Budget 2021: Quite green on green
The Budget was the latest example of the Government trying to bind its net zero ambitions directly to the broader political focus on levelling-up. While new green measures were relatively limited generally, the ones mentioned in the Chancellor’s speech were mainly those that delivered direct benefit to specific places across the country. This included direct investment in port infrastructure to grow the offshore wind supply chain and support new CCUS projects, as well as investment to create new net-zero hives of economic activity, such as a hydrogen hub in Holyhead.
This focus on connecting green investment to the wider economic agenda reflects the approach taken in the Prime Minister’s recent 10-point plan and the Government’s energy white paper published last year. It is telling that the new National Infrastructure Bank – which will begin operating in the Spring – will focus specifically on driving investment in the green industrial revolution. The choice of freeport locations has also clearly prioritised those areas, like Teesside and Humberside, that are well placed to develop new green technologies, such as CCUS.
Alongside the focus on delivering the wider economic benefits of the net zero transition, the Budget also signalled that Government is determined to position the UK at the heart of the green financial revolution that is now taking hold globally. The Chancellor announced that the remit of the MPC has been updated to reflect the importance of the net zero target. He confirmed that the Government will issue £15bn in green gilts by the end of the year, launch a green retail savings product and create a working group led by Dame Clara Furse to position the UK as a leader in the market for high quality carbon offsets.
While many will welcome the new spending announcements, the tax measures announced were distinctly less positive. Fuel duty will be frozen for an 11th year in a row and the carbon price support rate will be kept at its current level for another year. There was no movement on other pro-green tax measures, such as the much-hoped for cut to VAT on low-carbon products. Despite much debate about the role of carbon taxation being extended, the Budget only signalled that the new UK Emissions Trading Scheme could be extended in the future but gave no detail on potential changes.
The overall reaction to the green measures announced in the Budget is likely to be one of disappointment. As pressure grows on the UK to set out a more ambitious net zero policy framework ahead of COP26, attention will now turn to what further measures need to be come as part of the Government’s net zero strategy that is expected in the autumn. Today’s Budget does little to quell concern that the Government is yet to really back up its positive political rhetoric on the green agenda with a economic and fiscal framework that is up to the task.