Does Rishi want to be known as the UK’s last ‘fossil fuel chancellor’?
Like buses, they all came along at once. After months of waiting for direction on net zero ahead of the Glasgow climate summit, last week the government delivered, unveiling almost 2,000 pages of documents from across government.
The prime minister often talks of ‘world leading’ policies, but some of last week’s announcements genuinely are. In the words of Tim Lord, who used to be responsible for the government’s decarbonisation strategy, “the UK can meaningfully claim to have the most comprehensive, whole economy net zero strategy in the world”.
The UK is the first country in the world to set a target to end the sale of fossil fuelled heating systems. There are drives to make electric heating more attractive by backing heat pumps with £5,000 subsidies and promises to remove levies from electricity bills. Ministers are betting that this package will kickstart the market enough so that companies can make good on their promised cost reductions, driving further demand. Although these measures need to be accompanied by faster rollout of home energy efficiency to be effective, they are a good start.
In nine years’ time, there is confirmation that new petrol and diesel cars will no longer be sold and the government has also committed to a ‘ZEV mandate’, pushing car manufacturers to produce more zero emission vehicles every year to meet demand. Green Alliance has championed this policy for some time, which will accelerate the first, second and third hand electric vehicle market, and start driving down costs.
The UK is exposed on gas
We have shown the world how to swap fossil fuels for cheaper renewable energy, but we still rely heavily on gas. The past months have shown how exposed we are to volatile gas prices, whether at home or in industry. But, thankfully, the crisis pushed the government to double down on domestic renewables with the largest ever investment auction and, crucially, it didn’t back away from a commitment to kick gas off the grid by 2035.
The Treasury also came in with positive notes. Not only did its Net zero review lead with the clear message that the “cost of inaction is greater” than the cost of decarbonisation; its green finance strategy made major progress in requiring large corporations to publish net zero transition plans.
But the chancellor’s short termism is a still a big problem. Briefings from parts of the Treasury were intended to buoy concerns over the cost of net zero. MPs without an economic grounding have jumped on uncosted concerns over household bills, without advocates having figures on benefits to counter them.
The Treasury’s own Office for Budget Responsibility has said that delayed action on net zero will increase debt by 14 times that of early investment. It is fiscally irresponsible for the Treasury to sit on its hands. Last week’s Net zero strategy is a good start but, in this Wednesday’s spending review, the chancellor can prove that he doesn’t want to burden future generations, and do more on climate.
Greening the economy will be the source of future growth
Getting to net zero and reversing nature decline will be central to future economic prosperity. Being proactive on structural changes to the global economy is infinitely better than letting them happen to us as other countries lead the way.
The Net zero strategy has a 30 year time horizon and, while the spending review sets out what the government will spend over the next three years, it can point to where long term spending can evolve as markets grow and uncertainty around technology falls. As the Committee on Climate Change has set out, that will mean ramping up higher public spending quickly. Investment should increase four to five fold from the £7 billion a year the Treasury is currently promising.
If he’s worried about money the chancellor should look to the tax system, which currently penalises employment while benefiting polluters. A good start would be a commitment to eliminate VAT on the repair of goods and the renovation of buildings, and to back away from lowering Air Passenger Duty on domestic flights.
If he continues to hold up the government’s objectives on climate, in the face of public support and pressure from the PM, Rishi Sunak is likely to go down in history as the UK’s last ‘fossil fuel chancellor’.
[Image: HM Treasury Flickr https://www.flickr.com/photos/hmtreasury/51625394244/]