Recommendations & Conclusions
8 items
2
Recommendation
Fifty-Fifth Report - Environmental tax …
Not Addressed
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, …
Read more
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, the government’s decision to end the sale of new petrol and diesel vehicles by 2030 will accelerate the transition to electric vehicles and reduce revenue from fuel duty. Fuel duty raised around £28 billion in 2019–20, equal to an increase of around 6p on the basic rate of Income Tax. The government said in November 2020 that revenue from motoring taxes would need to keep pace with the move to electric vehicles so that it can continue to fund public services and infrastructure. In its evidence to us, HM Treasury suggested that it had nine years to prepare for declining levels of fuel duty. But we disagree. The government, with the Department for Transport in the lead, is seeking to encourage people and businesses to move to cleaner vehicles now. Government typically needs several years to consult on major tax changes and HM Treasury will need to act soon to identify and consult on options for motoring taxes, and the impact on different parts of society and the levelling-up agenda. Recommendation: 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; and ensure it plans for sufficiently early and broad consultation with different parts of society, particularly with the government’s levelling-up agenda in mind.
Show less
Government response AI summary
The government's response discusses issues with identifying clinically extremely vulnerable people, the development of a national GP dataset, and a forthcoming data strategy for health and social care, failing to address the recommendation on consulting for replacing declining fossil fuel revenues.
Read full response →
HM Treasury
3
Recommendation
Fifty-Fifth Report - Environmental tax …
Not Addressed
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 …
Read more
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 commitment 6 Environmental tax measures to reach net zero emissions by 2050. HM Treasury told us that as net zero is a 30- year programme it needs to consider interventions over a long timeframe and not simply year by year. It also recognises that households and businesses need to understand the overall policy direction and where costs are likely to fall so they can plan accordingly. But HM Treasury has yet to provide a long-term view for taxpayers on the difficult action that will need to be taken to get the UK on the path to net zero. The Institute for Government has called for a tax road map to net zero to provide that long-term view, and the Treasury Select Committee has recommended a wider tax strategy including principles for meeting climate change and other environmental objectives. Recommendation: HM Treasury should consider the pros and cons of publishing a roadmap that signals a clear trajectory to taxpayers for how tax measures will be deployed to contribute net zero. It should write to the Committee to set out its thinking before the next Budget.
Show less
Government response AI summary
The government's response discusses local variation in the Shielded Patient List and future analysis by NHS Digital and DHSC, failing to address the recommendation for HM Treasury to consider and report on a tax roadmap to net zero.
Read full response →
HM Treasury
4
Recommendation
Fifty-Fifth Report - Environmental tax …
Not Addressed
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 …
Read more
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 Passenger Duty which both increase the cost of polluting forms of travel. Tax changes announced in Budget 2021 may also impact on the environment significantly. The new temporary 130% super deduction on Corporation Tax, worth £25 billion, could encourage investment which harms the environment as there are no environmental restrictions on eligible companies. The exchequer departments rarely quantify in tax information and impact notes the environmental impact they expect from tax changes intended to alter behaviour. This prevents effective scrutiny of the environmental impact when Parliament considers tax changes. Recommendation: From the next budget, HM Treasury should: • assess the environmental impact of every tax change considered; and • publish the expected environmental impact for each tax measure in the budget, including the extent of behavioural change, alongside forecasts for tax receipts.
Show less
Government response AI summary
The government's response discusses local authority confidence, shielding, and MHCLG's work with councils, failing to address the recommendation regarding environmental impact assessments for tax changes.
Read full response →
HM Treasury
6
Recommendation
Fifty-Fifth Report - Environmental tax …
Not Addressed
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 …
Read more
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 the Department for Business, Energy & Industrial Strategy (BEIS) leads. HM Treasury, HMRC and other departments contribute to Defra and BEIS’s environmental objectives. Taxes are blunt financial instruments which HMRC accepts can have adverse consequences as well as disincentivising behaviour that is damaging to the environment, but it seems to us it leaves managing these consequences to other departments. The risk of adverse consequences, combined with the lack of transparency around the environmental impact of tax measures and limited evaluation, should require a high level of engagement across government which the exchequer departments have not persuaded us is the case. Recommendation: The exchequer departments need to: • consider and describe the expected impact of taxes on other departments’ responsibilities for environmental objectives, for example within tax impact and information notes; and • by autumn 2021, agree with other departments robust approaches for assessing and monitoring the effect of tax measures on government’s environmental goals. 8 Environmental tax measures 1 The relationship between the tax system and the government’s environmental objectives
Show less
Government response AI summary
The government's response consists of boilerplate text that does not address the recommendation for exchequer departments to consider and agree approaches for assessing tax impacts on environmental goals.
Read full response →
HM Treasury
1
Conclusion
Fifty-Fifth Report - Environmental tax …
Not Addressed
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 AI summary
The government stated it agrees with an unspecified recommendation and provided a target implementation date of Autumn 2021, while also describing HM Treasury's active role and ongoing analytical review related to environmental goals, but this does not address the committee's procedural conclusion.
Read full response →
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 …
Read more
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 to ministers, on environmental taxation and the environmental impacts of tax decisions, and on the role that tax can play in achieving environmental objectives.11
Show less
HM Treasury
32
Conclusion
Fifty-Fifth Report - Environmental tax …
Not Addressed
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 …
Read more
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 relatively blunt financial incentive”.63 A 2018 independent review of serious and organised crime in the waste sector said that since its introduction in 1996 the tax had “been transformational in commoditising waste as a resource, but a consequence of its introduction has been to increase the attractiveness of the market to organised crime”.64 HMRC estimates that the misclassification of waste at authorised landfill sites and waste disposed at unauthorised sites reduced Landfill Tax revenue by around £275 million in 2018–19 (28% of the tax due). This figure does not include tax lost from the illegal exports of waste and from fly-tipping.65
Show less
Government response AI summary
The government's response explicitly quotes and rejects a different recommendation (Recommendation #6) from the committee, therefore not addressing the provided conclusion #32.
Read full response →
HM Treasury
34
Conclusion
Fifty-Fifth Report - Environmental tax …
Not Addressed
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 …
Read more
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 impact on competitiveness, especially considering the impact of carbon leakage (which is the offshoring of carbon generating activities in response to domestic policies to control emissions).71 As explained above, the Carbon Price Support gives a price advantage to imports over domestic electricity generation from fossil fuels. As there are large untapped renewable energy resources in the UK, we asked HM Treasury whether it was happy for the UK to carry on importing electricity. HM Treasury said that BEIS lead on energy policy, and it had a constant dialogue with BEIS on energy issues, including renewable energy. However, it could not say what the government’s position was on imported electricity or whether it had discussed with BEIS the impact of the Carbon Price Support on imports.72
Show less
Government response AI summary
The government's response explicitly quotes and rejects a different recommendation (Recommendation #6) from the committee, therefore not addressing the provided conclusion #34.
Read full response →
HM Treasury