UK government has ‘no plan’ for replacing taxes from net zero drive, MPs say

In a new report, it found that there is currently no pathway for replacing taxes from fuel duty and “no reliable estimate of what the process of implementing the net zero policy is actually likely to cost British consumers, households, businesses or government itself”.

In 2019-20, fuel duty raised £28bn, representing about 3.3 per cent of all tax receipts, equivalent to £1,000 per household and 1.2 per cent of national income.

The value of the duties are also expected to plummet over the coming decade in the lead-up to the 2030 ban on sales of new petrol and diesel vehicles.

The government has “too often pursued stop-start strategies which undermine confidence for business, investors and consumers in committing to measures which would reduce carbon emissions - especially when some green alternatives are still significantly more expensive than current options,” the report reads.

Treasury officials questioned by the committee were “reluctant to be drawn” on future costs.

Various net zero initiatives are currently under way, including plans to scrap gas boilers as well as roadmaps to help manufacturers decarbonise their operations.

To achieve its net zero goal by 2050, the government has committed around £25bn up to 2024–25, with more funds expected after that.

But the PAC warned that the current approach is composed of a series of “disconnected initiatives” which will not bring about the changes that are set out in law.

In 2019, the UK became the first country to pass a law enshrining the UK’s commitment to reaching ‘net zero’ by 2050.

Dame Meg Hillier MP, the PAC’s chair, said: “Government is relying heavily on rapidly changing consumer behaviours and technological innovations to drive down the costs of green options, but it is not clear how it will support and encourage consumers to purchase greener products or incentivise businesses and drive change.

“Every government department has a responsibility for delivering policies towards the target of net zero but two years after enshrining the ‘Net Zero’ by 2050 target in law, the government has unveiled a plan without answers to the key questions of how it will fund the transition to net zero - including how it replace significant income from taxes such as fuel duty.

“The government’s net zero strategy requires government, local government, regulators, businesses, and consumers working all together to deliver its targets. A top-down strategy from government won’t deliver on its own. There is a risk that a series of disconnected initiatives announced by central government will not bring about the changes that are now set out in law.”