When it comes to the environment, Philip Hammond’s Budget was “the dog that didn’t bark,” according to Deloitte’s head of tax policy Daniel Lyons.
Despite expectations of a whole raft of measures designed to prompt business and consumers into behavioural change, firm announcements were few and far between – and most commentators describe it as somewhat disappointing from a green perspective.
“There will be a single use plastic tax, but not until April 2022,” Lyons said. “Quite a few people thought it might come in a bit sooner.”
The tax will apply to the manufacturing or import of plastic packaging without at least 30% recycled plastic. The three-year time lag will give businesses time to redesign their products.
It followed public consultation which showed overwhelming support for a tax designed to encourage a reduction in plastic packaging. 162,000 members of the public responded individually to the consultation, which Lyons described as sending “a strong message.”
The plastic tax was the highest profile environmental measure announced. “Fiscal Phil” said he hoped would leave the environment in better shape than when he inherited it, but that phrasing has struck many as optimistic.
“It is fair to say that the recent Budget announcement from the Chancellor could have included more focus around the environment, with the majority of policies announced unlikely to have implications any time soon,” said Paul Falvey, tax partner at BDO.
He did point out that the plastic tax is part of a wider strategy to address plastic waste, with further details expected in the Resources and Waste Strategy which will be published later this year. There will also be a reform of the Packaging Producer Responsibility System.
No “latte levy”
Yet notably absent was the inclusion of a tax on visible consumption taxes on items such as single-use cups, despite widespread public demand for it. A cross-party Environmental Audit Committee in January recommended a 25p tax on single-use cups, known as the “latte levy” for reducing waste and increasing recycling. Some estimates suggest 2.5bn disposable coffee cups are used in the UK every year.
Jayne Harrold, PwC environmental tax leader said: “This seems like a missed opportunity to lead the pack and stimulate change.”
That may be all the more surprising given that the 5p tax on plastic bag use, while not a traditional tax as stores get to keep the revenue, has shown itself to be very effective in changing behaviour. “When I’ve asked at the supermarket counter, they say hardly anyone buys bags anymore. In the Spring Statement, it was announced that their use has fallen by 85% since the charge was introduced,” Deloitte’s Daniel Lyons said. Nevertheless, it will be left to the industry and the consumer to reduce the number of disposable cups used – for the time being.
A resource issue?
“Not very much of an explanation was given. It might be that Government doesn’t have the capacity to design more taxes at the moment. HMRC would find it almost impossible,” Lyons said.
As well as the large number of people who have been moved onto Brexit, resources are being poured into Making Tax Digital. At the same time, HMRC is in the process of moving all staff to 13 regional centres, resulting in many of them leaving, he said.
Hammond left the way open to announce further measures in the future, including a possible incineration tax. This may come as a surprise to those who note that Government policy favours incineration over landfill. A landfill tax, announced in 1994, has significantly reduced the amount of waste going to landfill sites.
Tax aside, investment in some environmental projects was announced in this year’s Budget. Those include an Industrial Energy Transformation Fund, backed by £315 million of investment. BDO’s Paul Falvey said this will support businesses making the transition to a low carbon future and cut their bills through increased energy efficiency.
The Government is also setting up a Woodland Carbon Guarantee scheme. It will support the planting of about 10 million trees by purchasing up to £50 million of carbon credits which qualify for tree planting.
Further research will take place into plastics, with an investment of £10m, and another £10m going towards pioneering new approaches towards recycling and reducing litter, including “smart bins.”
“Less encouraging from an environmental perspective but a positive benefit in reducing complexity was the news that Enhanced Capital Allowances for energy and water efficient plant and machinery will end,” Falvey said. These currently provide a 100% first year allowance for expenditure incurred on qualifying plant and machinery or the ability to claim a first year tax credit for loss making businesses investing in qualifying items.
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