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- This Autumn Budget the Chancellor will be balancing spending cuts and tax increases to fill the fiscal ‘black hole’ with measures to stimulate growth. The green economy grew 9% in 2023 against 0.1% growth in rest of the economy. Stimulating green growth offers the best opportunity to revitalise the economy.
- A change to the government’s fiscal rules could be critical to helping the government to electrify the economy, reducing the risk of huge increases in energy bills due to spikes in the cost of fossil fuels driven by international crises.
- Funding for the National Wealth Fund and GB Energy expected to be confirmed, offering a £14 billion boost to the green economy which could leverage in 3 times as much private investment.
- Government expected to increase the windfall tax on profits of oil and gas firms – with the energy profits levy due to rise from 35% to 38% on 1st November and remain in place to 2030.
Green prosperity at the foundation
The green economy grew 9% in 2023, against a growth rate of 0.1% in the rest of the economy. Stimulating green investment is the most effective way to grow the economy and create jobs in high tech industries. The Chancellor’s Investment Summit, and the launch of the National Wealth Fund, was welcome recognition of the role net zero can play in turbocharging British growth.
The government must use its first budget to provide a clear signal that boosting green investment and growth will be at the heart of its economic strategy. Any announcement on changing the fiscal rules to enable greater borrowing for capital investment should be accompanied by commitments to focus this investment on stimulating the green economy, in particular electrifying industry and building a clean power system.
A Net Zero Investment Plan, long championed by E3G, business and investors, will be a critical step towards ensuring government policy effectively incentivises investment. This would provide a clear and regularly updated sector-by-sector investment plan to deliver on Labour’s clean power and growth missions. Investment flow tracking would enable identification of investment gaps to ensure that public investment, including via the National Wealth Fund, is strategically targeted.
The Autumn Budget can also be used to help position the UK as the global green finance capital by announcing new requirements that mandate credible net-zero transition planning and disclosure across financial institutions and FTSE 100 companies. This could drive billions in private capital into building the net zero economy. The Chancellor should also embed net zero into the mandates of financial regulators and the Bank of England, helping to accelerate private sector investment into the economy.
Delivering a clean energy superpower
The new government is on a mission to move away from fossil gas and build a clean power system by 2030. To do so, the UK needs to rapidly expand wind and solar power generation, managed with flexible demand and storage. The energy sector contributes £149bn in economic activity and supports 743,000 jobs across the UK.
The Chancellor needs to confirm funding at the Budget for both GB Energy, the public energy company they pledged to set up in their election manifesto and the UK Wealth Fund, which is an expanded version of the UK Infrastructure Bank. This will be critical to investing in the net zero industrial transition needed to keeping UK industry competitive.
The government also needs to confirm that it is moving away from dependence on high-cost fossil fuels, confirming its manifesto commitment to end the licensing of new oil and gas fields. The Chancellor is expected to increase the windfall tax on profits of oil and gas firms – with the energy profits levy due to rise from 35% to 38% on 1st November and remain in place to 2030. This money should be invested back into clean energy and creating jobs.
Supporting clean British industry
The new government is looking to rebuild the UK’s industrial heartlands and future-proof British jobs and supply chains. The Autumn Budget can be used to catalyse investments at scale. Industry and manufacturing are crucial to the UK economy, providing 9.3% of GVA, supporting hundreds of thousands of jobs.
The recent announcement of an industrial strategy framework is a step that must be backed by policy and investment support set out in a detailed industrial strategy next year. Catalytic investment is needed to harness the UK’s competitive strengths and to draw investors into the UK over other markets. The window to do this is narrowing. In particular, public investment is vital to support clean energy and the electrification of industries that form the bedrock of secure, sustainable supply chains.
The new government made a welcome commitment to investing £3bn in UK clean steel. To stimulate supply chain growth, detail of how this will be spent is needed.
Lowering bills with the Warm Homes Plan
Insulating inefficient homes by 2030 would unlock £40 billion in economic and social benefits. For this one-year Budget, the government should build on existing retrofit schemes and introduce new initiatives which put the UK in a strong position to bring down energy bills and meet its legal obligations. This is particularly important following the controversial decision to axe the Winter Fuel Allowance for all pensioners except those on Pension Credit.
The new government has pledged £13.2bn to support their Warm Homes Plan, with a target to upgrade 5 million homes by 2030. This funding will need to be used to meet the twin objectives of decarbonising heat and meeting the statutory obligation to upgrade all fuel poor homes by 2030.
International climate finance
It’s crucial that, despite financial pressures, the UK honours its climate finance commitments ahead of COP29. As the UK aims to reassert its position as a global climate leader, poor signalling on the £11.6bn target would weaken its ability to play a vital role as a bridge-builder in the critical negotiations on a new climate finance goal that will take place in Baku. The UK can maximise the cost effectiveness of its international climate finance commitment by championing reforms to the multilateral development banks.
Quote
Ed Matthew, Campaigns Director said:
“The Autumn Budget is a critical opportunity for the Chancellor to set the foundations for economic revival. This requires green investment to be put at the heart of the government’s growth mission. To be a fast growing, internationally competitive economy requires rapid electrification and global leadership on green finance. This is the economic opportunity of the century.”
Ed Matthew – E3G Campaigns Director
Energy and climate across UK politics and policy
+44 7827 157 906, [email protected]
Heather McKay – Senior Policy Advisor, Finance and Resilience
UK sustainable finance, National Wealth Fund
+44 7955 597676, [email protected]
Will O’Leary – Policy Advisor, Finance and Resilience
UK Net Zero Investment Plan
+44 7784 897964, [email protected]
Ellie Mae O’Hagan – Programme Lead, Energy Transition
UK energy, housing, clean heat, power, industry and oil and gas
+47732 891 599 [email protected]
Laith Whitwham – Senior Policy Advisor, Energy Transition
UK industrial transition and CCS, decarbonising steel, cement and carbon-intensive manufacturing
+44 7808 045786, Let[email protected]
Beth Walker – Senior Policy Advisor, Clean Economy
Oil & Gas transition and energy diplomacy
[email protected]
Notes to Editors
- E3G is an independent climate change think tank with a global outlook. We work on the frontier of the climate landscape, tackling the barriers and advancing the solutions to a safe climate. Our goal is to translate climate politics, economics and policies into action. About – E3G
- For further enquiries email [email protected] or phone +44 (0)7783 787 863
- Read E3G’s latest briefing with more detailed asks for the Autumn Budget here