Our top eight recommendations for net zero spending in the coming year

Last week, with the pandemic once again accelerating, the chancellor announced that the long-awaited Comprehensive Spending Review (CSR), originally meant to cover four years of resource and capital budgets, will now only cover one year.

This will set out departmental budgets for the next year and fund some priority infrastructure projects, although whether that will include infrastructure funding needed for a green recovery is unclear. Further spending will be announced in the February budget, and at a rescheduled four-year CSR at some point in 2021.

All the fiscal events coming up over the next year will lay the foundations for the UK’s economic recovery and they will determine whether the UK is on course, or not, to reversing the climate, nature and environmental crises as we enter the next pivotal decade for action.

People want to see climate and nature prioritised in the recovery: with a strong majority agreeing that a failure to do so would be “bad for the economy in the long run”, and would be “a sign that the government has the wrong priorities”. And it is well established that green investments are major job creators, with some of the largest economic multipliers in comparison to other investments.

So what exactly should be the priorities in these areas in the next year? Here are our top eight recommendations for the chancellor:

1. A net zero test: New spending must not lock in high carbon emissions for the future through infrastructure that encourages high carbon activities, like road building, new airports or new fossil fuel extraction. To avoid this, the government should set a ‘net zero test’ to make sure that all new infrastructure is aligned with our environmental goals.
2. Energy efficient homes: The government needs to spend an additional £3.5 billion per year to upgrade UK homes to be more energy efficient and lower carbon. This is a social and environmental win-win; even achieving the government’s current targets for housing would pull 1.13 million households out of fuel poverty. And it is becoming increasingly urgent to tackle it as a large proportion of the population is spending so much more time at home, with implications for spending on energy bills.  This measure also has strong employment potential: a long term programme would support over 150,000 jobs.
3. Low carbon transport: The pandemic lockdown gave people a temporary insight into what it would be like to live with cleaner air to breathe, and 40 per cent of people are now reporting that they are cycling and walking more. The government should invest in making these experiences long term, with low carbon, convenient and reliable public transport, accelerating the transition to electric vehicles and through better walking and cycling infrastructure. £9.3 billion additional public investment a year in low carbon transport infrastructure is needed.
4. Digital opportunities: Data and smart systems will underpin a future low carbon society. The government should be promoting novel digital solutions, such as ‘product passports’ to track the flow of resources through the economy and improving observation and data on land use to improve decision making.
5. Circular economy: Investment of £400 million over the next four years in better design, reuse, refurbishment and high quality recycling would help businesses to deliver carbon savings and increase productivity.
6. Protection against extreme weather: Better management of forests, wetlands, rivers and grasslands will help to protect the UK against the impacts of extreme weather events like heatwaves, storms and floods. This should be achieved through a Nature Recovery Network that protects 200,000 hectares of priority terrestrial and marine habitat, funding for farmers through the new Environmental Land Management Scheme, and the greater use of nature-based solutions like restoration of wetlands and peatlands, including leveraging private funding where businesses can also benefit. This also has strong job creation potential: just achieving the government’s flagship environmental policies is estimated to create more 700,000 jobs.
7. Access to nature for all: Every community should have access to high quality green spaces, and the health and wellbeing benefits they bring. Research shows that disadvantaged communities have little or no access to green spaces compared to wealthier communities. A £5.5 billion commitment to an urban green infrastructure fund as part of the government’s recovery stimulus could potentially achieve £200 billion in physical health benefits, through disease prevention and mental wellbeing benefits.
8. Review VAT: As the start of a wider reform to put social and environmental principles at the heart of the tax system,  VAT rates for renovation should be zero rated in line with new build; repairs for products like electronics should also be zero rated; and the rate for domestic heating fuels should be set at 20 per cent, instead of five per cent, to encourage the shift towards lower carbon fuels like electricity. This would be revenue neutral as the additional tax collected should be ringfenced and directed to helping low income households with their energy bills.