Journalists heading to the Conservative party conference noticed their train carriage was leaking. Every few minutes, train staff improvised a solution, only for it to fail and for the pantomime to repeat. Many delegates to the event had avoided taking public transport altogether due to strikes. “We thought about busing them in,” a cabinet minister told Matt Chorley of The Times, “but there is a shortage of bus drivers as well.” That Wednesday Rishi Sunak diverted £36bn away from the UK’s flagship high-speed rail project.
Britain’s infrastructure is falling apart. The UK’s “investment gap” – the difference between what we would have needed to spend over the last 15 years to hit the G7 average and what we actually spent – has been estimated at half a trillion pounds. Bad infrastructure costs. “We haven’t grown quickly enough,” acknowledged the Prime Minister in his conference speech.
The promise of economic growth has driven competitor economies to funnel substantial investment into the green economy. Yet the UK has hesitated, with the government arguing that a major new programme of public spending, like Labour‘s Green Prosperity Plan, is unaffordable during a cost-of-living crisis.
When the Climate Change Committee (CCC) gave its assessment of the emissions reductions needed between 2033 and 2037, it included analysis of how the investment to achieve this would affect the economy. It gives the example of electric cars. People are switching in growing numbers – a quarter of car sales are expected to be electric in 2024 – but they remain more costly to buy than polluting cars. Some conventional views of economics see this simply as a cost, and multiplying it across the economy makes the green transition looks expensive.
But a used electric car can save its owner more than £1,200 a year in total ownership costs, spread across its lifespan. The initial investment provides a business opportunity to a company like Nissan, making electric cars in Sunderland, as well as to those installing charging points across the country and the renewable energy firms providing the power. These new industries tend to lead to higher productivity than their polluting counterparts. The CCC estimates investment in the green transition will add 2 per cent to GDP by 2030.
The Prime Minister has recently weakened key environmental policies, including delaying the phase-out of polluting cars. Green Alliance analysis shows that, as a result, 21 per cent of the emissions reductions the UK needs to make by 2032 to reach its net-zero target by 2050 still aren’t covered by any policy or even policy ambition. There is only policy to deliver 16-22 per cent of the investment needed by 2030 to meet the CCC’s Balanced Net Zero Pathway.
It looks like the Conservatives are leaving a credible strategy for green growth on the table before the next election. The political risk for them is that others will take credit for the savings families will get from the transition, and the opportunities businesses could capitalise on. Polling from Ipsos in September showed that a majority of voters (54 per cent) think Sunak is doing a bad job at delivering his pledge to grow the economy.
This may be why the Green Prosperity Plan – originally announced as annual investment of £28bn in green projects – remains at the heart of Labour’s pitch. Yet, under pressure from the Conservatives, Labour has clarified that £8bn of the emissions-reducing spending announced by the government since 2021 will be counted towards its total. Labour has also conceded that it will gradually ramp up investment to the £28bn target.
There is little point in drip-feeding public investment in the green transition. By investing early and at a large scale, the government is more likely to crowd in private sector financing, lock in efficiency gains, and lower consumer energy prices for longer.
Take home insulation. Energy costs have hit the budgets of low-income households hard. The government allocated £1bn to help insulate the least energy efficient homes in the lower council tax bands, spending half of this so far. But Green Alliance’s net-zero policy tracker from June suggests only around a quarter of the emissions reduction targets for the heat and building sector are covered by existing policy, which means many families are missing out on the cost benefits of more energy efficient homes. We calculate that this £1bn investment should rise to £6bn over the next parliament to meet the need.
Our new analysis confirms that, thanks to efficiency gains and reduced bills – combined with higher economic growth – the benefits of green investment will outweigh the costs over the medium to long term. As the Labour Party conference rolls around, the question now is how bold the party is prepared to be in taking forward its Green Prosperity Plan and capitalising on these gains – in both economic and political terms.