Taxes will rise to pay for Britain’s transition to net zero, after the Treasury ruled out borrowing to cover the costs of decarbonisation.
The prime minister has pledged that the UK can meet the targets “without so much as a hair shirt in sight”, but a separate document published by the chancellor warned that the change would require “additional taxes” or cuts to “other areas of spending”.
Rishi Sunak warned that, even under the existing plans, the government would have to deal with a £37bn-a-year black hole in its finances because of loss of revenue from fuel duty.
“Seeking to pass the costs on to future taxpayers through borrowing would not be consistent with intergenerational fairness nor fiscal sustainability,” the Treasury document said.
“This could also push up the economic cost of the transition.”
The paper estimated that from 2026 the additional public and private sector capital investment required to decarbonise would amount to more than £50bn a year, peaking at above £60bn by the mid-2030s.
Downing Street said that there was no reason why taxes would need to rise or public sector spending be cut to pay for the new commitments.
