MPs call for VAT reductions on green goods and services after Covid-19

Cross-party group also urges ministers to consider introducing tax incentives to encourage faster uptake of electric cars

The Environment Audit Committee said the PM’s 10-point climate plan was ‘not yet investible’ (Getty Images/iStockphoto)

A cross-party group of MPs has called on the government to do more to put efforts to tackle the climate and nature crises at the centre of the UK’s economic recovery from Covid-19.

The Environment Audit Select Committee recommended the introduction of new measures, such as VAT reductions on green home upgrades and tax incentives to encourage more uptake of electric cars.

The group also said the government should “begin scoping work on a carbon tax” as part of the drive to pursue a green recovery from the pandemic.

Conservative MP Philip Dunne, chairman of the committee, said: “The Covid-19 crisis must be treated as a wake-up call. It is a symptom of a growing ecological emergency. The economic recovery will shape our national economy for decades to come, and it is crucial that tackling climate change and restoring nature is at its core.

“A tax system fit for net-zero Britain is key. It will encourage innovation, give confidence to the sector and support companies to make the low-carbon transition.

“There are endless initiatives that can lead to a greener future and the chancellor should use his upcoming budget statement to start this process.”

The committee said that Boris Johnson’s 10-point climate plan, which was first unveiled in November 2020, “points in the right direction” but “is not yet investible”.

The strategies underlying the plan must be published rapidly “to give industry confidence”, the MPs added.

The group also said that the government’s green homes grant scheme must be “urgently overhauled” and “given a multi-year extension”.

The call comes after the government faced intense criticism for its decision to pull the majority of the funding originally allocated to the scheme, which was first unveiled last year.

Kate Blagojevic, a senior climate campaigner at Greenpeace UK, said: “The green homes grant needs to be fully reinstated, extended and delivered in full.

“How can we expect to fly the flag of climate leadership if we can’t even deliver a promise to insulate the millions of damp and draughty homes in the UK, which are a huge source of carbon emissions?”

The MPs said that “front-loading investment” in areas such as energy efficiency and climate adaptation could create new jobs in the face of rising unemployment.

“Levels of unemployment not seen in decades are now in prospect, on a scale which inevitably demands government intervention,” the MPs write in their report.

Other measures suggested by the committee include more long-term investment in public transport and more support to encourage walking and cycling in cities.

The MPs added that investments to facilitate nature recovery must not be an “afterthought”, and that the idea of a “national nature service” should be piloted to test its feasibility.

Caterina Brandmayr, head of climate policy at Green Alliance, said: “The EAC’s report rightly puts the spotlight on what the government still needs to do to deliver a green recovery.

“Front-loading investment in climate solutions, nature and the circular economy, and ensuring recovery plans are consistent with our climate and environmental goals must be a priority in the upcoming budget and government strategies.

“This will help create jobs, benefit businesses and communities across the country, and ensure the UK is seen as an environmental world leader as it prepares to host first the G7 and then Cop26.”

A government spokesperson said: “We’re committed to building back better and greener from the pandemic, which is why the prime minister’s 10-point plan will put the UK at the forefront of the global green industrial revolution and create hundreds of thousands of green jobs, while the treasury’s net-zero review is examining how the transition to net zero should be funded.

“We continue to bring forward bold measures to cut emissions, with plans to invest £9bn in improving the energy efficiency of buildings forming part of our wider commitment to end our contribution to climate change by 2050.”