Budget fell far short on UK green investment, experts say

<span>Green-tinged measures in the budget included more money for offshore wind developers, to encourage them to bid to build new projects.</span><span>Photograph: Ben Birchall/PA</span>
Green-tinged measures in the budget included more money for offshore wind developers, to encourage them to bid to build new projects.Photograph: Ben Birchall/PA

Opportunities to revive the UK’s flagging economy by boosting green industry were missed in one of the least green budgets of recent years, experts have said.

Several said this failure to recognise one of the fastest-expanding areas of business – the net zero economy grew by 9% in key areas last year, while the rest of the economy was stagnant, according to CBI estimates – would drag down the UK in the short and long term.

Alasdair Johnstone, of the Energy and Climate Intelligence Unit, said: “At a time when the US and EU are competing over investment in clean industries, there was little here to attract investment.”

He said this could prove costly, pointing to forecasts from the Office for Budget Responsibility that found instability in the Middle East could drive up energy costs again, leading to a need to borrow fresh billions on top of the government debt already accrued in combating the current gas crisis.

“Speeding up the deployment of renewables, the insulation of homes, the rollout of heat pumps and the uptake of electric vehicles would boost our energy security,” Johnstone said.

None of these received much attention in Wednesday’s budget. Instead, the chancellor, Jeremy Hunt, opted to freeze fuel duty for a 14th year running, a move likely to benefit richer people and do little for those on low incomes. Rail prices have risen annually over the same period, and Jürgen Maier, a former chief executive of Siemens in the UK and a strong advocate of HS2, who is now advising Labour on a green industrial strategy, said the move sent the wrong signal.

“It sends the message that we want you to drive your petrol and diesel cars,” he said. “Where are the incentives to get people back on public transport?”

Hunt, a self-described green Tory before he became chancellor, flourished a few minor measures with a green tinge. There was £120m for the green industries growth accelerator initiative, to be spent on emerging low-carbon technologies; a £270m push for zero-carbon aviation and road vehicles; a £1.5bn extension of the windfall tax on North Sea oil and gas to 2029; more money for offshore wind developers, to encourage them to bid to build new projects after previous offshore wind auctions failed; and slightly higher duties on business class flights.

Advocates of new nuclear power were buoyed up by the next phase of the competition to select a small modular reactor design, and the purchase of the Wylfa and Oldbury sites for potential new reactors, to be bought from Hitachi for £160m. Tom Greatrex, the chief executive of the Nuclear Industry Association, said: “This is a pivotal moment for the future of nuclear in the UK and should mark the beginning of new projects at these sites. The success of ramping up nuclear capacity for energy security and net zero rests a great deal on whether we develop at these sites and others.”

Also missing from Hunt was any detail on the government’s proposal, aired in December, for a carbon tariff on imports. The carbon border adjustment mechanism (CBAM) is intended to level the playing field for UK companies that are investing in cutting their greenhouse gas emissions, by penalising imports from countries with high emissions.

Judith Richardson, the head of sustainability at the consultancy Argon & Co, said: “It was hoped that the budget would give much-needed clarity over the UK’s plans to implement the CBAM. However, this opportunity was missed and businesses are still largely in the dark.”

It was the lack of a clear strategy for combining the need to reach net zero by 2050 with the growth opportunities offered by low-carbon technologies that most dismayed green economists.

Esin Serin, a policy fellow at the Grantham Research Institute on Climate Change and the Environment, at the London School of Economics, said: “The budget unfortunately fails to offer the kind of changes that would unleash public and private investment and drive sustainable growth … We pointed out that an additional £26bn a year in public investment is needed towards the sustainable economy to drive improvements in productivity and growth. The budget falls far short of this.”

Ed Matthew, a campaigns director at E3G, said: “This government has no credible plan for growth. Uncertainty on how the UK will decarbonise industry, homes, power and transport has led to chronic under-investment. This is compounded by a lack of green tax breaks, low levels of public investment and not having a long-term net zero investment plan. The UK economy is flatlining and this budget will fail to bring it back to life.”

Ed Miliband, the shadow energy secretary, said: “This budget confirms once and for all that the Sunak government has given up when it comes to making Britain a clean energy superpower. There was no ambition, no vision, no commitment.

“Where there should have been a plan to build the future in Britain, the inevitable consequence of five more years of the Conservatives will be higher bills, energy insecurity, and jobs going overseas. After 14 years of Tory failure, only Labour can make Britain energy-independent with Great British Energy, our new publicly owned energy company, and our national wealth fund to invest in good jobs across our country.”