Source · Select Committees · Public Accounts Committee
Recommendation 22
22
The exchequer departments define ‘environmental taxes’ as those with explicit environmental objectives.40 There are currently...
Conclusion
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 in nature and is not external to it, and as such all our fiscal measures have an environmental impact in so far as they either encourage or disincentivise different behaviours.42 The exchequer departments recognise that both Air Passenger Duty and fuel duty have an environmental impact by increasing the cost of polluting forms of travel. These taxes do not have environmental objectives and thus the exchequer departments’ primary measure for assessing the taxes’ performance has been the revenue they raise. However, HM Treasury told us they do advise Minsters on environmental impacts, including of previous fuel duty freezes, before decisions are taken on tax rates.43
Government Response
Not Addressed
HM Government
Not Addressed
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 of every tax change considered and publish the outcomes. At this stage, it would not be practical, cost effective or possible to consider detailed environmental impacts for every tax change, such as any changes to the personal allowances for income tax or employer National Insurance Contributions. 4.3 The government does already carefully consider the environmental implications in relevant measures. For example, when considering reforms to the taxation of red diesel, the government assessed that in total red diesel accounts for the production of nearly 14 million tonnes of carbon dioxide a year. The National Audit Office report on environmental taxes highlighted that HM Treasury and HMRC 'use environmental data collected by third parties or feedback from stakeholders to assess impact and inform advice to ministers.' At Budget 2021, the government published an assessment of environmental impact of relevant tax measures - for example in the Tax Information and Impact Note for Plastic Packaging Tax which set out