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Lack of “understanding, leadership and coordination” at HMT and HMRC in face of global “climate storm breaking all around us”

28 April 2021

Public Accounts Committee today warns HM Treasury and HMRC have a “very limited view of the role of tax”, with a “limited understanding of the environmental impact” of taxes, and were unable to explain to the Committee “how the tax system is used in achieving the government’s environmental goals”.


Yet despite a narrow “focus on the revenue taxes raise”, the two departments also “have yet to plan for the impact of the government’s environmental ambitions on tax revenues”.  For example, £28 billion of fuel duty was raised in 2019-20, but this will steadily decline as people change to electric vehicles to meet the government’s target to end the sale of new petrol, diesel and hybrid cars by 2035: “HM Treasury cannot explain how it will manage declining revenues from consumption of fossil fuels”.

At present HMRC and Treasury only recognise four environmental taxes, that have specific environmental objectives. The departments have not kept track of the impact of other tax measures with environmental impacts, such as tax reliefs to support energy saving and clean technologies, or the impact of tax measures affecting the consumption of fossil fuels. They have started to assess the impact of fuel duty freezes on the environment, but the PAC says “environmental assessments should be made for all taxes”.  

The Committee sees “a lack of leadership and coordination” that “mirrors findings in our recent reports on Achieving government’s long-term environmental goals and Achieving net zero”. Given the Treasury’s cross-government remit, it is “disappointing to see the silo thinking we often see in other Whitehall departments extending to the Treasury itself”. The Treasury is still considering how tax should fit within a comprehensive programme for funding net zero. It acknowledges that further action is needed to hit the 2050 target. 

Meg Hillier MP, Chair of the Public Accounts Committee:

“The economic revolution required to abandon fossil fuels and reach net zero must be the greatest co-ordinated ask, of governments around the globe, in history. But the UK government has been blithely issuing ever more ambitious climate targets for years now, with no sign of a roadmap to reach any of them. The departments in charge seem stuck in a bygone era, with little sign of the innovative thinking needed to achieve all this.

Every week brings reports of some climate record disturbingly broken - the hottest year, the hottest decade, warming seas rising faster than we feared, carbon emissions raging back even as the economy takes more faltering steps. Now we are six months from hosting the next major global climate summit and the climate storm is breaking all around us. HMRC and HMT need to catch up fast.”

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Image: PA