LONDON, Oct 19 Reuters - Britain will probably have to introduce new taxes to compensate for the loss of revenues from its move away from fossil fuels which will hit the government's income raised by fuel duty on Tuesday.
The largest impacts of the transition on the public finances will be permanent changes to behaviour that feed through the tax system, the ministry said. Some of these are the losses of significant amounts of tax revenues as the economy shifts from fossil fuels to oil and gas. Fuel duty and vehicle excise duty revenues amounted to 37 billion pounds $51.2 billion in 2019 20 financial year, equivalent to 1.7% of economic output said it said.
On Tuesday, Prime Minister Boris Johnson announced his plans to shorten climate change by offering carbon-neutral alternatives to oil in every sector of the economy, from heating to transport and industry.
The Government's budget forecasters said in July that Britain's 2 trillion-pound public debt pile would rise as the country spent to make its economy net carbon zero by 2050.
If there is urgent global action against climate change, the hit could be less severe than that of the coronavirus pandemic, they said.
The finance ministry said any temporary revenues from expanded carbon pricing were unlikely to be sufficient to offset the general decline in tax revenues although it would help during the transition period.
If there is additional public spending, the government may have to consider changes to existing taxes and new sources of revenue throughout the transition in order to deliver net zero sustainably and consistent with the government's fiscal principles.