VAT reductions in green sectors could help the UK build back better and enhance green recovery, says the Environmental Audit Committee (EAC) in its report published today.
The body suggests VAT cuts would encourage energy efficiency, the use of recycled materials and repair services and could offer a long term reset to design an economy fit for net zero.
The EAC also recommends the introduction of carbon targets for the construction of new homes to spur demand for low carbon materials.
In addition, the Green Homes Grant must be given a multi-year extension if it is to meet the government’s target of issuing 600,000 vouchers, according to the analysis.
The body also suggests policymakers should begin work on a carbon tax to incentivise low carbon changes across the whole economy.
A long term investment in manufacturing processes to support the rollout of electric vehicles and tax incentives for drivers are also among the EAC’s recommendations.
The report estimates the UK will require up to eight gigafactories to meet demand and its electrification targets.
Environmental Audit Committee Chairman, Rt Hon Philip Dunne MP, said:”A tax system fit for net zero Britain is key. It will encourage innovation, give confidence to the sector and support companies to make the low-carbon transition.
“There are endless initiatives that can lead to a greener future and the Chancellor should use his upcoming Budget statement to start this process.
“But a greener future hinges on the health of biodiversity and ecosystems. The economic recovery must not overlook nature recovery. Planning and infrastructure decisions must take into account the impact of nature, and piloting a new National Nature Service can protect wildlife while offering employment opportunities.
“There will be no vaccine against runaway climate change, and it is our responsibility now, using the opportunity of the economic recovery, to set the UK on track for net zero.”