Not taxing something is not a subsidy
There are claims that not taxing something, or even not raising the tax on something, is a subsidy:
UK slashes grants for electric car buyers while retaining petrol vehicle support
What petrol vehicle support?
The cut is likely to be controversial, only a fortnight after the chancellor, Rishi Sunak, extended a generous implicit subsidy for drivers of petrol and diesels by freezing fuel duty.
Not raising tax is neither an implicit nor, obviously, explicit, subsidy. Not increasing income tax is not a subsidy to people working for a living, not increasing VAT is not a subsidy to consumers.
It is possible to argue about externalities of course. Emissions have effects, those are costs that an activity might not be paying, that could be, with a squint, a subsidy. As we’ve pointed out a number of times over the years this is not true of petrol or diesel in the UK.
As we know the Stern Review told us that those social costs of carbon are $80 per tonne Co2-e. This is 11 pence per litre of diesel. That would then, to cover those externalities, be the righteous and just tax to adjust market prices. Since the fuel duty escalator was introduced by Ken Clarke - to “meet our Rio commitments” - the escalator has added 25 pence per litre. At least that’s what it was last time we went and counted.
That is, far from being subsidised by under-taxation to corral those externalities petrol and diesel are over-taxed. Do note that this is not some strange neoliberal construction, this is simply a straight reading of that insistence contained within the basic climate change report itself.
We can approach the calculation another way too. Total UK emissions are of the half a billion tonnes order. At $80 a tonne that’s around the £30 billion mark for the correct tax to adjust for those externalities. Fuel duty alone costs consumers about that amount. If anything - again, not some weird construction but the plain and open reading of the Stern case itself - petrol and diesel are over-taxed on climate change grounds and all other emissions in the economy under-taxed.
Freezing fuel duty is not a subsidy, implicit or of any other kind. Don’t let anyone tell you different.