Net zero will raise taxes

Treasury: Taxes may need to rise to support net zero drive Prime Minister Boris Johnson has unveiled plans for Britain achieving net zero by 2050 but the Treasury has warned that taxes may have to rise to cover the estimated £1trn bill. The Treasury said the transition to a greener economy will have “material fiscal consequences” and warned: “There will be demands on public spending, but the biggest impact comes from the erosion of tax revenues from fossil fuel-related activity.” It added: “If there is to be additional public spending, the Government may need to consider changes to existing taxes and new sources of revenue throughout the transition to deliver net zero sustainably.” According to the Treasury’s net zero review, higher taxes could discourage foreign companies from operating in the UK, lowering tax revenues further. The Treasury document also suggested: “Seeking to pass the costs onto future taxpayers through borrowing would deviate from the polluter pays principle,” adding that it would also “not be consistent with intergenerational fairness nor fiscal sustainability.” Despite flagging issues around the financial element of achieving net zero, the Treasury acknowledged that the costs of global inaction on the climate were greater than those of action. Isaac Delestre, research economist at the Institute for Fiscal Studies, said that if the Government is successful in steering the UK towards net zero, fuel duty and vehicle excise duty revenues will “decline substantially, placing direct pressure on the public finances.” Julian Jessop, economics fellow at the Institute for Economic Affairs think-tank, said that lost tax revenues from fossil fuels “will be significant” but added that this “should not be a key consideration in setting climate change policy”.