Opinion: Not a budget for green policy

Wind turbine - Some rights reserved by thomas vlDavid Cameron may now view climate change as a serious threat, thanks to the winter floods, but you wouldn’t know it from his Chancellor’s Budget statement on Wednesday. What did the Budget do for green growth and the low-carbon agenda? –

  • Froze the carbon price floor (paid by large emitters) until the end of the decade. Introduced just last year at £16/tonne carbon dioxide, it was supposed to increase steadily to reach £30 in 2020 and £70 in 2030; now it’ll stick at £18. This makes coal more attractive and low-carbon energy less.
  • Ended Enterprise Investment Scheme tax breaks for investments in renewable electricity and heat (while retaining them for everything else).
  • Extended compensation for energy-intensive industries from the electricity bill levies funding renewable energy. There is a good case for giving energy-intensives which compete internationally some form of tax break – but they get a sizeable one already, and the government is not attempting to make the compensation conditional on any kind of action to reduce emissions.
  • Announced a review of the North Sea oil and gas taxation regime to maximise extraction.
  • Froze fuel duty, as in previous years; so throughout this Parliament, fuel duty has fallen steadily behind inflation.
  • Reduced air passenger duty for some long-haul flights.

To be fair, it wasn’t all bad news from a green point of view: there’s a new incentive for combined heat and power, an increase in company car tax, and a higher subsidy for ultra-low-carbon vehicles – but this is all pretty small beer beside the impacts of the measures listed above.

There are three problems here. First, the Budget adds to the sense of policy uncertainty over government support for renewable energy. Thanks to Liberal Democrat ministers, the UK has a good support programme in place – but every time Osborne opens his mouth, it’s to support fossil fuels. Renewable energy requires big up-front investment and therefore confidence that investors will get their money back over time. Osborne’s approach undermines that confidence, making these investments less likely and more costly.

Second, I can’t find a shred of evidence that the Treasury has considered the impact of the Budget either on carbon emissions or on the UK’s ability to hit its own –fairly ambitious – carbon reduction targets. I accept that there are arguments for all the measures set out above, but I can’t see how they make achieving the legally binding UK carbon budgets easier – so what does the government propose to do about it? We have no idea – which is the kind of reason why those of us who published The Green Manifesto last week (see www.green-book.org.uk) included a proposal to create an Office for Environmental Responsibility (modelled on the Office for Budget Responsibility), with the duty to report publicly on the long-term implications of policy decisions – such as Budget measures – on the environment.

And third, why is a coalition government including Liberal Democrats responsible for such an anti-green budget? I’m pleased the increase in income tax thresholds is included, but is this the only Liberal Democrat objective we’re ever expected to achieve?

* Duncan Brack is the Editor of the Journal of Liberal History and former Vice Chair of the Federal Policy Committee.

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13 Comments

  • Green Energy Can NEVER be a significant Energy Supply and your idea of Green is to Tax struggling hard working an sadly sick and unemployed to fund it ALL WRONG GET REAL UNTIL the main player polluters ie CHINA RUSSIA USA cut I say we NOT cut a gram of carbon too PUT OUR ECONOMY OUR PEOPLE FIRST NOT IDEOLOGY

  • Tony Greaves 21st Mar '14 - 12:14pm

    Good questions, Duncan.

    “And third, why is a coalition government including Liberal Democrats responsible for such an anti-green budget?”

    There are some good things in this budget including (in my opinion) the stuff on pension pots and annuities. But overall it is not a Liberal budget and will in my view come back to bite us.

    Tony

  • Adam Corlett 21st Mar '14 - 12:27pm

    One more: I noticed we’re going to exempt more old (dirty) cars from VED!

  • Simon McGrath 21st Mar '14 - 12:54pm

    “Announced a review of the North Sea oil and gas taxation regime to maximise extraction. ”
    We are going to be using some oil and gas for many years however much renewable energy we develop. Surely better to get it from the North Sea rather than buy from overseas?

  • @Simon McGrath
    The problem is that compared to our level of consumption, there is relatively little gas and oil either under the north sea or locked up in shale deposits under land.

    I suspect that part of the rationale is to ensure that the north sea reserves are exploited to a much greater extent before they are abandoned as being uneconomic. Also we shouldn’t forget that much of the oil under the north sea is exported, so a useful earner to help balance the books.

    My concern is the lack of real incentives to invest in the development of alternatives to fossil fuels.

  • One possible answer to Duncan’s very fair question is that the Liberal Democrat secretary of state for Climate Change has his mind on other things.
    If you spend a high proportion of your time as a cabinet minister chasing the goal of more Chinese and Russian investment in yet more nuclear power stations in the UK, you do not have a lot of time for all that green stuff.

    Germany is working to get 80% of their energy needs met from renewables within 30 years. What is The UK Coalitiom initiative and achievement in this area? Edward Davey has boasted here in LDV about the startling breakthrough of a new symbol on printed fuel bills to make it easier to switch suppliers, but is that the sum of his achievements? is a Blue Red coalition in Germany more green? It would appear that it is.

  • Sarah Whitebread 21st Mar '14 - 4:41pm

    Completely agree Duncan.

    We do need the green NGOs, if not gushingly positive, to at least not give this government’s record a complete pasting in the run up to 2015. If we keep going about it this way there’s no chance of that.

    Is there any record anywhere that we’ve stood up against this stuff?

  • Chris Manners 21st Mar '14 - 5:05pm

    Good post.

    A shame you good people have been done up like kippers.

  • Quite simple really this was a budget for jobs – true blue tory MP jobs. With a bone or two thrown to the one time ginger (now blue through and through) rodent.

  • If you have eight minutes of your life to spare, here is a Liberal Democrat MP talking about the budget without mentioning any green policy whatsoever. He is amongst his friends, the IEA and. The TPA. Not all Liberal Democrats would be happy in the company of the IEA ( the provisional wing of Big Tobacco ) or the Tax Payers Alliance, but this is Jeremy Browne —

    http://www.iea.org.uk/multimedia/video/iea-tpa-post-budget-2014-briefing-4

  • Tony Rowan-Wicks 22nd Mar '14 - 5:15pm

    I’m sure Tony Greaves is right, this budget will come back to bite us – because it has too few Liberal principles but mostly money-playing which will not be remembered at election time. I have already forgotten the budget, haven’t you?

    Green policies are Liberal, maybe difficult but memorable, and for the future. The Tories are about gaining votes in May – hence the so-called low level give-aways and the pension guessing games about taking out lump sums LATER when the Tories are defeated, we hope. Please people, let’s stay with principles and not with silly election chatter.

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