Verdict on the PBR

Green Alliance welcomes the government’s commitments in the pre-budget report to policies that support its ambitious environmental objectives. In particular we welcome the proposal to bring forward public spending on insulation for the homes of fuel-poor households, on public transport, and on flood defence.

We also back unreservedly the government’s view that the downturn should lead to an acceleration of, not a retreat from, the environmental investments needed to put the UK on track to meet its rightly demanding commitment to cut CO2 emissions by 80 per cent by 2050. The chancellor is right to reaffirm the priority that the UK places on investments now for long-term environmental sustainability and energy security. The commitment to an extension of the renewables obligation is also good news, as are the decisions to bring in a feed-in tariff for micropower and a renewable heat incentive for households and businesses generating their own renewable energy.

The government has been a leader in the EU and OECD in bringing in an 80 per cent target for emissions cuts by 2050 and in establishing the new regime of carbon budgets. We applaud the level of ambition and concern in the government’s statements on climate policy and in the PBR. Many of the measures announced yesterday will help move the UK further along the path towards a low-carbon economy. In particular, the  statement that the UK sees huge potential for job creation in the development of the environmental technologies and services sectors, and we support the view that now is the time for urgent and far-reaching action to underpin the UK’s commitments to deep emission cuts and preparation for adaptation to climate change.

We also support the government in taking further steps to support households at risk of fuel poverty to reduce their energy bills. The expansion of funding for Warm Front and other elements of the Home Energy Saving programme is to be welcomed. It is encouraging that government recognises that environmental progress in cutting emissions and energy demand is wholly compatible with progressive social measures: fuel poverty is best tackled via home energy efficiency, which reduces bills, improves quality of life and generates jobs and scope for social enterprise.

However, we urge more radical and consistent action from government to ensure that it meets its own objectives in a coherent and efficient way. The PBR falls short in important respects, in terms of specific measures and overall strategy. 

Specific measures and omissions of concern are:

· The £60 concession to the users of the most polluting cars. This is a measure incompatible with the welcome overall policy of increasing incentives for people to use the least environmentally harmful vehicles. The desire to soften blows to motorists at a time of recession is politically understandable but the message to consumers about the need for less damaging forms of transport is not made clearer or more compelling by the PBR.

· The large increase in spending on home energy saving for low-income households is very welcome, but we note that the number of households in or at risk of fuel poverty (some 3.5 million according to the PBR) is far higher than the numbers that will be supported via the new measures. The scale of action to reduce energy waste and fuel poverty remains inadequate, with consequent missed opportunities to save on other social spending and to boost job creation in insulation services.

· The across-the-board reduction in VAT to 15 per cent until 2010. This is likely to be an ineffective measure, if the aim is to stimulate consumer spending. So many households will be rightly trying to save more and pay off debt rather than increase their outgoings and many retailers are offering large reductions in any case. A general reduction in VAT, if it works to stimulate spending, will encourage consumption of energy-inefficient goods as well as of energy-saving ones. No signal or incentive is given via this measure other than: “Keep shopping”. We would prefer to see a strong differential established in VAT to favour energy-saving products and to make such a signal permanent rather than temporary.

· While we welcome the proposed stimulus for social housing, the lack of activity in the house building sector means that progress towards the government’s excellent 2016 target for all new homes to be zero-carbon is stalled. Lay-offs and closures in the sector mean loss of skills and momentum in developing a low-carbon construction sector able to compete internationally and to offer excellence in sustainable design and building. We urge the government to consider incentives for the sector, such as an acceleration of work on retrofitting and new low-carbon house-building, for example via relief on corporation tax for builders committing to deliver a target number of homes built to the higher levels of the Code for Sustainable Homes.

These points underline the problem with the PBR package as a whole, namely the lack of a consistent and radical strategy to increase incentives for emission cuts and behaviour change across the board, and to push hard for a low-carbon transition throughout the economy. We acknowledge and welcome the government’s stated plans to publish and investigate more detailed proposals in 2009 on key issues such as its low carbon industrial strategy, low-carbon buildings and development of skills for a low-carbon economy. We look forward to the forthcoming reports and consultations.

But the question needs to be asked, as we approach the passage of the Climate Bill and the final stages of preparation for the Copenhagen summit to agree a post-Kyoto global deal on climate action: will we see radical shifts in behaviour and incentives on the large scale needed in the short and medium term, as a result of the package set out in the PBR? 

The number of people in fuel poverty will remain very high, despite the investments in the Home Energy Saving programme and the boost to Warm Front. Householders still show few signs of responding to the incentives on offer for home energy efficiency and micropower. Smart meters will not be available to all before 2020, while we need to make signals about energy efficiency and conservation as clear as possible, as soon as possible, to all householders and businesses. Above all, as noted above, we are concerned that the extreme slow-down in house building and retrofitting will damage prospects for achievement of the 2016 target for all new homes to be built to zero-carbon standard. We also question the level of investment in environmental technologies: the green stimulus amounts to over £500m according to the PBR, but investments in energy and low-carbon research and development have been historically low for some time and the scale of the challenge means that even the large sums committed by the PBR are likely to be insufficient to accelerate innovation and take-up as required.

So we welcome many aspects of the PBR and of the government’s clear commitment to maintain and enhance its programme of work on policies and incentives for a low-carbon economy in the face of the downturn. This is right and far-sighted. But the package needs to be more consistent and urgent if we are to get what we need: a truly sustainable recovery, one that ensures we are on track for the 2050 emissions cut and for a low-carbon economy that brings all the many economic and social benefits it promises along with the environmental gains.

The coming decade is crucial for beginning the transition to a low-carbon economy and society: if our 2050 goals are to be met, as they must be, then radical cuts in emissions and a major shift in patterns of energy consumption and production are needed in the coming decade. There is no time to lose, in transport, housing, manufacturing and energy generation and distribution. The PBR shows willing, but the level of ambition and urgency needs to be raised. We welcome the moves signalled by President-elect Obama to accelerate action in the USA to cut emissions and launch a low-carbon industrial transition. The UK is still a leader in its commitments on these fronts, it now needs to become a leader in investment and action on the ground.

Ian Christie, Green Alliance associate