The UK government raised a total of £40.8bn through “green taxes” last year, which is equivalent to 6% out of the £633bn raised through taxes overall, down from 8% of all taxes a decade ago.
According to Pinsent Masons, the amount of money brought in by green taxes has only risen 19% in the ten years since 2009/10 compared to a 53% rise in taxes as whole and far lower than inflation over the period.
In addition to revenue from green taxes remaining low, new research from the firm showed that the government gave back only £2.9bn in green tax breaks last year, which represents just 7% of the amount raised by green taxes.
Jason Collins, head of tax at Pinsent Masons claimed that revenue from environmental taxes remained “stubbornly low” and the freezing of key green taxes in the Budget including fuel duty and carbon price support mean it is likely that this revenue will continue to fall.
He said: “The statistics suggest that far from making progress in using tax policy to reduce polluting activity, the UK has been going backwards.
“Taxation will play a vital role in driving the UK to its net zero target. The shrinking share of revenue brought in by green taxes is evidence that the Government isn’t yet doing enough to discourage polluting behaviour.”
He added: “The government needs to address the imbalance between taxes and tax reliefs to not only penalise polluters but reward businesses that invest in green technology to get the UK closer to carbon neutrality.
“A wholesale review of the tax system is needed – with all new legislation designed with a focus on the impact on the net zero target.”