Budget 2017 preview: Seven green policy hopes for Philip Hammond’s Spring Budget
As Chancellor Philip Hammond prepares to deliver his first - and last - Spring Budget on Wednesday (8 March), edie rounds up the key environmental issues that the sustainability community will hope are included in the Government's spending plans.
Chancellor Hammond concluded his Autumn Statement last November by revealing that the 2017 Spring Budget will be the last of its kind; the Spending Review is set to be downgraded to a fiscal statement with the major announcements switched to the autumn from this year.
In the build-up to this Wednesday’s Budget, the Chancellor has been called upon to provide significant measures to strengthen the UK economy; from relief for small businesses hit by stringent rate rises, to investment into social care to save it from the “brink of collapse”. Meanwhile, the Government is also under intense pressure to give a cash boost to the crisis-hit NHS and care for the elderly.
We can almost certainly expect a degree of “fiscal discipline” as Hammond keeps an eye on Brexit negotiations, with Britain just weeks away from triggering Article 50. As with all bi-annual budgets, the environmental community will be hoping that the Chancellor can pull rabbits out of his little red box to help accelerate the UK’s transition to a low-carbon, resource-efficient economy.
But with the Treasury’s purse strings expected to remain securely tightened ahead of the crunch Brexit discussions, it is feared that the most likely outcome of this Budget will be that sustainability issues placed on the back-burner, at least until the upcoming long-term plans for emissions reduction and the environment.
With the Treasury facing heavy criticism for failing to adequately factor in long-term sustainability risks into its decisions, now is the opportune moment for the Chancellor to assure the green business community that the Government is fully committed to securing sustainable economic growth.
So, in advance of this week’s Budget statement, we’ve rounded up the specific green announcements we would like to see made by Hammond that would underline the UK’s shift away from fossil fuel dependency towards a clean, affordable energy system.
Spring Budget 2017: Seven green policy hopes for Chancellor Philip Hammond
1) Carbon Price Floor tax extension
In the Autumn Statement 2016, Hammond confirmed that the Carbon Price Floor – which works in conjunction with the EU ETS scheme to underpin the price of carbon at a level that drives low-carbon investment – will remain frozen at a maximum of £18 per tonne of CO2 until 2020, as originally announced by his predecessor George Osborne in the 2016 Budget.
But with the future of the Price Floor uncertain after it is uprated in line with inflation in 2020-21, the green business sphere will be keen for Hammond to use the Spring Budget to confirm whether the floor will continue from this time period.
Environmental campaigners will hope for a positive announcenet on the Carbon Price Floor, which played a major role in the huge decline in coal use and 5.8% fall in national carbon emission in 2016, the lowest recorded levels in almost 100 years.
Environmental law firm ClientEarth’s chief executive James Thornton said: “The dramatic drop in UK coal use in 2016 is tribute to how well a carbon price floor can work. It has helped to provide the economic momentum to price coal out of the UK market more quickly, paving the way for the UK to lead with energy innovation. With high hopes for the UK’s coal phaseout plans, we fully expect to hear fresh and ambitious commitment to the carbon price floor beyond 2021 from Philip Hammond on Wednesday – and will be questioning the UK’s tenacity if we don’t.
“A decisive transition away from coal is an economic and environmental necessity for the UK and it’s vital we don’t leave it too late. Policy decisions should equip the UK energy sector to race ahead with new, clean technologies to increase efficiency, regulate demand patterns and produce cleaner power.”
2) Assistance for low-carbon transport
Hammond satisfied the green community in his last fiscal overview with the announcement of £390m funding “to build on our competetive advantage in low-emisson vehicles and the development of connected, autonomous vehicles”.
In the weeks and months that followed, the Government faced a litany of pleas from businesses, MPs and green groups to tackle the UK’s rising air pollution levels by phasing out the most polluting vehicles. Many have suggested this shift could come through the introduction of a diesel scrappage scheme, which would offer cashback or a discount for people to scrap old diesel vehicles in exchange for low-emission models.
Discussions are understood to have taken place with the Treasury about the possibility of a pilot scheme in areas of the UK with the worst pollution, before a nationwide rollout. In the anticipation of an announcement in this week’s Budget, Friends of the Earth (FoE) have claimed that a Vehicle Excise Duty would incentivise people to switch from polluting diesel vehicles to cleaner alternatives.
3) Levy Control Framework clarity
The future of the Levy Control Framework will be set out in the 2017 Spring Budget. The Autumn Statement document confirmed the Government is considering the future of the Framework, which allows the Government to set an overall cap for the amount of money that can be raised and spent through this mechanism in support of low carbon electricity.
The much-maligned Framework recently received backing from the Department for business Energy and Industrial Strategy (BEIS) for providing “confidence, measurability and control” now that is was “back on track” after overspending the £7.6bn budget by a projected £2bn.
4) Drop the solar tax hike
Recent Government cuts to renewables subsidies have left the attractiveness of the UK’s renewable energy markets now at an all-time low. Renewables installations have largely ground to a halt and more than ten thousand job have been lost in the UK solar sector. On top of that, businesses that have invested in solar panels to generate energy for their own use, will be affected by business rate rises of up to 800% from April 2017.
The industry fears that businesses will be deterred from installing solar panels in the future, and have called on Chancellor Hammond to act now to rectify the situation.
Solar Trade Association (STA) chief executive Paul Barwell said: “We urge the Chancellor to do the right thing and to drop the solar tax hike in his Budget next week. If we want a modern, clean economy it makes no sense to load crippling business rates on the very people who are taking care to invest in our future.
“These self-defeating proposals couldn’t come at a worse time for the solar industry – rooftop solar deployment is at a six-year low. The last thing solar needs right now is an extreme and nonsensical tax hike.”
5) Confirm the Emissions Reduction Plan
As alluded to in a CBI report last week, business will be looking to the forthcoming Emissions Reduction Plan to provide a clear and long-term framework so that can invest and innovate for the future. The long-awaited Plan has suffered a series of delays in recent months, and is now expected to be published by the end of March 2017.
Chancellor Hammond can provide a much-need confidence boost by outlining how the Plan, along with the Government’s upcoming Industrial Strategy, will include policies to support the decarbonisation of industries and buildings. The BEIS Committee has stated it would like the Government strategy to provide “clear signs” as to how Government will embed clean growth, driven by battery technology and energy storage, in the country’s economic future.
6) Confirm the 25-year Environment Plan
The Government has consistently promised to become the first “to leave the environment in a better state than it found it”. Under this premise, two separate 25-year environment and food & farming Plans were meant to be launched last year in isolation. However, constant delays to the publication of a white paper for the 25-year plan has cast these claims into doubt.
The Chair of the Natural Capital Committee (NCC) has said that the Treasury must use the 25-year Plan as a catapult to launch the concept of natural capital into the mainstream. The latest report from the NCC states that Defra’s Plan has progressed “considerably slower” than hopes and expectations. Environmental campaigners will hope Hammond can provide assurances that the Plan will advance rapidly, if there are to be demonstrable improvements in England’s natural capital before 2020.
WWF-UK director of advocacy Trevor Hutchings said: “This Budget needs to embrace the full potential of green growth to boost our economy, bolster our environment and secure a better future for Britain. Over the past few years the UK Government has decreased its spending on environmental protection yet pressures on the environment have grown. That includes 60% of UK wildlife species being in decline and an estimated 40,000 deaths a year from outdoor pollution – we urgently need to reverse these trends.”
7) Provide assurances over post-Brexit environmental regulation
An issue of overriding importance for green business is the necessity for Ministers to start focusing on the reality of Britain’s vote to leave the EU. With more than 70% of the UK’s environmental laws deriving from Brussels, it will be crucial to see a firm commitment from the Government to continue to uphold key EU environmental legislation, regardless of the outcome of Brexit.
Under current Government plans, the UK will only be bound by EU environmental law until negotiations are concluded in March 2019. At this point the Government hopes to have transposed all EU-derived legislation into law through the Great Repeal Act.
Environment Secretary Andrea Leadsom recently confirmed that the majority of EU environmental legislation will be transferred across into UK law in the immediate aftermath of Brexit, but uncertainty looms for around a third of green regulations which Leadsom admitted “won’t be easy to transpose”.
On Wednesday, Hammond can assure the green community that the complexity of the negotiations won’t lead to some laws becoming “unenforceable” or ignored, as suggested in a recent report by Green Party co-leader Caroline Lucas.
Stay tuned for edie for live coverage of the 2017 Budget on Wednesday, along with a full round-up of the key announcements for sustainability professionals in our weekly newsletter (register for free here).
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