As the Spring Budget nears, expectations within the UK built environment sector and sustainable business community are low, given a weak economy and looming Election. Looking ahead, Jim McClelland asks: Are hopes of a green giveaway already history?
This is not just any old Budget. It is likely the last one before a UK General Election, which puts the Chancellor under pressure to pull every policy lever possible to win votes.
In effect, the Government has been electioneering for months now — since the Autumn Statement and before, when the Prime Minister first turned negative on Net Zero, in June.
Here in the UK, maybe the era of Budget giveaways for sustainable business is already over
Jim McClelland Sustainable futurist, editor, journalist and speaker
National debt and a tactical dilemma
Anti-green agendas aside, the fact is the public purse is pretty much empty, anyway.
By the end of the second quarter last year, the UK national debt was equivalent to 101.2% of gross domestic product (GDP). Whilst that record number has improved slightly, it still stands at an eye-watering 97.7%, as of this January.
So, there is precious little money to play with, when it comes to dangling fiscal carrots.
This leaves Chancellor Jeremy Hunt facing a tactical dilemma.
The Conservative Party has just suffered two humiliating by-election defeats, losing previously safe seats in Wellingborough and Kingswood. They are also lagging well behind Labour in the polls. All of this is making their sitting MPs very nervous.
Therefore, any cash Hunt can find is desperately needed to offer sweeteners to voters. Top of the incentives wish-list would be personal tax cuts, for both income and inheritance.
This means he has even less to spend on business, unless there is some kind of win-win scenario available that will keep the general public happy at the ballot box too.
More oil and gas, less clean tech
In terms of innovation, the budget may therefore promise slim pickings for clean tech. The Government has recently made moves to back the likes of heat pumps and hydrogen — and with both receiving unfavourable press in the more right-wing national media, they would be a brave choice for further support at this stage in the electoral cycle.
Renewables are similarly tricky, since onshore wind and solar farms are political hot potatoes at local NIMBY level. To the dismay of climate activists, it is perhaps more likely the Government will follow up its controversial allocation of hundreds of news oil and gas licences with inducements for carbon capture and storage in empty North Sea gas fields.
Overall, some might simply say that companies and sole traders have already enjoyed the benefit of handouts in the Autumn Statement, with cuts to National Insurance and a freeze on rates, plus full expensing made permanent for investment in plant and machinery.
In short, then, what could the Chancellor actually do for business next month?
Brownfield land and a 99% mortgage
Well, the Government is working to boost residential development on brownfield land, by making planning permission easier to obtain. This feeds into one of the potential win-win scenarios, since private housebuilders are influential political animals, their supply chain is full of micro-business owners, and homebuyers are desperate for more properties.
Whilst inflation is coming down in the UK, interest rates are unchanged as yet, so the cost of borrowing remains high. Therefore, rumours that the Chancellor might be drawing up plans for a 99% mortgage scheme point to home ownership as a policy target.
Also, although the Chancellor is short of fiscal carrots, he can of course still wield sticks — as long as there is no risk of hurting electoral prospects, even indirectly.
This probably rules out the Government appeasing greenies with punitive measures against fossil fuels. Despite that fact that home fuel bills are set to fall in April as the energy price cap drops, the cost-of-living crisis is still a major concern for voters. So, anything that put up the price of domestic utilities, or petrol at the pumps, is a clear no-no.
A Budget does however provide the opportunity to put more meat on the bones of previous policy announcements. The steel industry, for instance, would welcome further information about what will happen with the UK Carbon Border Adjustment Mechanism (CBAM). This is the levy applied to carbon-intensive imports due to come into force in 2027.
Looking ahead, though, there is arguably a broader debate to be had about what to expect from politicians, especially on green issues. Here in the UK, at least. it is time for a reality check — maybe the era of Budget giveaways for sustainable business is already over?
Green fiscal policy out in the cold
The Conservatives have made their position plain: Sunak went gunning for the green lobby last summer and there is no chance of a change of tack now.
The Labour Party has also been backtracking on its own £28 million green investment plan and, in Rachel Reeves, boasts a Shadow Chancellor found to have accepted donations from climate sceptics at the notorious Global Warming Policy Foundation.
Without the leverage that proportional representation might provide in Parliament, this really leaves only the Liberal Democrats and Green Party campaigning on Net Zero.
In the US, the Inflation Reduction Act (IRA) delivered the largest investment in climate and energy in American history. By contrast, the UK has gone cold on green fiscal policy.
So, expectations of political support around sustainability need to be managed and, ultimately, lowered, especially where the Treasury is involved. Business is increasingly unlikely to get what it wants — not only at Election time, or on Budget day, but in general.
Time for the private sector to step up
So where do we go from here?
\Well, in a timely call-out to business and industry, a new report on making markets has set out a practical roadmap for ways to mobilise private-sector investment towards net zero.
Authored by the Institute for Public Policy Research (IPPR), with contributions from the Green Finance Institute, it argues for policy predictability from Westminster, along with an element of pump-priming public finance. However, it is private investment that will make up the majority of the £50-60 billion in capital needed every year through 2030 and beyond.
In truth, the mythical ‘green Budget’ is the dream that probably never was and, now, never will be. It is time for us all to wake up; and, ultimately, for the private sector to step up.
Jim McClelland is a sustainable futurist, editor, journalist and speaker
