Osborne's anti-green agenda is strangling growth

The government's refusal to commit to a decarbonisation target is preventing the creation of tens of thousands of manufacturing jobs.

With growth in the British economy so anaemic, you would have thought George Osborne would welcome it wherever it could be found.  Particularly in the manufacturing sector, whose weak performance in recent years has kept the UK stuck in trade deficit. Yet this week the Chancellor stands accused of actively preventing the creation of tens of thousands of British manufacturing jobs. 

The charge is levelled in an extraordinary letter sent to Osborne (along with Business Secretary Vince Cable and Energy Secretary Ed Davey) by six of the world’s largest energy manufacturers. These companies – Alstom, Mitsubishi, Doosan, Areva, Vestas and Gamesa – between them already employ over 12,000 people in the UK. For the past few years they have all been developing investment plans, collectively worth hundreds of millions of pounds, to build factories in Britain to supply the country with low carbon energy equipment, in fields such as offshore wind, nuclear power, energy efficiency and carbon capture and storage. But in their open letter they warn that these investments, and the jobs they will create, will not go ahead if the government does not commit to a long-term low carbon electricity target in its Energy Bill now passing through Parliament. And it is no secret that it is Osborne who is blocking that commitment. 

Energy policy can be an arcane affair, but this issue is pretty straightforward. Since Labour’s pioneering Climate Change Act in 2008, UK energy policy has been on a long-term trajectory to cutting greenhouse gas emissions by shifting supply towards renewables (particularly wind), along with some nuclear, and gas fired power stations fitted ultimately with carbon capture and storage.  As a result, global manufacturers in these fields have been looking to build factories in Britain to supply the required equipment – with at least six companies developing sites on the east coast to manufacture offshore wind turbines alone. But over the last six months uncertainty has suddenly crept in, putting these investments at risk. And the reason is Osborne.

At present the UK only has an energy policy out to 2020. But investors need a longer timeframe than that – anything they plan now will barely be in operation by then. So the policy they are calling for is a legal limit to the emissions which the electricity sector will be allowed by 2030. This will give certainty to energy companies and their suppliers about the technologies to be installed. There is remarkable unanimity around the need for such a ‘decarbonisation target’ – last month 35 companies, NGOs and other organisations signed a joint statement in support.  It is well known that Ed Davey, the Lib Dem Energy Minister, wanted such a target in the Energy Bill, but Osborne objected. Hence the very pointed addressing of the letter from the six global manufacturers this week to the Chancellor as well as to Davey.

The wider context here is rather remarkable. The British economy now produces far more jobs in green industries than it does in brown or dirty ones. Last year the CBI produced a report, The Colour of Growth, estimating that over a third of the UK’s economic growth in 2011-12 came from green business. Now worth £122bn annually to the UK economy, the environmental sector has been growing (despite the recession) at over 2 per cent a year for the last five years. It employs just under a million people and is taking an increasing share of a rapidly growing global market, so also reducing Britain’s trade deficit.  These facts have in turn made CBI into a rather remarkable cheerleader for stronger environmental policies. 

So why is Osborne setting himself against one of the few job-creating sectors of the otherwise flatlinng British economy? (He has also interfered to obstruct new regulations enduring that new homes are low-carbon.) The answer appears to be entirely political.  Fired up by rural opposition to onshore windfarms and a more general anxiety about rising energy bills, and backed by an increasingly strident campaign in the Daily Telegraph and Daily Mail, a revolt against low carbon policy has developed among a number of backbench Tories, and it’s their support that Osborne is now after. 

His alternative energy policy is the so-called ‘dash for gas’. In the US the exploitation of cheap shale gas has revolutionised energy supply, displacing coal, and this has led to hopes that the same might happen in the UK.  But there is no evidence that we have anything like the reserves found in the US, and being part of a competitive European market there is no guarantee that they would be cheap. On the contrary, a report by the IPPR last week showed that relying on volatile gas markets would cost the economy more than the decarbonisation target if gas prices rise in line with market expectations – and much more if gas prices are higher.  It is high wholesale gas prices which have been responsible for almost the entire rise in energy bills over recent years, not green policy.

But Osborne is now under pressure.  For the Tory chairman of the environment select committee, Tim Yeo, has tabled an amendment to the Energy Bill inserting a 2030 decarbonisation target. Labour have committed to supporting it. Now six Liberal Democrats, defying agreed Coalition policy, have done the same, with the party’s president, Tim Farron, indicating that he too will vote for it.  It will take only a few more Lib Dems to break ranks in support of their own party policy and the government will be facing defeat.  

This may come down to the increasingly abrasive relationship between Nick Clegg and David Cameron.  Buoyed by the Eastleigh by-election, the newly assertive Lib Dem leader faces intense pressure from his own party to tell Cameron that he must finally make good on his tattered promise to lead "the greenest government ever". But in doing so the Prime Minister knows that he would have to defeat his own Chancellor. 

George Osborne wears a high visibility jacket as he makes a visit to the Prysmian Group factory in the constituency of Eastleigh. Photograph: Getty Images.

Michael Jacobs is visiting professor in the Department of Political Science / School of Public Policy at UCL and at the Grantham Research Institute on Climate Change and the Environment at the London School of Economics. He is co-editor of the Political Quarterly

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Why the Liberal Democrats by-election surge is not all it seems

The Lib Dems chalked up impressive results in Stoke and Copeland. But just how much of a fight back is it?

By the now conventional post-Brexit logic, Stoke and Copeland ought to have been uniquely inhospitable for the Lib Dems. 

The party lost its deposit in both seats in 2015, and has no representation on either council. So too were the referendum odds stacked against it: in Stoke, the so-called Brexit capital of Britain, 70 per cent of voters backed Leave last June, as did 62 per cent in Copeland. And, as Stephen has written before, the Lib Dems’ mini-revival has so far been most pronounced in affluent, Conservative-leaning areas which swung for remain. 

So what explains the modest – but impressive – surges in their vote share in yesterday’s contests? In Stoke, where they finished fifth in 2015, the party won 9.8 per cent of the vote, up 5.7 percentage points. They also more than doubled their vote share in Copeland, where they beat Ukip for third with 7.3 per cent share of the vote.

The Brexit explanation is a tempting and not entirely invalid one. Each seat’s not insignificant pro-EU minority was more or less ignored by most of the national media, for whom the existence of remainers in what we’re now obliged to call “left-behind Britain” is often a nuance too far. With the Prime Minister Theresa May pushing for a hard Brexit and Labour leader Jeremy Corbyn waving it through, Lib Dem leader Tim Farron has made the pro-EU narrative his own. As was the case for Charles Kennedy in the Iraq War years, this confers upon the Lib Dems a status and platform they were denied as the junior partners in coalition. 

While their stance on Europe is slowly but surely helping the Lib Dems rebuild their pre-2015 demographic core - students, graduates and middle-class professionals employed in the public sector – last night’s results, particularly in Stoke, also give them reason for mild disappointment. 

In Stoke, campaign staffers privately predicted they might manage to beat Ukip for second or third place. The party ran a full campaign for the first time in several years, and canvassing returns suggested significant numbers of Labour voters, mainly public sector workers disenchanted with Corbyn’s stance on Europe, were set to vote Lib Dem. Nor were they intimidated by the Brexit factor: recent council by-elections in Sunderland and Rotheram, which both voted decisively to leave, saw the Lib Dems win seats for the first time on massive swings. 

So it could well be argued that their candidate, local cardiologist Zulfiqar Ali, ought to have done better. Staffordshire University’s campus, which Tim Farron visited as part of a voter registration drive, falls within the seat’s boundaries. Ali, unlike his Labour competitor Gareth Snell and Ukip leader Paul Nuttall, didn’t have his campaign derailed or disrupted by negative media attention. Unlike the Tory candidate Jack Brereton, he had the benefit of being older than 25. And, like 15 per cent of the electorate, he is of Kashmiri origin.  

In public and in private, Lib Dems say the fact that Stoke was a two-horse race between Labour and Ukip ultimately worked to their disadvantage. The prospect of Nuttall as their MP may well have been enough to convince a good number of the Labour waverers mentioned earlier to back Snell. 

With his party hovering at around 10 per cent in national polls, last night’s results give Farron cause for optimism – especially after their near-wipeout in 2015. But it’s easy to forget the bigger picture in all of this. The party have chalked up a string of impressive parliamentary by-election results – second in Witney, a spectacular win in Richmond Park, third in Sleaford and Copeland, and a strong fourth in Stoke. 

However, most of these results represent a reversion to, or indeed an underperformance compared to, the party’s pre-2015 norm. With the notable exception of Richmond’s Sarah Olney, who only joined the Lib Dems after the last general election, these candidates haven’t - or the Lib Dem vote - come from nowhere. Zulfiqar Ali previously sat on the council in Stoke and had fought the seat before, and Witney’s Liz Leffman and Sleaford’s Ross Pepper are both popular local councillors. And for all the excited commentary about Richmond, it was, of course, held by the Lib Dems for 13 years before Zac Goldsmith won it for the Tories in 2010. 

The EU referendum may have given the Lib Dems a new lease of life, but, as their #LibDemFightback trope suggests, they’re best understood as a revanchist, and not insurgent, force. Much has been said about Brexit realigning our politics, but, for now at least, the party’s new normal is looking quite a lot like the old one.