Soaring environmental taxes will slowly bankrupt Britain

Stealth levies will fuel the hostility among people already growing lukewarm to the 2050 net zero target

Corporate taxes have been hiked. Frozen thresholds have dragged thousands more into higher tax brackets. And, of course, there are dozens of other levies, from stamp duty to inheritance taxes that the Chancellor has quietly used to boost Treasury receipts.

But there is another tax category that has been rising even further.

According to the latest data from the Office for National Statistics (ONS), environmental taxes are hitting fresh records with every year that passes.

Few disagree on the need to combat climate change, and green levies can be a tool to change our behaviour. But the blunt truth is this: they have just been turned into another stealth tax by the Exchequer – and that needs to be stopped before it does any more damage to an economy that is already struggling under the weight of an over-mighty state.

The UK has been putting up so many levies, and so quickly, that even some tax advisers must be struggling to keep up. The overall tax burden has risen to roughly 40pc of GDP, and is on track to reach its highest level in 70 years. Marginal rates for some people have reached 60 or 70pc.

Against that backdrop, it would be easy to overlook what has steadily been turned into the biggest stealth tax of all. The ONS this week published the latest figures for environmental taxes and they make for sobering reading.

In 2023, the UK squeezed £52.5bn out of the economy in green taxes, a 4.9pc increase year-on-year, and it is now close to its pre-pandemic high.

The revenue raised by green taxes has almost doubled since 2000. Within that, fuel duty is by far the biggest contributor, accounting for nearly £25bn. The UK’s Emissions Trading Scheme, which seeks to reduce greenhouse gas emissions in energy intensive sectors, now raises close to £6bn. Air passenger duty brings in £3.7bn, and the climate change levy – an environmental tax charged on the energy businesses use – close to £2bn.

Add it all up, and it is turning into a major burden. The average household paid £623 in green levies in 2021, up from £575 in 2020. They accounted for 5.5pc of government revenue, and took 2pc out of total GDP, in 2022. And that’s before the shadow climate change secretary Ed Miliband gets to work, as he almost certainly will later this year.

Under Labour, there could be an extra tax on business class air travel, as has been pushed by some environmental groups. The “full expensing” regime for companies could be restricted to “green projects”, substantially increasing the amount squeezed out of companies. Capital gains tax could be increased for any investment that was not carbon-neutral.

The list goes on and on. In reality, it is hard to avoid the conclusion that environmental taxes will keep on rising higher and higher.

Here’s the problem, however. Many economists have argued that we should impose higher taxes in order to bring down emissions. It is a blunt instrument, but it can be an effective way of changing what we buy, altering manufacturing processes, and ensuring the negative externalities from emitting carbon are tackled.

But surely the money raised through environmental taxes should be offset by reductions elsewhere? That way, the overall revenue impact could be neutral, and the mechanism far less opaque. So, for example, companies might pay for emissions trading, but that would be compensated for with lower corporate taxes.

Or air passenger duty could be balanced out by slightly lower income tax. Instead, it has been turned into cover for another “green” tax raid.

This cannot continue for ever. First, it will crush the life out of the economy. No government should expect to impose increasingly punitive levies on individuals and businesses, and to pour those revenues into a state machine with rapidly declining productivity, without it damaging the nation’s prosperity.

Indeed, one reason why we haven’t seen the “climate-led technological ‘New quote no glyph quotes Four deck pullquote, one of six column width. Austin deck growth” that would generate lots of “well-paid green jobs” we keep being promised is because the entire programme is becoming a vehicle for simply increasing the tax burden.

Second, it will fuel hostility towards the entire decarbonisation project. Most people want to do their bit to lower emissions. But they are understandably frustrated when bureaucrats try to force on them technologies they don’t want or cannot afford, and when the Government appears to use the project to hike their taxes by stealth. People are starting to notice, with polls indicating the public is already turning lukewarm on the 2050 net zero target.

The next time Jeremy Hunt, Lib

Dem leader Sir Ed Davey, Sir Keir Starmer or Ed Miliband lecture us about the need for a new environmental levy they need to tell us what taxes will be cut elsewhere to make up for it. But given the received wisdom now appears to be that tax rises are an inevitability, few will be holding their breath.

People are starting to notice when the Government appears to be using green levies to hike their taxes by stealth