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What will it take to support green growth in the UK?

At a roundtable, policymakers and experts discussed how the public and private sectors need to work together on the path to net zero.

At the Labour Party conference in October a major topic of discussion was the party’s Green Prosperity Plan. Should Labour win the next election, the party says it would spend up to £28bn a year on capital investment in green infrastructure. The idea is to make Britain a “clean energy superpower” – creating jobs, cutting energy bills, and delivering energy security.

However, questions remain on how to achieve this, not least how the public and private sector might work together, and what should be asked of consumers in the process.

This was one of the issues top of mind at a roundtable discussion that the New Statesman held as part of its Labour Party Conference 2023 fringe events programme, in conjunction with PwC. The panel was brought together as part of PwC’s commitment to support a just transition, seeking to ensure that no one is left behind as we move to a net-zero economy, and ensuring the benefits are maximised in a way that is fair and inclusive.

To help create a free and frank conversation, the discussion was held under the Chatham House rule, meaning that comments have not been attributed to specific individuals or organisations. But given the interesting conversation, we wanted to share what was discussed on an anonymous basis.

Increasing green investment

Among those in the room, there was agreement that increasing the level of investment in green industries was needed. However, as one MP noted, Labour’s Green Prosperity Plan isn’t just about opening the public purse. Rather, the plan could serve to boost investor confidence and unleash spending in the green economy. They said: “Let’s make sure that we have got the right investment environment so that we do get that private sector financing, and then spend the public money where the market can’t quite step in.”

One business leader, working in sustainable finance, remarked that investor confidence in the UK risks being undermined by delays involved in green projects, especially in connecting new renewable energy to the national electricity grid and the time taken in planning applications. They said: “We need the private money to come into the UK, but we’re currently putting up brick walls and obstacles that are stopping it from happening.”

While there was consensus of the need for businesses to play their part, many in the group agreed that businesses could not be expected to shoulder the net-zero transition alone, and that government action was also necessary. As a think tank researcher stated, “the private sector is [currently] being asked to solve a public policy challenge without any support”.

The group discussed ways in which policymakers could harness the power of business, reflecting on what the UK might learn from the Inflation Reduction Act in the US. “We could copy certain things, compete in certain areas, and focus on collaborations,” said a policy adviser, who added that the UK’s competitive advantage may lie in being nimble in its regulation. One expert executive suggested that the UK would do well to specialise in a few industry areas, among them sustainable finance, in which it is already a world leader.

One policy adviser suggested offering incentives to businesses and lenders to create innovative products that empower consumers, for example, by making it easier to finance the installation of heat pumps and insulation. Added to this, there was broad agreement that reforms should have the aim of making clean technologies cheaper than their fossil fuel equivalents, creating an obvious incentive for consumers.

The panellists agreed that people want clear leadership from governments before being compelled to act. As one think tank researcher put it: “With the cost-of-living crisis, people feel that they’re being asked to do a lot, and the government asking [them] to do more could cause a backlash.” A financial services professional added that, when it came to topics such as retrofitting your home, the consumer journey could be complicated, and a public information campaign might help. 

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How to spread the costs

There was a consensus that, to make new measures palatable, the government needs to emphasise their affordability and work to overcome the pain points. According to new PwC polling that was shared at the discussion, a sizeable proportion of UK consumers remain unsure about switching to green technology due to the upfront costs.

One of the most significant transitions on the path to net zero will be changing how homes are heated, moving away from gas boilers to alternatives such as heat pumps. But today, only one-in-nine homeowners would currently consider making the switch, with cost cited as the biggest obstacle. “Our polling shows we have this big chunk of the population who really aren’t on this journey yet, because they see getting on that journey as being expensive,” said the expert contributor from PwC.

In the discussion on the polling, an MP pointed out that it is important for politicians to emphasise that renewables are cheap and an energy-efficient home will save money in the long run. However, as noted by a sustainable finance expert, “no one can go into an election saying, ‘this is going to hurt, but it’s good for you’, and expect to win that election”.

Other themes discussed included the need for training and skills development; the case for changing the UK’s emissions reporting requirements; and the need to base our infrastructure development around the circular economy. A think tank researcher argued that, since the UK is not a mineral-rich country, we should also be seriously thinking about energy reduction and recycling the essential materials used in wind turbines and other renewable power generation. Otherwise, they said, “we’re going to really struggle to get the materials that we need to power the low-carbon transition”.

Towards the next election

The discussion highlighted the need for vote-winning policies as we head towards an election. But ultimately, delivery will be key for any government. As one MP said: “You get lots of different ideas, so how do you focus down and think, these are the ones we feel could achieve the most and could be actionable quickly?”

PwC will be holding a similar event with the Conservative Party in the first quarter of 2024.

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