As the UK prepares to host the UN Climate Change Conference (COP 26) the UK government urgently needs to demonstrate leadership on transforming its tax system to support a green and fair transition.
The crucial net zero review by the UK Treasury, which will assess how the UK can manage the transition to a low carbon economy, has been delayed. And on ‘Tax Day’ in March the Treasury announced its plans to slash Air Passenger Duty on domestic flights while alo effectively ruling out a frequent flier lecy. This is simply not good enough.
Last month an important report by the UK’s Office for Budget Responsibility found that the cost of making the transition to a green economy is manageable. That’s if we act soon. The report set out that the costs of transitioning to a green economy would be less than the cost of the covid pandemic. It also argued that this could be offset by taxes on carbon.
With this in mind UK Chancellor Rishi Sunak should look urgently at the role that tax reform can play in a green and fair transition. The tax system can incentivise environmental goods, reduce emissions intensive and other environmentally destructive activities, encourage people and businesses to make the most of emerging low carbon opportunities and raise funds to support government action.
“ It’s crucial that the tax system should be progressive overall, focusing on those with the greatest ability to pay and with the greatest responsibility for climate and other environmental damage.”
Together with a range of partners from the Green Alliance to Greenpeace and Oxfam we have set out principles for how the UK government should reform the tax system to help steer our economy to a fairer, net zero, future.
The principles stress the importance of aligning taxes to support climate and environmental goals, taxing fairly and ensuring effectiveness. It’s crucial that the tax system should be progressive overall, focusing on those with the greatest ability to pay and with the greatest responsibility for climate and other environmental damage. This will ensure that any changes are popular.
You can read the full set of principles here.
It is also important to stress that there are limitations, too. Tax reform will not be a complete solution and must be accompanied by other policies, such as regulation and increased public and private investment.
For ideas and suggestions what more needs to happen watch our webinar ‘Climate and Tax Justice: Time to act?’, which was chaired by UK Green Party MP Caroline Lucas and featured a range of speakers including entrepreneur and millionaire Gemma McGough and many others. Watch the recording here.
- Sara Hall, Head of Movement and Partnerships, Tax Justice UK
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