Treasury blocking green policies key to UK net zero target

Treasury blocking green policies key to UK net zero target

Treasury blocking green policies key to UK net zero target

Experts say chancellor refusing to commit spending needed to shift economy to low-carbon footing

The prime minister, Boris Johnson, and the chancellor of the exchequer, Rishi Sunak

Environment correspondent

Last modified on Fri 13 Aug 2021 13.57 EDT

The Treasury is blocking green policies essential to put the UK on track to net zero emissions, imperilling the UK’s own targets and the success of vital UN climate talks, experts have told the Guardian.

A string of policies, from home insulation to new infrastructure spending, have been scrapped, watered down or delayed. Rows about short term costs have dominated over longer term warnings that putting off green spending now will lead to much higher costs in future.

The UK’s credibility as host of the Cop26 climate talks this November in Glasgow rests on a clear net zero strategy – but publication has been postponed until near the eve of the summit, giving the UK little leverage to bring other countries to the negotiating table with the tougher carbon targets needed. Meanwhile, steep cuts to overseas aid have severely damaged the UK’s standing internationally, experts on the UN talks said.

Jamie Peters, director of campaigning impact at Friends of the Earth, said: “The Treasury has been helping to fuel the climate emergency for far too long. The reality is that a rapid transition to a zero carbon future would be far less expensive than delaying the green measures we so urgently need, and that will create significant economic opportunities and new jobs.”

Civil society groups, thinktanks and political insiders said the Treasury had refused to commit to the spending needed to shift the UK’s economy to a low-carbon footing. Complaints about the potential short-term costs of net zero policies have been one flashpoint during weeks of high tension between the prime minister, Boris Johnson, and the chancellor, Rishi Sunak, the Guardian understands.

Kate Blagojevic, head of climate at Greenpeace UK, said: “There are strong reports that Rishi Sunak is intent on blocking climate spending at exactly the moment we need it most, and that his fingerprints sit heavily on moves to delay or block crucial investment to cut emissions from buildings or gas boilers.”

The lengthy charge sheet against the Treasury includes: scrapping the green homes grant insulation scheme; freezing fuel duty while slashing electric car incentives; mulling cuts to air passenger duty on domestic flights, while making above-inflation train fare increases; failing to cut VAT on green home refurbishment; underfunding the new infrastructure bank; and delaying the phasing out of gas boilers.

There have also been glaring omissions and delays. For instance, the transport strategy failed to back road pricing, which many believe will be essential to reducing emissions, which have remained stubbornly high as more people buy SUVs. Both the hydrogen strategy and heat and buildings strategy have been delayed until autumn, as has the overarching net zero strategy.

Not all of these policies were under direct Treasury control, but the Treasury holds the purse strings and can effectively veto plans by other departments that require government investment or might raise costs for consumers. “The Treasury is at the root of this,” said Ed Matthew, campaign director at E3G, a green thinktank. “They are completely obsessed with short-term costs. It’s bonkers.”

Chris Venables, head of politics at the Green Alliance thinktank, said: “The Treasury has this huge institutional resistance to medium term economic benefits [that entail short term costs]. They have to be dragged kicking and screaming to consider it.”

Ministers and advisers are understood to be anxious that costs such as switching to heat pumps from gas boilers, estimated from GBP5,000 to GBP20,000 for some households, or the higher purchase price of electric cars, will hurt consumers’ pockets. But the independent committee on climate change has said the costs of net zero are affordable and falling, at about 1% of GDP by 2050, while green investment will generate new jobs, and policies can be devised that shift the costs from lower-income households and distribute them fairly.

Moreover, as this week’s report from the Intergovernmental Panel on Climate Change spelled out, extreme weather is already here and will get worse. As recent flooding has demonstrated, the costs of inaction will far outweigh the costs of action.

Even observers normally sympathetic to the government find the Treasury’s reluctance concerning. Josh Buckland, author of a report for the liberal conservative thinktank Bright Blue, said: “The Treasury is absolutely crucial to net zero. It has taken some welcome steps thus far to drive green finance and investment, but the jury is still out on how far it is willing to go given wider pressures on the public finances.”

Buckland, a former environmental adviser to Johnson, believes that Sunak, known to be a fiscal “hawk” and free-marketeer, is not ideologically opposed to climate action. He said that while the Treasury was traditionally reluctant to commit spending on any issue, Sunak “also has a lot of priorities as we recover from the pandemic”.

Ed Miliband, the shadow business secretary, disagrees. “Their ideology is standing in the way – they think that it can be done by the market and it can’t. They are held back by thinking this can all be done by the private sector, when all the evidence is that this has to be done by the public and private sectors.”

Recent calls by Conservative MPs including Steve Baker and Craig Mackinlay to halt the race to net zero, which have received a warm welcome in sections of the press, have suggested that some MPs may also sniff electoral advantage in being seen to be anti-green.

Blagojevic said: “The chancellor’s position may be politically expedient for him in trying to court the small number of Tory MPs intent on delaying climate action. Ultimately, though, history will not look kindly if he is the chancellor who tried to hobble our chances of reaching a low-carbon future, with all the growth, good jobs and stable better future it offers.”

If the UK is to meet its net zero targets, ministers will have to face down backbench critics. E3G’s Matthew said: “It’s becoming understood [by the government] that you can’t just leave it to the market to deliver net zero, as that isn’t going to happen. For a Conservative government, that’s an inconvenient reality.”

Last year, as the world was plunged into recession after the first lockdowns, Johnson appeared to grasp this when he promised to “build back greener”. Since then, however, few spending plans to reduce emissions have been brought forward, other than the green homes grant. Johnson also produced a 10-point plan setting out areas of focus, including nuclear power and offshore wind, but this was dismissed by many experts as a wishlist rather than a strategy.

The Treasury said: “The government is committed to tackling climate change and the prime minister has set out an ambitious 10-point plan to help us achieve that. The Treasury is playing a crucial role in this effort, by allocating GBP12bn to fund the 10-point plan, setting up the UK infrastructure bank to invest in net zero, and announcing plans to issue GBP15bn in green bonds over the next year.”

As the UK prepares to host Cop26, the government will be trying to persuade other countries to set out clear policies on emissions cuts for the next decade, a task much harder if ministers have no policies of their own. Ultimately, says Venables, only one person can sort this out: “The prime minister needs to get stuck in, to make the difficult decisions, and soon.”

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