The wrong messages ahead of COP26: Green economy reacts to Rishi Sunak's Budget

After Chancellor Rishi Sunak opened his red Budget box to reveal new funding for electric vehicle (EV) manufacturing and low-carbon shipping, there has been a mixed reaction from the green economy, with widespread criticism of the Treasury's approach to aviation. Here, edie summarises the reaction.

Image: HM Treasury. CC BY-NC-ND 2.0 https://www.flickr.com/photos/hmtreasury/51632672881/in/album-72157720073583763/

Image: HM Treasury. CC BY-NC-ND 2.0 https://www.flickr.com/photos/hmtreasury/51632672881/in/album-72157720073583763/

Earlier this afternoon (27 October), Sunak took to the House of Commons to deliver the UK’s second major Budget update in a year, with Covid-19 changing the announcement calendar. Much attention was given to the need to deliver an economic recovery from Covid-19 and to deliver pay rises for key workers. The National Living Wage was increased and the NHS promised a further £5.9bn.

But there were also several announcements that will directly affect the UK’s transition to net-zero and efforts to improve nature for the next generation – for better and for worse.

READ EDIE'S FULL SUMMARY OF THE GREEN ECONOMY ANNOUNCEMENTS IN THE BUDGET

On the one hand, Sunak confirmed more than £3bn of funding for education and skills, including the launch of new T-levels to help young adults into vocational careers key to the net-zero transition, such as construction. There was also a promise of £800m in grants to EV manufacturers keen to expand operations in the UK;  a further £1.5bn for active and public transport and a business rates reduction scheme for firms looking to install heat networks, solar panels and battery storage.

On the other hand, only £9m in new funding for nature was confirmed; the fuel duty freeze was extended and air passenger duty (APD) for short-haul trips was cut.  Some organisations have argued that this sends the wrong message ahead of COP26 and that it will not help low-income people nor SMEs as much as Sunak believes it will.

Here, edie rounds up what key green economy leaders are making of the new funding pots and changes to fiscal policy frameworks.

Budget Day and Autumn Statement: Green economy reaction

The Energy Saving Trust’s chief executive Mike Thornton said: “A week after the UK Government announced its Heat and Buildings and Net Zero strategies and four days before the UK hosts COP26, the spending commitments outlined today by Sunak, confirming energy efficiency funding and announcing additional funding for transport infrastructure, are a step in the right direction to support the UK in achieving a net-zero society by 2050. 

“With the announcement of a significant commitment to innovation and R&D, there is also an opportunity to focus on creating the growth industries of the future, including renewable energy, low carbon transport and energy-efficient housing.

“In transport, Energy Saving Trust remains dedicated to supporting new and existing incentives to continue the UK’s transition to electric vehicles and active travel, with a fair transition for everyone at the core of our mission. The Chancellor’s commitment to invest in the decarbonisation of transport is welcome in order for us to continue our work in these areas.”

Volans’ chief executive officer Louside Kjellerup Roper said:  “Sunak’s budget speech did not include the words ‘climate change’ once and only referenced net-zero a couple of times in passing. This is seriously concerning. The Treasury clearly hasn’t yet grasped that net-zero requires a transformation of the whole economy: it’s not some little sideshow that needs a few billion here and a few billion there to fund it. So, unfortunately, from a net-zero perspective, this was another ‘rearranging deckchairs’ budget rather than a “turning the Titanic” budget.

“The Chancellor today confirmed £3.9bn of funding to decarbonise buildings, which is welcome, but mostly represents a re-confirmation of spending commitments that were in the Conservatives’ 2019 manifesto. The key issue is now about how that money gets spent. In our work as part of the Bankers for Net Zero initiative, we have called for government funding to prioritise deep retrofits that get homes and buildings net zero-ready in one go. If the Government’s £3.9bn is well-targeted, it can go some way towards kickstarting a Retrofit Revolution, but today’s announcements only get us to the starting line.”

Fauna and Flora International’s senior conservation director for cross-cutting programmes, Joanna Elliott, said:  “With four days to go until COP26, it’s disappointing to hear only a passing reference to climate and not a single mention of nature in the Chancellor’s Budget speech. It’s good that the Treasury states, in the Spending Review documents, that it agrees with the Dasgupta Review that nature underpins our economy and our livelihoods – but it would certainly be nice to hear Sunak say it.

“We need to be clear that addressing the climate and nature emergencies are not separate from the economic recovery from Covid-19, and thriving nature is essential to reach our carbon targets. Nature protection and restoration needs to be the cornerstone of our economies and societies. But the recent Environment Bill was stripped of many ambitious amendments that would have strengthened nature protection and, this week, we have also learnt that the world’s richest countries won’t hit their $100bn climate aid target until 2023 – three years late. It is also deeply regrettable that the overall UK aid budget will not return to 0.7% of national income until 2024-25.”

BEIS Committee Chair Darren Jones MP said: This Budget was a missed opportunity on climate change, failing to set out the required leadership on the fiscal measures needed to accelerate progress towards our net-zero target. Mere days ahead of the COP 26 international climate change summit, it’s concerning that the Treasury missed this chance to spell out the benefits of net-zero and instead took regressive action, such as cutting taxes on domestic flights.”

The Association for Renewable Energy and Clean Technology’s (REA) chief executive Dr Nina Skorupska said: “The Government’s heeding of our calls for a green business rate relief is certainly welcome and will support businesses in taking necessary steps to reduce their carbon footprint in a challenging economic climate.

“However, we can’t hide our disappointment that this Budget did not go much further by providing some of the fiscal measures needed to deliver the ambitions laid out in last week’s Net Zero Strategy, especially given that COP26 starts in just a few days’ time. Straightforward measures such as removing VAT on domestic renewables and clean technologies would have provided a catalyst for businesses and the economy, offered households long-term protections against volatile energy bills, and signalled a real statement of intent.

“In addition, while recognising the financial challenges faced by many motorists, any fuel duty freeze should have been accompanied by extra support to make electric vehicles more affordable and accessible. Similarly, although it was accompanied by investment last week in the ‘Jet Zero’ transition, a fuel duty cut for domestic aviation duty undermines the Government’s green credentials ahead of COP26.”

The Aldersgate Group’s executive director Nick Molho said: “We recognise that this was a tricky Budget to deliver after a uniquely challenging period for the UK economy, and the desire to stimulate economic activity across the country was welcome. However, coming a week after the welcome publication of the Government’s Net Zero Strategy and its Green Finance Roadmap and a week ahead of COP26, it is disappointing that the Chancellor’s Budget contained so few references to the Treasury’s role in supporting the UK’s net-zero transition and its other environmental ambitions.

“Economic evidence is clear that investing in low carbon infrastructure and nature restoration delivers high economic growth multipliers in terms of job creation, productivity gains and in generating the tax revenues the Chancellor needs to fund high-quality public services, as well as driving economic activity across the country.

"The Chancellor’s commitment to increase investment in skills and education is welcome but significant attention must now be given to putting together a comprehensive low carbon skills strategy, which will ensure that students and those already in the workplace are both equipped with the skills they need for a net-zero economy. This must include a comprehensive response to the key recommendations recently made by the Green Jobs Taskforce."

IEMA’s chief executive Sarah Mukherjee said: "In today’s Budget, the Chancellor has confirmed an increase of £3.8bn over the parliament in skills funding, which in part is targeted at developing the nation’s green jobs and skills. Investment in skills is critical if the Government is to achieve its environmental aims, be that reaching net-zero emissions by 2050, restoring biodiversity loss or maximising how we use natural capital.

“But investment alone is not enough. Creating a truly green economy will require a more strategic approach to skills planning and provision. IEMA is urging the Government to develop a National Green Skills and Jobs Strategy. As well as ensuring that there is a pipeline of talent coming through to propel growth in cleaner industries, the strategy should also focus on making all jobs ‘greener’ throughout the full range of economic sectors. As the leading professional body in the UK for environment and sustainability professionals, we are well-placed to help the Government develop such a strategy.”

Fladgate’s senior associate Adrian Mawlabaux said: “The focus on green investment comes as little surprise given the Government commitment to net-zero and the Prime Minister’s championing of green investment as part of his strategy for post-Brexit Britain. The success of the Global Britain Investment Fund will depend on the criteria upon which the funds are deployed and any conditionality imposed for securing long term commitment. It will be interesting to see the government’s approach to assessing eligibility and measuring taxpayer value.

Shadow Business and Energy Secretary Ed Miliband MP said:“ [This is] another Budget from the Chancellor which failed on both the cost of living crisis and the climate crisis. No green recovery, no plan to save families £400 on bills, no plan for green steel. Working people will pay the price of Tory climate delay.”

Scottish Greens’ finance spokesperson Ross Greer MSP said: “This is a Budget written for the Tories' corporate donors, not for the millions of people across the UK who desperately need help after a decade of Westminster austerity and a disastrous Brexit process. It certainly wasn't written with the planet's future in mind either. To cut aviation taxes just days before hosting COP26 has confirmed the UK Government's reputation as an international embarrassment.

"Unsurprisingly, there is nowhere near enough on the environment. The investment in green tech does not go far enough, and the plans to spend £21bn on roads while cutting air passenger duty for domestic flights, as well as freezing fuel duty, take a wrecking ball to the UK's climate obligations when we are only days away from COP. The Tories are a clear and present danger to our planet.”

Green Alliance’s deputy policy director Roz Bulleid said:“With no new funding announced for the UK steel industry, the Government continues to put the long-term future of the sector at risk. Without investment now in new technology for clean steelmaking, the UK Government is falling behind in the global race to make steel with hydrogen, risking jobs and the sector’s future competitiveness. 

“Ahead of COP26, the Government must signal its commitment to a net-zero future for the UK’s steel industry by committing to a net-zero target for the sector and investing in a pilot of hydrogen-based steelmaking”

Cluttons’ head of real estate management John Gravett said:"With COP26 right around the corner, we would have expected more in the budget to provide for supporting sustainability targets and future-proofing against the impacts of climate change.

“Earlier this year, funds were put aside to help private companies develop better EVs and rapid charging but nothing has been mentioned about the infrastructure and connecting charging points with real estate needs. This is something that really needs to be elevated if we are to get a potential five million EVs on the roads by 2030. Interest in these vehicles has peaked in recent months thanks to the fuel panic seen in early October, but to capitalise on this potential demand, we must look at the provision of charging points in the right locations as part of a UK wide strategy. While raising fuel tax is not the only answer, we were surprised this was omitted today from the budget - there needs to be a carrot as well as a stick and realistic alternatives to petrol and diesel cars."

Luke Murphy, head of the IPPR Environmental Justice Commission, said: “Today, the Chancellor declared the UK was entering an ‘age of optimism’. Instead, he used the budget to extend the age of fossil fuels. Cutting air passenger duty was the most significant new policy mentioned in the budget speech today which will have an impact on greenhouse gas emissions – and it will increase them.  Sunak talked for longer about beer duty, than our duty to future generations to address the climate and nature crises.

“The truth is, this climate-void, fossil-fuel heavy budget failed to deliver the necessary £30 bn of investment needed each year to meet our climate and nature targets. Investing in a green economy would have been the fiscally responsible thing to do, avoiding the huge costs of inaction, and maximising the benefits and opportunities of the transition. Our research shows that 1.7 million jobs could be created by 2035 in sectors from transport to home retrofit and low carbon electricity.”

“This budget was an own goal for a Government that should be leading the world, ahead of the all-important global climate summit COP26, into a new low carbon age.”

UK Sustainable Investment and Finance Association (UKSIF) chief executive James Alexander said: "We welcome the Chancellor’s confirmation that the UK intends to return to its commitment to spend 0.7% of national income on overseas aid before the end of this Parliament, which sends a positive signal to other countries ahead of COP26. We would urge the government to restore this vital target as soon as possible to rebuild international confidence in the UK’s leadership.

“However, this Budget needed to provide further detail on how the Government’s public spending plans can deliver on the significant investment gaps identified in the Net-Zero Strategy, which are needed to help drive the private investment required for the UK to reach its world-leading emissions targets. The longer the government delays the public investment needed to build a low-carbon economy, the harder this transition will be.

“To help meet these objectives, UKSIF continues to support the inclusion of a dedicated ‘net-zero’ chapter in every Budget statement, explaining in detail how the tax and spending decisions announced bring the UK closer towards this goal. This would lead to a far firmer demonstration that each Budget has net-zero at its core.”

Shakespeare Martineau’s head of energy Andrew Whitehead said: “As we look forward to COP26 in Glasgow next week, expectations have been low that the Chancellor was going to have much more to offer on the climate agenda.  The Treasury’s spending promises were largely stuffed into last week’s Net-Zero Strategy.

“But the Government needs to be taking every opportunity to put some clear actions and policies behind its multiple net-zero strategies and targets, which so far are generally considered to be laudably ambitious but lacking in substance and detail in too many areas. And on a global stage, our Government is being increasingly called out over its “mixed messaging”, the clearest example being the new Cumbrian coalmine. 

“At such a critical time, with COP26 only days away, it’s therefore ‘inconvenient’, putting it mildly, to see two of our principal green taxes getting ‘cut’, namely fuel duty and air passenger duty.  That’s not an easy message for the world to hear next week, despite all the government rhetoric in this budget about investing in innovation and R&D and the UK as a ‘science superpower’.

“Faced with some admittedly difficult short term challenges, the Chancellor clearly judges that consumers are already getting hit in the pocket by high fuel prices, both at the pump but also at home.  The energy sector continues to be rocked by the surge in gas prices which are having such a traumatic effect on the country’s retail energy suppliers.  They are faced with a domestic price cap sitting way below the cost of supply, and industrial users unprotected by the cap are in many cases unhedged and exposed to massively increased energy costs.

“The cut in air passenger duty is aimed at domestic flights and is no doubt aimed at improving the fortunes of our airlines and getting people moving again, against the backdrop of the levelling up agenda.  But is it really right to be encouraging me to be taking the plane from Birmingham to Glasgow next week, rather than using the train?

“In isolation and out of context, these decisions are understandable, and there is as always a balancing act to perform.  However, this tension between ‘doing the right thing’, and cost, is one that is going to be played out around the world in coming months and years, as governments grapple with the unpalatable truth that taking real action to combat climate change requires hard decisions, in many cases involving increased costs and inconvenience for consumers and taxpayers.  And the UK has an opportunity to help ram home that message next week.

“At the end of the day, there is an even bigger cost – and not just financial, but human – to adapting to unmitigated climate change, and this is a case that needs to be made much more loudly and frequently.”

PwC’s environmental tax lead Jayne Harold said: “With COP26 around the corner and the Net Zero Strategy released last week, it is surprising to see that the Chancellor did not present more of a ‘green focused' budget. He could have used environmental tax measures like carbon taxes to help drive a shift in behaviour, but it is possible he is holding back on these topics for COP26. Consultation on reform of carbon pricing through the emissions trading scheme was undertaken earlier in the year, and the Red Book does confirm that the Government is committed to carbon pricing as a tool to drive decarbonisation and intends to publish more later in 2021.

“Freezing fuel duty, carbon price support and reform of Air Passenger Duty with a 50% cut to domestic flights from April 2023, and a new ultra-long-haul band to tackle emissions from flights over 5,500 miles illuminate the conflict between achieving environmental objectives and balancing impacts on the economy.

“The Chancellor took the chance to use the UK’s exit from the EU to reform elements of the tax system that he felt needed to be changed for policy or simplification reasons. The reduced rate of VAT for energy saving materials installed in residential properties falls into a similar category. Installation of energy-saving materials normally forms part of a wider package of works which prevents the VAT relief from applying. The Chancellor seems to have missed an opportunity to reform the rules to reduce the cost of improving the energy efficiency of existing housing stock. Reducing the cost by allowing the 5% VAT rate to apply more often would help drive adoption by householders, and allow the recently announced pot of grant funding for the installation of low carbon heating systems to stretch further.

“Buried within the releases today is the announcement of some tweaks to be made to the primary legislation governing the new plastic packaging tax. With only five months left before plastic packaging tax is due to go live, we had hoped for the release of more detailed secondary legislation together with today’s announcements. This will set out the crucial operational detail that affected businesses need to know in order to implement, report the tax and hold all the evidence required by HMRC. Further delays will create uncertainty in planning for these large implementation projects and squeeze the time available for the project to be completed.”    

Conservative Environment Network director Sam Hall said: "There was much to welcome in today's Budget from an environmental perspective, especially the confirmation of the significant funding commitments made in last week's Net Zero Strategy. New spending on levelling up, improving regional transport links, and scaling up R&D will also support the Government's net-zero mission, while the firm commitment to restoring the 0.7% target for overseas aid has given a boost to the imminent COP26 negotiations. 

"But the Chancellor missed an opportunity to position nature recovery and net-zero at the heart of the Treasury's long-term economic strategy, to align the tax system with our environmental goals, and to plug some important funding gaps, such as incentives for owner-occupiers to insulate their homes and funding for ambitious nature restoration beyond tree planting and peat restoration."

The Go-Ahead Group’s managing director Martin Dean said: “Buses are a green mode of transport and with COP26 looming, we’re glad that the Government is committing more funding to electric vehicles.

“But to make the transition to low-carbon buses financially sustainable, the industry needs to sell more tickets. More bus lanes and bus priority schemes are vital in improving frequencies and speeding up journey times, which will encourage people to leave their cars at home.This is a once-in-a-generation shift in transport technology – and that means a clear long-term roadmap is needed for decarbonisation of the national bus fleet.”

TLT’s head of energy and renewables Maria Connolly said: “The absence of focus on COP26 and tackling climate change was striking – so much so that one wonders whether Mr Sunak accidentally lost a page from his speech.

“The announcement on business rates exemptions for green property investments is clearly a highlight from this Budget and is very welcome. It ought to spur businesses to take charge of their environmental sustainability by incentivising them to invest in their properties.

“The multi-billion funding boost to bring public transport services up to speed is encouraging, although most of that money is recycled from past spending pledges. The issue is that it does little to accelerate the broader shift needed from fossil fuel to electric personal vehicles and while investments to expand the use of electric vehicles and increase charging points across the UK have been announced in recent weeks these still do not go far enough.

While the Budget delivered a few good announcements, it was very much lacklustre on the energy transition… There remains a real disconnect between the Government’s supposed ambitions on climate change and the methods and financing it is putting in place to achieve its goals. With every passing year progress is being made, but the issue is now the speed of that progress. Just when the government needs to put its pedal to the metal it seems that unfortunately the Chancellor is taking his foot off the gas.”

WWF’s executive director of advocacy and campaigns Katie White said: “Announcements in today’s Budget – from cutting tax on domestic flights to freezing fuel duty – take us headlong in the wrong direction when it comes to tackling the climate and nature crisis.

“If the Chancellor is serious about levelling up and improving life chances for future generations then he must invest now to deliver the net zero transition, creating new green jobs while building resilience to climate change. A net-zero test for government spending is critical to success, yet this was still missing from today’s Budget.”

Green Party MP Caroline Lucas said: “This is an utter moral failure from the Chancellor in a crucial year for climate and nature. Pretending the debt-to-GDP ratio is a moral issue, whilst pouring fuel on the fires of ecological breakdown, the Budget takes us yet further away from the kinder, greener, fairer economy we desperately need.”

More reaction to follow.

Sarah George and Matt Mace



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