Since the earliest days of taxation, governments around the world have used taxation to influence people’s behaviour. So, when I read the Department for Transport’s call for evidence on Carbon Offsetting in Transport I was surprised that existing taxes, and the way certain taxes have been devolved around the UK, don’t get a mention. Having last week drawn attention to the wrong-headedness of the Treasury leaving the NHS to fix the pensions tax problem, it really does look as though government departments are losing the ability to work as a team. So, what’s the DfT doing?
Transport accounted for 27 per cent of UK carbon dioxide emissions in 2017, and the department is inviting views on whether companies selling travel tickets, including tickets for flights, ferries, trains and coach travel, should have to offer additional carbon offsets so that consumers can choose to compensate when they book.
In a nutshell the call for evidence will:
- look at whether transport operators should provide information on carbon emissions;
- explore the public’s understanding of carbon emissions from the journeys they make and the options to offset them; and
- establish how more consumers could be encouraged to make voluntary payments for carbon offsetting when buying travel tickets, to reduce their carbon footprint.
With many people unaware of what they can do to reduce greenhouse gas emissions from transport, and others concerned that carbon offset payments may be going to organisations that are not providing worthwhile, quality projects, the consultation is welcome and, indeed, long overdue. However, there are some surprising omissions.
For example, the consultation recognises that a scheme to encourage people to make carbon offset payments would have to be voluntary at the outset. But if the UK is to meet its net-zero commitment by 2050, sooner rather than later the scheme would have to become mandatory.
Here the lack of joined-up thinking becomes glaringly obvious. Carbon offset payments are retained by the companies providing approved offset schemes. But if carbon offset payments became compulsory, what would happen to Air Passenger Duty which is a tax paid to the public purse and currently charged at rates of up to £528 per passenger? Would APD be scrapped? Logically that wouldn’t be necessary but politically it might be inevitable. With an expected yield of £3.7bn in 2019-20 the government would then need to raise more taxes elsewhere to fill the hole.
APD brings us to the tricky matter of devolved taxes. The Scotland Act 2016 includes provisions for the devolution of APD to Scotland. When it is devolved, the Scottish Government has a stated policy intention to halve rates and eventually to abolish the tax. And although APD is not a devolved tax in Northern Ireland, the government has already reduced rates for some flights starting there. However, the DfT plan for carbon offset payments will operate uniformly across the whole of the UK. Resolving this will require all the skills of the Transport Secretary.
While the thrust of the call for evidence is to avoid non-essential travel and to complete other journeys in the most CO2-efficient manner, the DfT seems to struggle to come up with any proposals for ‘non-ticketed road transport’. That’s cars, vans and HGVs. These account for 90 per cent of UK domestic transport so cannot be ignored.
Just around the corner from the DfT in Westminster, the Treasury already has a highly effective but unpopular mechanism for reducing fuel consumption. It’s called fuel duty. Raising £28bn in 2019-20, the duty rate used to increase annually but has remained static for the last 10 years. Updating fuel duty to reflect the urgency of the Government’s declared climate emergency might help the DfT with its aims. That’s not a complete solution – as traffic emissions fall with the rise of more efficient combustion engines, hybrids and electric vehicles, sooner or later the yield of fuel duty will decline, so it in turn will have to be reformed. But if the DfT is short of ideas and the call for evidence doesn’t produce any, they could do worse than talk with their friends in the Treasury.