Environmental tax measures

Public Accounts Committee Closed Inquiry
Opened: 1 Feb 2021 Closed: 28 Jun 2021 Parliament page
Tax measures which have an environmental impact act alongside government’s wider environmental objectives. As these objectives have become more ambitious, the role of the tax system may become more important. HM Treasury’s 2020-21 review into funding the transition to a net zero greenhouse gas economy explicitly plans to “consider the … Read more
6 Recommendations
29 Conclusions
1 Report
1 Oral session
1 Letter
1 Event
Activity timeline 4 events
2 Sep
2021
Report published
28 Apr
2021
Report published
16 Apr
2021
Correspondence
8 Mar
2021
Oral evidence
Oral evidence sessions 1 session
8 Mar 2021
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Environmental tax measures
Beth Russell · HM Treasury Jim Harra · HMRC Ruth Stanier · HM Revenue and Customs Sir Tom Scholar · HM Treasury
Title HC No. Published Items Response
Fifty-Fifth Report - Environmental tax measures HC 937 28 Apr 2021 35 Responded
Recommendations & Conclusions
35 results
2 Recommendation Not Addressed
Fifty-Fifth Report - Environmental…
HM Treasury cannot explain how it will manage declining revenues from consumption of fossil fuels,...
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 … Read more
Government Response
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.
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3 Recommendation Not Addressed
Fifty-Fifth Report - Environmental…
We are concerned that immediate priorities have often outweighed action needed to support long-term environmental...
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 … Read more
Government Response
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.
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4 Recommendation Not Addressed
Fifty-Fifth Report - Environmental…
Tax impact assessments do not sufficiently recognise the potential for every tax measure to affect...
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 … Read more
Government Response
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.
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5 Recommendation Accepted in Part
Fifty-Fifth Report - Environmental…
HMRC has not done enough to evaluate how tax measures with environmental objectives have changed...
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 … Read more
Government Response
The government agrees with the recommendation for HMRC to ensure sufficient information on environmental tax impacts and sets a target implementation date of Winter 2021. However, it highlights existing data usage, ongoing development for the Plastic Packaging Tax, and notes that further evaluation activity will be considered within an overarching, proportionate approach.
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6 Recommendation Not Addressed
Fifty-Fifth Report - Environmental…
We were concerned that HM Treasury and HMRC seemed to view the consequences of environmental...
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 … Read more
Government Response
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.
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1 Conclusion Not Addressed
Fifty-Fifth Report - Environmental…
On the basis of a report by the Comptroller and Auditor General, we took evidence...
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
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.
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7 Conclusion
Fifty-Fifth Report - Environmental…
We asked HM Treasury why it had not undertaken the comprehensive public review of the...
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 … Read more
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8 Conclusion Acknowledged
Fifty-Fifth Report - Environmental…
HM Treasury also said that two years ago it had been asked to prepare a...
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 … Read more
Government Response
The government confirms HM Treasury is actively supporting environmental goals through an ongoing analytical Net Zero Review, whose final report will highlight factors for designing policy to allocate transition costs.
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9 Conclusion Accepted
Fifty-Fifth Report - Environmental…
HM Treasury told us that the final report will provide an analytical framework to consider...
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 … Read more
Government Response
The government explains that HM Treasury is actively supporting environmental goals by conducting a Net Zero Review and is closely involved with BEIS in developing an overall Net Zero Strategy, ensuring tax options are considered.
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10 Conclusion Accepted in Part
Fifty-Fifth Report - Environmental…
The UK is hosting the 26th UN Climate Change Conference of the Parties (COP26) in...
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 … Read more
Government Response
The government agrees with the recommendation for HM Treasury to set out a net zero vision, stating that BEIS will publish the comprehensive Net Zero Strategy. HMT will not publish a separate strategy but its Net Zero Review will update on how climate considerations are embedded within its own processes.
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11 Conclusion Accepted
Fifty-Fifth Report - Environmental…
We asked whether by the time we get to COP 26 everybody will have a...
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 … Read more
Government Response
The government agrees with the committee's implicit recommendation that HM Treasury should aim to become an exemplar finance department in supporting government’s environmental goals like net zero, with a target implementation date of Autumn 2021.
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12 Conclusion Rejected
Fifty-Fifth Report - Environmental…
HM Treasury’s December 2020 interim report on net zero said that “the transition to net...
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 … Read more
Government Response
The government disagrees with the committee's implicit recommendation to set out a timetable for the replacement of fuel duty revenues before the next Budget, stating it would pre-empt policy decisions.
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13 Conclusion Rejected
Fifty-Fifth Report - Environmental…
The transition to cleaner vehicles in the UK will reduce the demand for petrol and...
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 … Read more
Government Response
The government disagrees with setting a timetable before the next Budget for replacing fuel duty revenues, stating it would pre-empt policy decisions, although it acknowledges the need to consider implications for tax revenue from net zero.
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14 Conclusion Rejected
Fifty-Fifth Report - Environmental…
We asked what planning HM Treasury had undertaken to counteract the reduction in revenue from...
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 … Read more
Government Response
The government rejects the implied recommendation to set out a timetable for replacing fuel duty revenues before the next Budget, stating it would pre-empt ministerial policy decisions. It agrees on the need to consider revenue implications and set out a plan over time.
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15 Conclusion Acknowledged
Fifty-Fifth Report - Environmental…
We pointed out that the ban on new petrol and diesel cars from 2030 is...
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 … Read more
Government Response
The government acknowledges the fiscal implications of the transition to net zero, particularly the erosion of motoring tax revenue, and states its intention to ensure revenue keeps pace and to plan for sufficiently early and broad consultation.
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16 Conclusion Acknowledged
Fifty-Fifth Report - Environmental…
It may also take time for government to introduce tax changes needed to make- up...
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 … Read more
Government Response
The government acknowledged the fiscal implications of the transition to net zero, noting the need to ensure motoring tax revenue keeps pace and committing to early and broad consultation on future tax changes.
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17 Conclusion Accepted
Fifty-Fifth Report - Environmental…
We raised the potential impacts of changes to taxes, to address the reduction in revenue...
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 … Read more
Government Response
The government acknowledges the fiscal implications of transitioning to net zero and the erosion of fuel duty revenue. It commits to ensuring motoring tax revenue keeps pace to fund public services and will undertake early and broad consultation with society on future plans.
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18 Conclusion Rejected
Fifty-Fifth Report - Environmental…
The March 2021 Budget took place the week before our session with HM Treasury and...
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 … Read more
Government Response
The government disagrees with setting a timetable for consulting on options for replacing declining fossil fuel revenues before the next Budget, stating it would pre-empt policy decisions, but acknowledges the need to plan for consultation in the future.
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19 Conclusion Accepted in Part
Fifty-Fifth Report - Environmental…
When we asked HM Treasury whether the tax system would have a role to play...
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 … Read more
Government Response
The government agrees with the implied recommendation for long-term tax planning for net zero, committing to write to the Committee on the pros and cons of a roadmap by Autumn 2021. However, it notes reasons why a standalone tax roadmap may not be appropriate and defers decisions to Ministers.
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20 Recommendation Deferred
Fifty-Fifth Report - Environmental…
In September 2020, the Institute for Government called for HM Treasury to publish a 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 … Read more
Government Response
The government agrees with the recommendation but commits only to writing to the Committee on the pros and cons of setting out a longer-term roadmap on tax and net zero, noting that decisions on publication are for Ministers.
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21 Conclusion Deferred
Fifty-Fifth Report - Environmental…
Against this background, we asked HM Treasury whether it would publish its plans so that...
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 … Read more
Government Response
The government agrees with the recommendation but commits only to writing to the Committee on the pros and cons of setting out a longer-term roadmap on tax and net zero, noting that decisions on publication are for Ministers.
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22 Conclusion Rejected
Fifty-Fifth Report - Environmental…
The exchequer departments define ‘environmental taxes’ as those with explicit environmental objectives.40 There are currently...
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 … Read more
Government Response
The government disagrees with the recommendation to assess and publish the environmental impact of every tax change from Budget 2022, citing impracticality and cost, but affirms it already carefully considers environmental implications for relevant measures.
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23 Conclusion Rejected
Fifty-Fifth Report - Environmental…
The March 2021 Budget does not include any new tax measures with environmental objectives but...
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 … Read more
Government Response
The government rejects the implied recommendation to assess the environmental impact of every tax change, stating it would be impractical and not cost-effective. It clarifies that environmental implications are already considered for relevant measures, citing examples like red diesel and plastic packaging tax.
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24 Conclusion Accepted in Part
Fifty-Fifth Report - Environmental…
If Parliament is to be able to effectively scrutinise the environmental impact of tax changes...
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 … Read more
Government Response
The government agrees with the recommendation that HMRC should have sufficient information. It states HMRC already uses various data sources and is building evaluation mechanisms into the Plastic Packaging Tax design, but notes that further activity will be considered within HMRC's broader evaluation approach.
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25 Conclusion Accepted
Fifty-Fifth Report - Environmental…
The NAO found that HMRC monitors tax receipts for the four environmental taxes it administers...
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 … Read more
Government Response
The government agreed with the committee's Recommendation #5, which called for HMRC to ensure it has sufficient information to assess the impact of environmental taxes on behaviour, and set a target implementation date of Winter 2021.
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26 Conclusion Accepted
Fifty-Fifth Report - Environmental…
We asked HMRC what it had done to quantify the impact of Landfill Tax on...
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 … Read more
Government Response
The government states it agrees with the general importance of HMRC having sufficient information on environmental tax impacts, describing existing data usage and new evaluation mechanisms for taxes like the Plastic Packaging Tax, though not specifically detailing plans for quantifying Landfill Tax impacts on fly-tipping or exports mentioned in the conclusion.
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27 Conclusion Accepted in Part
Fifty-Fifth Report - Environmental…
We also asked about the impact of the Carbon Price Support on the amount of...
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 … Read more
Government Response
The government agrees with the recommendation that HMRC should ensure it has sufficient information to assess environmental tax impacts. It states HMRC already uses various data sources and is building evaluation mechanisms into the Plastic Packaging Tax design, but notes that further activity will be considered within HMRC's broader evaluation approach.
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28 Conclusion Accepted
Fifty-Fifth Report - Environmental…
Evaluations can help the exchequer departments to understand whether environmental taxes are achieving their objectives...
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 … Read more
Government Response
The government agrees with the derived recommendation that HMRC should ensure it has sufficient information to assess environmental tax impacts, setting a target implementation date of Winter 2021. It highlights existing efforts and commits to further proportionate evaluation within HMRC's overarching approach.
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29 Conclusion Accepted
Fifty-Fifth Report - Environmental…
HMRC told us that it shared with this Committee and the NAO the ambition to...
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 … Read more
Government Response
The government acknowledges the importance of evaluation and states that HMRC already uses various data sources and is building evaluation mechanisms into new taxes like the Plastic Packaging Tax, while further activity will be considered proportionally.
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30 Conclusion Rejected
Fifty-Fifth Report - Environmental…
As we explain in Part One, the Department for Environment, Food & Rural Affairs (Defra)...
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. … Read more
Government Response
The government rejects the recommendation for exchequer departments to describe tax impacts on other departments' environmental responsibilities and agree robust assessment approaches, arguing it could constrain ministerial decisions on publications, but states it will consider next steps for internal assessment.
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31 Conclusion Rejected
Fifty-Fifth Report - Environmental…
The NAO found that some recent environmental strategies mentioned tax measures which have an impact...
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 … Read more
Government Response
The government rejects the recommendation for exchequer departments to describe tax impacts on other departments' environmental responsibilities and agree robust assessment approaches, arguing it could constrain ministerial decisions on publications, but states it will consider next steps for internal assessment.
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32 Conclusion Not Addressed
Fifty-Fifth Report - Environmental…
We found the picture for cross-government working on the operation of a tax was 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 … Read more
Government Response
The government's response explicitly quotes and rejects a different recommendation (Recommendation #6) from the committee, therefore not addressing the provided conclusion #32.
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33 Conclusion Rejected
Fifty-Fifth Report - Environmental…
HMRC expressed the opinion that Landfill Tax “needs to be complemented by regulation and effective...
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 … Read more
Government Response
The government rejects the recommendation for exchequer departments to describe tax impacts on other departments' environmental responsibilities and agree robust assessment approaches, arguing it could constrain ministerial decisions on publications, but states it will consider next steps for internal assessment.
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34 Conclusion Not Addressed
Fifty-Fifth Report - Environmental…
The Carbon Price Support is one of a number of policy interventions which has contributed...
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 … Read more
Government Response
The government's response explicitly quotes and rejects a different recommendation (Recommendation #6) from the committee, therefore not addressing the provided conclusion #34.
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35 Conclusion Accepted
Fifty-Fifth Report - Environmental…
The apparent lack of leadership and coordination on environmental tax measures, mirrors findings in our...
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 … Read more
Government Response
The government agrees with the implied recommendation to address coordination, setting an Autumn 2021 target. It highlights HM Treasury's active role, its ongoing Net Zero Review, and close involvement in the BEIS-led Net Zero Strategy, which will be published before COP26.
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Government Response AI assessment · 34 of 6 classified
Accepted 8
Accepted in Part 5
Acknowledged 3
Deferred 2
Not Addressed 7
Rejected 9
Total 6 recs + 29 conclusions
Correspondence 1 letter
16 Apr 2021 Correspondence from Tom Scholar, Permanent Secretary, HM Treasury, re Public Accounts Committee – Session of 8 March 2021, 24 March 2021
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