To create a resilient and ‘levelled-up’ UK, this budget must be green | Alfie Stirling

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This week’s budget will be the first passed by parliament since MPs declared a climate emergency, but it could be the last before the UK hosts the Cop26 climate talks later this year.

Many people have drawn legitimate comparisons between the respective responses to coronavirus and the climate crisis – both big shocks to the economy. But it’s important not to lose sight of why the response to Covid-19 has been so rushed and dramatic – we were caught by surprise. We have not, however, been taken by surprise by the climate crisis.

If we let things get to that point with our climate – whether through increased water scarcity, coastal flooding or wildfires – the consequences will not only be severe and tragic, but unlike an epidemic they will also be long-lasting.

And so this week’s budget can’t afford to miss the bigger picture; it must be a climate budget. Measures to contain or delay the spread of disease will be a necessity. But that won’t be an excuse to detract from efforts to mitigate and adapt to the climate emergency in a way that serves society.

The problems facing the chancellor, Rishi Sunak, are clear. To reach net zero, annual household emissions of carbon will need to fall from about 8,000kg of C02 today to not much more than 1,000kg by 2050. The largest reductions will need to be in heating, transport and electricity. But while good progress has been made to reduce emissions from the UK’s power sector, we are far behind in almost every other part of the economy. According to the Committee on Climate Change, the UK remains behind schedule in all but seven of its 24 indicators to reach even our previous legally binding emissions targets, before these were increased to “net zero by 2050“.

More importantly, we know private investment alone won’t cut it. This is partly because many of the risks in developing new technology are too high without significant government support. But we also know creating greener jobs in the right places is unlikely to succeed if we rely on markets alone. The UK remains one of the most regionally unequal countries in Europe, with GDP per head about three times higher in Milton Keynes compared with the Wirral. Transitioning to zero-carbon industry must be used to address the geographical imbalance of our economy at the same time.

So, what are the things that a chancellor serious about the climate emergency needs to do at this budget? Top of the list is significantly increasing investment in low-carbon infrastructure, prioritising electrification of transport, reforestation, and home insulation and heating. We currently spend a little under 1% of GDP per year on such investments (equivalent to around GBP15-20bn in 2019/20 terms), but the evidence suggests this will need to rise to more like 2-3%. Current plans see public investment sitting between 2-2.5% of GDP over the coming four years. So to avoid false trade-offs with other social infrastructure priorities such as schools and hospitals, the Conservative party’s arbitrary 3% limit on public investment will also need to be discarded.

Then, of course, there’s “levelling up“. The government’s new favourite mantra must quickly find meaning and ways of genuinely improving the lives of those living in places that first powered our industrial revolution and now power our high-carbon industries. Zero-carbon transformation and levelling up are mutually dependent: outside of major airports, each of the 40 local authorities where 30% or more jobs are reliant on carbon-intensive industries are situated in the Midlands and the north. Unless these areas are supported in transitioning to low-carbon industries through government intervention, they risk high levels of unemployment and inequality. A genuine industrial strategy for regions outside London – one that centres on transport and energy efficiency – would provide this support, and in ways that go beyond making the rest of the country a glorified, one-way commuter belt.

For the chancellor then, this is a no-brainer; yes, invest in the regions you want to level up, but make that investment green and you’ll be putting those places – and the country – on track for a more resilient and fairer economy as well.

Alongside investment, we also need to raise money to pay for higher day-to-day spending, such as for new skills training and a stronger social safety net for the most affected regions. At the same time, an ageing population and reduced inward migration are likely to shrink tax – and increase the costs of older age care – over exactly the same period.

So the chancellor will likely be considering some higher taxes, and wherever possible these will need to be green too. Things like replacing air passenger duty with a frequent flyer levy will help, as will replacing fuel duty with a more progressive alternative. Cuts to national insurance – costing billions, disproportionately benefiting higher income households and doing nothing to reshape consumption – will not.

Get this right now, and the chancellor will not only help address existential threat, but he could give us the chance of becoming a healthier and fairer society for a generation. Get this wrong, and history will judge cruelly. Being resigned to last-minute damage limitation is an inevitability with an epidemic, but with the climate crisis it is ours to choose.

o Alfie Stirling is head of economics at the New Economics Foundation

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