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Green revolution in UK will not inevitably mean tax rises, says minister

The Treasury has highlighted that £37 billion-a-year revenue from fuel duty and vehicle excise duty is threatened by phasing out petrol and diesel vehicles (PA Wire)
The Treasury has highlighted that £37 billion-a-year revenue from fuel duty and vehicle excise duty is threatened by phasing out petrol and diesel vehicles (PA Wire)

Tax rises to make Britain net zero are not “inevitable”, a Cabinet minister has said.

The Business Secretary Kwasi Kwarteng argued that a surge in extra investment in green technology would bring down the costs of switching to heat pumps, electric cars and other environmentally-friendly products.

The Treasury has highlighted that £37 billion-a-year revenue from fuel duty and vehicle excise duty is threatened by phasing out petrol and diesel vehicles. This would in effect be a tax cut and the Chancellor could have to recoup it from rises elsewhere.

The Treasury also stressed on going green: “If there is to be additional public spending, the Government may need to consider changes to existing taxes and new sources of revenue.”

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But Mr Kwarteng argued the Treasury analysis had not taken fully into account benefits of shifting to net zero. He told LBC: “I don’t think tax rises are inevitable. Ten years ago, 40 per cent of our electricity came from burning coal. Today, that figure is one to two per cent and renewables have taken up most of that difference and costs have not gone up.”

Watch: 440,000 new jobs with net-zero strategy - UK minister

The aim was to “bring people along with us” on the green switch rather than “impose additional costs and burdens”. However, environmental groups are already warning the Government’s Net Zero Strategy, to make the UK carbon neutral, does not go far enough to stop catastrophic global warming.

Tory MPs, on the other hand, are warning against tax hikes and other costs on households to pay for the £26 billion of government capital investment being ploughed into the “green industrial revolution”. Mr Kwarteng insisted extra burdens could be avoided and said the Government was not considering road pricing, where people pay for how much they travel, to plug the hole in lost fuel duty revenue.

Motor manufacturers were planning electric cars costing about £10,000, he added, and argued the cost of heat pumps would fall significantly.

Ahead of the Cop26 climate change summit in Glasgow, he also warned that the “cost of inaction could be greater than actually doing things”.

Cop26 president Alok Sharma was updating MPs today on progress for the summit with doubts remaining over whether China’s Xi Jinping and Russia’s Vladimir Putin will attend. Their countries are major polluters and if they do not engage fully in Cop26, its chances of success will be severely dented.

The Net Zero Strategy includes nearly £1 billion to boost the take-up and manufacturing of electric cars in the UK, £625 million to triple tree planting in England by 2024, £500 million to develop green technologies, £120 million towards developing new small modular nuclear reactors, and a £140 million scheme to accelerate carbon capture and hydrogen green projects.

Ministers have also allocated £450 million to offer £5,000 grants to households to replace their gas boiler with a low carbon heat pump.

Watch: Global economic development arm overhauls tax rate

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