26.10.21
Climate Change

The UK's Net Zero Strategy

Delivering the net zero transition? Last week the government published its long-awaited Net Zero Strategy, along with a variety of other plans detailing how the UK government proposes to deliver the transition to a net zero emission economy. The three main documents are the overall Net Zero Strategy: Build Back Greener, the Heat and Buildings Strategy and the Treasury’s Net Zero Review Final Report. For a short summary of policies outlined in these three documents, read this overview by the Financial Times.  


The Net Zero Strategy. The Net Zero Strategy outlines how the UK government plans to deliver its emissions targets of Net Zero by 2050 and a 78% reduction from 1990 to 2035. It estimates that additional capital investment must grow to “an average of £50-60bn per year through the late 2020s and 2030s”, with the private sector filling the majority of this. The Climate Change Committee’s (CCC) independent assessment concludes that it “sets an ambitious, credible path for UK decarbonisation, consistent with tough territorial emissions targets in the near and long-term that we (and others) assess to be in line with the demands of the Paris Agreement Implementation and delivery is what matters now”.

Gaps: food, agriculture and behaviour change. Many have criticised the lack of delivery mechanisms in the Net Zero Strategy for decarbonising agriculture and land use, and the lack of emphasis on the issue of behaviour change (such as changing diets and demand for flights). 


BEIS’s Heat and Buildings Strategy. The Heat and Buildings Strategy includes a target (not legally mandated) to end the sale of fossil fueled heating systems by 2035, and a £450m three year grant programme giving £5,000 to households to shift to low carbon heating systems (mainly air and ground source heat pumps). Read this commentary from Business Green.

  • Not enough money. Business Green’s James Murray pointed to “serious concerns amongst policy wonks that the whole thing is badly underfunded”, particularly in support for reducing demand through higher energy efficiency. Friends of the Earth’s Mike Child’s noted that the money allocated would only pay for 90,000 heat pump installations over three years, which falls way short of the Prime Minister’s target of 600,000 a year by 2028
  • Warmer homes for a cooler planet. IPPR’s Luke Murphy argued that a successful plan would include grants of £7,500 as well as covering the full costs for those suffering from fuel poverty, a legal commitment to phase out new boilers, a nationwide information campaign and a focus on local delivery and skills for a “retrofit army”. IPPR has provided a comprehensive plan to decarbonise the UK’s homes, setting out a blueprint for delivering a successful and fair national housing retrofit drive. Follow NEF’s campaign for a Great Homes Upgrade for more resources on decarbonising homes. NEF has explained how a ‘Future Skills Scheme’ could help address the skills shortage, which it describes as a “binding constraint on decarbonisation initiatives, such as building retrofit”.


HMT’s Net Zero Review. It was widely predicted that the final report of the Treasury’s review of the costs and benefits of meeting the net zero target would focus mainly on the costs, as part of an apparent desire by Rishi Sunak to slow down the net zero momentum. But most commentators acknowledged that in the end it was a mostly reasonable assessment, suggesting that in the run up to COP26 Boris Johnson had won an internal fight with the Chancellor. 

Weekly Updates

Fiscal policy

A “green and care-led recovery”. Nine of the UK’s leading think tanks and over seventy academic economists have written an open letter to Chancellor Rishi Sunak and Prime Minister Boris Johnson, urging them to use this week’s Budget and Spending Review to invest in a “green and care-led recovery”. The group, including the TUC, NEF, IPPR, Women’s Budget Group, Tax Justice UK and Positive Money, call for an additional £70-90bn in annual spending in order to achieve the government’s stated aims of net zero, levelling up and “building back better”. Read the group’s briefing note and Guardian article by Michael Jacobs for more.

  • £30bn green spending package. IPPR estimates that annual green spending in this Spending Review should be increased by around £30bn a year, which could create at least 500,000 new jobs, spread right across the country. More detail on the green spending package here (p4).
  • £11-29bn to reform social care. The group called for greater investment in social infrastructure, as social care and childcare enable people - overwhelmingly women - to increase their working hours. The additional earnings contribute to raising demand, which generates higher tax receipts. IPPR calculates that at least £11 billion in additional funding is needed to deliver free personal care for people over 65 under current eligibility rules, improve access to care, and raise pay for social care workers paid below the Real Living Wage. WBG calculates that an additional £29bn a year is needed to increase eligibility, free at the point of use, for those aged 18-64 and the over 65s, and increase pay and working conditions for carers. This would create around 466,000 new jobs. 
  • £10.4bn investment in childcare. WBG’s Jerome de Henau also calculatesd that a £10.4bn additional investment to provide 30 hours of free childcare for all children aged between 6 months and 4.5years, with a pay rise for carers, would create 310,000 new FTE jobs. 70% of the spending could be recouped from increased tax receipts. 
  • Levelling up. To ensure that ‘levelling up’ is real and not just rhetorical, the open letter calls on the Treasury to publish a comprehensive Equality Impact Assessment of the Budget and Spending Review and to mandate the OBR to evaluate it. (See WBG’s explainer on Equality Impact Assessments) This should include the proportion of spending going to the poorest third of local authorities - measured by the Index of Multiple Deprivation - and the impact of spending decisions on women, black and minority ethnic groups, people with disabilities and others.
  • Tax reform. The group also urged the Chancellor to act now to make the tax system fairer by equalising tax rates on capital gains and dividends, introducing a windfall tax on excessive profits and look at reform of land and property taxes. The Tax Justice UK has made the case
  • The case for a fiscal stimulus. The desired spending package equates to a stimulus of 3-4% GDP to return the UK economy to its pre-pandemic growth path and stabilise public debt. For more on the case for a fiscal stimulus, see BBC economics correspondent Andy Verity’s helpful explainer on borrowing and debt and our Resource bank page Stimulating economic recovery.
  • Other resources. The WBG published its pre-Budget briefings along with a joint response to the Spending Review with a coalition of women’s organisations including Maternity Action and the End Violence Against Women Coalition. The TUC published its submission to the Spending Review calling for “concrete plans - backed by investment - for decent jobs, resilient public services, and a just transition to net-zero.”

Replace fiscal rules with ‘fiscal referees’. NEF has published a report arguing that the government’s ‘fiscal rules’ should be replaced by a new framework, including a Fiscal Policy Committee (FPC) housed at the OBR or other third-party institution, appointed by government and parliament and guided by a set of ‘fiscal principles’. The FPC’s mandate would be based on resource constraints, full capacity utilisation, the private sector balance sheet position, and public sector net worth. NEF’s Frank van Lerven summarised the report in a Twitter thread here.

Work

Unions, low pay and labour shortages. The TUC published a report outlining its key tests for ‘levelling up’. “Any genuine attempt to level up Britain must start with levelling up work”, by increasing employment rights and the minimum wage. (Politics Home article by TUC General Secretary Frances O’Grady here.) The TUC have also published their latest Jobs and Recovery Monitor, which looks at the relationship between labour shortages and pay growth. It finds that real wage growth is likely to be flat over the rest of the year and negative in the public sector without any government action.


Trade union membership. The Wales Institute of Social and Economic Research and Data published a trade union data mapping tool which maps union density, presence, coverage and collective pay agreement coverage by local authority area.

Housing

Fund for tackling rental debts. The Department for Levelling Up, Housing and Communities has announced a £65m fund for local authorities to support low income families suffering from rental arrears

Tax

Millionaires call for wealth tax. A group of 30 UK millionaires have written an open letter to Chancellor Rishi Sunak calling for a wealth tax to tackle inequality, the pandemic and climate change: “We know where you can find that money - tax wealth holders like us. We can afford to contribute more, and we want to invest in repairing and improving our shared services. We are proud to pay our taxes to reduce inequality, support stronger social care and the NHS, and to ensure that we’re building a more just and green society.” (Guardian coverage here)

  • The case for a wealth tax. Labour MP Jon Trickett outlined the case for a wealth tax in a new report The Nature of Wealth in Britain, proposing four different options including a one-off tax, an annual tax and a hybrid tax targeting increases in wealth. The median revenue raised would be £218.4bn with the hybrid option raising another £85.7bn. Tax Justice Network produced an explainer video on wealth taxes as part of their ‘Tax Justice 101’ series.

Wellbeing and paradigm shift

Happy Planet Index. The Wellbeing Economy Alliance published its 5th edition of the Happy Planet Index, which “ranks countries by how efficiently they deliver long, happy lives for their people using limited environmental resources”. The UK ranks 56th, due to an unsustainable ecological footprint, despite high life expectancy and wellbeing. 


Wellbeing budget. IPPR released a report calling for a £35bn ‘public health budget’ to reduce health disparities across the country. The authors estimate that this funding could raise life expectancy by 2 years on average and add at least £20bn to the economy. They call for a ‘wellbeing budget’ to redefine economic progress and broaden the definition of prosperity beyond GDP. (Twitter thread summary from IPPR’s Chris Thomas, including a health and wealth data tracker to create your own data visualisations)


The genesis of Genesys. The OECD’s New Approaches to Economic Challenges unit has established Government Economists for New Economic Systems (GENESYS), a platform for government economists and policymakers to debate, experiment and discuss policy alternatives which could solve “systemic structural issues which threaten the future”. Watch their launch webcast with Paschal Donohoe, President of the Eurogroup, and others (including New Economy Brief’s Michael Jacobs) on 4 November, 14:00-16:00 GMT.