The Economic Secretary to the Treasury (Sajid Javid)
This Government are reforming the tax system to make it more competitive, simpler, fairer, and greener. As part of this, in May 2010 Government committed to increasing the proportion of tax revenue accounted for by environmental taxes.
Last summer, the Government published their definition of environmental taxes which set the baseline for achieving that commitment. This statement provides an update of the Government’s progress against that commitment, using the independent OBR forecasts published alongside the Budget. To provide greater clarity the Government will also publish similar summaries of progress each year until the end of this Parliament.
The Government classify environmental taxes as those that meet all of the following three principles:
The tax is explicitly linked to the Government’s environmental objectives;
The primary objective of the tax is to encourage environmentally positive behaviour change; and
The tax is structured in relation to environmental objectives (for example: the more polluting the behaviour, the greater the tax levied).
The Government have defined the following as environmental taxes based on these principles:
Climate Change Levy
Aggregates Levy
Landfill Tax
EU Emissions Trading System (EU ETS)
Carbon Reduction Commitment Energy Efficiency Scheme
Carbon Price Floor
The OBR forecasts demonstrate that the coalition remains on track to achieve its commitment to increase the proportion of revenue accounted for by environmental taxes.
Tax | Actual Revenue Raise 2010/11 | Actual Revenue Raise 2011/12 | Revenue forecast 2012/13 | Revenue forecast 2013/14 | Revenue forecast 2014/15 | Revenue forecast 2015/16 | Revenue forecast 2016/17 | Revenue forecast 2017/18 |
|---|---|---|---|---|---|---|---|---|
Climate Change Levy and Carbon Price Floor | £0.7 bn | £0.7 bn | £0.6 bn | £0.3 bn | £1.9 bn | £2.4 bn | £2.5 bn | £2.5 bn |
Aggregate Levy | £0.3 bn | £0.3 bn | £0.3 bn | £0.3 bn | £0.3 bn | £0.3 bn | £0.3 bn | £0.3 bn |
Landfill Tax | £1.1 bn | £1.1 bn | £1.1 bn | £1.0 bn | £1.1 bn | £1.2 bn | £1.1 bn | £1.2 bn |
EU ETS | £0.5 bn | £0.2 bn | £0.3 bn | £0.7 bn | £0.7 bn | £0.8 bn | £0.8 bn | £0.9 bn |
Carbon Reduction Commitment | £0.0 bn | £0.7 bn | £0.7 bn | £0.7 bn | £0.9 bn | £0.9 bn | £1.0 bn | £1.0 bn |
Total | £2.5 bn | £3.0 bn | £3.1 bn | £4.0 bn | £4.9 bn | £5.6 bn | £5.7 bn | £5.9 bn |
2010/11 | 2011/12 | 2012/13 | 2013/14 | 2014/15 | 2015/16 | 2016/17 | 2017/18 | |
|---|---|---|---|---|---|---|---|---|
Total Revenue from Environmental Taxes | £2.5 bn | £3.0 bn | £3.1 bn | £4.0 bn | £4.9 bn | £5.6 bn | £5.7 bn | £5.9 bn |
Total Tax Forecast Receipts | £551.4 bn | £572.6 bn | £586.8 bn | £612.4 bn | £633.1 bn | £657.6 bn | £694.1 bn | £723.0 bn |
Proportion of Total Tax Receipts | £0.5 bn | £0.5 bn | £0.5 bn | £0.7 bn | £0.8 bn | £0.8 bn | £0.8 bn | £0.8 bn |
Revenue Raising Taxes & Fiscal Instruments with Environmental Benefits
These are taxes and fiscal instruments which are primarily designed to raise revenue or to achieve other objectives, and therefore do not qualify as environmental taxes on the basis of the Government’s three principles.
Differentiating environmental taxes from taxes which are designed to achieve other objectives provides greater clarity and transparency to the Government’s overall tax strategy. However, non-environmental instruments may have an environmental impact due to behavioural change. On that basis, the Government believe that it is important to make reference to transport taxes, levies and exemptions/reliefs in its overall assessment of environmental taxation.
Budget 2013 made several announcements that will act to sharpen the environmental signals of non-environmental taxes, including:
Ultra Low Emissions Vehicles—Budget 2013 announced a £100 million package to support the purchase and manufacture of Ultra Low Emission Vehicles (ULEVs) in the UK through company car tax (CCT) and the capital allowances regime. Government are guaranteeing reduced rates of CCT for ULEVs until 2020; and extending the 100% first year allowance for ULEVs until 2018.
Enhanced capital allowances: energy-saving and water-efficient technologies—The list of designated energy-saving and water-efficient technologies qualifying for enhanced capital allowances will be updated during summer 2013, ensuring the most efficient technologies continue to be targeted.
Capital allowances: railway assets and ships—Budget 2013 announced the extension of first year allowances (including enhanced capital allowances for energy-saving and water-efficient technologies) to expenditure on railway assets and ships from April 2013.
VED: Reduced Pollution Certificates (RPCs)—Budget 2013 announced that the Government will end RPC Vehicle Excise Duty discounts for Euro I-III vehicles within the HGV Road User Levy scheme from 1 April 2014, and for all other Euro I-III vehicles from 1 April 2016.