The Public Accounts Committee (PAC) has criticised the Treasury as it has yet to set out how the tax system can help government achieve the UK’s net zero target by 2050
In the latest PAC report, MPs said that the Treasury and HMRC have a ‘very limited view of the role of tax’, with a ‘limited understanding of the environmental impact’ of taxes, and were unable to explain to the committee ‘how the tax system is used in achieving the government’s environmental goals’.
The PAC also stated that despite a narrow focus on the revenue taxes raise, the two departments also ’have yet to plan for the impact of the government’s environmental ambitions on tax revenues’ and that the lack of understanding, leadership and coordination at the Treasury and HMRC in face of the global ‘climate storm breaking all around us’ is disappointing.
Meg Hillier MP, chair of the Public Accounts Committee, said: ’The economic revolution required to abandon fossil fuels and reach net zero must be the greatest co-ordinated ask, of governments around the globe, in history. But the UK government has been blithely issuing ever more ambitious climate targets for years now, with no sign of a roadmap to reach any of them. The departments in charge seem stuck in a bygone era, with little sign of the innovative thinking needed to achieve all this.’
The PAC stated that at present HMRC and Treasury only recognise four environmental taxes that have specific environmental objectives and that the departments have not kept track of the impact of other tax measures with environmental impacts, such as tax reliefs to support energy saving and clean technologies, or the impact of tax measures affecting the consumption of fossil fuels.
The Treasury has already identified risks to £37bn of revenue from taxes that are solely dependent on the consumption of fossil fuels or the emission of greenhouse gases.
The Budgets in 2020 and 2021 froze the rate of fuel duty to help with the cost of living but while recognising that future rates would need to be considered in the context of the UK’s commitment to reach net zero emissions by 2050, they said that as net zero is a 30-year programme it needs to consider interventions over a long timeframe and not simply year by year.
The Treasury is still considering how tax should fit within a comprehensive programme for funding net zero and it acknowledges that further action is needed to hit the 2050 target.
With the UK hosting the UN Climate Change Conference (COP26) in Glasgow in November 2021, the PAC is concerned that the Treasury’s progress is too slow and urged them to provide a clear vision on the role of tax in reducing carbon emissions and help the UK to provide global leadership.