The Public Accounts Committee (PAC) has criticised a “lack of leadership and coordination” from HMRC and the Treasury in targeting environmental action.
In a new report from the Committee, it said the governmental departments have a “very limited view of the role of tax”, with a “limited understanding of the environmental impact” of taxes. It added that they were unable to say how the tax system is and could be used to achieve environmental goals such as net zero.
Additionally, they seemed unaware of the impact that the government's environmental goals will have on tax revenues, pointing to the rise of electric vehicles as an example. In the year 2019-20, fuel duty raised £28 billion, but as the ban on the sale of new petrol and diesel cars looms “HM Treasury cannot explain how it will manage declining revenues from consumption of fossil fuels”.
Meg Hillier MP, chair of the PAC said reaching 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 report follows the government again increasing its decarbonisation target to 78% by 2035 earlier this month, a move that while welcomed, led to many organisations calling for more policy and detail around the path to such reductions.
HMRC and the Treasury currently only recognise four environmental taxes, and have not kept track of the impact of other tax measures that have an environmental impact. This includes things like tax reliefs to support energy saving and clean technologies, or those affecting the use of fossil fuels.
Assessments have been started for fuel duty freezes to see the impact on the environment, but all taxes should undergo environmental assessment said the PAC.
It criticised the lack of coordination and leadership that mirrors previous concerns from the PAC, in particular from the Treasury which has a cross-governmental remit. Therefore it is “disappointing to see the silo thinking we often see in other Whitehall departments extending to the Treasury itself”, the report added.
The PAC called on the Treasury to consider how tax should fit into a comprehensive programme for funding net zero.
It follows a report from Green Alliance earlier this week that pointed to support from the general public for utilising the tax system for decarbonisation. The report noted that the tax system is one of the most powerful tools available to the government to deliver its policy ambitions and shape the economy, but that more needed to be done.
“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,” finished Hillier.
“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.”