New Tax?

My Essay Of a New Tax

What is the average electricity consumption of households in the UK?
At times when climate change is being talked about, not just by a few green ‘tree huggers’ but by the government and being, at times the main obligation to tackle in the country and also in the world, to sustain and maintain the Earth for future generations.
Pollution is a negative externality, a by-product of goods and services which affect the third party, as victims of flash-flooding, hurricanes, earthquakes etc, as it leads to a social cost paid by society, by government money and at times innocent lives.
Market Failure arises from negative externalities as there is over production and consumption of products which causes negative externalities and thus creates allocative inefficiency; where scarce resources are being over used, and could be used for more beneficial purposes.
Electricity of the main grid is a source that us, being humans have adapted to and use every day, and may be at the point that we cannot live without; as research has shown that an ‘average’ household consumes 4,800 kWh and researchers have used the fact that every kWh consumed produces 0.527 kg of CO2. And so on, average it reveals that 2529.6 Kg of CO2 is being emitted into the atmosphere, which consequently results in changes in the atmosphere and on the planet which can be dangerous to us, the population.
An idea, which I believe the Chancellor should be passing through the budget is a new tax, to raise revenue and to spend as government spending, to loosen the pull on the current deficit, is to have an ‘Electrical tax’.
The ‘Electrical tax’ should be added onto the Recommended Retail Price, so paid by consumers and collected from the supplier, as a onetime tax for every electrical product sold; and have a different percentage of the tax payable to more, or less consuming goods and have the electrical goods placed in bands, of low consumption to high electrical consumption. As the different bands have a different amounts of tax added on to the price.
(There was a chart here showing the usage of energy from different goods, leave a comment and i'll try and email you the chart :))



Below is an example of what could be the bands and an estimate of how much the tax of each band can be concluded to.Band Electrical Consumption (WATTS) Tax added on to Price
A 0 – 50 Unviable for tax
B 51 – 100 2.0 %
C 101 – 200 2.5 %
D 201 – 300 3.0 %
E 301 – 500 3.5 %
F 501 – 1000 4.0 %
G 1001 – 1500 4.5 %
H 1501 – 5000 5.0 %
I 5001 + 7.5 %


As shown in the table above Band A which has the lowest electrical consumption is ‘Unviable for tax’ as the product only uses 0-50 watts of electricity, then the table carries on to ‘Band I’, which has been proposed for the higher consuming devices which can be mainly luxuries such as a range cooker and oven and is liable to the highest tax rate at 7.5%.
As the tax would be paid by consumers, every time a taxable electrical good is bought, the tax is thus collected by the suppliers and in total paid to the government monthly. This would be achieved using store records of which and how many taxable electrical products are sold to the consumer each month. As it is monthly paid to the government, the treasury would have a shorter time without the tax money if it was collected annually and with shorter time intervals it would make predictions of the next months total easier to calculate if the government were to depend on, to take out or pay loans.
As the tax is resulting from negative externalities, pollution, the tax money should be used to correct them and pay for the social costs, to prevent worse off and long term consequences. And thus the benefiters of this tax is not only the government but us, society, as this tax should be a way to cause a contraction of demand on higher electrical consuming products and reduce the effects of climate change.
But not only to put us off products but for the government to subsidise ‘greener’ technology, lowering the prices and increasing the demand for them, and to carry on with correcting information failure and providing us information and education of what would be cheaper for us, lower our electricity bills by introducing more websites such as: direct.gov.uk; where they have provided information and advice of buying and using more energy efficient products.
Plus, there should be enough revenue, as so many electrical goods are sold in UK every day, to be able fund environmental projects research into more efficient products and renewable sources of energy, to power the grid, with less waste products.

I believe that this tax would be a more effective than other measures such as; Regulations of electricity as electricity is part of consumers every-day needs and by regulating the amount of electricity could stir up unwanted issues. As well as that, a tax can easily help greener technology to move forward and be more available to consumers, with subsidies to increase demand of more efficient products.