Overview. The Office for Budget Responsibility published its Fiscal Risks Report 2021 last week. It's a landmark report that focuses on “three large, and potentially catastrophic, sources of fiscal risks'' to the UK’s public finances: the Covid-19 pandemic, unmitigated climate change and public sector debt. (Watch the OBR’s short video summary here)
~~Findings. The OBR notes that the costs of achieving net zero emissions are “significant”, but would be greater without “decisive action” and “early steps” to mitigate climate change. It envisages a 1.4% hit to GDP to achieve net zero, adding 21% of GDP to UK public debt by 2050. Unchecked climate change could take public debt to 289% of GDP by the end of the century.
~~Total costs of net zero. Carbon Brief’s Simon Evans explains that the Climate Change Committee’s estimations of the costs of reaching net zero are £1.4tn, offset by savings of £1.1tn, with an overall net cost of £321bn over 30 years (“Anyone pointing to the costs, but not the savings, is being disingenuous”).
~~Reception. Carbon Brief’s round-up of the UK media response gives a good overview of the report’s reception.
Fiscal multipliers and co-benefits. The OBR report identifies that the permanent fiscal costs of the pandemic depend on the degree of economic scarring (long-term damage). One solution is to ensure that public spending on net zero has high co-benefits and fiscal multipliers, for instance through investment in retrofitting homes which creates jobs in the poorest areas.
~~A green recovery is politically popular. New analysis from the ECIU finds majority public support for a green recovery, particularly on issues like installing low carbon technology in housing.
Green taxes. The OBR notes that the main hit to public revenues from decarbonisation will come from the loss of fuel duty. But this could be offset by higher carbon taxes, which could cover public spending of around 0.4% of GDP per year on net zero investments.
Fixing the BoE’s green mandate. NEF’s Lukasz Krebel writes for Rethinking Poverty explaining the shortcomings of the Bank of England’s green mandate, calling for credit guidance, a Green Finance Action Taskforce and more “to help tackle the climate crisis, while supporting new jobs and the recovery from Covid-19”.
Welfare and poverty
£20 Universal Credit uplift to be phased out in Autumn. Work and Pensions Secretary Theresa Coffey confirmed that the £20 per week uplift to Universal Credit would be abolished in the autumn.
~~Justification. Torsten Bell of the Resolution Foundation criticised the government’s framing of the policy choice as a decision to “get people into work”, explaining why reducing the level of welfare payments is self-defeating.
Free-market based approach is unrealistic. Political economist Max Krahé explained that net zero can only be achieved with a degree of central planning because the price mechanism cannot transform energy, transport, buildings, industry and agricultural sectors at the scale and speed needed.
Trade union-led green industrial strategy. Steve Turner, standing in the election for General Secretary of Unite, released Workers’ Greenprint for a Million Jobs, a 10 point union-led industrial strategy to create one million well-paid green jobs to rebuild the UK’s manufacturing capacity, with “equality, social justice and sustainability at its heart”.
Cooperatives. Cooperatives UK and the Employee Ownership Association launched the Ownership Hub, an organisation “to raise awareness, develop training, deliver advice and expertise to create resilient and inclusive businesses” owned and controlled by their employees. The Ownership Hub will start in the Sheffield city region.
~~Long Covid. The authors pointed to the risks of “creating a generation left with chronic health problems and disability, the personal and economic impacts of which might be felt for decades to come”. (Watch the video of their press conference, Mass infection is not an option, here.)
