Source · Select Committees · Public Accounts Committee
Recommendation 12
12
HM Treasury’s December 2020 interim report on net zero said that “the transition to net...
Conclusion
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 report also said that much of the current tax revenue that is wholly dependent on individuals’ and businesses’ consumption of fossil fuels or emission of greenhouse gases is likely to be eroded during the transition to a net zero economy. In 2019–20, £37 billion of revenue came from taxes on fossil fuels 15 Q 9 16 Qq 27, 47 17 Qq 9, 16–17 18 Q 18 19 UN Climate Change Conference (COP26) website, https://ukcop26.org/, accessed 6 April 2021 20 Q 76 21 Q 77 Environmental tax measures 11 and greenhouse gases. Around £28 billion of this comes from fuel duty: the equivalent of around 6p on the basic rate of Income Tax.22 The remaining £9 billion came from Vehicle Excise Duty, Landfill Tax, emissions trading scheme receipts, and Carbon Price Support.23
Government Response
Not Addressed
HM Government
Not Addressed
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 duty revenues but disagrees with the Committee's specific recommendation to set out a timetable before the next Budget, since that would pre-empt policy decisions which are for Ministers to take at the relevant time. 2.3 The interim Net Zero Review report in December 2020 highlighted that structural changes in the economy related to net zero will have fiscal implications. Much of the revenue from fossil fuel-based taxes is likely to be eroded during the transition to a net zero economy, the most significant of which are motoring taxes such as fuel duty. As set out by the Prime Minister in the Ten Point Plan for a Green Industrial Revolution, whilst the UK moves forward with the transition away from petrol and diesel cars and vans, the government will need to ensure that revenue from motoring taxes keeps pace with this change, so that the government