Will the 2021 Budget help the UK deliver a green recovery?
Chancellor Rishi Sunak will deliver his second Budget on 3 March. But, faced with the challenge of supporting the economy as the UK completes its lockdown exit roadmap, will the Budget deliver an appropriate response to the climate and nature emergencies?
Sunak delivered his first Budget last March, when the UK’s first lockdown had not been confirmed. He used that speech to set out the first supports for the public health crisis but also promised multi-million-pound spending pots for low-carbon transport, renewable energy, natural climate solutions and carbon capture and storage (CCS).
The world has changed hugely since then. Amid the biggest recession the world has seen since World War Two, the Treasury has delivered a string of updates designed to support businesses and individuals, including Summer Economic Update the Spending Review. As well as drawing a mixed reaction on the extent to which they would tackle the Covid-19-related economic fallout, they received a mixed reaction from green groups.
All eyes will be on Sunak as he delivers the 2021 Budget next Wednesday (3 March). His speech is set to begin at around 12.30pm.
With a week left to go, edie outlines the measures which have already been confirmed – and those which are at the top of the green wishlist for businesses, NGOs and the general public.
What will be included?
Boris Johnson used the speech in which he outlined the UK’s ‘roadmap’ out of lockdown to state that Sunak will “not pull the rug out” on current Covid-19 support measures. As such, many national media outlets are reporting that the uplift in Universal Credit allowances will be extended along with the furlough scheme – and, potentially, that the stamp duty holiday could be extended.
Newspapers are also generally in agreement that any tax hikes are likely to be delayed until either later in the year or the 2022 Budget. Some environmental groups have been hoping for a fuel duty rise after consecutive years of freezes, coupled with an online sales tax to help small, local brands compete with e-commerce giants that have thrived during lockdown. The government had reportedly been considering a new carbon tax, before shelving the suggestion over anger that it could push up food prices during the current recession.
Aside from broad Covid-19 recovery funding, Budget previews in tabloids have also homed in on the Government’s latest commitments to finance the removal of dangerous cladding from high-rise buildings in England in the wake of the Grenfell Tower fire. Housing Secretary Roger Jenrick has already announced an extra £3.5bn pot for this purpose.
Previews of specific ‘green’ policies, however, remain scarce. The Budget usually comes with major pots for low-carbon sectors but, given that the £12bn Ten Point Plan is not yet four months old, the picture may be different in 2021.
What do green groups want?
The Environment Agency has this week published a new report urging the government to opt-out of a deregulation approach in a bid to jump-start the economy after lockdown. In the foreword, the Agency’s chief executive James Began called for a “modern approach” to legislation that both minimises the negative impacts on air, land and water quality and builds resilience against longer-term threats including climate change.
Also within Government, MPs on the Environmental Audit Committee (EAC) want Sunak to pilot a Natural Nature Service helping disadvantaged people into conservation-related jobs. The EAC’s latest policy briefing, released last week, also calls for VAT relief for businesses that offer repair services or use high quantities of recycled materials, and for an update on the National Investment Bank following concerns about its net-zero “teeth”. Green Alliance and the Wildlife and Countryside Link have supported these calls to action.
Elsewhere, bodies including IEMA and the Green Construction Board are calling for more clarity on how the Government intends to meet its green jobs targets and close skills gaps in low-carbon sectors. They have described construction as a key facet for ‘building back better’, literally, given that the buildings erected today will be standing past 2050 and that the sector can be used as a rapid job creation mechanism.
And edie has reached out to several of the UK’s biggest green groups for their thoughts.
The Aldersgate Group’s head of public affairs and communications, Signe Norberg, said the Budget will be “crucial” to set the UK on a “credible” pathway to net-zero post-Covid-19. She said: “Among other things, this means confirming the remit of the National Infrastructure Bank, ensuring that it has climate and environment at its core and full banking powers. The Bank will play a critical role in unlocking private finance for the creation of future-fit and resilient infrastructure across the whole of the UK, meeting local investment needs and driving a productive, sustainable, and inclusive green recovery.”
Norberg said that the Group also wants to see an extension to the Green Homes grant, formal recognition of the Dasgupta Review on biodiversity and more clarity on the carbon price trajectory under the UK’s Emissions Trading Scheme (ETS).
The ECIU’s head of analysis Dr Jonathan Marshall said that “movement on carbon pricing seems imminent, with the government aware of the risks that a badly implemented tax can bring”.
The REA, like the Aldersgate Group, has said that an extension of the Green Homes Grant is “at the top of its agenda” for the Budget.
The REA’s chief executive Dr Nina Skorupska added: “We would also strongly support the removal of VAT on a range of clean technologies such as energy storage; an increase in the Contracts for Difference budget; and additional funding for best practice standards and Defra’s ‘Quality Protocol’ revisions for the organics industry. A provision of stable, long-term funding options for businesses looking to transition to net-zero is a necessity too.
“I recognise that this is an incredibly challenging economic landscape, but now is the time to support business and encourage consumers, not to squeeze investment.”
UKGBC chief executive Julie Hirigoyen expressed similar concerns over the Green Homes Grant and called the budget a chance for Sunak to “provide some much-needed clarity on the scheme’s future”.
She said: “At a very minimum, the Chancellor should use the Budget to bring forward and fulfil the Government’s manifesto pledge to spend £9.2 billion on energy efficiency, and commit to rolling over all the Green Homes Grant funding unspent this financial year into the next. Then he must go further and set out a long-term roadmap for energy efficiency moving forward, backed with funding which goes far beyond the GHG.
“One practical incentive the Chancellor should consider is to scrap VAT on green goods (e.g. insulation and solar panels) and green services (e.g. home retrofit works) to kick-start demand for the Green Homes Grant and stimulate the UK’s green recovery.”
What is on the general public’s green wishlist?
The results of a survey of 3,000 UK adults, garnering their views on policies relating to the Green Industrial Revolution, were published this week by the Politics of the Environment and Climate Change (PECC) lab at Royal Holloway, University of London. Two-thirds of respondents said they supported the Ten-Point Plan and would welcome further policy and government financial support in the areas covered.
Support was particularly strong for tree planting, offshore wind power capacity expansion, electric public transport and grants for EV purchases by businesses and individuals. Sunak is being urged to focus efforts here both to win public trust and to deliver short-term economic returns in the early stages of the net-zero transition.
Separately, citizens’ climate juries in London and the North East, co-convened by think-tank the IPPR, have revealed a strong desire for job creation schemes in low-carbon sectors and financial incentives to tackle fuel poverty and energy efficiency in homes. On the former, the Government is targeting two million ‘green collar’ jobs by 2030 but has historically faced challenges with quantifying progress and scaling up the skills pipeline. On the latter, the Government’s recent decision to pull the majority of the £2bn of original funding from the Green Homes Grant scheme has proved broadly unpopular and Sunak will be facing pressure to clarify this decision or develop an alternative.
While the proposed carbon tax on products like meat, which would have been passed on to the consumer, proved unpopular, the Zero Carbon Campaign is petitioning for the Budget to include new commitments to scoping work on a carbon tax. A survey by the campaign found that 76% of respondents want new requirements for businesses to pay for their emissions and the broader scope of their negative environmental impact. Moreover, 68% wanted lower-income houses to be protected from price increases using dedicated mechanisms.
WHAT DO YOU WANT TO SEE RISHI SUNAK ANNOUNCING FOR THE GREEN ECONOMY THIS BUDGET? LET US KNOW IN THE COMMENTS.
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