Taxes must rise to pay for climate change, MPs warn

Taxes will need to rise to pay for the green revolution which is necessary to save the planet from global warming, MPs warn today.

By Rosa Prince, Political Correspondent Last Updated: 3:45PM GMT 16 Mar 2009

In a report on the impact of the recession on attempts to transform the UK into a low-carbon economy, an influential Commons committee reveals that levels of green taxes are now falling while overall tax revenues increase.
And the MPs on the Environmental Audit Committee warn that without tax rises or radical cuts in public spending elsewhere, the Government will not be able to afford to continue the "green stimulus package" announced in the pre-Budget report in November.

Last week, the world's leading climate change scientists, gathered in Copenhagen, issued a desperate plea to politicians to take urgent action on climate change or risk catastrophic global warming.
But in their report, the MPs expose the timidity of the Government's response to the crisis, revealing that the £535 million package for low carbon measures announced in the PBR was made up of money brought forward from future budgets.
That means that the Government will either have to cut spending or raise taxes to pay for future measures to "green" the economic recovery.
Tim Yeo, chairman of the committee, said: "The Treasury has announced very little new money for green investments.
"Yet meeting our climate change targets will require a step-change in funding for the low carbon energy sector, especially when the financial crisis has led to a shortage of capital."
In their report, the MPs say that the Treasury's take from green taxes has fallen slightly since 1998, while overall revenues have risen by 30 per cent.
They call on Alistair Darling, the Chancellor, to announce more environmentally-friendly projects in the upcoming Budget, adding that investment in low carbon industries could lead to job creation. They also want guaranteed financing for green projects through the current credit squeeze.
Banks in receipt of public funds could be forced to invest in low-carbon firms, and the committee called on Lord Mandelson, the Business Secretary, to be explicit about the demands placed on car manufacturers to build greener models before being granted government aid.
Mr Yeo added: "Measures designed to pull the economy out of recession provide an invaluable opportunity for the Treasury to drive the kind of change required to build a sustainable modern economy.
"The upcoming Budget is a real test of the Government's commitment to its own climate change policies. Yet the measures in the Pre-Budget Report show the Treasury lacks the consistency and boldness of purpose required.
"There is clear evidence that investment in low carbon industries will lead to net job creation. The Budget should contain a much bigger and more coherent package of green fiscal stimulus."