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UK government’s Net Zero Review touts business incentives

Author: ICAEW Insights

Published: 18 Jan 2023

Tax incentives, a Help to Grow Green campaign for SMEs and reforms of the planning system are among the 129 recommendations made by Chris Skidmore MP.

The UK’s leadership on tackling climate change has delivered real change, but more should be done to reap the economic benefits that presents, Chris Skidmore MP, Chair of the government’s Net Zero Review has said in his final report on the government’s Net Zero Strategy.

Skidmore’s latest report, Mission Zero, published on 13 January, makes 129 recommendations covering areas including business incentives, making better use of infrastructure and delivering more energy-efficient homes to maximise economic investment, opportunities and jobs.

Proposals include reviewing incentives for business investment in decarbonisation, including via the tax system, and launching a Help to Grow Green campaign offering information and advice to small businesses so they can upskill, plan ahead and invest in the net zero transition. 

The Review also calls for reform of the planning system to put net zero at its heart, and backing for at least one trailblazer net zero city, local authority and community that can work towards reaching net zero by 2030.

To deliver energy-efficient homes, Skidmore’s review suggests legislating for the Future Homes Standard so that no new homes will be built with a gas boiler from 2025, adopting a 10-year mission to make heat pumps a widespread technology in the UK.

The review also highlights the key role of infrastructure and calls on development of a cross-sector infrastructure strategy by 2025 to support the building of and adaptation for new green energy sources such as hydrogen to support the green economy.

Skidmore has urged ministers to grasp the “historic opportunity”, highlighting how the government’s Net Zero Strategy offers the right direction and the right policies to do so. He said the UK should be proud of the lead it has taken in tackling climate change, which as well as being essential environmentally also puts the UK at an economic advantage globally.

“We lead in areas including clean technologies, science, manufacturing and green finance – areas that, if managed right, can lead to new jobs and strong economic growth. My recommendations are designed to make the most of this historic opportunity, covering the length and breadth of our economy, so that people in every part of the country can reap the benefits of this both in their communities and in their pockets,” Skidmore said.

ICAEW Chief Executive Michael Izza described the report and its recommendations as a positive reinforcement of the importance of the UK’s transition to net zero, and the role businesses can play in its delivery. 

“I’m pleased to see that many of our suggestions in our submission have been picked up. ICAEW has long advocated supporting SMEs to enable net zero transformation and produce a roadmap for aligning tax measures with delivering net zero. We therefore welcome the report’s recommendations for a ‘Help to Grow Green campaign’ and reviewing how HMT incentivises decarbonisation, including via the tax system,” Izza said.

Official statistics show there are already around 400,000 jobs in low carbon businesses and their supply chains across the UK, with turnover estimated at £41.2bn in 2020. McKinsey estimates a global market opportunity of £1trn for British businesses by 2030 and the government hopes that the British Energy Security Strategy and Net Zero Strategy will leverage an additional £100bn of private investment, while supporting an additional 480,000 British jobs by 2030.

Meanwhile, Izza welcomed the report’s calls for the simplification of the local net zero funding landscape, and for an Office for Net Zero Delivery. “Local government will be trusted delivery partners in meeting the UK’s net zero commitments; however, ICAEW has long felt local authorities are held back by the funding mechanism and the lack of coordination between central government departments,” he said. 

The report underlines the important role of standard setting and international alignment of standards in meeting the net zero challenge. “The transition to net zero won’t be possible unless businesses are able to measure and report on their climate-related activity, and investors and the public have assurance on these disclosures. We support the call for the UK to draw on its leadership around standard-setting to shape standards internationally and adopt agreed ones as appropriate.

“ICAEW and our members will have a key role in supporting the UK’s transition to a net zero economy. This report is a welcome contribution on how to achieve this, and I encourage ministers to take forward its recommendations,” Izza said.

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