Treasury under fire over green taxes

The House of Commons Environmental Audit Committee has slammed the government for a “lack of ambition” over the use of green taxes

In a report published yesterday, the committee complains that green taxes accounted for just 7.3% of all tax revenue in 2006 – down from a peak of 9.7% in 1999. The MPs want the government to increase the level of taxation on high carbon activities like flying and driving and called for taxes on aviation to be “significantly increased”. They suggest different levels of taxation depending on whether journeys are short-haul, long-haul or very long-haul to reflect the fact that longer flights emit more carbon dioxide.

The MPs also warned the Chancellor not to backtrack on the increases in road fuel taxes planned for April.

The committee notes that the public regards many green taxes as stealth taxes and urged the government to do more to explain their purpose. It also thinks that taxpayers would accept higher levels of green taxation if they see the money being spent on protecting the environment.

On green taxation, the Treasury has “continually demonstrated a lack of ambition and imagination,” said committee chairman Tim Yeo (Conservative, Suffolk South). “The Treasury must be bolder in raising green taxes once again. It should sell these tax rises to the public by linking them to increased spending on the environment and reductions in other taxes.”

The committee also criticised the government for not providing enough funding to encourage low carbon technologies like carbon capture and storage. It notes that the government is likely to receive millions of pounds more from the auctioning of allowances under the second phase of the EU emissions trading scheme than it has allocated to its much trumpeted environmental transformation fund.

It also wants environmental issues to be “mainstreamed” across government, and says it should set sectoral targets for emissions reductions and give relevant departments responsibility for meeting them.

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