When will the low-carbon bank open for business?
If we are to deliver on the commitments being negotiated in Copenhagen and in the government’s own Low Carbon Transition Plan, we need to use the big economic levers of tax, public spending and capital investment to make it happen. But such measures need political leadership to ensure delivery. We recognise that current economic circumstances make any major changes in policy harder to achieve. Against this backdrop, Green Alliance welcomes measures announced today in the pre-budget report (PBR), such as:
· the creation of Infrastructure UK to focus on renewal of Britain’s infrastructure including the low carbon transition, which will look at the case for a low carbon investment institution, or green investment bank;
· the extra £200m of government spending on energy efficiency, at a time of tightening spending across the board;
· the extra £150m for low carbon business support going through the Strategic Investment Fund.
However, taken as a whole, this PBR is not as bold as the Copenhagen agenda demands. Between now and the spring budget, we urge the government to turn its strong rhetoric on low carbon growth, at home and abroad, into more ambitious policy commitments.
Where the PBR could have done better
Infrastructure UK, if given the correct terms of reference, could form the foundations for a major Green Investment Bank. Its remit needs to be exclusively devoted to a low carbon transition and facilitating the delivery of the legally binding carbon targets of the Climate Change Act. Without such a clear direction, the taxpayer could easily end up underwriting further investment in infrastructure that either has no regard for carbon emissions, or worse, actually generates more. The government has an opportunity to show how it will transform Infrastructure UK into a Green Investment Bank with a remit to reduce the capital costs for rebuilding Britain’s infrastructure as a means to reduce overall emissions. Green Alliance will be taking this case to government in the next few months.
On tax measures, at a time when the economic situation requires some extra revenue raising, we are disappointed that little consideration appears to have been given to using green taxes as a significant part of that revenue raising. Fuel duty, the Climate Change Levy and Air Passenger Duty could all have contributed more to the revenue raising effort, whilst giving a signal to the market that the price of carbon, which has fallen during the recession, needs to increase further. Such measures will also have been better for the economy and job creation than the announced increase in National Insurance Contributions.
On public spending, there are insufficient details to judge at this point, but we recommend that the forthcoming spending reviews look very carefully at government spending that supports high carbon development. Road building, airport development, support for high carbon manufacturing and extraction industries or unsustainable agricultural practices should all come under close scrutiny.
Chris Hewett, associate
Theme leader on Sustainable Economy
Green Alliance response to the pre budget report 09.12.09
Green Alliance's Sustainable Economy theme