Recommendations & Conclusions
35 items
2
Recommendation
Fifty-Fifth Report - Environmental tax …
HM Treasury cannot explain how it will manage declining revenues from consumption of fossil fuels, worth £37 billion in 2019–20. HM Treasury has identified risks to £37 billion of revenue from taxes that are wholly dependent on the consumption of fossil fuels or the emission of greenhouse gases. In particular, …
Government response. agree with the conclusion that DHSC and NHS Digital took too long to identify all clinically extremely vulnerable people. Given the data available at the time, and the novelty of shielding policy, NHS Digital, DHSC, and frontline clinicians worked as …
HM Treasury
3
Conclusion
Fifty-Fifth Report - Environmental tax …
We are concerned that immediate priorities have often outweighed action needed to support long-term environmental objectives. Budgets in 2020 and 2021 froze the rate of fuel duty to help with the cost of living, while recognising that future rates would need to be considered in the context of the UK’s …
Government response. agree with the conclusion that there was huge local variation. NHS Digital and DHSC have already written to the Committee with an initial analysis of the local variation in growth of the Shielded Patient List (SPL). This found that most …
HM Treasury
4
Conclusion
Fifty-Fifth Report - Environmental tax …
Tax impact assessments do not sufficiently recognise the potential for every tax measure to affect progress towards environmental objectives. The exchequer departments’ current definition of environmental taxes covers just four taxes with specific environmental objectives. Other established tax measures can have significant environmental impacts, such as fuel duty and Air …
Government response. agree with the conclusion that a centrally directed system was chosen because of a lack of confidence in local authorities. Councils are crucial partners in delivery of shielding support to clinically extremely vulnerable individuals and since July 2020, councils and …
HM Treasury
5
Conclusion
Fifty-Fifth Report - Environmental tax …
HMRC has not done enough to evaluate how tax measures with environmental objectives have changed behaviour. HMRC’s monitoring of environmental taxes focuses on tax revenue, but this is not sufficient on its own. For example, falling tax receipts may mean that a tax is effective because businesses are changing behaviour, …
Government response. 5: PAC conclusion: HMRC has not done enough to evaluate how tax measures with environmental objectives have changed behaviour. 5: PAC recommendation: HMRC should ensure that it has sufficient information to assess whether environmental taxes are achieving their objectives and …
HM Treasury
6
Conclusion
Fifty-Fifth Report - Environmental tax …
We were concerned that HM Treasury and HMRC seemed to view the consequences of environmental taxes as the responsibility of other government departments. The Department for Environment, Food & Rural Affairs (Defra) has lead responsibility for all environmental policy areas apart from climate change mitigation, including net zero, on which …
Government response. 2021. This is the Government’s response to the Committee’s report. Relevant reports • NAO report: management of the Industrial Strategy Challenge Fund – Session 2019-21 (HC 1130) • PAC report: Industrial Strategy Challenge Fund – Session 2019-21 (HC 941) Government …
HM Treasury
1
Conclusion
Fifty-Fifth Report - Environmental tax …
On the basis of a report by the Comptroller and Auditor General, we took evidence from HM Treasury and HM Revenue & Customs (HMRC).1
Government response. 1.1 The government agrees with the Committee’s recommendation. Target implementation date: Autumn 2021 1.2 HM Treasury is already playing an active role in supporting the government’s environmental goals, including delivery of the legally-binding net zero commitment. As well as its …
HM Treasury
7
Conclusion
Fifty-Fifth Report - Environmental tax …
We asked HM Treasury why it had not undertaken the comprehensive public review of the options for environmental taxation that the Mirrlees Review had called for. HM Treasury said that in the past 10 years, it had done an enormous amount of internal analysis, as part of its policy advice …
HM Treasury
8
Conclusion
Fifty-Fifth Report - Environmental tax …
HM Treasury also said that two years ago it had been asked to prepare a report on the costs and benefits of transition to net zero.12 This report was due in autumn 2020 but has been delayed.13 An interim report was published in December 2020.14 HM Treasury 6 C&AG’s Report, …
Government response. 1.2 HM Treasury is already playing an active role in supporting the government’s environmental goals, including delivery of the legally-binding net zero commitment. As well as its role in relation to tax and spend policy and the financial services sector, …
HM Treasury
9
Conclusion
Fifty-Fifth Report - Environmental tax …
HM Treasury told us that the final report will provide an analytical framework to consider the economic and fiscal costs of moving to net zero.16 HMRC said the final report would dovetail within a broader cross-government strategy on how to achieve net zero which BEIS is due to publish later …
Government response. 1.2 HM Treasury is already playing an active role in supporting the government’s environmental goals, including delivery of the legally-binding net zero commitment. As well as its role in relation to tax and spend policy and the financial services sector, …
HM Treasury
10
Conclusion
Fifty-Fifth Report - Environmental tax …
The UK is hosting the 26th UN Climate Change Conference of the Parties (COP26) in Glasgow in November 2021. COP26 provides the opportunity for the UK to work with all countries and join forces with civil society, companies and people to inspire climate action.19
Government response. 1b: PAC recommendation: HM Treasury should by COP26 in November 2021, set out a clear vision of how it will work to help the UK achieve net zero. 1.4 The government agrees with the Committee’s recommendation. Target implementation date: Autumn …
HM Treasury
11
Conclusion
Fifty-Fifth Report - Environmental tax …
We asked whether by the time we get to COP 26 everybody will have a good idea of exactly how the government is going to meet its net carbon target by 2050. HM Treasury told us this was really a matter for BEIS. It explained that net zero would require …
Government response. 1a: PAC recommendation: HM Treasury should aim to become an exemplar finance department in supporting government’s environmental goals like net zero; 1.1 The government agrees with the Committee’s recommendation. Target implementation date: Autumn 2021 1.2 HM Treasury is already playing …
HM Treasury
12
Conclusion
Fifty-Fifth Report - Environmental tax …
HM Treasury’s December 2020 interim report on net zero said that “the transition to net zero and consequent structural changes in the economy will also have implications for the UK’s public finances and fiscal sustainability. As some sectors grow and others shrink, the mix of tax revenues will change.” The …
Government response. 2.1 The government disagrees with the Committee’s recommendation. 2.2 The government agrees on the need to consider the implications for tax revenue from net zero and the need over time to set out a plan for the replacement of fuel …
HM Treasury
13
Conclusion
Fifty-Fifth Report - Environmental tax …
The transition to cleaner vehicles in the UK will reduce the demand for petrol and diesel and thus affect the amount of fuel duty raised. In November 2020, government announced its ambition to stop the sale of new cars that are powered solely by petrol or diesel by 2030.24 The …
Government response. 2.1 The government disagrees with the Committee’s recommendation. 2.2 The government agrees on the need to consider the implications for tax revenue from net zero and the need over time to set out a plan for the replacement of fuel …
HM Treasury
14
Conclusion
Fifty-Fifth Report - Environmental tax …
We asked what planning HM Treasury had undertaken to counteract the reduction in revenue from taxes on fossil fuels and greenhouse gases. It said that the government did not have a plan, but the reduction in revenue had been flagged and under review for several years, with ministers advised on …
Government response. 2.1 The government disagrees with the Committee’s recommendation. 2.2 The government agrees on the need to consider the implications for tax revenue from net zero and the need over time to set out a plan for the replacement of fuel …
HM Treasury
15
Conclusion
Fifty-Fifth Report - Environmental tax …
We pointed out that the ban on new petrol and diesel cars from 2030 is likely to have an impact on both the type of vehicles and volume of fuel purchased well before then.27 Under the lead of the Department for Transport, the government is using a range of levers …
HM Treasury
16
Conclusion
Fifty-Fifth Report - Environmental tax …
It may also take time for government to introduce tax changes needed to make- up for the reduction of fuel duty. The government normally consults on tax changes as it has recognised the importance of engaging with individuals, businesses and other organisations on possible tax measures.29 Tax changes are often …
HM Treasury
17
Conclusion
Fifty-Fifth Report - Environmental tax …
We raised the potential impacts of changes to taxes, to address the reduction in revenue from fuel duty, on small and medium-sized businesses, on different regions and on the levelling-up agenda. HM Treasury said decisions on taxes, such as fuel duty, include consideration of distributional impacts and the impacts on …
HM Treasury
18
Conclusion
Fifty-Fifth Report - Environmental tax …
The March 2021 Budget took place the week before our session with HM Treasury and HMRC on environmental tax measures. The Budget did not include any particular announcements on green taxes. It did however freeze fuel duty rates for the eleventh year. The Budget said the freeze would support hard-working …
HM Treasury
19
Conclusion
Fifty-Fifth Report - Environmental tax …
When we asked HM Treasury whether the tax system would have a role to play in achieving net zero, it said the role of tax would evolve over time from Budget to Budget.35 However, HM Treasury also recognises that as net zero is a 30-year programme, it needs to think …
HM Treasury
20
Recommendation
Fifty-Fifth Report - Environmental tax …
In September 2020, the Institute for Government called for HM Treasury to publish a tax roadmap to net zero, showing taxpayers how and when taxes might change.37 More recently, in February 2021, the House of Commons Treasury Committee recommended that the government should draw up a tax strategy for consultation …
Government response. 3.1 The government agrees with the Committee’s recommendation. Target implementation date: Autumn 2021 3.2 The government agrees to write to the Committee on the pros and cons of setting out a longer term roadmap on tax and net zero. It …
HM Treasury
21
Conclusion
Fifty-Fifth Report - Environmental tax …
Against this background, we asked HM Treasury whether it would publish its plans so that taxpayers may prepare for how and when taxes might need to change in order to achieve net zero. HM Treasury said that it was sure that in setting out its plans the government will be …
Government response. 3.1 The government agrees with the Committee’s recommendation. Target implementation date: Autumn 2021 3.2 The government agrees to write to the Committee on the pros and cons of setting out a longer term roadmap on tax and net zero. It …
HM Treasury
22
Conclusion
Fifty-Fifth Report - Environmental tax …
The exchequer departments define ‘environmental taxes’ as those with explicit environmental objectives.40 There are currently four that meet this definition (paragraph 17).41 Other taxes can have environmental impacts. Indeed the 2021 Dasgupta Review on the Economics of Biodiversity (commissioned by HM Treasury in 2019) argues that our economy is embedded …
Government response. 4.1 The government disagrees with the Committee’s recommendation. 4.2 The government agrees that it is important to consider the environmental impacts of relevant tax changes, but disagrees with the Committee's specific recommendation to assess, from Budget 2022, the environmental impact …
HM Treasury
23
Conclusion
Fifty-Fifth Report - Environmental tax …
The March 2021 Budget does not include any new tax measures with environmental objectives but it does include other tax measures that are likely to have an environmental impact.44 In March 2021 the Office for Budget Responsibility (OBR) said the most significant contributor to the economic recovery measures in the …
Government response. 4.1 The government disagrees with the Committee’s recommendation. 4.2 The government agrees that it is important to consider the environmental impacts of relevant tax changes, but disagrees with the Committee's specific recommendation to assess, from Budget 2022, the environmental impact …
HM Treasury
24
Conclusion
Fifty-Fifth Report - Environmental tax …
If Parliament is to be able to effectively scrutinise the environmental impact of tax changes it needs good quality information. For each tax policy change, the exchequer departments publish a Tax Information and Impact Note (TIIN) explaining the objective of the change, and its revenue and other impacts. The NAO …
Government response. 5: PAC conclusion: HMRC has not done enough to evaluate how tax measures with environmental objectives have changed behaviour. 5: PAC recommendation: HMRC should ensure that it has sufficient information to assess whether environmental taxes are achieving their objectives and …
HM Treasury
25
Conclusion
Fifty-Fifth Report - Environmental tax …
The NAO found that HMRC monitors tax receipts for the four environmental taxes it administers but it collects little other data to understand changes in behaviour.50 Monitoring Landfill Tax receipts enables HMRC to collect and report data on the volume of waste going to landfill sites, which declined by 65% …
Government response. 5: PAC conclusion: HMRC has not done enough to evaluate how tax measures with environmental objectives have changed behaviour. 5: PAC recommendation: HMRC should ensure that it has sufficient information to assess whether environmental taxes are achieving their objectives and …
HM Treasury
26
Conclusion
Fifty-Fifth Report - Environmental tax …
We asked HMRC what it had done to quantify the impact of Landfill Tax on the exporting of waste and fly-tipping.52 HMRC said that it knew there is a risk that Landfill Tax will incentivise illegal dumping or exports, but said other departments had lead responsibility for these forms of …
Government response. 5: PAC conclusion: HMRC has not done enough to evaluate how tax measures with environmental objectives have changed behaviour. 5: PAC recommendation: HMRC should ensure that it has sufficient information to assess whether environmental taxes are achieving their objectives and …
HM Treasury
27
Conclusion
Fifty-Fifth Report - Environmental tax …
We also asked about the impact of the Carbon Price Support on the amount of electricity the UK imports. The Carbon Price Support is levied on around 100 electricity generators located in Great Britain on the fossil fuels supplied to them. The departments confirmed that the tax increases the price …
Government response. 5: PAC conclusion: HMRC has not done enough to evaluate how tax measures with environmental objectives have changed behaviour. 5: PAC recommendation: HMRC should ensure that it has sufficient information to assess whether environmental taxes are achieving their objectives and …
HM Treasury
28
Conclusion
Fifty-Fifth Report - Environmental tax …
Evaluations can help the exchequer departments to understand whether environmental taxes are achieving their objectives and how they are changing behaviour. However, since 2010 HMRC has evaluated only one of the four environmental taxes, in part because it has not secured the necessary resources.55 HMRC confirmed its 2014 evaluation of …
Government response. 5: PAC conclusion: HMRC has not done enough to evaluate how tax measures with environmental objectives have changed behaviour. 5: PAC recommendation: HMRC should ensure that it has sufficient information to assess whether environmental taxes are achieving their objectives and …
HM Treasury
29
Conclusion
Fifty-Fifth Report - Environmental tax …
HMRC told us that it shared with this Committee and the NAO the ambition to evaluate more tax measures. HMRC said it had therefore secured an additional £2 million for evaluation in 2021–22. In 2020–21, HMRC’s central budget for commissioning external research, including evaluations, was £2 million. HMRC also told …
Government response. 5: PAC conclusion: HMRC has not done enough to evaluate how tax measures with environmental objectives have changed behaviour. 5: PAC recommendation: HMRC should ensure that it has sufficient information to assess whether environmental taxes are achieving their objectives and …
HM Treasury
30
Conclusion
Fifty-Fifth Report - Environmental tax …
As we explain in Part One, the Department for Environment, Food & Rural Affairs (Defra) has lead responsibility for all environmental policy areas, apart from climate change mitigation on which the Department for Business, Energy & Industrial Strategy (BEIS) leads. The exchequer departments, HM Treasury and HMRC, are expected to …
Government response. 6: PAC conclusion: We were concerned that HM Treasury and HMRC seemed to view the consequences of environmental taxes as the responsibility of other government departments. 6: PAC recommendation: The exchequer departments need to: - consider and describe the expected …
HM Treasury
31
Conclusion
Fifty-Fifth Report - Environmental tax …
The NAO found that some recent environmental strategies mentioned tax measures which have an impact on government’s environmental goals, and some of these strategies included a brief consideration of the impact of tax measures or their interaction with other policy measures. But the NAO also identified gaps, particularly relating to …
Government response. 6: PAC conclusion: We were concerned that HM Treasury and HMRC seemed to view the consequences of environmental taxes as the responsibility of other government departments. 6: PAC recommendation: The exchequer departments need to: - consider and describe the expected …
HM Treasury
32
Conclusion
Fifty-Fifth Report - Environmental tax …
We found the picture for cross-government working on the operation of a tax was more complex when we looked in detail at Landfill Tax and the Carbon Price Support. Landfill Tax has had both positive and adverse impacts, and HMRC described it, and by extension all environmental taxes, as “a …
Government response. 6: PAC conclusion: We were concerned that HM Treasury and HMRC seemed to view the consequences of environmental taxes as the responsibility of other government departments. 6: PAC recommendation: The exchequer departments need to: - consider and describe the expected …
HM Treasury
33
Conclusion
Fifty-Fifth Report - Environmental tax …
HMRC expressed the opinion that Landfill Tax “needs to be complemented by regulation and effective enforcement of that regulation” to deal with the negative 58 Q 74; C&AG’s Report, para 1.33 59 C&AG’s Report, para 3 60 C&AG, Reducing carbon emissions from cars, Session 2019–2021, HC 1204, 26 February 2021, …
Government response. 6: PAC conclusion: We were concerned that HM Treasury and HMRC seemed to view the consequences of environmental taxes as the responsibility of other government departments. 6: PAC recommendation: The exchequer departments need to: - consider and describe the expected …
HM Treasury
34
Conclusion
Fifty-Fifth Report - Environmental tax …
The Carbon Price Support is one of a number of policy interventions which has contributed to the large reduction in coal used by electricity generators based in Britain.70 However, the Mineral Products Association told us that the environmental outcome of the Carbon Price Support must be set against its wider …
Government response. 6: PAC conclusion: We were concerned that HM Treasury and HMRC seemed to view the consequences of environmental taxes as the responsibility of other government departments. 6: PAC recommendation: The exchequer departments need to: - consider and describe the expected …
HM Treasury
35
Conclusion
Fifty-Fifth Report - Environmental tax …
The apparent lack of leadership and coordination on environmental tax measures, mirrors findings in our recent reports examining how the government is organised to deliver environmental goals. In our February 2021 report, Achieving government’s long- term environmental goals, we found that Defra had not shown that it had the clout …
HM Treasury