Progress on tackling climate change is crucial in this current decade if the UK can hope to meet its 2050 net zero emissions target. With that in mind, Wednesday’s Budget was expected to deliver a foundation of measures to accelerate progress as part of the government’s pledge to ‘build back better’ after the pandemic.
Environmental groups were hoping to see a rise in fuel duty after several years of freezes. There was hope for an online sales tax to help smaller brands compete with e-commerce giants. Organisations and lobbying groups called for an end to VAT on goods such as insulation and solar panels and green services such as home retrofit works, to kick-start demand for the Green Homes Grant.
Going further, the Environmental Audit Committee Report recommended VAT reductions for businesses that offer circular economy services like repair, products made using recycled content, and in sectors including home energy efficiency and ultra-low emissions vehicles.
These are just some of the tax measures in a wish list that included green job creation, infrastructure spending, funding and responses to the Dasgupta Review. While some of those did materialise, much of it was conspicuous by its absence.
Put climate and fairness front and centre
“The laudable ambition for a fair recovery and a green Industrial Revolution we have heard a lot about from the government didn’t translate into the hoped-for battery of actions in this Budget,” says Richard Spencer, Director, ICAEW Technical Thought Leadership. “We expected to see climate and fairness issues, far more front and centre. Instead, it felt it felt like a sideshow.”
One positive step in the right direction in the Budget was the announcement that nature would form part of the Bank of England’s monetary policy assessments – a move towards the recommendations outlined in the Dasgupta Review that the UK needs a more comprehensive view of economic success that includes wellbeing and our stewardship of the environment.
The aim to fund at least £40bn of private and public sector projects via the new National Infrastructure Bank, which has been allotted an initial £12bn in capital, was also welcome news. Another £15bn will be put into green bonds, open to retail investors, to help fund the net-zero transition. A further £1bn will be put into a net-zero innovation fund. The Carbon Markets Working Group was also welcome news.
The fuel duty freeze, however, remained. There was also no mention of the Green Homes Grant. 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. “We still need some kind of strategy around what the pathway for carbon pricing is,” says Spencer.
The support for offshore wind and the investment in a hydrogen hub in Holyhead was a big step in the right direction, says Spencer. “I think what we're looking for is a hydrogen strategy. Hydrogen isn't clean yet, but it can be. That can be a longer-term goal, but we need a plan for how we get here.”
There is clearly an ambition for the government to deliver on green targets, and the integrity of the government’s vision seems sound. But we are yet to see a lot of detail as to how it will be delivered. The National Infrastructure Bank and the Bank of England’s green remit are promising moves. “Hopefully it will result in changing our economic goals, which would be audacious and brave. Ultimately, we want more delivery to meet the ambition. In my view, the Chancellor needs to be audacious.”
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