Waste not, want not - at last a tax everyone likes

Britain is to get its first green tax on Tuesday, part of a revolution gathering pace throughout Europe.

The Landfill Tax - on dumping waste in holes in the ground - is supported by all three major political parties and described even by its fiercest critics as "the first publicly welcomed tax". It aims to cut waste, to get more of it reused or recycled - and to boost employment.

It is Britain's first attempt at shifting taxation from jobs to pollution, an "ecological tax reform" endorsed by European Union heads of government at the Florence summit in June.

This week the EU's Environment Agency is to publish a special report praising the "effectiveness" of green taxes being introduced throughout the Continent. And next week, the Institute for Public Policy Research, a leading think-tank, is to produce detailed proposals for further British environment taxes to cut UK emissions of carbon dioxide, the main cause of global warming, by nearly a tenth and create more than 700,000 jobs.

The Landfill Tax is expected to raise pounds 450,000 a year through a levy of pounds 7 a tonne on waste (reduced to pounds 2 for "inert" material such as bricks or soil). Nearly three-quarters of the 140 million tonnes of solid waste produced in Britain each year goes to landfills, which have been much cheaper and less well regulated than in other European countries, encouraging the import of vast amounts of toxic rubbish.

HM Customs and Excise says the tax is "designed to use market forces to protect the environment by making disposal of waste at landfill sites more expensive". Landfill operators will be able to claim a rebate of up to a fifth of their payments by giving money to environmental bodies to clean up old dumps or to develop recycling.

Kenneth Clarke, the Chancellor of the Exchequer, said the proceeds of the tax will help to take about pounds 500,000 a year off employers' National Insurance contributions, encouraging them to take on more people. Admitting "in some cases, taxes actually do some good", he said: "I want to increase the tax on polluters and make further cuts in the tax on jobs." He thus endorsed the central tenet of the green tax reform, which aims to provide a "double dividend" by cleaning up the environment and creating employment. This seeks to reverse the long trend by which governments have increasingly taxed employment, which should increase, rather than pollution and waste, which ought to be reduced. Since 1960, charges on labour have soared from less than a third to about half of Europe's tax burden.

The EU Environment Agency report concludes that green taxes are often the best way to protect the environment, as they are more flexible and cost effective than regulations. It adds that they can provide a vital spur to business innovation and thus improve "overall competitiveness".

It examines 16 such taxes in five European countries, concluding that they have been "environmentally effective" at "reasonable cost". A waste tax in Denmark, for example, has more than doubled reuse and recycling and more than halved dumping; a charge on toxic waste in the German state of Baden-Wurttemberg has greatly reduced it; and a Swedish tax on sulphur in fuel has cut the pollutant, a cause of acid rain, by 40 per cent. In Germany, leading companies have bought full-page newspaper advertisements calling for green tax reform. In Britain, it has been backed by the Advisory Council on Business and the Environment, representing leading industries, and by the Prime Minister's own panel of environment advisers.

The main opposition to the Landfill Tax comes from the Environment Services Association, representing waste contractors, which, however, admits it to be "the first publicly welcomed tax anyone can remember". But one of Britain's two biggest landfill operators, Biffa, supports it and wants it to be increased.

Next week's Institute for Public Policy Research report will also call for the tax to rise, and propose a package of measures, including charges on energy, road transport and quarrying and reductions in National Insurance contributions. It calculates that this will cut carbon dioxide emissions by 9 per cent and landfill by 18 per cent while creating 717,000 new jobs over the next nine years.