The chancellor of the exchequer promised a “real commitment to green growth” in his budget, though environmentalists expressed concern about a lack of detail over how that might be achieved.
Rishi Sunak devoted a scant two minutes of his budget speech to government plans to reach net zero emissions, pledging £12bn initial funding to a national infrastructure bank without specifying how much of that spending would go to low-carbon projects, and promising green bonds that could raise £15bn this year.
“Our future economy needs investment in green industries across the UK, so I can announce today the first ever UK infrastructure bank,” he said. “Located in Leeds, the bank will invest across the UK in public and private projects to finance the green industrial revolution.”
However, critics pointed out the bank could also finance high-carbon projects such as roads or even coal mining, if its mandate is not focused on a green recovery.
Sunak said the City of London would become a global hub for carbon offsetting, and hailed a transition to a low-carbon Britain that would “replace the industries of the past with green, innovative, fast-growing new businesses”, in part through the development of free ports.
He ordered an update to the Bank of England’s remit for monetary policy that will mean environmental sustainability and the net zero target are taken into account in its decisions.
A new “super deduction tax break”, which will allow businesses to claim tax relief on 30% more than they invest in new equipment and other productivity measures, could also benefit the environment if companies use the boost to invest in measures that reduce their emissions or clean up their operations.
Jeegar Kakkad of the Tony Blair Institute for Global Change thinktank said the new infrastructure bank would invest less in the UK each year than the £7bn that used to come from the European Investment Bank before Brexit.
“While an infrastructure bank was long overdue, it is baffling why the government has chosen to give it only a fraction of the funding recommended by the National Infrastructure Commission,” said Kakkad. “The chancellor’s lack of ambition means the bank could struggle to attract the private-sector investment needed to address the scale of our net zero and levelling-up challenges.”
Seven times the chancellor promised “green” growth, innovation or jobs, but there was no mention of the green homes grant, a scheme to subsidise insulation and low-carbon heating with grants of up to £10,000 per household, unveiled to great fanfare as the centrepiece of the government’s promise to “build back greener” last summer.
Despite its popularity with homeowners, with more than 100,000 applications and many more would-be applicants, the scheme has descended into chaos as requests for vouchers go unanswered and builders unpaid. Unspent funding of more than £1bn looks set to be withdrawn, with only £320m in its place for the next year.
Julie Hirigoyen, the chief executive of the UK Green Building Council, said: “We are still none the wiser about the fate of the green homes grant, which just a few months ago the chancellor told us would support over 100,000 jobs. Today’s budget leaves both industry and householders still in the dark.”
Sam Alvis of the Green Alliance thinktank, warned: “The green homes grant was the government’s flagship green jobs programme, but its absence from the budget gives little confidence that it isn’t going to be scrapped. Pulling moderate spending packages like this is not a good sign.”
Sunak also kept fuel duty frozen for the 11th year in a row, which is likely to raise emissions by 300,000 tonnes this year. The freeze is estimated to have cost the Treasury at least £50bn so far. Carbon dioxide from transport, which makes up more than a third of the UK’s emissions, has barely budged in the past decade as gains from people switching to electric vehicles have been more than wiped out by increasing numbers of people driving SUVs.
Mike Childs, the head of policy at Friends of the Earth, said: “It’s astonishing that a government pledging to confront the climate emergency has frozen fuel duty yet again. The sale of gas-guzzling SUVs are a particular concern – Sunak should be doing more to discourage the purchase of these polluting vehicles, such as slapping a significant increase in road tax on them.”
Green experts said the budget failed to bolster the UK’s green reputation ahead of the presidency of the G7 summit this summer and as host of vital UN climate talks, called Cop26, this November, and showed little sign of the “muscular interventionism” needed to spur a green recovery.
Nick Mabey, the chief executive of the environmental thinktank E3G, said: “Ahead of Cop26, this budget was a missed opportunity by failing to set out an unequivocal direction of travel towards a green zero carbon future. The chancellor has dropped the green recovery ball before the try line.”
The government’s own supporters also acknowledged that more was needed to give ministers credibility at the G7 and Cop26. Sam Hall, the director of the Conservative Environment Network, said: “This budget was understandably focused on supporting the economy through the final phase of lockdown and setting out a medium-term plan for the public finances.
“It is essential that, in the net zero strategies and the spending review that are due later this year, the government sets out further measures to mobilise significant levels of private capital into projects that both create jobs and tackle environmental challenges like climate change and nature loss.”