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

Getty
Show Hide image

We still have time to change our minds on Brexit

The British people will soon find they have been misled. 

On the radio on 29 March 2017, another "independence day" for rejoicing Brexiteers, former SNP leader Alex Salmond and former Ukip leader Nigel Farage battled hard over the ramifications of Brexit. Here are two people who could be responsible for the break-up of the United Kingdom. Farage said it was a day we were getting our country back.

Yet let alone getting our country back, we could be losing our country. And what is so frustrating is that not only have we always had our country by being part of the European Union, but we have had the best of both worlds.

It is Philip Hammond who said: “We cannot cherry pick, we cannot have our cake and eat it too”. The irony is that we have had our cake and eaten it, too.

We are not in Schengen, we are not in the euro and we make the laws that affect our daily lives in Westminster – not in Europe – be it our taxes, be it our planning laws, be it business rates, be it tax credits, be it benefits or welfare, be it healthcare. We measure our roads in miles because we choose to and we pour our beer in pints because we choose to. We have not been part of any move towards further integration and an EU super-state, let alone the EU army.

Since the formation of the EU, Britain has had the highest cumulative GDP growth of any country in the EU – 62 per cent, compared with Germany at 35 per cent. We have done well out of being part of the EU. What we have embarked on in the form of Brexit is utter folly.

The triggering of Article 50 now is a self-imposed deadline by the Prime Minister for purely political reasons. She wants to fix the two-year process to end by March 2019 well in time to go into the election in 2020, with the negotiations completed.

There is nothing more or less to this timing. People need to wake up to this. Why else would she trigger Article 50 before the French and German elections, when we know Europe’s attention will be elsewhere?

We are going to waste six months of those two years, all because Prime Minister Theresa May hopes the negotiations are complete before her term comes to an end. I can guarantee that the British people will soon become aware of this plot. The Emperor has no clothes.

Reading through the letter that has been delivered to the EU and listening to the Prime Minister’s statement in Parliament today amounted to reading and listening to pure platitudes and, quite frankly, hot air. It recalls the meaningless phrase, "Brexit means Brexit".

What the letter and the statement very clearly outlined is how complex the negotiations are going to be over the next two years. In fact, they admit that it is unlikely that they are going to be able to conclude negotiations within the two-year period set aside.

That is not the only way in which the British people have been misled. The Conservative party manifesto clearly stated that staying in the single market was a priority. Now the Prime Minister has very clearly stated in her Lancaster House speech, and in Parliament on 29 March that we are not going to be staying in the single market.

Had the British people been told this by the Leave campaign, I can guarantee many people would not have voted to leave.

Had British businesses been consulted, British businesses unanimously – small, medium and large – would have said they appreciate and benefit from the single market, the free movement of goods and services, the movement of people, the three million people from the EU that work in the UK, who we need. We have an unemployment rate of under 5 per cent – what would we do without these 3m people?

Furthermore, this country is one of the leaders in the world in financial services, which benefits from being able to operate freely in the European Union and our businesses benefit from that as a result. We benefit from exporting, tariff-free, to every EU country. That is now in jeopardy as well.

The Prime Minister’s letter to the EU talks with bravado about our demands for a fair negotiation, when we in Britain are in the very weakest position to negotiate. We are just one country up against 27 countries, the European Commission and the European Council and the European Parliament. India, the US and the rest of the world do not want us to leave the European Union.

The Prime Minister’s letter of notice already talks of transitional deals beyond the two years. No country, no business and no economy likes uncertainty for such a prolonged period. This letter not just prolongs but accentuates the uncertainty that the UK is going to face in the coming years.

Britain is one of the three largest recipients of inward investment in the world and our economy depends on inward investment. Since the referendum, the pound has fallen 20 per cent. That is a clear signal from the world, saying, "We do not like this uncertainty and we do not like Brexit."

Though the Prime Minister said there is it no turning back, if we come to our senses we will not leave the EU. Article 50 is revocable. At any time from today we can decide we want to stay on.

That is for the benefit of the British economy, for keeping the United Kingdom "United", and for Europe as a whole – let alone the global economy.

Lord Bilimoria is the founder and chairman of Cobra Beer, Chancellor of the University of Birmingham and the founding Chairman of the UK-India Business Council.