How British industry is missing out on the green economy

Where's that rose garden Cameron promised?

David Cameron’s husky-hugging Rose Garden pledge to deliver the greenest government ever always felt more like a marketing or branding statement than a policy, containing as it did no specific description of what on earth that would mean in practice. Nevertheless, as a statement of intent it was very powerful.

However, a little over thirty months on from the Rose Garden conference, and Cameron’s pledge to make the Conservatives the environmental party is probably the most discredited of all his pre-election gambits. Remember “Vote Blue Go Green?” – it all seems quite a long time ago. Because despite the strictures imposed by the 2008 Climate Change Act, a series of policy u-turns, relaxations of environmental ambitions and a drip feed of rhetoric stressing the costs rather than the benefits of moving to a green economy, have together contributed to a situation where there is little leadership on the green agenda.

That’s why 11 major property and construction organisations, representing a huge swathe of the £100bn UK industry, last week signed a letter to chancellor George Osborne calling for the government to back a campaign by Building magazine to get behind the green agenda – or risk losing forever the potential the sector holds for major economic growth. The signatories of the letter, and the wider backers of the campaign, represent an unprecedented alliance of interests, from brick-makers and builders to the high-finance property companies that own and develop in our major cities.

The hope is that this unusual alliance, taking in environmentally committed big name architects such as Richard (Lord) Rogers, and red-in-tooth-and-claw housebuilders, will persuade the Chancellor that business doesn’t actually see sustainability and economic growth as something you have to choose between – that you can do both. That, in fact one drives the other: a move toward environmental sustainability will actually deliver growth.

At the moment Osborne has been very clear that this is not how he views the world, telling the Tory conference in 2011 that “a decade of environmental laws and regulations are piling costs on the energy bills of households and companies” and that he wasn’t going to “save the planet” by “putting the country out of business.”

It’s not as if the whole government sees things in the same way: many departments are doing what they can to fight the scepticism from the centre. That shouldn’t be a surprise, as the Confederation of British Industry (that bastion of environmental activism) has called for investment in green growth, saying the “market” accounts for £122bn, or 8 per cent of GDP, and may have accounted for a third of all growth in the economy in 2011/12. But one who has seen government operating up close, former construction tsar Paul Morrell, couldn’t have been clearer when he testified in December: “There clearly is no belief inside Treasury that there is real opportunity of growth in the green agenda. I don’t know why they think that, [because] oddly business does.”

This lack of belief explains a lot – from the government’s u-turns on subsidies for solar power which led directly to one contractor, Carillion, putting 5,000 staff on notice; to the government’s decision to withdraw all previous subsidy regimes for helping householders install insulation, focusing instead on one unproven programme, the Green Deal, with the result that the number of lofts that get lagged each year are predicted to fall by up to 93 per cent. It’s not that surprising that a recent poll by You-Gov found that just 2 per cent believe the coalition has met Cameron’s “greenest ever” pledge.

Another example of where the government has missed a trick is in the cancellation of the planned introduction of something called Display Energy Certificates (DECs), a measure that would have forced offices and shops to calculate and publicly display the energy they use. The measure was pulled despite blanket industry support for its introduction.

Unlike businesses, the Treasury currently seems not to see how targeted and reasonable regulation – as opposed to form-filling bureaucracy – can actually help drive innovation and growth. For businesses it can set a level playing field which stops ethical firms being undercut by fly-by-night operators.

The Treasury instead seems to see lobbying for any green regulation as a form of self-serving bidding for government support by hard-pressed building firms. While the Treasury is right that regulation can in some circumstances falsely create a market for services to comply with that regulation, thereby adding a cost to end users, this view ignores the fact that this particular bit of regulation, DECs, was also supported by the private sector firms who would have paid for the work: the developers and office owners.

Because for them the business case for making investment in green technology is often marginal because it requires significant up-front investment, even though it pays for itself in reduced energy bills over time. To make it really worthwhile they want their clients – building occupiers – to be able to see how green their buildings are, and be able to compare this transparently against their rivals. Then it starts to have a market value. That’s what DECs could have done. But the opportunity was missed.

It’s just one example. The practical impact of this reluctance from government to intervene where there is market failure is that fewer and fewer businesses are seeing investment in sustainability as the key to future profits, because they are less clear that both the market and the regulatory regime are moving in that direction. One chief executive of a major listed contractor told me in the last six months that he had stopped investing in upskilling his business to carry out green retrofitting, because he didn’t see the demand under the current government.

Thus an industry, construction, which represents a tenth of the UK economy, remains in deep recession, dragging down the output of the nation. But beyond this immediate impact, the real risk of not taking a leadership position on the green economy is that an opportunity is missed to take a lead in a global market that is likely to be one of the key industries of the 21st century. The UK could be the country with the skills the rest of the world turns to in order to combat climate change. But not if the current course continues.

The campaign is being tweeted at #green4growth

Cameron’s pledge to make the Conservatives the environmental party is probably the most discredited of all his pre-election gambits. Photograph: Getty Images

Joey Gardiner is assistant editor at Building magazine

Getty
Show Hide image

BHS is Theresa May’s big chance to reform capitalism – she’d better take it

Almost everyone is disgusted by the tale of BHS. 

Back in 2013, Theresa May gave a speech that might yet prove significant. In it, she declared: “Believing in free markets doesn’t mean we believe that anything goes.”

Capitalism wasn’t perfect, she continued: 

“Where it’s manifestly failing, where it’s losing public support, where it’s not helping to provide opportunity for all, we have to reform it.”

Three years on and just days into her premiership, May has the chance to be a reformist, thanks to one hell of an example of failing capitalism – BHS. 

The report from the Work and Pensions select committee was damning. Philip Green, the business tycoon, bought BHS and took more out than he put in. In a difficult environment, and without new investment, it began to bleed money. Green’s prize became a liability, and by 2014 he was desperate to get rid of it. He found a willing buyer, Paul Sutton, but the buyer had previously been convicted of fraud. So he sold it to Sutton’s former driver instead, for a quid. Yes, you read that right. He sold it to a crook’s driver for a quid.

This might all sound like a ludicrous but entertaining deal, if it wasn’t for the thousands of hapless BHS workers involved. One year later, the business collapsed, along with their job prospects. Not only that, but Green’s lack of attention to the pension fund meant their dreams of a comfortable retirement were now in jeopardy. 

The report called BHS “the unacceptable face of capitalism”. It concluded: 

"The truth is that a large proportion of those who have got rich or richer off the back of BHS are to blame. Sir Philip Green, Dominic Chappell and their respective directors, advisers and hangers-on are all culpable. 

“The tragedy is that those who have lost out are the ordinary employees and pensioners.”

May appears to agree. Her spokeswoman told journalists the PM would “look carefully” at policies to tackle “corporate irresponsibility”. 

She should take the opportunity.

Attempts to reshape capitalism are almost always blunted in practice. Corporations can make threats of their own. Think of Google’s sweetheart tax deals, banks’ excessive pay. Each time politicians tried to clamp down, there were threats of moving overseas. If the economy weakens in response to Brexit, the power to call the shots should tip more towards these companies. 

But this time, there will be few defenders of the BHS approach.

Firstly, the report's revelations about corporate governance damage many well-known brands, which are tarnished by association. Financial services firms will be just as keen as the public to avoid another BHS. Simon Walker, director general of the Institute of Directors, said that the circumstances of the collapse of BHS were “a blight on the reputation of British business”.

Secondly, the pensions issue will not go away. Neglected by Green until it was too late, the £571m hole in the BHS pension finances is extreme. But Tom McPhail from pensions firm Hargreaves Lansdown has warned there are thousands of other defined benefit schemes struggling with deficits. In the light of BHS, May has an opportunity to take an otherwise dusty issue – protections for workplace pensions - and place it top of the agenda. 

Thirdly, the BHS scandal is wreathed in the kind of opaque company structures loathed by voters on the left and right alike. The report found the Green family used private, offshore companies to direct the flow of money away from BHS, which made it in turn hard to investigate. The report stated: “These arrangements were designed to reduce tax bills. They have also had the effect of reducing levels of corporate transparency.”

BHS may have failed as a company, but its demise has succeeded in uniting the left and right. Trade unionists want more protection for workers; City boys are worried about their reputation; patriots mourn the death of a proud British company. May has a mandate to clean up capitalism - she should seize it.