Treasury and HMRC criticised over ‘lack of understanding’ of taxes’ climate impact

MPs tell Treasury and Tax Office that they are showing limited leadership and coordination in face of global ‘climate storm’ breaking all around the world

Big Zero Report 2022

MPs have warned today that HM Treasury and HMRC lack understanding, leadership and coordination regarding the climate impact of tax policies as the departments seem ‘stuck in a bygone era’.

The Public Accounts Committee said the two departments were unable to explain to the body how the tax system is used in achieving the government’s goals.

The committee states as an example the revenues raised from the fuel duty.

According to its report, an estimated £28 billion of fuel duty was raised in the period 2019-20 but expects this to gradually decline as people change to electric vehicles.

It notes: “HM Treasury cannot explain how it will manage declining revenues from consumption of fossil fuels”.

The body claims 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.

The committee recommends by the next Budget, HM Treasury should set out a timetable for how it will consult on options for replacing declining revenues from fossil fuels including fuel duty.

It also suggests a roadmap of how tax measures will be deployed to contribute net zero is needed if the country wants to be on track to reach its ambitious climate targets.

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.

“Every week brings reports of some climate record disturbingly broken – the hottest year, the hottest decade, warming seas rising faster than we feared, carbon emissions raging back even as the economy takes more faltering steps.

“Now we are six months from hosting the next major global climate summit and the climate storm is breaking all around us. HMRC and HMT need to catch up fast.”

A government spokesperson said: “We’re leading the world in building back better and greener from the pandemic.

“We were the first major economy to commit to net zero by 2050 and one of the first to phase out petrol and diesel cars by 2030, and just last week we announced more ambitious carbon emissions targets.

“But this is about policies not just targets, which is why the Prime Minister has outlined an ambitious Ten Point Plan to achieve our environmental goals.”

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