Last reviewed 26 February 2021

The Government must use the economic recovery after the Covid-19 crisis as an opportunity to “grow back better” or the UK will face an even greater crisis from climate change and biodiversity collapse, MPs say.

The report, published by the Environmental Audit Committee (EAC), warns that environmental responsibilities cannot be shirked at this stage in the UK’s economic recovery.

The committee calls on the Government to “front-load its investment” in climate adaptation, nature recovery and the circular economy, and offer VAT reductions across a range of goods and services to counter rising unemployment, create green jobs and build a “more resilient economy”, post-Covid.

Commenting on the report findings, the EAC’s Chairman, Phillip Dunne MP, said: “There will be no vaccine against runaway climate change, and it is our responsibility now, using the opportunity of the economic recovery, to set the UK on track for net-zero.”

“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.”

The EAC’s report lays out recommendations for fiscal and financial incentives to cultivate a green recovery, including VAT reductions to encourage energy efficiency, and further tax incentives to make ultra-low emissions vehicles more affordable.

Reducing the rate of VAT on repair services as well as products that contain recycled materials has also been recommended to build resilience and circularity in the UK’s resources sector.

The Government should also begin scoping work on a carbon tax to incentivise low-carbon changes across the whole economy and investigate the merits of carbon border adjustments, to accompany work on a carbon tax, as a way of addressing carbon leakage.

If implemented, these proposals for tax reform and targeted investment will seek to bolster green businesses and encourage others to adopt cleaner, more sustainable practices, the report concludes.

Under pressure to protect jobs and support those most affected by the pandemic’s economic fallout, Chancellor Rishi Sunak will announce this year’s budget on Wednesday 3 March.