities to ensure they are applying the law on litter. Where they are failing to do so, the OEP should mandate the use of third-party enforcement services to apply the law on litter within a local authority’s area.

Third-party enforcement services, usually private companies, are already used by some local authorities in England, such as Barnet London Borough Council and Bristol City Council. These third-party enforcement services are given authority to issue FPNs to those who litter by local authorities.  The use of such third-party enforcement services can be cost-effective for local authorities as they can generate revenue from the fines they issue. This also incentivises third-party services to actively enforce the law on littering and issue FPNs.

In 2018, the 73 local authorities who employed private, third-party enforcement services to issue FPNs issued an average of 2,940 fines each per year.[106] By comparison, the 230 local authorities who did not employ third-party enforcement services to issue FPNs issued an average of 157 each per year.[107]

Recommendation two: Update National Highways’ Key Performance Indicators to include litter, with an accompanying ambitious target for reducing it.

Littered verges along motorways remain a common sight for motorists in England. National Highways are responsible for keeping the motorways and strategic roads under their management free of litter. Attempts by National Highways to outsource this responsibility to third party contractors have been unsuccessful, as the earlier example of Connect Plus Ltd attests to.

National Highways’ Key Performance Indicators (KPIs) focus on the activities and outcomes which are most important to the organisation, broken down into several different categories. One category is ‘Being environmentally responsible’, where KPIs include noise reduction, no loss of biodiversity, air quality targets, and a reduction in carbon emissions, but with no mention of litter. Instead, litter is mentioned as a Performance Indicator,[108] but unlike KPIs, Performance Indicators are not seen as a critical measure which must be achieved and generally do not have targets.

National Highways should establish litter as a KPI. This would ensure that litter is treated as a critical measure which must be prevented, thereby embedding it within the strategic direction of National Highways. Furthermore, it should be accompanied by an ambitious litter reduction target for England’s motorway verges.

Alongside keeping motorway verges clear of litter, this would ensure that breaching contracts is taken more seriously. The contracts which have failed to deliver, such as Connect Plus Ltd, would be deemed intolerable and therefore likely to be negotiated more effectively in the future, such as including penalty clauses for failure to deliver.

Punishments

Recommendation three: Introduce imprisonment as a minimum sentence for those fly-tipping asbestos.

Currently, those caught fly-tipping face penalties ranging from unlimited fines and seizure of the vehicle used to commit the offence through to imprisonment, irrespective of the material being fly-tipped. Given the strong link between asbestos and mesothelioma – a form of cancer with an extremely high mortality rate – those caught fly-tipping asbestos should face imprisonment as a minimum sentence.[109]

Behavioural

Recommendation four: Defra should re-establish the Litter Innovation Fund on a long-term basis with annual funding grants.

The Litter Innovation Fund ran for two years from 2018 to 2019 and gave £450,000 worth of funding to various charities and organisations to trial novel anti-littering methods, some of which have been described earlier.[110] Defra should re-create the fund on a long-term basis with new grants available annually for local authorities and other third party organisations for initiatives to effect positive behavioural change around littering.

While there is no analysis for the overarching efficacy of the Littering Innovation Fund in reducing litter, specific projects that were funded from it such as Keep Britain Tidy’s reflective litter campaign and Medway Council’s cigarette butt bin scheme have proven efficacy.[111][112]

After the Litter Innovation Fund has been evaluated to demonstrate efficacy and value for money, it should be committed to on a long-term basis with local authorities and third parties allowed to bid for grants annually. This policy would encourage and assist local authorities in meeting their local littering reduction ambitions and encourage the development of new ideas to reduce littering behaviour.

Educational

Recommendation five: Establish a Litter Intelligence Programme within the NCS so young people can become UK ‘Citizen Scientists’

The National Citizen Service (NCS) is a government-sponsored voluntary initiative for 16-17 year olds where they engage with a range of extracurricular activities that include outdoor team-building exercises, independent living, and social action projects. Currently, the scheme offers placements during school holidays in spring, summer and autumn.[113] In a previous report, Distant Neighbours, Bright Blue recommended that all state school students should participate in at least one week of NCS during term time in Year 9 or Year 10.[114]

During the second week of the scheme the children “design and implement a social action project which will have a long-lasting impact in the local community.”[115] While litter collection is already an option, the NCS should create a more formalised Litter Intelligence Programme mimicking that of New Zealand’s during the second week of the programme for student groups who choose litter collection as their social action.

The groups of students who choose to participate in this programme route in the NCS will be given a local area to adopt and then trained on how to collect data on litter. Once students have completed this one week course they can become labelled as Citizen Scientists or equivalent based on the level of training they received. Additionally, the data collection aspect of the training can be put on both their CVs, university applications, and if the scheme is successful form an additional source of litter data for national analysis.

Conclusion

Fly-tipping and littering continues to cause economic, environmental and social damage to communities across the country. With fly-tipping incidents rising over the past three years and reports of littering increasing, it is clear that public policy needs to do more in order to tackle this serious problem.

The policy recommendations above, or ones proposed by Bright Blue previously, are not exhaustive and will not end fly-tipping and littering. But by acting on these recommendations, government can play its part in reducing the level of fly-tipping and littering, creating a robust policy framework upon which to build on in the future. 

Authors

Patrick Hall, Rebecca Foster, Joshua Marks and Shrishti Kajaria

Acknowledgments

This report has been made possible with the generous support of the John Ellerman Foundation. The views expressed in this publication do not necessarily reflect the views of the sponsor. We would like to thank Sam Hall and Kitty Thompson for peer reviewing this report. We would also like to thank Ryan Shorthouse for his editing and feedback.

Footnotes

[1] Patrick Hall, “Nature positive? Public attitudes towards the natural environment”, Bright Blue, http://www.brightblue.org.uk/wp-content/uploads/2021/07/Nature-positive.pdf (2021), 33.
[2] Ibid,76.
[3] Patrick Hall and William Nicolle, “Global green giant? A policy story”, Bright Blue, http://brightblue.org.uk/wp-content/uploads/2020/02/Global-green-giant-a-policy-story.pdf (2020), 29-30.
[4] Bright Blue, “Littering petition”, http://green.brightblue.org.uk/littering-petition (2021).
[5] GOV UK, “The Controlled Waste Regulations 1992”, https://www.legislation.gov.uk/uksi/1992/588/contents/made (1992).
[6] Louise Smith, “Fly-tipping – the illegal dumping of waste”, House of Commons Library, https://commonslibrary.parliament.uk/research-briefings/sn05672/ (2021).
[7] Sara Priestley, “Litter: key trends, policy and legislation”, House of Commons Library, https://commonslibrary.parliament.uk/research-briefings/sn06984/ (2017).
[8] United Nations Environment Programme, “Plastic planet: How tiny plastic particles are polluting our soil”, https://www.unep.org/news-and-stories/story/plastic-planet-how-tiny-plastic-particles-are-polluting-our-soil#:~:text=Chlorinated%20plastic%20can%20release%20harmful,species%20that%20drink%20the%20water l (2018).
[9] Ibid.
[10] RSPCA, “How littering affects animals”, https://www.rspca.org.uk/adviceandwelfare/litter (2021).
[11] Macquarie University, “It’s not just fish, plastic pollution harms the bacteria that help us breathe”, https://www.eurekalert.org/pub_releases/2019-05/mu-inj051219.php (2019).
[12] Annie Gouk, “The true cost of litter and fly-tipping in England”, https://www.inyourarea.co.uk/news/the-true-cost-of-litter-and-fly-tipping-in-england/ (2020).
[13] Estimates for clearance costs of other sizes of fly-tipping are unavailable.
[14] Department for Environment, Food & Rural Affairs, “Fly-tipping and littering statistics for England, 2020 to 2021”, https://www.gov.uk/government/statistics/fly-tipping-in-england/fly-tipping-statistics-for-england-2020-to-2021 (2021).
[15] Keep Britain Tidy, “How clean is England? The Local Environmental Quality Survey of England 2014/15”, https://www.keepbritaintidy.org/sites/default/files/resources/KBT_How_Clean_Is_England_LEQSE_Report_2015.pdf (2015), 36.
[16] British Pest Control Association, “PestAware the pest control blog from BPCA” https://bpca.org.uk/Pest-Aware/pest-awareness-week-kicks-off-with-war-on-litter-to-tackle-rodent-numbers/194769 (2018).
[17] Zero Waste Scotland, “Litter and flytipping – the costs and the consequences” https://www.zerowastescotland.org.uk/litter-flytipping/impacts (2022)
[18] Gov.uk, “Levelling Up the United Kingdom”, https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/1052706/Levelling_Up_WP_HRES.pdf (2022)
[19] Fiona Harvey, “Fly-tipping in England increases during Covid pandemic”, The Guardian,  https://www.theguardian.com/environment/2021/dec/08/fly-tipping-in-england-increases-during-covid-pandemic (2021)
[20] Figures are presented by tax year – e.g. 2019-20 refers to the period April 2019 to March 2020. Due to methodological changes, data from 2018-19 onwards is not comparable with earlier years.
21] ChronicleLive, “Incidents of fly-tipping soared in the North East during the pandemic”, https://www.chroniclelive.co.uk/news/north-east-news/flytipping-soar-north-east-pandemic-22876153 (2022).
[22] ‘Other unidentifiable’ was the most prevalent form of fly-tipped waste after household waste, but cannot be categorised.
[23] Keep Britain Tidy, “Littering Monitoring” https://www.keepbritaintidy.org/sites/default/files/resource/KBT17_Policy_Position_Litter_Monitoring.pdf (2016), 1-2.
[24] Keep Britain Tidy, “Litter in England: The local environmental quality survey of England 2019/20”, https://www.keepbritaintidy.org/sites/default/files/resource/National%20Litter%20Survey%20How%20Clean%20is%20England%20Leaflet%202019%202020.pdf (2020).
[25] Alistair MacQueen, “Britain in midst of ‘litter crisis’ according to latest data”, iNewshttps://inews.co.uk/news/britain-in-litter-crisis-1055667, 2021.
[26] Keep Britain Tidy, “Litter in England: The local environmental quality survey of England 2019/20”, https://www.keepbritaintidy.org/sites/default/files/resource/National%20Litter%20Survey%20How%20Clean%20is%20England%20Leaflet%202019%202020.pdf (2020).
[27] Keep Britain Tidy, “Littering in England: the local environmental quality survey of England”, https://www.keepbritaintidy.org/sites/default/files/resource/National%20Litter%20Survey%20201718_0.pdf (2017/18), 1-7.
[28] Department for Environment, Food & Rural Affairs, “Government explores next steps to clean up tobacco litter in England”, https://www.gov.uk/government/news/government-explores-next-steps-to-clean-up-tobacco-litter-in-england (2021)
[29] Clean Up Britain and DecTec, “Cigarette butt littering research: report summary” (2021), 3-4.
[30] Ibid,13.
[31] Ibid.
[32] Campaign to Protect Rural England, “Three in four people report rise in PPE litter since coronavirus”, https://www.cpre.org.uk/about-us/cpre-media/rise-in-ppe-litter-since-coronavirus/ (2020).
[33] UK data based on unpublished Savanta ComRes polling commissioned by Bright Blue.
[34] Ibid., 17-32.
[35] Paul Bonarrigo et al., “Using Behaviour-Change Strategies to Reduce Littering in Lambeth” https://cpb-us-w2.wpmucdn.com/wp.wpi.edu/dist/2/96/files/2020/03/Lambeth-Final-Presentation.pdf (2020), 7-8.
[36] Social Engine, “Reducing littering in the New Forest: A behavioural insight project”
https://local.gov.uk/sites/default/files/documents/Final%20Report%20050121.pdf (2020), 2-3.
[37] Ibid., 37.
[38] Conserve Energy Future, “What is Littering?” https://www.conserve-energy-future.com/causes-problems-solutions-littering.php (2021).
[39] Fenland District Council, “Bulky Waste”,  https://fenland.gov.uk/bulkywaste (2021).
[40] Medway Council, “Book a large or bulky item collection”, https://www.medway.gov.uk/info/200132/waste_and_recycling/71/book_a_large_or_bulky_item_collection (2022).
[41] Blackpool Council, “Collection of bulky items”, https://www.blackpool.gov.uk/Residents/Waste-and-recycling/Collection-of-bulky-items/Collection-of-bulky-items.aspx (2022).
[42] Buckinghamshire Council, “Full list of non-household waste charges”, https://www.buckscc.gov.uk/services/waste-and-recycling/household-recycling-centres/charges-for-non-household-waste/full-list-of-non-household-waste-charges/ (2021).
[43] West London Waste, “Charges at household re-use and recycling centres”, https://westlondonwaste.gov.uk/recycling-sites/hrrc-charges-your-questions-answered/ (2022).
[44] Patrick Hall and William Nicolle, “Global green giant? A policy story”, Bright Blue, http://brightblue.org.uk/wp-content/uploads/2020/02/Global-green-giant-a-policy-story.pdf (2020), 30
[45] Department for Business, Energy & Industrial Strategy, “Government announces new crackdown on fly-tipping”, https://www.gov.uk/government/news/government-announces-new-crackdown-on-fly-tipping (2022).
[46] Damian Carrington, “Littering unpunished by many councils in England and Wales”, The Guardian, 27 Aug, 2020.
[47] Alex Thomson, “The private company failing to tame epidemic of litter on our motorways,” Channel 4 News, https://www.channel4.com/news/the-private-company-failing-to-tame-epidemic-of-litter-on-our-motorways, 2020.
[48] National Audit Office, “PFI and PF2”, https://www.nao.org.uk/wp-content/uploads/2018/01/PFI-and-PF2.pdf (2018), 40.
[49] Street Litter Control Notices gave councils the power to require businesses or individuals to clear litter from around their premises and take steps to prevent future littering. On the other hand, Litter Abatement Notice enables the Principal litter authorities to take action where a duty body is not keeping its relevant land clear of litter and refuse. Courts can also fine the littering authority with £2,500 charges and subsequent increase of £125 for each day after conviction. Similarly, Principal litter authorities also have the power to issue Litter Clearing Notices when land in their area is littered and detrimental to the amenity of that area. This notice can be used for most types of land and is thus a tool to tackle little on private land which might be blown towards public areas. Authorities also have the right to clean the litter themselves and then recover the cost from the occupier or owner of the land.
[50]GOV UK, “Anti-social Behaviour, Crime and Policing Act 2014” https://www.legislation.gov.uk/ukpga/2014/12/contents/enacted (2014).
[51] GOV UK, “Environmental Protection Act 1990” https://www.legislation.gov.uk/ukpga/1990/43/section/33 (1990).
[52] Ibid.
[53] Insight Security, “Large=Scale Fly-Tipping On The Rise”, https://www.insight-security.com/large-scale-fly-tipping-on-the-rise (2020)
[54] Department for Environment, Food and Rural Affairs, “Carrier bags: why there’s a charge”, https://www.gov.uk/government/publications/single-use-plastic-carrier-bags-why-were-introducing-the-charge/carrier-bags-why-theres-a-5p-charge (2021).
[55] Ibid.
[56] Patrick Hall and William Nicolle, “Global green giant? A policy story”, Bright Blue, http://brightblue.org.uk/wp-content/uploads/2020/02/Global-green-giant-a-policy-story.pdf (2020), 27
[57] House of Common Library, “Single use plastic: How do bans differ across the UK and EU?”, https://commonslibrary.parliament.uk/single-use-plastic-how-do-bans-differ-across-the-uk-and-eu/ (2022).
[58] Department for Environment, Food & Rural Affairs, “Straws, cotton buds and drink stirrers ban: rules for businesses in England”, https://www.gov.uk/guidance/straws-cotton-buds-and-drink-stirrers-ban-rules-for-businesses-in-england (2020).
[59] Department for Environment, Food and Rural Affairs, “Consultation on proposals to ban commonly littered single-use plastic items in England”, https://consult.defra.gov.uk/environmental-quality/consultation-on-proposals-to-ban-commonly-littered/  (2021).
[60] Timo Herberz 1, Claire Y. Barlow, and Matthias Finkbeiner, “Sustainability Assessment of a Single-Use Plastics Ban”, https://d-nb.info/1222099179/34 (2020).
[61] Department for Environment, Food and Rural Affairs, “Packaging and packaging waste: introducing Extended Producer Responsibility”, https://www.gov.uk/government/consultations/packaging-and-packaging-waste-introducing-extended-producer-responsibility (2022).
[62] Department for Environment, Food and Rural Affairs, “Mandatory digital waste tracking”, https://www.gov.uk/government/publications/digital-waste-tracking-service/mandatory-digital-waste-tracking (2022).
[63] Campaign to Protect Rural England, “What is litter?”, https://www.cpre.org.uk/what-we-care-about/better-places-to-live/cleaner-countryside/litter-and-the-law/what-is-litter/ (2020).
[64] Campaign to Protect Rural England, “Litter Law England and Wales”
https://www.cpre.org.uk/wp-content/uploads/2020/05/CPRE-Litter-Law-Report.pdf (2020), 4-5.
[65] Ibid.
[66]  Patrick Hall and William Nicolle, “Global green giant? A policy story”, Bright Blue, http://brightblue.org.uk/wp-content/uploads/2020/02/Global-green-giant-a-policy-story.pdf (2020), 29
[67] Carrington, “Littering unpunished by many councils in England and Wales”, The Guardian, 2020.
[68] Keep Britain Tidy, “The Effectiveness of Enforcement on Behaviour Change”, https://www.ipsos.com/sites/default/files/publication/1970-01/sri-manchester-effectivness-of-enforcement-kbt-2011.pdf (2011), 7-10.
[69] GOV UK, “Anti-Social Behaviour, Crime and Policing Act 2014”, https://www.legislation.gov.uk/ukpga/2014/12/notes/division/5/4 (2014).
[70] DEFRA, the official body responsible for collecting data on fly-tipping, changed its data collection methodology in 2018 due to which data from previous years is not comparable.
[71] GOV UK, “ENV24 – Fly Tipping Incidents And Actions Taken In England”, https://www.gov.uk/government/statistical-data-sets/env24-fly-tipping-incidents-and-actions-taken-in-england (2021).
[72]  Keep Britain Tidy, “Litter innovation fund (LIF)”, https://www.keepbritaintidy.org/sites/default/files/resources/KBT_260219_Reflective-Littering-Innovation_Defra-LIF.pdf (2019).
[73] Ibid.
[74] Medway Council, “Litter innovation fund (LIF)”, https://www.medway.gov.uk/download/downloads/id/4299/lif_final_report_final_jun19.pdf (2019).
[75] Biffa, “Deposit Return Scheme (DRS)”, https://www.biffa.co.uk/deposit-return-scheme (2022).
[76] Department for Environment, Food and Rural Affairs, “Government announces new crackdown on fly-tipping”, https://www.gov.uk/government/news/government-announces-new-crackdown-on-fly-tipping (2022).
[77] Oliver Nicholls, “Keep it, bin it”, Civil Service, https://civilservice.blog.gov.uk/2020/02/06/keep-it-bin-it-working-to-discourage-young-people-from-littering/ (2020).
[78]Keep Britain Tidy, “Keep It, Bin It”, https://www.keepbritaintidy.org/keep-it-bin-it (2021).
[79] Department for Environment, Food & Rural Affairs, “Devastating impact on nature highlighted in new campaign to fight litter”, https://www.gov.uk/government/news/devastating-impact-on-nature-highlighted-in-new-campaign-to-fight-litter (2018).
[80] Don’t Mess with Texas, “Don’t Mess with Texas – The Campaign”,  https://www.dontmesswithtexas.org/the-campaign/ (2022).
[81] Zero Waste Scotland, “Some of the Best Litter Prevention Campaigns from Around the World”, https://www.zerowastescotland.org.uk/litter-flytipping/top-campaigns.
[82] Aseniya Dimitrova, “Prague introduces smart bins to save energy and money”, The Mayor, https://www.themayor.eu/en/a/view/prague-introduces-smart-bins-to-save-energy-and-money-3527, (2021).
[83] Monika Dimitrova, “Smart bins reduce waste collection by up to 85%”, The Mayor, https://www.themayor.eu/en/a/view/smart-bins-reduce-waste-collection-by-up-to-85-1879 (2021).
[84]  Aseniya Dimitrova, “Malta uses Internet of Things technology to monitor smart bins”, The Mayor, https://www.themayor.eu/en/a/view/malta-uses-internet-of-things-technology-to-monitor-smart-bins-2827 (2021).
[85]  Ibid.
[86]  Alliance to End Plastic Waste, “The countries who have built a culture of cleanups”, https://endplasticwaste.org/en/our-stories/the-countries-who-have-built-a-culture-of-cleanups#:~:text=Singapore%20is%20known%20for%20having,punishments%20such%20as%20community%20cleaning (2021).
[87]  National Environment Agency, “Enforcement for littering offences increased by almost 22 per cent in 2018”, https://www.nea.gov.sg/media/news/news/index/enforcement-for-littering-offences-increased-by-almost-22-per-cent-in-2018 (2019).
[88] Djulia Montana De Veyra, “Singapore: laws to know before you go”, https://www.goabroad.com/articles/study-abroad/singapore-laws-to-know-before-you-go#:~:text=Littering,candy%20wrappers%20are%20fined%20%24300 (2021).
[89]  National Environment Agency, “Enforcement for littering offences increased by almost 22 per cent in 2018”, https://www.nea.gov.sg/media/news/news/index/enforcement-for-littering-offences-increased-by-almost-22-per-cent-in-2018 (2019).
[90] Alicia Tan, “Singapore has thousands of litterbug catching cameras”, Mashable (2016).
[91] Cheryl Lin, “More than 1,000 enforcement actions taken against high-rise litterbugs last year”, Channels News Asia, 2 February 2021.
[92] Ibid.
[93] Singapore Statutes Online, “Regulation of imports and exports act”, https://sso.agc.gov.sg/SL/272A-RG4 (1999).
[94] Djulia Montana De Veyra, “Singapore: laws to know before you go”, https://www.goabroad.com/articles/study-abroad/singapore-laws-to-know-before-you-go#:~:text=Littering,candy%20wrappers%20are%20fined%20%24300 (2021).
[95] Naren Kashyap and Mary Rani Thomas, “3-Rev7 in Singapore- Case Study Editor”, https://www.researchgate.net/publication/333446623_3-Rev7_in_Singapore-_Case_Study_Editor, (2019)
[96] Clean Europe Network, “Nudging: from Denmark with love”, https://cleaneuropenetwork.eu/en/blog/nudging-from-denmark-with-love/agf/, (2016).
[97] Ibid.
[98] Ibid.
[99] Keep Australia Beautiful is a non public body but is partnered with the Australian Government
[100] Keep Australia Beautiful, “Community Towns” https://kab.org.au/beechworth-crowned-australias-most-sustainable-community/ (2022).
[101] The Commonwealth, Clean Ocean Alliance “ Litter Intelligence Programme, New Zealand”, https://thecommonwealth.org/case-study/case-study-litter-intelligence-programme-new-zealand-going (2020).
[102] Ibid.
[103] Ibid.
[104] Patrick Hall and William Nicolle, “Global green giant? A policy story”, Bright Blue, http://brightblue.org.uk/wp-content/uploads/2020/02/Global-green-giant-a-policy-story.pdf (2020)
[105] Damian Carrington, “Littering unpunished by many councils in England and Wales”, The Guardian, 27 Aug, 2020.
[106] Manifesto Club, “Corruption of punishment: over 200,000 litter fines issued by private security guards in 2018”, https://manifestoclub.info/corruption-of-punishment-over-200000-litter-fines-issued-by-private-security-guards-in-2018/ (2019).
[107] Ibid.
[108] National Highways, “Highways England: Operational metrics manual”, https://nationalhighways.co.uk/media/5isknpuq/ris2-operational-metrics-manual-july-2021-1.pdf (2021).
[109] Cancer Research UK, “Risks and causes” https://www.cancerresearchuk.org/about-cancer/mesothelioma/risks-causes (2022).
[110] WRAP, “Litter Innovation Fund”, https://wrap.org.uk/what-we-do/our-services/grants-and-investments/litter-innovation-fund (2022).
[111] Keep Britain Tidy, “Litter innovation fund (LIF)”, https://www.keepbritaintidy.org/sites/default/files/resources/KBT_260219_Reflective-Littering-Innovation_Defra-LIF.pdf (2019).
[112] Medway Council, “Litter innovation fund (LIF)”, https://www.medway.gov.uk/download/downloads/id/4299/lif_final_report_final_jun19.pdf (2019).
[113] National Citizen Service, “Your questions answered”, https://wearencs.com/faqs (2022).
[114] Bright Blue, “Distant neighbours? Understanding and measuring social integration in England”, http://brightblue.org.uk/wp-content/uploads/2019/07/Distant_Neighbours_Final.pdf (2019).
[115] Bright Blue request for information from NCS support line.

Jonas Balkus: The removal of the banker’s bonus cap: potential impacts

By Centre Write, Economy & Finance, Politics

One of the main priorities of Chancellor Kwasi Kwarteng in the ‘mini Budget’ was to boost growth against the backdrop of a global recession. With the UK having the lowest level of investment among the G7 countries, one controversial way in which Kwarteng has attempted to boost it is through the removal of the banker’s bonus cap, which would, arguably, increase investment in London and keep it competitive with other global financial hubs.

The banker’s bonus cap was introduced in 2014 by the European Union, with immediate criticism from the UK government; then-Chancellor George Osborne argued it would have a ‘perverse’ effect on the economy. The intended effect was to stabilise the financial system by shifting employee pay from variable bonuses to fixed salaries and therefore shifting the priorities of banks from short-term gain to long-term investments and lessening risk-taking.

Yet, the impacts on the economy were not as significant as hoped; a report by the European Banking Authority suggests there has been ‘no real impact’ on institutions’ financial stability, while also noting that the percentage of high-earners (those who earn 1 million euros or more per financial year) at these institutions rose from 59% in 2013 to 87% in 2014. This trend suggests that the removal of bonus caps may even lead to a slight fall in fixed salaries for many bankers, especially as job losses and salary cuts are forecast this year. Yet the real effect for many in the financial sector will be minimal, as these falls will simply be offset by higher bonuses.

Perhaps the most certain impact will be the greater level of flexibility for banks when faced with economic downturns such as the current one. Banks will now be able to adapt to changing economic conditions by varying the levels of their bonuses, decreasing and increasing them dependent on revenue. With this reduction in fixed costs, some could argue that the cap being scrapped may even benefit those who are currently at risk of losing their jobs at banks— as banks could choose to lower their salaries rather than simply cut jobs. This situation is not ideal, and it has led some bankers to criticise the potential move, but a fall in salaries is slightly preferable to mass job losses.

A potential impact of the cap removal, touted by Kwarteng, is that it would make London a more attractive location for investment from financial companies. Contrary to predictions of a mass flight to Continental Europe by banks following Brexit, the majority of firms have stayed put. London continues to top global financial centre rankings and European centres such as Frankfurt are far from overtaking it. Rather, London should fear competition from Asia and US centres such as New York and Singapore, which have recently been outdoing the UK in attracting skills and talent. By deregulating bonuses, London could compete with US financial hubs and strengthen its current position. Similarly, as the cap removal would apply to all employees of UK-based banks, it could also help British businesses with extensive operations abroad, such as Barclays and HSBC.

Finally, a key concern repeatedly voiced is that the removal of the cap is something of a return to pre-2008 policies, when unregulated banking caused one of the biggest economic shocks of recent memory. The cap in and of itself did not improve financial stability, as reports have shown, and regardless, London’s bankers have remained highly paid. But it may cause issues in once again encouraging short-term risk taking over long-term stability, as some have suggested

The regulatory infrastructure, however, is very different now than to what it was in 2008. The defunct Financial Services Authority (FSA) has been replaced by the more specialised Financial Conduct Authority (FCA) and Prudential Regulation Authority (PRA), and the memory of the 2008 crisis still looms large in the eyes of policymakers and regulators alike. As long as financial regulatory services themselves are not weakened, and as long as the economy still recovers from the COVID-19 pandemic, the risk of a crisis such as what was seen in 2008 remains low.

Overall, the removal of the bankers’ cap, though it may be incredibly poorly timed, is not as destabilising or misguided as has been implied. Whether the policy will go far in injecting life back into an economy with rising interest rates and inflation and low growth, remains to be seen. It may help London’s financial institutions recover against the backdrop of the Russian invasion of Ukraine and the aftermath of the COVID pandemic, but the extent to which it would impact the wider economy, especially as a standalone policy, seems relatively small.

Jonas is currently undertaking work experience at Bright Blue. Views expressed in this article are those of the author, not necessarily those of Bright Blue. [Image: Tetyana Kovyrina]

Andrius Urbelis: The government must act to reform commonhold in England

By Centre Write, Energy & Environment, Housing & Homelessness, Politics, Towns & Devolution

In 2002 the government was presented with a once-in-a-century challenge. Most of the residential leases granted at the beginning of the previous century were expiring. To provide a potential solution to extending one’s lease, the Commonhold and Leasehold Reform Act 2002 was introduced along with a new form of ownership – commonhold.

Commonhold allows unit owners in multi-occupancy buildings, such as a block of flats, to be the owners of their units for an indefinite amount of time. This stands in sharp contrast to leasehold, where a tenant has only a temporary right to hold property and has to pay for extending one’s right to live in it. Essentially, leasehold is a two-party relationship between landlord and tenant, whereas commonhold ownership involves only one party that has a perpetual right to the property.

Although similar types of ownership successfully exist across Europe and the rest of the world, commonhold ownership failed to take off in the UK. As of now, only 20 properties in the country are owned as commonholds.

Apart from the failed Commonhold reform, the overall housing situation in the UK is grim. The housing crisis is arguably one of the principal medium-term problems Britain faces along with wealth inequality, the North-South divide and a warming climate. 

The nature of the problem has severe implications for the whole economy and the geographical distribution of inequalities. As a result, addressing housing inequalities is inseparable from the Conservative goal of levelling-up the economy.

The unequal regional dynamics can be illustrated by comparing house prices in greater south east England with the rest of the UK. For instance, in Chatham, between 2013 and 2018, total housing wealth increased by a total of £6.4 billion whereas in Sunderland, a city of similar size, it increased only by £600 million during the same period.

The reasons behind housing inequalities and shortages can be attributed to numerous factors. One of them is the restrictive planning system. Liz Truss has quite controversially highlighted it by stating that one million new homes have to be built on the Green Belt.

Addressing the housing crisis by allowing new developments to appear on the Green Belt seems more like treating the symptom but not the disease. It has limited capacity to solve systemic regional inequalities in the housing market and would only temporarily make the situation less pressing. 

Throughout this century house prices have gone up exponentially, especially in the past few years. Although slight correction is likely, as the cost-of-living bites and interest rates rise, the nominal drop in house prices does not mean that buying a home suddenly becomes a feasible option for everyone who needs it. 

Thus, the important thing that the Government has to keep in mind is how to solve the problem of commonhold reform without exacerbating the other problem of unaffordable housing. 

Reforming the current commonhold system cannot be ignored, as the existing framework does not allow flat-owners to be the owners of their flats. The fact that 93% of owner-occupied flats are owned through leasehold is a peculiarity of the UK property market, barely comparable to any other country in this regard. 

The Law Commission published three reports in 2020 on commonhold and leasehold reform and proposed quite drastic modifications to the current legislation. For instance, it proposes to change the requirement of unanimity when seeking to convert from leasehold to commonhold, and that the threshold for conversion would be lowered to 50% of leaseholders. Although there are questions around how to finance the conversion to commonhold when only half of the residents consent, and how democratic such processes would be, the other pertinent issue that is somewhat neglected in the Law Commission’s report is how large-scale conversion to commonhold will affect prices in the housing market. 

What is clear from the international evidence is that introducing commonhold-strata-condominium legislation can lead to the rapid redevelopment of certain city areas, a change of urban landscape and higher housing prices. This was the case in Vancouver, where the introduction of the Strata Titles Act (1966) led to the redevelopment of entire neighbourhoods, such as Fairview Slopes, where condominium towers now dominate the landscape. In Singapore, Land Titles Strata Act amendments in 1999 enabled the country to address its land scarcity problem, stimulate investment and create new housing units.

Nevertheless, in both jurisdictions commonhold legislation also had adverse consequences, such as the eviction of residents in Vancouver and skyrocketing housing prices in Singapore. When applied to the UK context, the regions that could be the most transformed by commonhold reform are the ones which have the largest concentration of leasehold properties. 

As a rule of thumb, leasehold ownership is most popular in densely populated and highly sought-after areas, such as London, where 51% of transactions are leasehold sales. If the 50% rule where only 50% of leaseholders have to consent to commonhold conversion is implemented, and large-scale conversion from leasehold to commonhold gathers pace, housing inequalities between London and more rural areas will widen. The government should reconsider the 50% threshold and recognize that moving away from leasehold to commonhold is not a solution in itself since issues around the taking care of common areas and administering the building will remain. 

Since 2017, the government has been taking the right steps to make sure that leasehold functions effectively and that leaseholders are protected from unfair ground rents. It has to continue to address unfair practices within the leasehold system, like distorted dispute resolution process, to keep both commonhold and leasehold on the table.  Making both ownership systems fully functional will enable leaseholders to have the freedom of choice to convert but should also minimise the negative repercussions that large-scale conversion could have on levelling-up and the affordability of housing. 

Andrius is currently undertaking work experience at Bright Blue. Views expressed in this article are those of the author, not necessarily those of Bright Blue. [Image: Tetyana Kovyrina]

Cllr Eleanor Cox: Overcoming the Great British Skills Crisis

By Centre Write, Education, Politics, Transport

Manufacturing was at the beating heart of the British economy and is at the centre of our long-term recovery from the pandemic. It is also a key part of Britain becoming more self-reliant in a challenging geopolitical climate and growing its GDP by improving exports. Rolls-Royce and GSK are great examples of British excellence – companies making significant contributions to local employment, investing in innovation, and helping UK exports.

The sector accounts for 10% of GDP and represents huge potential for growth, with the manufacturing trade body Make UK saying that “if manufacturing output as a share of UK GDP were to increase from 10% to 15% this year, that could result in an extra £142 billion to the UK economy.” That output is colossal. It is comparable to Hungary’s entire GDP and it is achievable with the right government policy, investment, innovation, and, critically, skilled staff to help the sector grow. But where have our skilled workers gone?

This article will explain how reform of the Apprenticeship Levy is critical to attracting a talented, diverse range of workers to fill job vacancies and drive business growth.

Manufacturing is a high-skill sector. As a result of this, manufacturing companies pay significantly higher wages than the national average. Yet despite attractive pay, job vacancies in 2022 remain high. They are at the highest they have been since records began, with the ONS reporting in August that there are 93,000 job vacancies in the sector. These vacancies matter because of their impact on inflation. Wages will increase if manufacturers cannot find enough skilled workers to keep their operations churning at maximum capacity meaning their input costs rise, which can, if supply and demand remains unchanged, cause price increases for consumers. 

Whilst we can look to global imports to keep the costs of goods competitive, labour scarcity is not just a UK issue, with a shortage of labour endemic globally. In Germany and the US, job vacancies have also reached an all-time high this year. With many job vacancies and a current UK unemployment figure of 1.3 million, you would expect that there was a surplus of workers available. This raises the question of why cannot manufacturing firms find enough skilled workers.

‘The Great Resignation’ began during the pandemic as a trend of people either changing careers or leaving the workplace entirely. Many workers took stock to reassess their lives, with an exodus of older workers from the labour market. Others chose to start up their own businesses, with the number of business start-ups registered on Companies House at an all-time high during the pandemic. More women than men have left the workplace post-pandemic, with many citing increasing childcare costs and the lack of availability as the reason.

The impact of the pandemic and Brexit on UK worker shortage are interlinked. One of their challenging after-effects on business has been a smaller UK labour market and, consequently, strong competition for skilled workers. Pre-pandemic manufacturing obtained 11% of its workers from the EU but Brexit made labour mobility from the EU more complicated and costly. A report by UK in a Changing Europe, Manufacturing After Brexit, highlights that “EU citizens wishing to work in the UK not only need to obtain a visa, but also to obtain recognition of their qualifications by the relevant UK regulator.” The International Monetary Fund reported in 2022 that there is “a mismatch between the types of jobs available and the willingness of people to fulfil them.”

Whilst the sector is adapting to attract talent, offering flexible working patterns, in-depth training, and educational opportunities, government help is also needed to attract workers back to work.

The government can help by nurturing our skills economy to aid our unemployed and economically inactive people in getting back into employment. Apprenticeships develop specialist skills and Make UK’s State of the Industry report revealed that “28% of manufacturers said that greater investment in apprenticeships would make a big difference to their ability to grow.”

The Government’s Apprenticeship Levy was introduced in April 2017 and was implemented to increase the level of employer investment in training and drive up the number of people accessing the workplace through apprenticeships. The Apprenticeship Levy is a tax paid by large companies at a rate of 0.5% of an employer’s annual pay bill. The levy funds raised are used to subsidise apprenticeship training for all employers. While the Government’s intention was there, the Levy has not increased the number of apprenticeships, with the number of manufacturing and engineering apprenticeships falling from 36,170 (pre-apprenticeship levy) in 2016/17 to 32,000 in 2020/21, and total apprenticeships falling from 494,900 in 2016/17 to 321,400 in 2020/21.

Manufacturing firms have fed back that levy fund application can be restrictive, not reflective of the true costs of apprenticeships, burdened with government red tape processes, and too short on time frame, with firms only having 24 months to spend their allocated levy funds before they expire. There is a compelling requirement for the process to be changed to reflect the full cost and time frame of training apprentices. This could be achieved by doubling the time companies have to spend their levy funds from 24 months to 48 months and reviewing levy funding band limits. Raising the band limits to reflect full training costs would act as a stronger incentive for companies to take on apprentices. 

Giving employers greater flexibility to apply levy funds to a wider curriculum of training would also ensure that the Levy works to cover bespoke training requirements. The CIPD (Chartered Institute of Personnel and Development) has called for it to be replaced by a “flexible training levy” which empowers businesses to have greater autonomy and spend levy funds on whatever training best meets the needs of their business. Some firms do not spend their levy allowances, meaning apprenticeship training funds are wasted. Increasing the amount of levy funds that larger businesses can transfer to smaller firms to pay for apprenticeships would help to tackle this problem. 

Rishi Sunak announced in his Spring 2022 Statement as Chancellor his intentions to review and consider the effectiveness of the scheme after acknowledging that “the current tax system may not be doing enough to incentivise businesses to invest in the right kinds of training.” With Liz Truss making strong commitments to the levelling up agenda, boosting productivity, and economic growth, it is likely she will look to review the scheme as the new Prime Minister.

The CIPD said in a report produced by the BBC in 2021 that, since the levy was introduced, apprenticeship numbers have fallen and fewer have gone to young people, with its CEO Peter Cheese saying that “On all key measures the apprenticeship levy has failed.” It is clear the Apprenticeship Levy needs urgent reform to reflect the actual training requirements that business needs.

Eleanor is currently Conservative Councillor in Lower Morden, London Borough of Merton. Views expressed in this article are those of the author, not necessarily those of Bright Blue. [Image: Pixabay]

William Miller: What should NATO’s approach be to the Russian-Ukraine conflict moving forward?

By Centre Write, Defence, Foreign, Politics

Despite all the sanctions that many NATO nations have imposed on Russia – including travel bans and asset freezes of individuals, bans on imports and exports of key Russian materials such as crude oil, bans on broadcasting of Russian media, a SWIFT ban which bans making or receiving international payments, and a ban on maritime transport – Vladimir Putin shows no indications that he will back down in the near future. As the Associated Press reported on July 8, Putin even made the following statement in a Kremlin Parliament meeting: “Everybody should know that largely speaking, we haven’t even yet started anything in earnest.”

‌ It appears that Putin simply doesn’t care about the toll sanctions are taking on the Russian economy, and frankly why would he? He isn’t suffering the consequences; instead, Russian citizens are. Putin is clearly determined to do whatever it takes to overwhelm Ukraine, and the economic weapons NATO is employing against Russia certainly will not stop him. The goal was for these sanctions to damage the Russian economy to the point where they would be forced into ceasing their invasion efforts in Ukraine. It certainly has done significant economic damage, but it is not making Putin second guess his decisions in Ukraine in the slightest. The fact that this has forced Russia into a debt default for the first time in over one hundred years according to NPR, yet Putin is completely disregarding it, is proof that the economic sanctions aren’t as effective as anticipated. So that then begs the question: how should NATO deal with this going forward? 

This is a very difficult question to address. Being too aggressive could lead to a third world war, but appeasing a ruthless dictator could be a horrible mistake, especially when considering what events in history have taught us. Are the United States and other NATO countries really going to allow Putin to expand the Russian empire and inflict massive amounts of damage upon innocent civilians even more so than he already has? Sitting on the sidelines as a power-hungry, anti-democratic dictator seizes control of a democratic nation completely goes against the values of the US and most NATO countries.

The Russian government is not particularly solicitous towards ensuring and protecting human rights, and that is just evident not only in their massacres of Ukrainian citizens, but also with their treatment of their own citizens. If Ukraine were to fall to Russia, the worldwide impact would put the future of the world into jeopardy. Russia would gain more power and influence, and this in turn would encourage the rise of other tyrannical governments. Since Putin grew up in the height of the Soviet Union, and served as a KGB officer, it is clear he has a desire to reinstate the areas that were once a part of the USSR; this means his invasions may not end with Ukraine. According to the Guardian and the Spectator, Countries such as Moldova, Lithuania, Slovakia, Latvia, Estonia, and Poland could all be potential targets if Russia were to overcome Ukraine. 

The bottom line is that the US and the rest of NATO need to do everything in their power to prevent this from happening. This doesn’t necessarily mean they need to join the war, but they certainly need to be more aggressive than economic sanctions and show Russia that they are willing to stand up against them especially in high stake situations such as this. The way this could be done is by giving Russia an ultimatum: if Russia chooses to continue its attacks after a given period of time, then the NATO countries will join the war. Disregarding nuclear weapons, Russia’s military is outmatched by the US’s military alone. Despite having around the same personnel, the level of military equipment the US possesses is considerably stronger than that of Russia. For reference, Russia spends $62.2 billion annually on its military, while the US spends $715 billion annually according to Forces. Additionally, the US’s Navy and Airforce is far stronger than that of Russia’s: the US has 11 aircraft carriers versus Russia’s 1, the US outnumbers Russia in Cruisers, Destroyers, and Frigates 113 to 31, the US has 416 drones while Russia has under 50, and the US has 1,574 aircrafts capable of combat compared to Russia’s 1,172. 

Additionally, if several other NATO countries would join the US and get involved, Putin would be a fool to not back down. Countries such as France, the United Kingdom, Germany, and Italy also exhibit strong military forces that together would likely intimidate Putin to the point where he would pull out of the invasion. The fear of Putin utilizing nuclear weapons is very common among NATO countries; it is a particular concern when it comes to confronting Russia in a military conflict. But Putin is well aware that any decision to fire nuclear power towards a NATO country would result in a similar response towards Russia. These nuclear threats from Russia are almost certainly bluffs. In reality, it would take a lot for Putin to come to this decision, as it is a decision that would harm him and Russia to an equal if not greater extent. There may be room for diplomacy, but with the conditions Putin initially laid out about what it would take to end this war, it seems unlikely that he would meet in the middle, especially if he felt he would win the war regardless. 

All in all, joining a war against Russia is not ideal. But, if all other options were exhausted, joining the war may have to be considered for the greater good; especially when a likely outcome of the ultimatum I mentioned previously would be Russia pulling out of the war prior to NATO countries physically getting involved.

William Miller is currently undertaking work experience at Bright Blue. Views expressed in this article are those of the author, not necessarily those of Bright Blue. [Image: Katie Godowski]

Graham Allen: The death of democracy?

By Centre Write, Politics

US President Joe Biden was right to say in his inauguration week and repeat after that the greatest political battle we have to confront is between autocracy and democracy. While it is fashionable in some UK circles to mock the current President, would a British political leader be able to pitch a vision as clearly and for once leave tomorrow’s short-term headlines aside?

This defining battle has been played out ever more intensely over recent years. This is now seen at its rawest and most violent where Putin’s autocracy meets the new democracy of Ukraine. It is not, however, limited to this most extreme example, but is finding form across the democratic world, from the USA to India and Hungary, and to all stations between; and increasingly in the UK.

The UK was once the consummate model of informal democracy. Now, hidden behind the face of a clown, our country and democracy has been threatened by an embarrassing rump, unrecognisable to traditional One Nation democrats. Boris Johnson’s ideology owes less to Churchill, Macmillan, and Major and is drawn more from Trump, McConnell, and Bannon. The required reading is not so much Disraeli’s Sybil, but Margaret Atwood’s The handmaid’s tale.

The anti-democratic right think it is cool to imitate their US brethren. The imports include a contempt for debate and deliberation, a cynicism about truth and honesty, and the fixing of the political process. These fixes range from making it harder for your opponent’s supporters to vote, to curbing their civil and personal rights, to using diversion and misinformation through a largely pliant media, to weakening or even intimidating independent referees from the Electoral Commission and the UK Supreme Court. This is not the knock-about of party politics but steps – indeed strides – towards autocracy. Repairing these deliberate rips in our democratic fabric is the equal and onerous responsibility of democrats of all political parties and persuasions.

Of course the best and easiest time to strengthen and maintain the habits of democracy is not when it is in crisis, but as part of a culture of constant maintenance and evolution. It should be done purely because it is the right thing to do. Instead, there have been few of us who, in better times for democracy, acted without complacency and elitism. This bordered on neglect by failing to gently and consistently renew our democracy when we had the chance. Some of the powerful and influential even had the temerity to mistake their own entitled elevation for our collective arrival at ‘the end of politics.’ This blissful social and Christian democratic nirvana did not need thoughtful and sustained improvement, but just the occasional dabbling to the inherited ‘Rolls Royce residual process.’ The opportunities and moments available to Blair, Brown, Clegg, and Cameron were spurned. We now have the consequences, which become harder to put right as the populist and autocratic genies are out of the bottle.

While the task is more difficult than it needed to have been, it still has to be tackled. At the heart of that is restoring the health of our democratic ideology, putting back the pieces, but also having the self-awareness to understand what we must do to improve democracy itself. The battle between democracy and autocracy is not merely about being content to criticise autocrats abroad, it is about remaking democracy at home in the UK, in the USA, and in every democracy on the planet.

Making a transcending UK democratic coalition and basing it on a solid and practical democratic culture is the greater good that unites democrats of all parties. If we are lucky enough to get another chance – and that is by no means a certainty – democrats must act together to renew the ideology and practice of democratic governance and make it fit for purpose. It is the key to enable the resolution of all our other questions, up to and including climate change. It is a coalition of democrats, including Conservatives, many of whom have already acted with great courage at high personal cost, that has to be put together now and in public, so as to lessen the impact of misrepresentation in the final days of a General Election campaign.

Central to that mission is to win back the trust of voters. Polling shows us that in many countries there is an increasing disdain for democracy when compared to strong and clear autocracy. There is an innovative way to strengthen the fabric of trust. That is to build on one of modern democracy’s few success stories: deliberative democracy.

Over 600 successful Citizens’ Assemblies have taken place in recent years. Here a balanced microcosm of a population, independently selected, facilitated, deliberated, and resolved some of our most difficult political problems from abortion in Ireland to nuclear waste in Australia. Democratic renewal and climate change are popular issues amenable to deliberation too. Such questions often defeat whipped and lobbied legislators, yet they too can become liberated by partnering the legitimate and non-partisan deliberations of the public.

Deliberative democracy can make an impact even if isolated in one country. However, President Biden once again set out a vision for global democratic renewal by creating the Summit for Democracy. We should support this institution, as it now steps up from bureaucracy and boxticking to some hard work on deliberative democracy and Citizens’ Assemblies. This could include a global What Works Centre on deliberation, or the Summit’s own year round global Citizens’ Assembly on democratic renewal, or even pitching an inspiring declaration to reunite our democratic system of government with its electors around the world, and much more.

British, and indeed global, democracy is not dead, but you and I as democrats have to choose urgently and with courage the path to renewal.

Graham Allen is Convener of The Citizens’ Convention on UK Democracy and was previously a Labour MP and Chair of the Parliamentary Select Committee on Political and Constitutional Reform from 2010 to 2015. This article first appeared in our Centre Write magazine State shifting? Views expressed in this article are those of the author, not necessarily those of Bright Blue. [Image: Heidi Fin]

Lee Marsons: We need to be cautious about Human Rights Act reform

By Centre Write, Law & Justice, Politics

In the 2019 general election manifesto, the government promised a programme of constitutional reform rebalancing the relationship between the judiciary, government and Parliament (p.48). It then established the Independent Human Rights Act Review (IHRAR) to assess the need to reform the Human Rights Act (HRA). This is an Act of Parliament which allows British judges to domestically enforce certain rights in the European Convention on Human Rights (ECHR). Put simply, British residents do not need to pursue cases in the European Court of Human Rights in Strasbourg to vindicate ECHR rights. Instead, cases can be heard and rights protected by British judges.

Led by a former Court of Appeal judge, IHRAR recommended modest reforms and concluded that the HRA was broadly working to “bring rights home”. After receiving these recommendations, the government consulted on much more significant reforms, and the briefing notes to the recent Queen’s Speech suggest that many of these will be adopted when the proposed new Bill of Rights is published soon.

The HRA has been instrumental in defending human rights as diverse as property rights, physical liberty, freedom of religion, freedom of expression and the presumption of innocence. It remains a key, and sometimes the only, reason for success in important cases where human rights have been subject to arbitrary and disproportionate state action. Equally, on matters such as assisted dying, foreign relations, public health, welfare benefits, and immigration, judges have been careful to respect the will of Parliament and the expertise of ministers.

In contrast to IHRAR, the evidence base for reform in the government’s consultation was not extensive. In general, the consultation relied on past trends in case law which have since been modified by the judges themselves; identifies problems that Parliament itself has already substantially resolved; and at times offers no empirical basis beyond one or two unrepresentative cases. 

In this context, it is worth highlighting some of the specific proposals and explaining why we should be cautious. Reform of the HRA should not be done casually or lightly. 

First is the introduction of a human rights permission stage, requiring claimants to prove that they have suffered “significant disadvantage” through the interference with their rights before pursuing a court case. This could lead to individuals being unable to pursue claims domestically which they could win at Strasbourg. 

Strasbourg also has a “significant disadvantage” threshold but with an exception where “respect for human rights…requires an examination of the application”. 

This contrasts with the government’s more stringent exception of “highly compelling reasons”, “exceptional circumstances” or “overriding public importance”. With this disparity, it is possible that cases will fall at the domestic level but go onto succeed at Strasbourg – that is, if the claimant even has the resources and energy to pursue their case that far. Prior to the HRA, on average a claimant waited five years and spent £30,000 before even getting to Strasbourg and, once there, with the current backlog, it can often take a year before the court begins work. We need to be alive to the risk of this dire situation returning, even for a small number of claimants.

This proposal could also reduce the influence that the British judiciary have over the eventual outcome of a case because they would have been required not to hear it and so would not be able to offer reasons which could then be considered by Strasbourg. Indeed, in important cases, British judges, especially in the UK Supreme Court, have been decisive in causing Strasbourg to change course following potentially problematic rulings.

A second proposal suggests abolishing the judicial power to invalidate (‘quash’) statutory instruments which violate human rights. Statutory instruments are a type of secondary legislation produced by ministers, normally not authorised in advance by Parliament. During the Covid lockdown periods, for instance, we were primarily governed via statutory instruments. 

An example of how this quashing power was used is a case in 2020 brought by the British Medical Association. The Health Secretary had produced a statutory instrument giving him the right to revoke an NHS pension where an NHS employee was charged with a criminal offence. There was no right of appeal and no automatic right to have the pension restored, even after acquittal. 

The Administrative Court declared this scheme to be a violation of the right to property, the right to a fair trial and the principle of non-discrimination. The judge quashed the statutory instrument so that this unilateral ministerial power was invalid and could not be used. If the government’s proposal is pursued, the BMA could not have received the powerful remedy that it did.  

In any event, this power to quash is used only very rarely. PLP research has demonstrated that of the 14 successful challenges to statutory instruments under the HRA between 2014 and 2021, the court quashed the instrument in just 4 cases.

A third proposal relates to section 3 of the HRA, which requires courts to interpret legislation “so far as it is possible to do so” to be compatible with human rights. This provision means that, for example, where a statute criminalises “grossly offensive” language, judges are able to give effect to that statute in a way that still respects freedom of expression.

By contrast, the government proposes to prevent courts using section 3 to make interpretations which are contrary to the ordinary meaning of a statute. Section 3 can be used to interpret legislation in a way that is contrary the ordinary meaning of words but, ordinarily, as research by JUSTICE indicates, courts take a cautious approach to the use of this power. In any event, Parliament remains sovereign and, if it believes that a court has gone wrong via a section 3 interpretation, it can reverse the case.

We need to proceed with caution. Reform in this important area should make use of the best available evidence, go no further than necessary to resolve problems, and be done in full awareness that disproportionate attempts to stop “bad cases” risk also stopping the good.

Lee is currently Research Fellow in Constitutional Reform at the Public Law Project. Views expressed in this article are those of the author, not necessarily those of Bright Blue. [Image: Gov.uk]

Michael Stephens: Is it over for the Tories in London?

By Centre Write, Media, Politics, Towns & Devolution

The May local election was not a happy one for southern Tories. With the notable exceptions of Croydon and Harrow, Conservative Councillors found themselves facing a backlash from voters which saw prized Councils such as Westminster, Wandsworth, and Barnet, fall to Labour for the first time in decades. In Richmond, which had 39 Tory Councillors in 2014, only one remains. Similar stories of woe were to be found across Kent, the South Coast and Wales. 

The traditional London Conservative strongholds in Wandsworth and Westminster collapsed is probably not all that surprising. For weeks worried Conservative pollsters announced that Partygate might spell the end for the Tories in Wandsworth, but Westminster falling only added insult to injury. The eight percent slide in the Tory vote across the parliamentary constituencies of Battersea, Putney, Wimbledon and Richmond Park in 2019, was an ominous warning which 2022’s results have only reconfirmed

So what is to be done? Firstly, Tories should not panic. Despite the bruising defeat that myself and hundreds of others suffered, I firmly believe that reports of the death of the London Tory might be greatly exaggerated. 

Much has been written of London’s changing demographics, primarily that stable middle-class communities of homeowners are being replaced by more diverse transient renters, which erodes the base upon which Conservatism naturally lies. True, homeowners are more naturally inclined to vote Conservative, and yes the Borough of Wandsworth now experiences a 20% annual turnover in registered voters. But wealthy suburbs like Putney and Balham are still filled with homeowners, many of whom are more than comfortable, and can absorb the recent uptick in the cost of living. Additionally local elections rarely see more than 40% turnout, and it is transient voters who are the least likely to vote in such elections. So, while this might partly explain Conservative woes it certainly does not account for why key Councils were lost. 

In my experience as the local candidate for 15 months in East Putney (a Wandsworth Tory stronghold where Labour gained a seat) it was clear that for many voters the Conservatives had lost both their moral authority to govern, and their reputation for sound financial management. Losing one pillar was damaging, but losing both proved fatal, and critically undermined the Local Conservative message of Low Council Tax as the bastion of decades of good governance. 

I come away from this election cycle feeling that the Conservatives were punished because core voters were left behind. Elections tend to focus voters’ minds on one or two key issues that really matter, and time and again it was clear that the Local Conservative message of Low Council Tax simply could not cut through to soft Conservatives and floating voters. 

Even more concerning was the Local Conservative message began to whither among the normally reliable base of Middle-Class white voters, and it was from these disenchanted Conservatives that the anger was most apparent: “You’ve lost us”, “I’m a Conservative but you deserve a good kicking”, “Not while you’ve got that man in charge”, are all memorable doorstep quotes that came my way in the final days. 

The sharp rise in split ballots across Conservative strongholds attests to this sense of anger and disillusionment. Council Elections can always throw up odd results owing to the number of candidates on the ballot, but in this instance the number of split ballots this time was quite unparalleled. Alienated from the Conservative Party by relentless scandals, and impending economic woes, many voters had nowhere to turn. Rather than swing hard to Labour, many simply ticked boxes for anyone that was not a Tory. The bleed of split votes proved to be too much across a number of important Tory Wards, proving Benjamin Franklin’s maxim right that eventually “a small leak will sink a great ship”.  Thus, the message was sent, the voters were unhappy and gave the Conservatives the “good kicking” that I was promised on the eve of the elections. 

With the kick having been administered it is now time to think about how the Conservative Party reconnects with its London voters and across the South more broadly. While some may argue that solid results in the North might mean the Tories simply abandon London to focus on lower income constituencies in the North, the Telegraph rightly notes that this will lead to almost certain defeat at the next general election. Boris might have had the force of personality to drag the party over the line back in 2019, but relying on the Prime Minister in today’s political climate looks an increasingly dangerous strategy.  

Reengaging the South requires a complex re-evaluation of policies past and present. The days of the “Cameroons” and their big society are well and truly behind us, and the financial woes induced by the pandemic mean that a low tax high growth economy so favoured by London’s middle classes is but a pipedream. To compound the problem increasing inflation means that interest rates will surely rise, increasing the cost of borrowing and with it the cost of mortgages that mean an even larger percentage of Southern voters under 40 are unlikely to be receptive to the Tory message. 

Red meat policies like sending asylum seekers to Rwanda or the levelling up agenda do not appeal to Southern voters, and especially not London voters. Rather concrete policies to tackle the cost of living crisis, and stabilise both the housing and rental market would go some way towards bringing back voters who do not wish to be paying half their monthly salary for cramped accommodation. If this can be done while reinjecting a little more integrity back into politics, then Southern voters might, just might forgive us in the years to come.

Michael is an associate fellow for Bright Blue. Views expressed in this article are those of the author, not necessarily those of Bright Blue. [Image: Peter Laskowski]

Sam Robinson and Ryan Shorthouse: A vision for tax reform in the 2020s

By Anvar Sarygulov, Centre Write, Economy & Finance, Energy & Environment, Politics

Summary

This report offers compelling principles and consequent policy ideas for an ambitious agenda of tax reform that tackles the leading economic, social and environmental challenges of the 2020s and beyond.

It is the final vision that flows from our multi-year project on tax reform, which has been advised by a high-profile cross-sector, cross-party commission.

The Government recently launched its 2022 Spring Statement Tax Plan, which has been described as the foundations of a future low tax economy. But we believe the Chancellor can be and should be much more ambitious with tax reform during this Parliament.

Thus, to build on this Government’s ongoing thinking about tax in the years ahead, we propose nine key principles that should underpin an ambitious programme of tax reform, supported by policy recommendations to achieve them.

  1. Supports effort, enterprise and entrepreneurialism
  2. Fairly taxes income derived from luck, rent-seeking and externalities
  3. Treats similar activities by individuals and institutions more equally
  4. Incentivises investment to facilitate long-term economic growth
  5. Ensures sound public finances
  6. Protects and enhances the livelihoods of the poorest
  7. Is easier to understand and more difficult to avoid
  8. Supports the transition to a net-zero economy
  9. Helps to address regional imbalances, thereby levelling up the country

This final paper includes only policies that derive directly from reports we commissioned for our project on propertycarbonwork and wealth, and business taxation.

Introduction

The past two years have been tumultuous. The world has been rocked by multiple major crises, from the COVID-19 pandemic to the war in Eastern Europe. Divisions in and disruptions to our society and economy have been exacerbated.

The UK economy is now in a fragile state. There is record, rising inflation which is eroding livelihoods.[1] Long-term growth is forecast to remain modest at best.[2] Net public debt and the structural budget deficit are at historic highs, thanks to record levels of public spending necessary to combat the consequences of Coronavirus.[3] The sustainability of the UK’s fiscal position is vulnerable to rising interest rates.

The UK Government has, rightly, committed to three preeminent objectives in the years ahead: economic, social, and environmental. Boosting growth and living standards after the pandemic. Levelling up the country to improve opportunities and outcomes for those living in so-called ‘left-behind’ communities, thereby reducing the geographic inequality which has been particularly pronounced in the UK for too long. And, finally, deeply decarbonising across economic sectors so the UK achieves net zero greenhouse gas emissions by 2050, so as to avoid the most extreme and expensive consequences of rapid climate change.

Despite the uncertain economic and fiscal outlook after the pandemic, this current Conservative Government has committed to increased levels of public spending to achieve these three major objectives. Unusually for a Conservative Government, there is a high degree of tolerance for ongoing historically high levels of taxation and spending. This is a very different situation to after the 2008 financial crisis, when the Conservative-led Coalition Government that came into power cut both taxes and spending, the latter deeply.

Certainly, the traditional centre-right approach to taxation is largely sceptical. The instinct of centre-right politicians and policymakers is to pursue a tax cutting agenda, stemming from a belief in personal responsibility, economic freedom and a smaller state. Indeed, the Chancellor recently announced the Spring Statement Tax Plan, with a vision for a lower tax economy that helps families with the cost of living, boosts growth and productivity, and lets people keep more of what they earn.[4] This seemed to mark a return to conventional Conservative thinking, but in reality official Government policy is still consistent with a more social democratic model.

The truth is that, in a mature economy, governments play a major role in ensuring both efficient and equitable outcomes. As the philosopher Professor Steven Pinker has noted: “The number of libertarian paradises in the world – developed countries without substantial social spending – is zero”.[5] What’s more, there seems little public appetite or institutional capacity for the degree of spending cuts experienced in the 2010s.[6] As such, the centre-right cannot simply look only to slashing taxes.

If high levels of public spending to meet major objectives are to be maintained whilst servicing current budget surpluses, in the 2020s this country will need to pursue a tax reforming – not solely a tax cutting – agenda. Indeed, as well as shoring up the public finances, tax reform can also play a positive part in supporting the Government to achieve their leading economic, social and environmental objectives.

Reforms to taxation, nevertheless, can be incredibly politically contentious. This causes conservatism in the way HM Treasury approaches tax as a policy lever, meaning it is under-utilised as a tool to help achieve positive, far-reaching change.

But if tax reforms are to be suitably effective and ambitious, as they should and can be, then it is vital that policy proposals derive from clear principles that attract sufficient political support.

For the past two years, the team behind Bright Blue’s project on tax reform – advised by a cross-sector, cross-party commission – has sought to do exactly this.

Our project

The purpose of our project has been to generate compelling principles and consequent policy ideas for an ambitious agenda of tax reform that tackle the leading economic, social and environmental challenges of the 2020s and beyond.

To arrive at the principles and policies in this final report, we undertook four main activities.

First, we established and hosted several meetings of a high-profile, cross-sector, cross-party commission to generate and exchange ideas.

The members of this commission included:

  • The Rt Hon David Gauke, Former Secretary of State for Justice
  • The Rt Hon Sir Vince Cable, Former Secretary of State for Business
  • The Rt Hon Lord Willetts, President of the Advisory Council and Intergenerational Centre at the Resolution Foundation
  • The Rt Hon Dame Margaret Hodge MP, Former Chair of the Public Accounts Committee
  • The Rt Hon Andrew Mitchell MP, Former Secretary of State for International Development
  • James Timpson OBE DL, Chief Executive of the Timpson Group
  • Luke Johnson, Entrepreneur and Chairman, Risk Capital Partners
  • Emma Jones MBE, Entrepreneur and Founder, Enterprise Nation
  • Mike Cherry OBE, National Chairman, Federation of Small Businesses
  • Mike Clancy, General Secretary, Prospect trade union
  • Victoria Todd, Head of the Low Incomes Tax Reform Group
  • Sam Fankhauser, Professor, University of Oxford
  • Christina Marriott, Interim Director of Policy and Advocacy, British Red Cross
  • Helen Miller, Deputy Director and Head of the Tax Sector, Institute for Fiscal Studies
  • Giles Wilkes, Former Special Adviser, Number 10 Downing Street
  • Caron Bradshaw, CEO, Charity Finance Group
  • Pesh Framjee, Global Head of Social Purpose and Non Profits, Crowe UK
  • Robert Palmer, Director, Tax Justice UK
  • The Rt Hon Lord Adebowale CBE, Chair, Social Enterprise UK

Second, we conducted an extensive literature review of existing UK and international evidence on taxation, to examine where the UK’s approach to domestic and international taxation is currently failing, identify alternative effective policy approaches from overseas, and ascertain what principles should underlie a program of ambitious, strategic reform of taxation.

Third, we conducted an extensive stakeholder consultation with current and former politicians, special advisers, civil servants, experts from the tax sector, academics, and senior representatives from the private, public and third sectors to learn about and appraise the UK’s current tax system, as well as identify a wide pool of new principles and policies to reform the tax system.

Fourth, we commissioned independent experts to author reports, and propose policies within them, on property, carbon, work and wealth, and business taxation. All these reports have been published over the past year.

This final paper includes only policies that derive directly from these commissioned reports. So, the proposed policies are not intended to be exhaustive and should not be treated as such. They are meant to be examples of some policies that fit with the principles we have generated. There will be many other compelling policy ideas – from a range of individuals and organisations – that should be adopted by the UK Government.

It is also very important to emphasise that members of the commission, although influential in the development of the principles and policies, do not necessarily endorse all of them.

Our principles for tax reform

The Government recently launched its Spring Statement Tax Plan[7], which has been described as the foundations of a future low tax economy. That Spring Statement Tax Plan reveals a determination by the Chancellor to lower taxes to help families with the cost of living, boost growth and productivity, and let people keep more of what they earn.

But we believe the Chancellor can be and should be much more ambitious with tax reform during this Parliament. The Chancellor’s Tax Plan should be supplemented: to not just always ideologically fixate on lowering taxes, and to also use tax as a tool to help a much wider set of economic, social and environmental goals. Ultimately, we believe that tax can achieve its potential as a substantial policy lever than facilitates bigger and bolder changes to our socioeconomic model than it does at present.

Thus, to build on this Government’s ongoing thinking about tax in the years ahead, we propose nine key principles that should underpin an ambitious programme of tax reform, supported by policy recommendations to achieve them.

1.    Supports effort, enterprise and entrepreneurialism

2.    Fairly taxes income derived from luck, rent-seeking and externalities

3.    Treats similar activities by individuals and institutions more equally

4.    Incentivises investment to facilitate long-term economic growth

5.    Ensures sound public finances

6.    Protects and enhances the livelihoods of the poorest

7.    Is easier to understand and more difficult to avoid

8.    Supports the transition to a net-zero economy

9.    Helps to address regional imbalances, thereby levelling up the country

 

Supports effort, enterprise and entrepreneurialism

Effort, enterprise and entrepreneurialism are all essential ingredients to achieve economic growth, which is an imperative as we emerge from the Covid-19 pandemic. Fortunately, GDP has now surpassed its pre-pandemic level[8] and the most recent unemployment rate matches record lows.[9] But economic growth forecasts for the years ahead – including from the Office for Budget Responsibility (OBR) – remain modest, from a both historical and international perspective.[10] This country also now faces significant economic problems, especially record, rising inflation.[11] Doing much more to encourage productive activity will in, the near-term, power economic growth to tackle our growing economic problems. In the long-term, it will boost Britain’s notorious sluggish productivity.

More than this, there is a moral imperative for encouraging such activity. Effort is associated with a more productive economy, a societal benefit, but it can also engender greater feelings of agency and accomplishment, benefitting individuals. Entrepreneurialism often involves considerable risk-taking, but can yield substantial private and public rewards in the long-run. Our society prizes deeply the principle that rewards should be linked to effort; it is essential for believing the socio-economic system is fair. So effort, enterprise and entrepreneurialism are morally and economically important activities, which should be encouraged by the tax system as far as possible.

This Conservative Government is increasing the National Insurance (NI) headline rate through the new Health and Social Care Levy (HSCL), while planning to reduce the basic rate of Income Tax from 2024-25.[12] This means that tax in this country is increasingly falling on income from work rather than income from other activities. It should be an urgent priority to better reward people’s effort by reducing taxes on work, especially NI and the HSCL.

There are ways of doing exactly this in a way that would both help businesses to minimise their costs in the short-term and, in the long-term, feed through into people’s wages and allow them to keep more of the money they earn from a job, all of which is important when inflation is increasing sharply. Reducing the rate of the new HSCL and NI more generally, and broadening their scope to other forms of income, would spread the impact of these taxes more evenly across the income and age distribution, reversing the troublesome shift of overall tax onto workers.

There is also more that the tax system can do to support enterprise and entrepreneurialism. The Enterprise Investment Scheme (EIS), Seed Enterprise Investment Scheme (SEISSs) and Venture Capital Trusts (VCTS) are important parts of the tax system that support innovative start-ups. Social Investment Tax Relief (SITR) is important to ensure social enterprises scale up and deliver value for their communities. But at present, these reliefs suffer from poor promotion and long delays.[13] For start-ups with limited access to capital, delays can have a damaging impact, forcing them to delay hiring or in some cases, pause vital projects.

The Government could better support effort, enterprise and entrepreneurialism in a number of ways, including these policy ideas:

  • Prioritise significantly lowering the headline rate of the employer element of the HSC Levy from 1.25% on income above the existing employer NICs threshold as soon as possible. Then, if the public finances allow, the rate of employers NICs should then also be cut. This measure would represent a cost to the Treasury in the short term. However, falling employer NICs, initially with the HSC Levy, can be expected to result in greater employment, higher wage levels and/or more profitable businesses in the long-term.
  • The HSCL should be broadened to apply to pensions and rental income. Broadening the scope of the HSCL would enable the rate of the HSC Levy and NI to be cut and ensure revenue for health and social care is raised in a way that spreads the burden of the new tax more equally across society.
  • End the exemption from Class 1, 2 and 4 NICs for those working above the State Pension Age. Exempting those above the SPA from NICs ignores a long-term increase in people working past retirement age. Extending Class 1, 2 and 4 NICs to those above the SPA will contribute to raising revenue to offset the reduction in the rate of the HSC Levy and NI.
  • Venture capital reliefs such as Enterprise Investment Scheme (EIS), Seed Enterprise Investment Scheme (SEIS) and Venture Capital Trusts (VCTs) should be maintained at current levels and the process for qualifying and accessing these reliefs should be streamlined in line with the Office for Tax Simplification’s proposals. These include administrative changes such as allowing applicants to save partially completed forms online, alongside allowing investors to benefit from the Capital Gains Tax (CGT) relief in years where they make an income tax loss.
  • Social Investment Tax Relief should be preserved, but more resources should be invested in promoting the relief. There is a sound economic rationale to allow investors in social enterprises to benefit from reliefs similar to the venture capital reliefs. However, to ensure the relief’s long-term viability, more needs to be done to combat low levels of awareness among accountants and social enterprises.

Fairly taxes income derived from luck, rent-seeking and externalities

Profit-making derived from effort, enterprise and entrepreneurialism is economically and socially good. But returns and profits do not always come from these productive activities. Sometimes, they can arise from sheer luck – such as happening to hold shares in a digital company right before the pandemic or inheriting a large sum from your family. Businesses can wield monopoly power to acquire higher than normal returns. Individuals and businesses may profit from activities that cause wider damage, such as pollution, without shouldering enough of the cost. In many ways, the tax system does not adequately tax income derived from these sources. Indeed, if it did, it could lower taxes on effort, enterprise and entrepreneurialism in a more sustainable manner.

First, luck. One of the key trends of the past three decades has been a large and sustained increase in wealth, levels of which have risen from 300% to 700% of GDP since the 1990s. Much of this can be attributed to rising asset prices. This has been largely underpinned by a global and long-term fall in interest rates; put another way, those who held interest-rate sensitive assets at the right time have seen a windfall as interest rates have sharply fallen in recent decades. It is difficult to see why returns based merely on good fortune should attract a significantly lower tax rate, as they do in the UK through Capital Gains Tax (CGT), than for other kinds of economic activity.

For children of parents who have accumulated wealth, they are often fortunate to receive financial support through gifts and inheritances that gives them proven advantages in education and employment. Indeed, inheritances can boost lifetime incomes significantly – by as much as 29% for those with wealthy backgrounds, according to the Institute for Fiscal Studies.[14] The current design of Inheritance Tax – with exemptions for gifts made more than seven years before death, and generous reliefs on business and agricultural property – means that many life-enhancing transfers of wealth go untaxed.

Second, rent-seeking. Some can use monopoly power, firm-specific capital, regulatory capture or luck to drive up profits. Here, financial returns take place regardless of effort, enterprise or entrepreneurialism. The excess profit from such activity is known as ‘economic rent’. Taxes on economic rent do not affect investment decisions and behaviour to the same extent that ungenerous taxes on effort, enterprise or entrepreneurialism do. Business taxes in particular should, where possible, focus on economic rent rather than marginal investment and risk.

Third, externalities. The most egregious is the under-pricing of carbon emissions in markets, given the scale of the challenge posed by climate change – which, if not controlled, will result in catastrophic and potentially irreversible effects on the natural environment and society. Overall, to achieve the UK’s legally binding target of net zero emissions by 2050, the amount of taxation on carbon-intensive production and consumption will have to increase, especially in key economic sectors. While a uniform carbon price would disproportionately impact certain economic sectors, it is nevertheless the case at present that the distribution of carbon taxation across the economy is grossly inconsistent and inadequate. The cost of emitting a tonne of CO2 from a car is around £109; aviation, meanwhile, effectively receives a subsidy of around £26.[15]

The flipside of rewarding productive activities in the tax system is fairly taxing unproductive or harmful activities. This could be achieved, to some extent, by some new policies:

  • Narrow the gap in headline rates between Capital Gains Tax (CGT) and Income Tax. Two main rates for all capital gains of 18% at the basic rate and 28% at the higher rate ought to be established, with modifications only for assets that have already paid Corporation Tax. This would end the distinction between standard CGT rates and rates applied on residential property or carried income, as well as end Business Asset Disposal Relief and Investors’ Relief. While this approach would narrow, and not eliminate, the discrepancy in tax rates between CGT and Income Tax, it would represent a simplification compared to the current system.
  • Replace Inheritance Tax with a Lifetime Receipts Tax (LRT). The LRT should have a starting lifetime allowance of £125,700. The headline rates should mirror Income Tax rates from now, with the threshold set at ten times the Income Tax salary thresholds. A tax that applies to lifetime gifts, and not just gifts bequeathed after (or near) death, would end the arbitrary distinction between the timing of gifts. This would also reduce the abilities of wealthier estates to minimise effective tax liabilities, thereby ensuring that inheritances are taxed more progressively.
  • Business Rates should be replaced with a Business Land Tax levied on commercial landowners, based on unimproved land values. This would move the Business Rates system away from taxing investments in commercial property, and focus the tax squarely on the economic rent flowing from the value of unimproved land.
  • Set a ‘target price range’ for carbon taxes across the whole economy by 2030. The range should include a 2030 ‘floor price’ that each economic sector would have to achieve at a minimum. A target price range for the economy would be a significant step towards a coherent carbon taxation framework that reflects the societal cost of emissions. But despite the need for consistency, different sectors will face different challenges in reaching the target price range, hence why a standard, economy-wide tax should be avoided. Indeed, a ‘price floor’ would ensure some flexibility for economic sectors.

Treats similar activities by individuals and institutions more equally

The current design of the tax system leaves individuals and institutions receiving the same amount of income paying vastly different effective tax rates, significantly distorting the economy.

In regards to individuals, self-employed people pay considerably less in tax than workers. In large part, this is due to there being no equivalent to employers’ NICs for the self-employed. As such, businesses have an incentive to contract labour on a self-employed basis in order to minimise tax liabilities. Individuals, especially younger and affluent ones less dependent on state benefits, also have a tax incentive to supply their labour as a self-employed contractor, rather than as an employee.

Another discrepancy is between those deriving income from assets and those who earn income through work: the former pays proportionately less tax than the latter. As an example, someone might be an owner-manager of their own business and take their income as dividends or retain income in the company and take it later as capital gains. Both of these forms of remuneration are more lightly taxed than labour income, which is subject to higher Income Tax and NICs rates.

Indeed, we can observe starkly different overall tax rates for individuals depending on how they take their income. Among very high earners, those earning £100,000 or more, some pay average tax rates of close to 10% – largely driven by the 10% rate on capital gains qualifying for Entrepreneur’s Relief – while others pay close to the headline 45% Income Tax rate.[16]

Institutions that are otherwise similar also face arbitrary distinctions in the way they are taxed. Because interest is tax deductible, investments that are financed through debt are treated differently to investments financed through equity.[17] The result is that projects funded through equity require a higher rate of return to be viable than those financed through debt. Businesses should not face a penalty or advantage based on how they choose to finance their investments.

More thought also needs to be given to bricks-and-mortar businesses versus online businesses, where the former pay more in Business Rates than the latter. Large differentials in Business Rates bills are not necessarily sufficient grounds to create a special tax on online retailers; Business Rates fall mostly, if not entirely, on commercial landlords, and as such only advantage online retailers in the short-term. There may, however, be other justifications for singling out online retailers. Many of the largest online retailers are able to take advantage of profit-shifting to other jurisdictions overseas to reduce tax burdens, which gives them a tax advantage over bricks-and-mortar businesses. The UK should be at the forefront of global efforts to respond to profit-shifting and tax multinational enterprise more fairly and robustly.

There is an economic rationale for reducing the gaps in effective tax rates for otherwise similar individuals and institutions. Doing so would reduce the distortions currently present in the tax system that favour some activities over others. And it would reduce the incentives for individuals and businesses to artificially package their activities in order to lower their tax rate.

At a moral level, reducing such gaps would make the tax system seem fairer. It is not clear why the hard work of an employer, asset manager or self-employed contractor should be rewarded more than the hard work of an employee. Nor is it clear why businesses should pay different amounts of tax merely because of their financing arrangements or business model.

It is therefore important, both for economic and moral reasons, to lessen the differences in tax rates between different legal forms of income and businesses. This does not need to mean complete parity: there are still differences between the nature of different forms of work such as employment and self-employment, and in some cases – such as with individual investments – we do not want to discourage entrepreneurialism and risk-taking. But the scale of current gaps between these different legal forms in the UK cannot be justified.

To narrow the gap in the tax take between different individuals and institutions receiving the same income, the Government as a first step should:

  • Prioritise significantly lowering the rate of the employer element of the HSC Levy from 1.25% on income above the existing employer NICs threshold as soon as possible. Then, if the public finances allow, the rate of employers NICs should then also be cut. Focusing on employer NICs – which are ultimately borne by employees through lower wages – would reduce the effective difference in tax rates between employees and the self-employed. Employer NICs account for most of the difference in effective tax rates between the two, as there is no equivalent for employer NICs for self-employed workers.
  • Narrow the gap in headline rates between Capital Gains Tax (CGT) and Income Tax. Two main rates for all capital gains of 18% at the basic rate and 28% at the higher rate ought to be established, with modifications only for assets that have already paid Corporation Tax. This would narrow, but not eliminate, the gap in headline rates between CGT and Income Tax. As such, it would weaken the tax incentives to convert income to capital gains, and ensure that the capital gains and income from work are more similarly taxed.
  • Eliminate the bias in favour of debt-financed investment by excluding interest from the corporate tax system. The cause of the debt-over-equity bias within our corporate tax system is that payments to holders of debt can be deducted, but the real return necessary to compensate shareholders for providing equity is not. One way to reduce the tax bias in favour of debt would be to effectively exclude interest from the tax system altogether. Debt interest payments would no longer be deductible expenses, but interest payments received would not be taxed either. This would bring the marginal effective tax rate on debt financed investments in line with the marginal effective tax rate on equity financed investments.
  • The UK should lobby internationally for the OECD’s proposed agreement on a 15% global minimum corporate tax to use a cashflow base. At the G7 summit in 2021, agreement was reached on a 15% global minimum corporate tax rate for large multinationals. Lobbying for the global minimum tax to have a cashflow base would ensure tax competition is focus on pro-investment and positive-sum reforms to the tax base. This aspect would better align the global minimum corporate tax with the goal of raising more revenue from highly profitable large multinationals., and ensure tax revenue from online companies and bricks-and-mortar companies is narrowed.

Incentivises investment to facilitate long-term economic growth

Investment from individuals and businesses is key to building a dynamic, productive and prosperous economy. Investment interacts in many ways with the tax system, chiefly through Corporation Tax and Business Rates for businesses, and Capital Gains Tax for individuals.

Admittedly, the Government has recognised the role tax policy can play in spurring business investment through policies such as the ‘super-deduction’, which offers businesses a 130% capital allowance against their Corporation Tax liabilities.[18]

Still, Corporation Tax in the UK has one of the least generous systems of capital allowances among OECD countries. Indeed, before the Covid-19 pandemic, only one OECD country – Chile – had a less generous system of capital allowances than the UK.[19] This penalises long-term investments, particularly when it comes to investments in buildings and structures. Moreover, the super-deduction is currently set to end in 2023, meaning that, combined with the scheduled rise in headline Corporation Tax rates, the corporate tax system is set to become significantly less generous towards investment in the coming years.

Added to this, the treatment of corporate losses, which are currently not adjusted for inflation, is less generous than it could be: due to levels of inflation over the last twelve years, a £100 loss made in 2010 that took ten years to carry forward would lose £24 worth of value.[20] As a result, all things being equal, businesses will prefer safe, short-term investments to risky, long-term investments.

The economic effects of Business Rates can be thought of, conceptually, as a tax on unimproved land value and a tax on improvements to commercial property. Taxes on land value are highly economically efficient; they do not interfere with economic activity as taxing land will not reduce its supply. But through Business Rates, businesses are also taxed for making improvements to their commercial property. This acts as a disincentive for investments to improve infrastructure such as generators, boilers and blast furnaces.[21]

Currently, for individuals, a lower rate of Capital Gains Tax (CGT) and tax-free initiatives such as Individual Savings Accounts (ISAs) exist to promote individual investment. But CGT chips away at the normal returns to investment by taxing gains arising only from inflation. At present, a person could make an investment that performed equal to inflation, and get taxed on the nominal returns, making them worse off than they were before investing. It is only fair that, if the upsides of investments are rightly taxed more, more is done to mitigate against the potential downsides.

There are many tax reforms that the Government could take to make investment more attractive, including:

  • Move to the full immediate expensing of capital investment in new plants, machinery, and industrial buildings when the investment super-deduction expires in 2023. Investment in new plants and machinery would be treated in the same way as any other business expense. Moving to full expensing permanently after 2023 for all capital investment would reduce the marginal effective tax rate for investment to zero. It would, in effect, eliminate the tax bias against investment. This would be a significant tax reduction on investment, reducing long-run corporate taxes revenues on a static basis. But this would be offset by higher tax revenues elsewhere resulting from higher output.
  • Allow corporate losses to be carried forward with a factor that adjusts for inflation and a safe rate of return on capital. The 50% annual cap of loss carryforwards should also be eliminated. Although losses can be carried forward and offset against future tax returns, inflation and the time value of money erode the value of the tax losses. This creates a bias towards lower risk investments and distorts firm behaviour. Allowing firms to preserve the present discounted value of losses would encourage investment and risk-taking.
  • Business Rates should be replaced with a Business Land Tax levied on commercial landowners, based on unimproved land values. Currently, Business Rates can be conceptualised as a combination of a highly efficient tax on unimproved commercial land and a distortive tax on improvements to commercial property. By shifting the tax burden away from investment and towards unimproved land, this proposal would have a positive impact on productivity and, in turn, wages.
  • Reintroduce inflation indexation on CGT liabilities. Given the behavioural impacts that a rise in CGT rates could have on individual investment and on tax revenues, rate rises should be paired with offsetting measures that improve the design of the tax base to protect the real value of investments.
  • Allow capital losses to be carried back for up to three years and set against taxable income, with relief restricted to CGT rates. Individual investors are only able to set capital losses against capital gains in the current tax year, or carry them forward to future tax years. In principle, there is no reason why capital loss offsets could not be extended to cover a wider range of assets and a wider period. This would better cushion investors against the downside risk of investments.

Ensures sound public finances

The UK needs to face up to the fiscal challenges ahead. These are the most acute they have been for decades: gross government debt is now more than 100% of GDP, and the structural budget deficit stands in excess of 15% of GDP, up from around 2.6% pre-pandemic.[22] Admittedly, recent inflation has eroded the value of the UK’s national debt. But in the long term, higher national debt leaves the UK vulnerable to interest rate rises.

Simply borrowing more and more to meet today’s spending demands, and thereby ladening future generations with unsustainable levels of debt, is economically and morally unacceptable. A tax-reforming agenda needs to ensure that, overall, the UK’s fiscal trajectory is sustainable.

We do not necessarily advocate for a strictly revenue-neutral approach when reforming taxes. Anyway, this will be difficult to forecast accurately. Proper revenue forecasting would be dynamic not static, as changes to tax prompt changes to behaviour. The issue is that it is hard to accurately predict how individuals and institutions will respond to tax changes, meaning calculating revenue precisely is impossible in advance. Regardless, the overall impact needs to be consistent with sustainable levels of national debt and the ongoing fiscal target to have a structural budget surplus in the near-term.

There are three important considerations when thinking about tax reform and fiscal sustainability.

First, anaemic economic growth, as the UK has experienced for much of the last decade, will worsen our long-run fiscal position. Measures to encourage effort, enterprise, entrepreneurialism and investment should not only be seen as pro-business policies; they should also be seen as an important piece of the puzzle in terms of strengthening the UK’s fiscal position.

Second, borrowing to invest or cut taxes in the present, in some circumstances, can improve the fiscal position by increasing revenues or reducing spending in the long-term. This is particularly important when it comes to climate change, arguably the greatest challenge of this century. The price of inaction today in reducing emissions is higher costs to mitigate worse environmental effects in the future. Indeed, late action to mitigate net zero – waiting until after 2030 – would make public debt as a proportion of GDP 23 percentage points higher than if the UK takes early action and imposes stronger carbon taxes from the middle of this decade, according to the Office for Budget Responsibility.[23]

Finally, value for money in in both spending and tax reliefs should be a key focus, with a drive to cut waste. While direct public spending is often held to a very high standard of scrutiny, the same cannot be said for the UK’s myriad of tax reliefs. Indeed, a large proportion of tax reliefs do not even have discernible objectives and are not assessed effectively – to the extent that some major tax reliefs, such as Employment Allowance, are “almost impossible to evaluate”, according to the Institute for Fiscal Studies.[24] A major focus for ensuring fiscal sustainability should be developing a more rigorous approach to evaluating, and where necessary scrapping, tax reliefs in order to make the tax system as efficient as possible.

To ensure sound public finances, there are a number of changes to tax policy that could help:

  • Adopt the German model for scrutinising tax reliefs. Germany legally mandates biannual reviews of corporate tax reliefs based on a standard evaluative framework on a range of metrics including: target accuracy; cost-effectiveness; necessity; and, sustainability.
  • The Patent Box, Film Tax Relief and High End TV Tax Relief should be abolished, and the Employment Allowance should be phased out over the next five years. The empirical evidence suggests that, while Patent Boxes do have some impact on international patent transfers, they have no impact on invention. There are better ways of encouraging innovation. Film Tax Relief and High End TV Tax Relief cost significant more than originally forecast, and largely benefit major international companies rather than smaller scale productions. And the little evidence there is on the Employment Allowance suggests it has a limited impact on employment. Ending these reliefs could raise around £5.2 billion.
  • Set a ‘target price range’ for carbon taxes across the whole economy by 2030, with a 2030 ‘floor price’ that each economic sector would have to achieve at a minimum. The Government should also publish an annual assessment in the Budget for how each economic sector and sub-sector performs against the carbon tax target. Setting a target price for the whole economy would set a clear fiscal framework for action on net zero, and deliver a clear signal to businesses and individuals of action on climate change. But simply setting a target means little unless there is an assessment of whether progress is being made towards it. Therefore, alongside setting a 2030 target range for each economic sector, the Government should be required to publish a set of metrics for forecasting how each sector and sub-sector of the economy performs against the carbon pricing target.
  • Introduce core ‘carbon tests’ as part of the government’s formal impact assessment process to assess changes to any policy that impacts the price of carbon paid by businesses or households. At a minimum, new measures to price carbon should satisfy tests on: impact on carbon price; alignment with net zero target price range; technological readiness; distributional impact; and, economic competitiveness.

Protects and enhances the livelihoods of the poorest

The escalating cost of living has made life miserable for many of those on the lowest incomes. This year, average real household incomes are forecast to sustain their largest yearly fall on record.[25] Current elements of the tax system are falling short in terms of protecting the poorest households. Future tax measures need to ensure the poorest have their livelihoods enhanced.

To its credit, the Government has taken action to blunt the impact of the new Health and Social Care Levy (HSCL), which is a 1.25% increase to National Insurance on employees, self-employed workers and employers, by raising employees’ Primary Threshold – or Lower Profits Limit for the self-employed – for National Insurance to £12,570 per annum – a measure that makes the impact of the HSCL more progressive and ensures that those earning between £10,000 and around £25,000 per annum will pay less tax on their earnings in 2022-23. But more can and should be done with tax to protect the poorest.[26]

Some elements of the tax system are plainly regressive. Council Tax disproportionately hits those in lower-value houses, who pay more in Council Tax as a proportion of their property value than those in more expensive homes. Even taking into account Council Tax discounts, on average someone living in a £100,000 house pays about 0.7% of that value in Council Tax each year, while someone in a property worth £500,000 pays 0.35% on average, according to the Institute for Fiscal Studies.[27] In large part, this is because of the disconnect between Council Tax bands, which are based on 1991 valuations, and today’s house prices. The Government has already recognised the role Council Tax can play in alleviating costs for struggling households – it introduced a rebate on Council Tax to mitigate against rising energy bills – but this is only a temporary measure.[28]

We must also be mindful of how societal projects can incur costs on individuals. The transition to net zero, which on some figures could cost the UK £1.4 trillion over the next three decades[29], could – without proper public policy – risk being expensive for the poorest in society. High-profile opposition to higher carbon taxes, such as the ‘gilets jaunes’ movement in France, underscore the consequences of not adequately considering this in the development of climate policy.

It is vital to pursue a just transition to net zero. That means those on low incomes do not bear burdensome costs. This is not only morally fair; it is also key to ensuring lasting political support for deeper decarbonisation. It is also entirely feasible; countries such as Sweden, Norway, Japan and France already hypothecate carbon taxes to reallocate a proportion of revenues through rebates, tax cuts and green investment.[30]

There are many areas of tax in which the UK could do more to protect the least well-off. As a first step, the Government should:

  • Replace Council Tax and Stamp Duty Land Tax with an Annual Proportional Property Tax (APPT) on the capital value of houses, with a tax exemption for houses worth less than £50,000. Doing this would ensure that property taxes in the UK have an explicit link with today’s house prices. An APPT would also be more progressive with respect to property values than the current Council Tax system.
  • Ensure that houses are revalued for tax purposes annually. Or at least on a regular basis, by applying modern statistical techniques to price data to estimate property values. Such an approach is already used in at least 15 other countries. To smooth increases in tax for households, property taxes could be based on a three-year moving average of the property’s value.
  • Create a ‘Green Dividend Framework’ made up of the various carbon pricing schemes that contribute to the Exchequer, and identify a specific portion of funds from the revenues to be used to reduce the impact of rising prices on low-income households and vulnerable customers. Beyond the environmental gain, the key societal value of carbon taxation us the revenue it will generate to fund public services and to reinvest in driving the adoption of green technologies. To ensure individuals feel the value of revenue generated more directly, the Government should establish a Green Dividend Framework. This would allow for a total figure to be set for what has been delivered to the public purse, which could be set out in personal tax summaries. While those on the lowest incomes emit the least compared to all other income deciles, a flat carbon tax would disproportionately impact those households. This is demonstrably unfair and can only be avoided if a portion of the revenues generated by a more consistent regime are redistributed to support those most impacted.

Is easier to understand and more difficult to avoid

There are often good reasons behind the complexity of the UK’s tax system, which needs to reflect a variety of different circumstances and situations. But a needlessly complex tax system is hard to understand, reducing the transparency of taxes and the ability of politicians to explain what tax reforms are achieving.

There are two ways that we can make the tax system easier for individuals and institutions to understand. First, ensuring that the design of taxes is more explicitly linked to their purpose; in the case of property taxes, for example, there should be more resemblance to today’s house prices.

Second, simplifying reliefs. There has been a proliferation of reliefs and offsets to the tax system, to the extent that HMRC does not even maintain a complete and accurate list of all UK tax reliefs; even among those that are monitored, many lack discernible objectives or the cost of them is not known.[31]

Indeed, in large part due to the extensive range of reliefs, businesses often find navigating the Business Rates system is costly in terms of time and effort: some responses to the Government’s Fundamental Review of Business Rates noted that “complexity in the system can lead to ratepayers failing to understand their eligibility [for Business Rates reliefs], or relying on external agents for support in navigating the system”. Too much complexity can have an impact on productive economic activity.[32]

A further concern is ensuring that taxes are harder to avoid. For individuals, some taxes – particularly Inheritance Tax – are relatively easy to avoid: wealthier estates can take advantage of reliefs on Inheritance Tax, or avoid the tax entirely by passing on assets well before death. Multinational businesses often use profit-shifting to minimise their tax liabilities by moving profits to low-tax jurisdictions overseas. In both cases, this makes the tax system both less effective and less equitable, especially when wealthier individuals and larger companies have access to the advice that can ensure they avoid more tax.

Some policies that the Government can pursue to make the tax system easier to understand, and make taxes harder to avoid, include:

  • Replace Council Tax and Stamp Duty Land Tax with an Annual Proportional Property Tax (APPT) on the capital value of houses. Doing this would ensure that property taxes in the UK have an explicit link with today’s house prices, making the system more intuitive for taxpayers.
  • Adopt the German model for scrutinising tax reliefs. Germany legally mandates biannual reviews of corporate tax reliefs based on a standard evaluative framework on a range of metrics including: target accuracy; cost-effectiveness; necessity; and, sustainability.
  • Replace Inheritance Tax with a Lifetime Receipts Tax (LRT). A tax that applies to lifetime gifts, and not just gifts bequeathed after (or near) death, would end the arbitrary distinction between the timing of gifts. This would also reduce the abilities of wealthier estates to minimise effective tax liabilities, thereby ensuring that inheritances are taxed more progressively.
  • Business Property Relief and Agricultural Property Relief in IHT, or the new LRT, should only apply where the donor had a demonstrable working relationship to the business or farm and for at least two years after acquisition. Reliefs for business and agricultural property are there for a good reason: to ensure the viability of family businesses as they are passed down. But they should be better targeted at genuine and viable family businesses. Requiring donors to demonstrate that they owned, worked for, or had significant control in the company or farm, and clawing back relief if the business was sold within two years of acquisition would make sure that these reliefs benefit the group they are supposed to.

Supports the transition to a net-zero economy

Achieving the UK’s legal commitment to net zero emissions by 2050 – meaning that any greenhouse gas emissions the UK does produce by then are offset overall – is the defining and transformative policy goal of this century. Experts have warned that, on a global scale, failing to achieve net zero by 2050 will result in global warming above 1.5 degrees, bringing with it increased risk of irreversible and catastrophic environmental changes, including rising sea levels, loss of ecosystems, and unprecedented flows of migration.[33]

While the key policy drivers of this transition will be investment, innovation and spending, the tax system should nevertheless play a role in supporting the UK’s net zero ambitions.

The new UK Emissions Trading Scheme, a cap-and-trade system which sets a limit on total emissions and creates a carbon market to link emissions to a price signal, is pricing carbon at around £50 per tonne of CO2. But according to Government estimates, prices on carbon may need to rise as high as £125-300 per tonne of CO2 to achieve net zero.[34]

At the moment, the UK’s carbon pricing across different economic sectors is inconsistent and insufficient. Different sectors of the economy are subject to vastly different levels of carbon taxes. The implicit price that taxpayers and consumers pay for emitting a tonne of CO2 can vary by as much as £700, according to the Energy Systems Catapult. If anything, certain sectors such as aviation and residential gas use receive a subsidy for carbon emissions.[35]

The mounting cost of living presents a challenge to the political viability of carbon taxes. Recently, the UK Government has cut Fuel Duty by 5p to support motorists with the rising cost of fuel, which goes against the direction of net zero by further subsidising carbon-heavy activity. In the long term, this is not sustainable for the environment or the Exchequer, since motorists are increasingly shifting to EVs, which are not subject to Fuel Duty. More needs to be done, for transport and beyond, to develop a credible set of reforms to carbon taxes that protects low-income households and builds a lasting political consensus as we make the transition to net zero.

Tax needs to support the UK’s transition to a net zero economy, with some policy ideas including:

  • Set a ‘target price range’ for carbon taxes across the whole economy by 2030, with a 2030 ‘floor price’ that each economic sector would have to achieve at a minimum. Setting a target price for the whole economy would set a clear fiscal framework for action on net zero, and deliver a clear signal to businesses and individuals of action on climate change.
  • Create a ‘Green Dividend Framework’ made up of the revenues from carbon pricing measures. This would allow for a total figure to be set for what has been delivered to the public purse by carbon taxation measures, and increase transparency around green tax reforms.
  • Immediately pilot a voluntary road pricing scheme for all road users ahead of a national rollout from 2030, including ‘Green Miles’ that offer a discount for a period to those driving electric vehicles and on low incomes, as well as surge pricing in congested areas. As drivers switch to electric vehicles (EVs), we need a strategy for replacing the substantial revenues brought in by Fuel Duty. The most viable replacement for Fuel Duty is a road pricing scheme, charging road users on a per-mile basis. Given the danger that the introduction of a road pricing scheme slows adoption of EVs, the Government could introduce a temporary ‘Green Miles’ scheme that offers a proportion of discounted or free miles to those with EVs or on low income. Any road pricing scheme should also include a surcharge for non-residents in urban areas to reduce car use and promote public and active transport.
  • Reform Air Passenger Duty so it delivers a more consistent carbon price and offers discounts for ‘Green Miles’ based on the proportion of sustainable aviation used. A frequent flyer surcharge should also be introduced. Air Passenger Duty (APD) should be reformed so it is directly linked to the net zero target, such as through removing the lower rate on short-haul flights or linking charges more directly to distance travelled. To target the scheme at those with the biggest impact, there should also be a surcharge introduced for frequent flyers, effectively placing an additional ‘rate’ of carbon tax predominately on business travellers. In addition a ‘Green Miles’ scheme could be introduced in the short-term. Such a scheme would mean passengers receive a tax discount for the proportion of the fuel requirement that is sourced sustainably.
  • The Climate Change Levy and Climate Change Agreements should be reviewed again in light of the 2050 net zero target to ensure they fully reflect the carbon content of the fuel being used by businesses. The Government should consult on extending carbon pricing further across energy usage in non-residential and public buildings. Many businesses are subject to the Climate Change Levy (CCL) that puts a carbon price on energy usage across a range of fuels. This acts as an incentive to invest in energy efficiency improvements and consider switching to lower-carbon forms of heating. While changes have been made recently to the Climate Change Levy, electricity still attracts a lower rate than gas use, something that will become untenable once coal is completely removed from the power system in 2024. The Government should therefore review the CCL again in light of the likely trajectory to the 2050 net zero target, making further changes to ensure the carbon prices the scheme delivers are sufficient.
  • A consistent ‘Climate Change Charge’ should be introduced for domestic energy use linked to underlying UK ETS prices that applies across both electricity and gas use, offset by removing low-carbon levies from bills and providing dedicated support for low-income households. While households already pay the pass-through costs of various carbon pricing schemes – such as the Carbon Price Floor – there is no direct carbon taxation placed on domestic electricity or gas use beyond VAT. This situation is already creating challenges for hitting the 2050 net zero target. The Government should introduce a consistent ‘Climate Change Charge’ across both electricity and gas that reflects the carbon content of both fuels, linked to underlying UK ETS prices.
  • Link the new farm payments scheme more directly to the delivery of projects that reduce or store carbon. In addition, before 2030, trial the introduction of tradeable credit markets based on carbon sequestration allowing a long-term route to land-use being included in a dedicated cap-and-trade model. The Government should also establish a ‘Farmland Carbon Code’ to ensure adequate verification of the carbon saved across the agricultural sector. The new Environmental Land Management (ELM) system, influenced in large part by previous Bright Blue policy work[36] has more deeply enshrined the notion of ‘public money for public good’, offering ways for farmers to secure support in relation to taking actions that will support the environment. After the initial pilots, the Government should set a specific target for what the ELM scheme should deliver in terms of carbon savings. This would, in effect, require a specific portion of farm payments to then be spent on carbon-based reduction projects, with requirements rising steadily over time as the target carbon savings required under the scheme grows.
  • Reform the Landfill Tax so it is based on a carbon metric. Over the medium-term, include the waste and recycling sector in the UK ETS. The Landfill Tax is already in place but is not linked directly to greenhouse gas emissions. A first step would be to link the landfill tax directly to the carbon content of waste. Given the waste and recycling sector is, in effect, an industrial process, the most obvious next step would be to eventually include the sector within the UK ETS.

Helps to address regional imbalances, thereby levelling up the country

The current Conservative Government’s flagship policy objective of ‘levelling up’ the country is one that many Governments over the years have attempted. It is a gargantuan task: geographical inequality in the UK is, on some measures, comparable to the economic divide between East and West Germany around 1990.[37] Remedying the UK’s regional imbalances will require a mix of many policies, of which tax is one.

Nevertheless, in some ways the tax system actively holds back progress on levelling up. As house prices have risen relatively faster in some areas, Council Tax falls disproportionately on  properties outside of London and the South East: while properties in areas such as Hartlepool might pay in excess of 1% of their value in Council Tax, in areas such as Westminster this can be as low as 0.1%, according to the Institute for Fiscal Studies.[38] While the British tax system is progressive overall, Council Tax is one of the only taxes that is outright regressive.

Stamp Duty Land Tax also plays a part in slowing progress on levelling up. By creating a disincentive for people to move house, the tax slows the housing market. It discourages older residents from downsizing and prevents growing families from moving to bigger houses, promoting inefficient use of living space. Estimates from the LSE suggest that even a two percentage-point increase in SDLT reduces mobility by 37%.[39]

Another central aspect of levelling up is improving equality of opportunity: indeed, the Prime Minister himself said “talent and genius is distributed equally, but opportunity is not”.[40] Inheritances are increasing as a proportion of lifetime income.[41] If left unchecked, this is likely to entrench intragenerational inequalities, with implications for social mobility. Fairly taxing inheritances and gifts will be a helpful tool to reduce the role of geography and affluence at birth in determining life outcomes.

At the moment, though, there are many ways for the richest estates to avoid Inheritance Tax: Business Property Relief and Agricultural Property Relief, which reduce overall liabilities, have loose eligibility criteria. For example, shares on the Alternative Investment Market can attract Business Property Relief, with no requirements for minimum shares in a company and no need to prove a personal relationship to the company.[42] And wealthy estates have the ability to avoid the tax altogether if wealth is passed on well before death thanks to the ‘seven-year rule’. Because of this, the very wealthiest estates pay proportionately less in Inheritance Tax: while most estates were found by the Office of Tax Simplification to pay an effective rate of 20%, for the very wealthiest estates – valued at £10 million or more – the effective rate was 10%.[43]

The tax system can do more to level up institutions as well as individuals. Manufacturing businesses tend to be highly capital-intensive relative to service businesses, and so would stand to gain the most from better capital allowances and incentives to invest through the tax system. They also tend to be based in areas outside of London and the South-East, particularly contributing to jobs and output in the Midlands and the North.[44] Besides being pro-business in general, tax reforms to stimulate investment would aid the levelling up agenda.

Business Rates, too, have a regional bias. As a result of infrequent revaluations that lag behind economic cycles, firms in areas with rising property prices can be caught out by sudden and substantial increases in their Business Rates liabilities. Conversely, businesses in areas with falling property prices can pay over the odds in Business Rates for years until the next revaluation. There is scope to smooth these fluctuations and reduce the compliance costs to businesses.[45]

Some tax policy options for enabling levelling up include:

  • Replace Council Tax and Stamp Duty Land Tax with an Annual Proportional Property Tax (APPT) on the capital value of houses. Properly designed, an APPT would be considerably more progressive than the current system of Council Tax and Stamp Duty Land Tax: in most scenarios, lower value properties would pay less in property taxes, while higher value properties would pay more. Moving to an APPT would also be regionally progressive, lowering taxes in areas such as the North West and shifting property taxes to London and the South East.
  • Replace Inheritance Tax with a Lifetime Receipts Tax (LRT). The LRT should have a starting lifetime allowance of £125,700. The headline rates should mirror Income Tax rates from now, with the threshold set at ten times the Income Tax salary thresholds. By including lifetime transfers of wealth, and making taxes on inheritances harder to avoid, the LRT would curtail the role of geography and background in determining life outcomes, thus helping to spread opportunity.
  • Move to the full immediate expensing of capital investment in new plants, machinery, and industrial buildings when the investment super-deduction expires in 2023. Investment in new plants and machinery would be treated in the same way as any other business expense. Moving to full expensing permanently after 2023 for all capital investment would reduce the marginal effective tax rate for investment to zero, benefitting in particular manufacturing industries in areas outside of London and the South-East.
  • Business Rates should be replaced with a Business Land Tax levied on commercial landowners, based on unimproved land values. This would move the Business Rates system away from taxing investments in commercial property, and focus the tax squarely on the economic rent flowing from the value of unimproved land. This would, in particular, benefit manufacturing businesses who often need to invest in industrial equipment such as blast furnaces.

Acknowledgements

This report, and the tax reform project generally, has been made possible by the generous support of Social Enterprise UK and the Joffe Trust. The ideas expressed in this publication do not necessarily reflect the views of our sponsors.

We would like to thank Alex Jacobs from the Joffe Trust and Andrew O’Brien from Social Enterprise UK for their support, patience and advice throughout the project.

Endnotes

[1] ONS, “Consumer price inflation, UK: March 2022”, https://www.ons.gov.uk/economy/inflationandpriceindices/bulletins/consumerpriceinflation/march2022 (2022).

[2] OBR, “Economic and fiscal outlook – March 2022”, https://obr.uk/efo/economic-and-fiscal-outlook-march-2022/ (2022).

[3] Philip Brien and Matthew Keep, “Public spending during the Covid-19 pandemic”, https://researchbriefings.files.parliament.uk/documents/CBP-9309/CBP-9309.pdf (2022).

[4] GOV.UK, “Spring statement tax plan”, https://www.gov.uk/government/publications/spring-statement-2022-documents/spring-statement-tax-plan (2022).

[5] Steven Pinker, Enlightenment now: The case for Reason, Science, Humanism and Progress (London, 2018), 110.

[6] John Curtice, “Have voters embraced a bigger state?”, https://onlinelibrary.wiley.com/doi/full/10.1111/newe.12264 (2021).

[7] GOV.UK, “Spring statement tax plan”.

[8] ONS, “GDP monthly estimate, UK : February 2022”, https://www.ons.gov.uk/economy/grossdomesticproductgdp/bulletins/gdpmonthlyestimateuk/february2022 (2022).

[9] ONS, “Unemployment rate (aged 16 and over, seasonally adjusted): %”, https://www.ons.gov.uk/employmentandlabourmarket/peoplenotinwork/unemployment/timeseries/mgsx/lms (2022).

[10] OBR, “Economic and fiscal outlook”.

[11] ONS, “Consumer price inflation”.

[12] GOV.UK, “Chancellor announces tax cuts to support families with cost of living”, https://www.gov.uk/government/news/chancellor-announces-tax-cuts-to-support-families-with-cost-of-living (2022).

[13] Sam Dumitriu, “Energising enterprise”, http://www.brightblue.org.uk/wp-content/uploads/2022/03/Energising-enterprise.pdf (2022).

[14]  Pascale Bourquin, Robert Joyce and David Sturrock, “Inheritances and inequality over the life cycle: what will they mean for younger generations?”, https://ifs.org.uk/publications/15407 (2021).

[15] Josh Buckland, “Green money: a plan to reform UK carbon pricing”, http://www.brightblue.org.uk/wp-content/uploads/2021/07/Green-money.pdf (2021).

[16] Arun Advani and Andy Summers, “How much tax do the rich really pay? New evidence from tax microdata in the UK”, https://warwick.ac.uk/fac/soc/economics/research/centres/cage/manage/publications/bn27.2020.pdf (2021).

[17] Dumitriu, “Energising enterprise”.

[18] GOV.UK, “Super-deduction”, https://www.gov.uk/guidance/super-deduction (2021).

[19] Dumitriu, “Energising enterprise”.

[20] Ibid.

[21] Ibid.

[22] ONS, “UK government debt and deficit: September 2021”, https://www.ons.gov.uk/economy/governmentpublicsectorandtaxes/publicspending/bulletins/ukgovernmentdebtanddeficitforeurostatmaast/september2021 (2021).

[23] OBR, “Fiscal risks report – July 2021”, https://obr.uk/docs/dlm_uploads/Fiscal_risks_report_July_2021.pdf#page=15 (2021).

[24] House of Commons Library, “National Insurance Contributions Bill”, https://researchbriefings.files.parliament.uk/documents/RP13-60/RP13-60.pdf (2013).

[25] Resolution Foundation, “Chancellor prioritises his tax cutting credentials over low-and-middle income households with £2 in every £3 of new support going to the top half”, https://www.resolutionfoundation.org/press-releases/chancellor-prioritises-his-tax-cutting-credentials-over-low-and-middle-income-households-with-2-in-every-3-of-new-support-going-to-the-top-half/ (2022).

[26] IFS, “Spring Statement 2022”, https://ifs.org.uk/spring-statement-2022 (2022).

[27] Stuart Adam, Louis Hodge, David Phillips and Xiaowei Xu, “Revaluation and reform: bringing council

tax in England into the 21st century”, https://ifs.org.uk/uploads/R169-Revaluation-and-reform-bringing-council-tax-in-England-into-the-21st-century.pdf (2020).

[28] GOV.UK, “Council tax rebate: factsheet”, https://www.gov.uk/guidance/council-tax-rebate-factsheet (2022).

[29] Jonah Fisher, “Climate change: Can the UK afford its net zero policies?”, BBC News, 23 February, 2022.

[30] Buckland, “Green money”.

[31] Michael Johnson, “Tackling intergenerational inequity at its roots”, https://www.brightblue.org.uk/tackling-intergenerational-inequity-at-its-roots/ (2019).

[32] Adam Corlett, Andrew Dixon, Dominic Humphrey & Max von Thun, “Replacing business rates: taxing land, not investment”, https://d3n8a8pro7vhmx.cloudfront.net/libdems/pages/43666/attachments/original/1535625230/embedpdf_Autumn18_Business_Rates.pdf?1535625230 (2018).

[33] IPCC, “Summary for Policymakers of IPCC Special Report on Global Warming of 1.5°C approved by governments”, https://www.ipcc.ch/2018/10/08/summary-for-policymakers-of-ipcc-special-report-on-global-warming-of-1-5c-approved-by-governments/ (2018).

[34] Joshua Burke, Rebecca Byrnes and Sam Fankhauser, “How to price carbon to reach net-zero emissions in the UK”, https://www.lse.ac.uk/GranthamInstitute/wp-content/uploads/2019/05/GRI_POLICY-REPORT_How-to-price-carbon-to-reach-net-zero-emissions-in-the-UK.pdf (2019).

[35] Buckland, “Green money”.

[36] Ben Caldecott, Sam Hall & Eamonn Ives, “A greener, more pleasant land: a new market-based commissioning scheme for rural payments”, http://www.brightblue.org.uk/portfolio/a-greener-more-pleasant-land-a-new-market-based-commissioning-scheme-for-rural-payments/ (2017).

[37] David Behrens, “Britain’s regions less equal than divided Germany, UK2070 conference hears”, Yorkshire Post, 13 June, 2019.

[38] Adam et al., “Revaluation and reform”.

[39] Christian Hilber and Teemu Lyytikäinen, “Transfer taxes and household mobility: Distortion on the housing or labor market?”, Journal of Urban Economics (2017), 57-73.

[40] Boris Johnson, tweet on levelling up, https://twitter.com/borisjohnson/status/1198340442451935232?lang=en-GB (2019).

[41]  Pascale Bourquin, Robert Joyce and David Sturrock, “Inheritances and inequality over the life cycle: what will they mean for younger generations?”, https://ifs.org.uk/publications/15407 (2021).

[42] Sam Robinson and Ryan Shorthouse, “Rightfully rewarded: reforming taxes on work and wealth”, http://www.brightblue.org.uk/wp-content/uploads/2022/01/Rightfully-Rewarded.pdf (2022).

[43] OTS, “Office of Tax Simplification: Inheritance Tax Review”, https://www.gov.uk/government/publications/office-of-tax-simplification-inheritance-tax-review (2018).

[44] Make UK, “Regional manufacturing outlook 2019”, https://www.makeuk.org/-/media/eef/files/reports/industry-reports/make-uk-bdo-regional-manufacturing-outlook-2019.pdf (2019).

[45] CBI, “Business rates system is entrenching regional inequalities – CBI President”, https://www.cbi.org.uk/media-centre/articles/business-rates-system-is-entrenching-regional-inequalities-cbi-president/ (2019).

[Image: Pixabay]

Kelly Beaver: Preaching to the converted? How to sell net zero to the public

By Centre Write, Energy & Environment, Politics

Given the increasing lived experience of climate change and the focus on the scale of what we need to do to combat it, it’s not surprising that November 2021 saw the third time that the environment topped the list of national concerns in Ipsos MORI’s monthly Issues Index, reaching its highest ever score since 1988 when the index started including the environment.

The environment was seen as the top issue facing the country, ahead of the economy, the pandemic, healthcare, and education, as well as any other issue raised by Brits. Partly this reflects the media interest in COP26 hosted here in the UK, but it also reflects a trend we saw before the pandemic, where we saw rising concern about the environment before it was interrupted by the pandemic drawing attention away from all other issues.

These levels of concern are not completely unprecedented. We saw similar levels in our polling back in 2005 too, but what happened then was a narrowing of concern about climate change during the Great Recession and its aftermath.

So, what does this tell us?

It suggests that concerns about other issues can temper concern about climate change, including, of course, the economy. Is this time different? Here we are approaching two years of a global pandemic, and we’re again at that high level of concern about climate change, so could this herald a new and consistent high level of concern about the environment and climate change?

If we take as a working assumption that concern about the environment is here to stay, but can be affected by other issues, what does that mean for political support for action addressing environmental and climate change issues?

High levels of concern shows there is a bedrock of support for action, but the Government will also need to engage the public with the implications“

In work done by Ipsos MORI as part of the Climate Engagement Partnership just before COP26, we explored support for some key net zero policies. We found that there was majority support across seven of the eight policies we asked about, and even the final one, higher taxes on red meat and dairy products, had 47% support, with only 32% opposed. This fits the pattern of high levels of public concern about the environment.

But it isn’t quite as simple as that. We then asked people if they would still support that policy in the face of various lifestyle and financial trade-offs, and it often had a marked effect. Taking one policy as an example, 62% of Brits support electric vehicle subsidies initially, but support falls to 42% if the policy meant that they themselves had less choice when buying a new car. So support falls by around a third once people think about the personal impact, even though they don’t all switch into outright opposition.

That effect is compounded once people have to think about the financial implications. If you tell people that they will have to pay more to drive their car, then support for electric vehicle subsidies falls further to 34%, and this time there is a bigger impact on opposition, up to 38% compared with 24% when personal trade-offs were all people were being asked to consider.

This highlights the need for proper understanding of what the public needs to convince them to take the essential steps to achieve net zero. On the one hand, the high levels of concern shows there is a bedrock of support for action, but the Government will also need to engage the public with the implications of actual policies for individuals, and their finances, as well as the potential benefits of a green strategy, and costs of inaction. Otherwise, public support should not be taken for granted.

Addressing the climate emergency will be a huge global challenge which will cut across many facets of our everyday life both personally and professionally. It’s only by understanding that and addressing the consequent concerns that people have that we’ll begin to make progress on this critical issue. This is why Ipsos MORI’s work as part of the Climate Engagement Partnership is so important.

So, while the public may have been converted to the need for concern when it comes to the environment and tackling climate change, they still need to be taken on a journey before they are ready to join the choir.

Kelly Beaver is the Chief Executive of Ipsos MORI. This article first appeared in our Centre Write magazine Favourable climate? Views expressed in this article are those of the author, not necessarily those of Bright Blue. [Image: ]