Exclusive: Green investment hole in the budget branded a ‘disgrace’ for failing Net Zero pledge
The UK’s ambitious target to become a net-zero economy is in doubt as it hosts the Cop26 climate conference in Glasgow.
The chancellor’s budget fell as much as £21bn short of the investment needed to meet the government’s own carbon reduction targets up to 2025, according to exclusive analysis shared with The Independent.
To meet its own carbon goals the government would need to invest an additional sum of at least close to £28bn by the end of 2025. Yet it committed just £7.2bn of fresh funds in Wednesday’s budget. Environmental think tank The Green Alliance separately calculated that the spending gap was closer to £55bn based on their own assessment.
“Public funding for net zero remains well short of that needed to meet the government’s own targets. This is particularly acute in support to decarbonise the nation’s homes, including large gaps for households on lower incomes,” said Jonathan Marshall, senior economist at the Resolution Foundation.
One senior Treasury official told The Independent that the Treasury had not been honest about how much money was being committed to net-zero efforts by lumping in old investment to cover up a shortfall in additional spending.
A lack of transparency about the real costs of going green is a political challenge for the Conservative Party ahead of the next election. The gap of around £21bn could make it harder for Rishi Sunak to cut taxes while also meeting his fiscal rules. And extra green taxes on households would put fresh pressure on families.
The chancellor shocked environmental groups and international partners by cutting taxes on aviation last Wednesday. The independent spending watchdog, the Office for Budget Responsibility (OBR), said that the step had made the job of getting to net zero “more difficult”.
A senior Treasury official told The Independent that there had been clear internal dissent at the decision, coming ahead of the UK playing host to Cop26 and after unveiling the net zero plan earlier this month.
“The decision is at best inconsistent and at worst a disgrace”, the official said. They added that they had not previously engaged with the media but had made an exception because they felt that it was a moral imperative.
They described a “duplicity of presenting a [net zero] strategy with the one hand and making it harder to reduce carbon emissions with the other”.
Shadow business secretary Ed Miliband told The Independent: “The chancellor could barely bring himself to mention action on the climate crisis when we needed it to be front and centre of his Budget.
“He is not committing anything like the investment required to genuinely tackle the climate emergency.
“A Budget with no proper plan for home insulation, no help for our steel industry to go green and a Budget that cuts air passenger duty on domestic flights is a greenwash Budget – not the green Budget we needed.”
Mr Miliband added that Labour would invest £28bn a year this decade on green issues.
The government has said it will require significant private investment alongside public funds to turn carbon goals into a reality. At the recent Global Investment Summit Boris Johnson called on some of the world’s most powerful investors to put trillions of dollars towards going green in the UK.
But estimates by economists suggests that at the present rate of investment it appears the government is expecting the private sector to provide around 80 per cent of the required cash. This is unrealistic, several said; the OBR has modelled 80 per cent of funds coming from the public sector dropping to 50 per cent by 2050.
“While government rhetoric is in the right ballpark on net zero, the investment plan does not yet match up,” said Phil McNally, senior net-zero researcher at the Tony Blair Institute. “The state should not be expected to put up all the investment required for the net-zero transition. The government needs to find the right balance of public investment and policy and regulatory frameworks that will draw as much private investment as possible to fill the gap.”
He added that increased public spending, as well as innovative policy mechanisms, are needed to attract private investment for the net-zero transition.
Still, funding net zero will likely prove a challenge for all political parties going forward.
Will Tanner, director of centre-right think tank, Onward, said that polling carried out by his organisation showed the “desire from voters is actually for further action [on cutting carbon] but where the difficulty does come is when they’re confronted with the costs”.
A government spokesperson said: “The Budget and spending review confirmed that since March 2021 the government will have committed a total of £30bn of domestic investment for the green industrial revolution. This includes £26bn of capital investment to support our net zero strategy.
“The funding will ensure we’re on track to meet our carbon budgets and reach net zero by 2050.”