The budget was a missed opportunity for the green economy

With promises of a ‘green industrial revolution’, what was in the budget?

Simon Walker/HM Treasury
Chancellor Rishi Sunak holds up a red Despatch Box in front of 10 Downing Street.
Simon Walker/HM Treasury

Thirty-six minutes. That is how long it took Chancellor Rishi Sunak to reference the first policies relating to the green economy in his budget speech.

In the year the UK hosts COP26, and with promises of a ‘green industrial revolution’, what was in the budget?

Under the shadow of the COVID-19 pandemic, it was always going to be clear that the Government’s priorities would be focused on helping businesses and people recover from the economic shock.

But the threat posed by climate change has not diminished over this last year and our need to take decisive action is more important than ever.

Here, we give our thoughts on where we go next and look at some of the announcements in the budget (good and not so good).

Looking forward - where do we go from here?

With the UK hosting the UN's climate summit this year, this was a great opportunity to show bigger ambition.

The Government could have put the green agenda right at the centre of the nation’s recovery from the coronavirus pandemic. 

We had hoped for an overarching green stimulus that supports new green jobs and green infrastructure right across the economy, not a new coal mine in Cumbria.

We wanted to see reduced VAT on a range of clean technology sectors (including renewable energy), more funding for the Green Homes Grant and long-term incentives to boost the electric vehicle market.

Policies like these were absent from the budget, as was clarity on the long-term funding for the net zero transition. As the Public Accounts Committee has recently noted, the government has ‘no plan for achieving net zero’.

We need to see more long-term ambition from government. We need clarity on the funding for the net zero transition and we need a budget that places the climate emergency front and centre, not a sidenote relegated to thirty-six minutes into the budget speech. 

We hope that the Treasury’s net zero review, later this year, will provide further details on implementation of the Government’s ‘Ten Point Plan for a Green Industrial Revolution’.

The good bits

Net zero mandate for the Bank of England – a new remit for the Bank of England which will mean for the first time ever that the UK’s net zero goal and environmental sustainability will form a core part of the Government’s monetary policy decision making.

National Infrastructure Bank – this is a welcome step in financing key net zero projects. The new infrastructure bank will be based in Leeds and will have a total of £22bn to finance green projects.

Green finance – the Government will be introducing the first sovereign green bond this year worth up to £15 billion. This will help finance projects to tackle climate change, fund infrastructure investment and create green jobs. In addition, the government has announced the launch of green retail saving product through the National Savings & Investments bank in the summer of 2021.

Net zero innovation projects – £1bn has been allocated for net zero innovation, including £20 million to fund a competition to develop floating offshore wind technology, £68 million for a competition to deliver long duration energy storage prototypes and £4 million for a biomass feedstocks programme to increase production of green energy crops.

Infrastructure – Teesside and Humberside have been chosen as the location for the new port infrastructure to build the next generation of offshore wind projects. Aberdeen Energy Transition Zone has been awarded £27 million to support northeast Scotland transition into a hub for offshore wind and hydrogen.

The not so good bits

Green Homes Grant – despite no mention in the Chancellor’s speech, the Treasury has subsequently confirmed that the Government’s flagship energy efficiency scheme has been renewed but with a significant reduction in funding to £320 million for 2021/22. The Government has confirmed the unspent funds from last year’s budget (over £1bn) will not be carried over to this year. This is a major setback in the vital goal to make the UK’s housing stock more energy efficient.

Carbon pricing – the Government has decided to freeze the Carbon Price Support at £18 per tonne of CO2 in 2022-23 (it was originally set to increase to £30 by 2020). We are still waiting for government proposals to expand the UK Emissions Trading Scheme in 2021.

Fuel Duty frozen – this is now the eleventh year in a row that fuel duty has been frozen. Whilst the Government says that "future fuel duty rates will be considered in the context of the UK’s commitment to reach net-zero emissions by 2050", this does not help address the urgent need to decarbonise the transport sector in the UK.  

Notable omissions – there was hardly any mention of key sectors that are fundamental to national decarbonisation efforts. They include onshore renewables, electric vehicles, batteries, biomass, agriculture, geothermal and building and transport emissions.