LONDON: British finance minister Rishi Sunak’s annual budget on March 3 is set to have a green tinge, even as the country goes hundreds of billions of pounds into the red to fund its response to the coronavirus pandemic.
Sunak will move forward with plans to launch Britain’s first “green” government bonds - designed to finance environmentally friendly investments - and might also nudge the Bank of England to focus more on climate change.
But any progress on carbon taxes - endorsed by the International Monetary Fund in October - is likely to be slow as Sunak grapples with how best to close a 400-billion-pound ($556 billion) budget deficit, the largest since World War Two.
Britain is hosting a major United Nations environmental summit, COP 26, in November and Sunak told other finance ministers last week that he wanted action on climate change to be a major theme of Britain’s chairmanship of the G7 this year.
Philip Dunne, the Conservative chair of the British parliament’s Environmental Audit Committee, said Sunak should use the budget to make progress on a government promise to reduce net carbon emissions to zero by 2050.
In a report published on Wednesday, the committee urged Sunak to lower the 20% rate of value-added tax on domestic energy efficiency projects and increase incentives to buy electric cars. The finance ministry should also start “scoping” work on new taxes on carbon emissions, and aim to have concrete proposals ready before the end of the year, Dunne said.
Britain has taken a piecemeal approach to environmental taxes. Duty on vehicle fuel has been frozen since 2012, and household energy bills have long benefited from a reduced rate of VAT.
But with a budget deficit of 130 billion pounds expected to remain after the economy recovers from the short-term shock of the COVID pandemic, according to US bank Citi, Sunak will be on the hunt for new revenue.