Don't turn off the future

The green economy in Britain is thriving - so why are politicians so reluctant to talk about it?

There is a sector where our economy is not dying, but flying. Somewhere that the UK continues to dominate the global stage, creating the deals, skills, services and products in an area the whole world is desperate to embrace. It will take until 2014 (at best) for our GDP to return to the pre-financial crisis level of 2007. In the same period, this sector will have grown by 40 per cent.

Unfortunately, this sector is the green economy. That means that, as far as some are concerned, it doesn’t count. Because green stuff isn’t meant to be about growth, only bills. In an oddly moralising way, many people seem to feel that something that does good can’t also bring economic benefits.

But it does. According to government data, last year we exported £121 million more green goods and services to Germany than we imported from them. £183 million more to India. £330 million more to China.

The Department for Business, Innovation and Skills tots up almost twice as many low carbon and environmental jobs - just under a million - than we have in motor trades. But, when a new car factory opens or closes it dominates the Today programme. If we’re talking about green and business in the same sentence, Nigel Lawson is released from his belfry to invade our morning bowl of cereal.

Part of the reason for this might be that the green economy doesn’t challenge existing sectors - it only strengthens them. While BIS takes a thorough and catalogued approach to their definition, the green sector is largely about changing current jobs, not replacing them.

So our green jobs can belong to people in the motor trade – such as those building hybrids in our factories. Our financial sector provides the financial and legal advice for a third of all the low carbon energy deals in the world. Green workers can be architects who design zero carbon buildings, or the manufacturers who have gone from making the iron bridges of the industrial revolution to the gears and turbine blades of the energy revolution.

When our nation decided to set out a regulatory framework supporting a low carbon agenda, we did so on the basis that those nations which moved first would receive the greatest benefit. Now we see that we have moved, and we have benefited. That’s why it’s frustrating to see that policy certainty threatened, just as the return is coming through.

This could be our way out of recession. According to the Treasury, in this financial year alone 88 per cent of our top 20 infrastructure projects are low carbon, and are worth £23 billion, compared to just £3.1 billion for high carbon projects. Some 63 per cent of this represents entirely private sector money. If you include what Treasury defines as public/private then the figure leaps to 94 per cent. By contrast, our high carbon spend for this year was 61 per cent dependant on the public purse.

The green economy is, as our recent analysis of this data called it, a UK success story. But there are worrying signals that the government may not want this success. It seems alarmingly focused on what we needed yesterday – a few more roads, a bundle of gas, perhaps squeeze in an extra airport. To this end, they are willing to sabotage something much more appealing to investors – the technologies of the future. The things that can attract far more investment because they haven’t already been developed. A letter was leaked earlier in the summer that made clear the Chancellor wants to ensure the energy of tomorrow is rejected for an expensive and outdated energy of the past. We can’t, as a nation, afford such a compromised infrastructure strategy - the equivalent of Disraeli ripping out train tracks because they threaten canals. We need to follow what we need, not what we needed, or we risk condemning this country to a policy that might run as follows – “Who needs the future when we have had the past?”

Alastair Harper is a senior policy adviser at Green Alliance, the environmental think-tank. He tweets: @HarperGA

Photo: Getty Images

Alastair Harper is Head of Politics for Green Alliance UK

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Stability is essential to solve the pension problem

The new chancellor must ensure we have a period of stability for pension policymaking in order for everyone to acclimatise to a new era of personal responsibility in retirement, says 

There was a time when retirement seemed to take care of itself. It was normal to work, retire and then receive the state pension plus a company final salary pension, often a fairly generous figure, which also paid out to a spouse or partner on death.

That normality simply doesn’t exist for most people in 2016. There is much less certainty on what retirement looks like. The genesis of these experiences also starts much earlier. As final salary schemes fall out of favour, the UK is reaching a tipping point where savings in ‘defined contribution’ pension schemes become the most prevalent form of traditional retirement saving.

Saving for a ‘pension’ can mean a multitude of different things and the way your savings are organised can make a big difference to whether or not you are able to do what you planned in your later life – and also how your money is treated once you die.

George Osborne established a place for himself in the canon of personal savings policy through the introduction of ‘freedom and choice’ in pensions in 2015. This changed the rules dramatically, and gave pension income a level of public interest it had never seen before. Effectively the policymakers changed the rules, left the ring and took the ropes with them as we entered a new era of personal responsibility in retirement.

But what difference has that made? Have people changed their plans as a result, and what does 'normal' for retirement income look like now?

Old Mutual Wealth has just released. with YouGov, its third detailed survey of how people in the UK are planning their income needs in retirement. What is becoming clear is that 'normal' looks nothing like it did before. People have adjusted and are operating according to a new normal.

In the new normal, people are reliant on multiple sources of income in retirement, including actively using their home, as more people anticipate downsizing to provide some income. 24 per cent of future retirees have said they would consider releasing value from their home in one way or another.

In the new normal, working beyond your state pension age is no longer seen as drudgery. With increasing longevity, the appeal of keeping busy with work has grown. Almost one-third of future retirees are expecting work to provide some of their income in retirement, with just under half suggesting one of the reasons for doing so would be to maintain social interaction.

The new normal means less binary decision-making. Each choice an individual makes along the way becomes critical, and the answers themselves are less obvious. How do you best invest your savings? Where is the best place for a rainy day fund? How do you want to take income in the future and what happens to your assets when you die?

 An abundance of choices to provide answers to the above questions is good, but too much choice can paralyse decision-making. The new normal requires a plan earlier in life.

All the while, policymakers have continued to give people plenty of things to think about. In the past 12 months alone, the previous chancellor deliberated over whether – and how – to cut pension tax relief for higher earners. The ‘pensions-ISA’ system was mooted as the culmination of a project to hand savers complete control over their retirement savings, while also providing a welcome boost to Treasury coffers in the short term.

During her time as pensions minister, Baroness Altmann voiced her support for the current system of taxing pension income, rather than contributions, indicating a split between the DWP and HM Treasury on the matter. Baroness Altmann’s replacement at the DWP is Richard Harrington. It remains to be seen how much influence he will have and on what side of the camp he sits regarding taxing pensions.

Meanwhile, Philip Hammond has entered the Treasury while our new Prime Minister calls for greater unity. Following a tumultuous time for pensions, a change in tone towards greater unity and cross-department collaboration would be very welcome.

In order for everyone to acclimatise properly to the new normal, the new chancellor should commit to a return to a longer-term, strategic approach to pensions policymaking, enabling all parties, from regulators and providers to customers, to make decisions with confidence that the landscape will not continue to shift as fundamentally as it has in recent times.

Steven Levin is CEO of investment platforms at Old Mutual Wealth.

To view all of Old Mutual Wealth’s retirement reports, visit: products-and-investments/ pensions/pensions2015/