The Budget has missed the opportunity to incentivise taxpayers to help achieve net zero, according to one of the main City law firms.
Whilst the Chancellor has announced tax changes to encourage businesses to invest in green technology, the Chancellor also rolled out a cut in fuel duty and air passenger duty, potentially denting the UK’s plans to meet its climate targets.
With COP26 around the corner, law firm Pinsent Masons told City A.M. this morning the changes to taxes announced in the Budget are “a missed opportunity” for the UK to use tax to meet its climate goals.
“Many are now calling for the UK to use its tax system to help move us closer to net zero. Some will see this year’s Budget as a missed opportunity to achieve that,” said Steven Porter, Head of Tax Disputes and Investigations at Pinsent Masons.
Whilst the Government is committing plenty of money to green expenditure, it’s not yet using the tax lever effectively.Steven Porter of Pinsent Masons.
The firm shared calculations with City A.M. that demonstrate their argument. Tax changes to carbon-intensive sectors in the Budget amount to support worth £8.3bn over five years, compared to just £225m worth for green tax incentives.
Tax measures announced in the Budget to help businesses to become greener include business rate exemptions to help firms decarbonise their buildings, at £175m worth of tax cuts to 2026/27 and carbon price support rates, £50m worth of tax cuts to 2026/27
However, tax support available to carbon-intensive sectors totals £8.3bn over five years. This includes a reduction in Fuel duty worth £7.85bn over the next five years and a suspension of the HGV road user levy worth £255m over the next five years.
In addition, a reduction in Air Passenger Duty worth £130m over the next five years and a freeze on Vehicle Excise Duty worth £65m over the next five years, the firm pointed out.