Report published on Budget 2011 and environmental taxes
7 July 2011
According to a new report from the Environmental Audit Committee the Treasury has undermined public trust in green taxes by appearing to use them as a revenue raising tool rather than a serious attempt to change environmentally damaging behaviour.
Chair of the Environmental Audit Committee, Joan Walley MP, said:
"The Treasury needs to stop giving green taxes a bad name. Recent Budgets have created the perception that environmental taxes are simply being used to pinch extra pennies from people. Politicians should use green taxes more carefully to challenge and change the most polluting activities. The Government must put its money where its mouth is and put greening the economy at the heart of its plan for growth."
The MPs single out two recent tax changes for particular criticism:
- Cutting a penny off Fuel Duty while providing no new incentives to switch to lower carbon alternatives sends the wrong signals
- Proposed changes to Air Passenger Duty will do nothing to reduce emissions or make it a more effective environmental tax
The committee is calling on the Treasury to adopt a coherent strategy for environmental taxation, setting out its objectives and rationale, the basis on which rates are set, and how their impact will be evaluated.
Environmental taxation
The MPs believe that with green taxes there is a strong case for ring-fencing some of the revenues for investment in green alternatives – for instance using fuel duty to reduce public transport fares – in order to build trust and support for environmental taxes.
According to the report, environmental taxes need to be straightforward so that taxpayers understand the behavioural change signal being sent. They must also be seen as fair so that political support can be built for environmental taxation.
In practice, however, many perceive them as just another means of raising revenue, and their growing complexity means that many businesses are unaware of the cumulative impact of the environmental taxes affecting them.
Chair of the committee, Joan Walley added:
"Ministers should be aiming to shift taxation from things that benefit society, such as jobs and income; to things that are socially harmful, such as pollution and waste.
Green taxes shouldn't be seen as some kind of add-on or used as a revenue raising trick – they should form an integral part of the Government’s plans to revive the economy.
The Treasury should start to rebuild trust in environmental taxes by ring-fencing some of the revenues raised from fuel duty to cut soaring train and bus fares."
The MPs also find that the Plan for Growth, published alongside the Budget, does not provide the much needed step-change to aid the transition to a low-carbon economy. They call on the Government to demonstrate greater commitment to putting the green economy at the heart of the Government's growth plans.