Ahead of COP26, the Chancellor must use the spending review to deliver on green investment
The UK is a world leader in reducing its reliance on coal and investing in clean power. But it is still off track to achieving its legally binding climate targets.
On successive Wednesdays, after barely a peep on the subject, the Chancellor Rishi Sunak will talk about the environment. First at the comprehensive spending review, where he will determine public spending for the next three years. Then at the COP26 climate summit in Glasgow, where he will try to push other finance ministers to invest in climate at home and abroad. He can make his second Wednesday much easier by delivering on green investment at the first.
The government is currently committing just £5 billion a year of green investment, far short of the investment needed to get us on track to net zero this decade – never mind by 2050. Green Alliance calculations show government needs to provide an extra £22 billion in upfront capital investment over the course of the spending review period.
Upfront costs pale in comparison to the impacts of delayed climate investment – on jobs, public debt and growth
Rishi Sunak comes from a long line of fiscally conservative chancellors. I would imagine he looks at net zero and sees costly short term capital expenditure, particularly with the pressures he’s facing on public finances. But this view is increasingly isolated from mainstream economics.
International institutions that have long supported the status quo, like the International Energy Agency or the International Monetary Fund, stand with the Treasury’s own Office for Budget Responsibility in recognising that upfront costs pale in comparison to the impacts of delayed climate investment – on jobs, public debt and growth.
The chancellor is also increasingly isolated politically. The Prime Minister and others in cabinet are eager to make progress on net zero. The opposition has sniffed an opportunity, with shadow chancellor Rachel Reeves promising a Labour government would meet the scale of ambition required with £28bn per year. Research from Opinium shows more people across every demographic are calling for investment to green the economy.
So, with this momentum, how can the Chancellor ensure the spending review delivers?
First, invest in homes. Families are staring at rising energy prices. Investing £3.9 billion in insulation and low-carbon energy over the next few years would bring down bills and help households shift to low carbon heating. An expanded grant scheme targeted at those who will help build markets would drive down prices for others.
Second, confirm the ambition of the government’s transport decarbonisation plan. As well as upping the delivery of electric vehicle charging points, especially in rural areas, the Chancellor should look to buses, trains and planes. A green spending review would include £2.3bn for restoring bus routes and £4.4bn to improve rail connectivity, particularly core north-south mainlines. In the weeks before COP26, the reduction in air passenger duty for domestic flights should be scrapped.
Finally, remember the natural environment. The Treasury’s own review into the economics of biodiversity showed the importance of a healthy environment to a healthy economy. Thriving nature is essential to our carbon targets and creating jobs in parts of the country worst hit by the pandemic. Finance to underpin new nature targets, and sufficient resources for the Environment Agency and the new Office for Environmental Protection, will be vital.
On green investment Rishi Sunak shouldn’t see a wall of cost. Investment will drive private sector growth and create local, high skilled jobs in the industries of the future – across the country. It will boost productivity, bring down energy bills and reduce pressures on the NHS. Investment in nature sees better returns per £1 than traditional infrastructure.
Green ambition in the spending review will be a fiscally responsible investment in the British economy. And it will show the British public, and the world leaders in Glasgow, that the UK government means business on the environment.
Sam Alvis is the head of green renewal at the Green Alliance.
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