Treasury ''giving green taxes a bad name''

08 July 2011

The Treasury has caused the public to mistrust environmental taxes, believing them just to be another way to raise revenue rather than a way of improving the environment, according to a report by the Environmental Audit Committee.

And Friends of the Earth (FoE) has called the Treasury's approach to green taxation "cack-handed".

The committee chair Joan Walley said: "The Treasury needs to stop giving green taxes a bad name. Recent budgets have created the perception that environmental taxes are simply being used to pinch extra pennies from people. Politicians should use green taxes more carefully to challenge and change the most polluting activities. The government must put its money where its mouth is and put greening the economy at the heart of its plan for growth."

The committee called for green tax revenue to be used to subsidise public transport fares and said the public is being given no incentives to change their behaviour and adopt a low carbon lifestyle. Also, the government's 'Plan for Growth' didn't really help to encourage a low carbon economy.

The committee said: "There is a pressing need for government to take a more coherent and clearly articulated approach to environmental taxes. A clear strategy is needed, setting out their objectives and rationale, the basis on which rates are set, and how their impact will be evaluated.

"We recommend that the Treasury should set out its detailed plans for increasing the proportion of environmental taxes as part of an environmental tax strategy, along with how these taxes are defined."

Insisting that "the most important characteristic of an environmental tax is that it promotes more sustainable and less environmentally damaging behaviours regardless of why it was introduced", the report went on: "We recommend that the government consider providing tax incentives, such as a council tax rebate or stamp duty discount, in next year's Budget to support the take up of the Green Deal."

And it said that the current system was too complex, meaning that "businesses cannot be expected to change their behaviours and investment decisions if they are unaware of the cumulative impact of the environmental taxes affecting them".

The report said: "To tackle the growing complexity of environmental taxes and to build greater trust in their purpose, a coherent and clearly articulated approach is needed towards environmental taxes and broader environmental policy. A clear environmental tax strategy, should be a key component of this.

"We are [also] disappointed that unnecessary delays in securing state aid approval seem likely to result in the status of the Green Investment Bank being fudged. We are disappointed that the government did not ... make preliminary contact with the European Commission to start the process for securing state aid approval."

However, the FoE's senior economy campaigner Simon Bullock said that the biggest threat to people's fuel bills was rising world fossil fuel prices, not green taxation.

"Green taxes can help wean us off our fossil fuel addiction and onto clean and affordable alternatives," he said, "our current dependency leaves all of us vulnerable to savage future price hikes. Developing the UK's huge green energy potential will also create new jobs and business opportunities and slash the billions of pounds spent on fuel imports.

"[But] the Treasury has consistently failed to play its part in tacking climate change – and its cack-handed approach to green taxation is little surprise. David Cameron must show real leadership by pushing the Treasury to lay the foundations for a low-carbon economy and ensure we all benefit from a green, safe future."

• The committee is examining the concept of a green economy in the UK, what it should look like, and how it will help deliver sustainable development. And it will look at the barriers preventing the transition to a green economy and the government's role in tackling these and creating the conditions necessary for a green economy to thrive.

The committee is looking for written input on what economic, social and environmental outcomes a green economy should aim to deliver, what barriers there are to a green economy, and what action needed to be taken, including which sectors of the economy would be crucial to a green economy. The committee will also look at the role of consumers, businesses, non-government organisations, and international bodies in delivering, and stimulating demand for, a green economy.
Written evidence and other submissions should be sent to the committee by Friday 26 August 2011.

Submissions should be sent by e-mail to eacom@parliament.uk and marked 'Green Economy', with a hard copy sent to: Clerk of the Committee, Environmental Audit Committee, House of Commons 7 Millbank, London SW1P 3JA.