Budget 2011 and environmental taxes - Environmental Audit Committee Contents

1 Introduction

1.  This report follows a series of annual inquiries on the Pre-Budget Report and the environment in the previous Parliament by our predecessor Committees.[1] They consistently found that Government was not doing enough to shift the balance of taxation from 'goods' (for example profits and income) to 'bads' (for example pollution) and expressed concerns that existing taxes such as Fuel Duty and Air Passenger Duty were not structured effectively to drive the change in behaviour needed for the transition to a low-carbon economy.

2.  The 2011 Budget was delivered on 23 March 2011, and followed the current Government's Spending Review in October 2010.[2] The Budget Report stated:

The Government is committed to being the greenest Government ever. A simple, efficient and cost effective policy framework will meet environmental objectives while supporting growth and maintaining a sound fiscal position. Market-based solutions to price carbon are at the heart of this approach, achieving objectives at the lowest possible cost. The Government will increase the proportion of tax revenue accounted for by environmental taxes.[3]

Alongside the 2011 Budget, the Government set out measures to deliver its priorities for the economy in the Plan for Growth,[4] and launched a consultation on Air Passenger Duty.[5]

Our inquiry

3.  Against this background, we decided to explore the principles of environmental taxes (Chapter 2). Our aim is to set out some foundations for future inquiries on environmental taxation and Budgets during the course of this Parliament. In this first report in this series, we go on to examine the application of these principles for transport taxes in particular (Chapter 3), the Carbon Floor Price (Chapter 4), and whether the Budget and Plan for Growth further the green economy agenda (Chapter 5). We received 43 submissions and took oral evidence from non-governmental organisations, think-tanks, academics and the Economic Secretary to the Treasury, Justine Greening MP. We are grateful to them all.

1   Most recently: Environmental Audit Committee, Third Report of Session 2008-09, Pre-Budget Report 2008 -Green Fiscal Policy in a Recession, HC 202. Back

2   HM Treasury, Spending Review 2010, Cm 7942, October 2010. Back

3   HM Treasury, Budget 2011, HC 836, March 2011, paragraphs 1.110 and 1.111. Back

4   HM Treasury and Department for Business, Innovation and Skills, The Plan for Growth, March 2011. Back

5   HM Treasury, Reform of Air Passenger Duty: a consultation, March 2011. Back

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© Parliamentary copyright 2011
Prepared 7 July 2011