MPs call for VAT cut to boost green economy

A cross-party group of MPs has called for a reduction in VAT for recycled goods and energy efficiency measures to help boost the post-pandemic economy.

A new report out today (17 February) from the environmental audit committee (EAC) urges the government to use the current crisis to create a greener, more resilient economy.

It calls for VAT reductions to repair services and items that have been recycled to encourage a circular economy.

The report also recommends VAT reductions on energy efficiency upgrades in homes and tax incentives to encourage more take-up of ultra-low emission vehicles could make greener options more attractive to consumers.

It also suggests the government should also consider applying carbon taxes in areas across the economy.

The report states the government should use the upcoming transport decarbonisation strategy to set out plans for long-term investment in public transport, and enhance travel infrastructure to support more walking and cycling in towns and cities.

It is also clear that cutting-edge manufacturing processes are required for the roll-out of electric vehicles and their batteries, with estimates suggesting the UK will require up to eight gigafactories, according to the report.

‘The Covid-19 crisis must be treated as a wake-up call,’ said committee chair, Philip Dunne.

‘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,’ added Mr Dunne.

Commenting on the report, 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. Frontloading 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.’

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