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12.03.20

Crisis, What Crisis?

Head of Policy and Research Craig Dalzell and Volunteer Researcher Patrick Wiggins share their review of the UK budget and announce Common Weal’s response to the UK’s review of investment and fiscal rules.

Wednesday’s budget was trailed as being one that would be introduced in a period of crisis. In truth there were 3 crises the Chancellor needed to address – the  COVID-19 coronavirus, the continuing uncertainty over the future trading relationship with the EU and the climate crisis.

Whist the budget announced a series of measures to support businesses overcome problems arising from the spread of the corona virus of c. £12bn, the Chancellor almost managed not to mention Brexit and was completely underwhelming on the climate crisis.

In May last year the UK Parliament declared a climate emergency but you wouldn’t have thought so in this budget. A £27bn roads programme, no change to fuel duty alongside a modest £1 bn into green transport and £1bn extra for flood defences and a phased, and partial, increase in ‘red diesel’ duty. A huge opportunity has been missed, not least for the UK to demonstrate leadership in the run up to COP26 but to fund a comprehensive Green New Deal.

A number of decisions have been put off, which may shed more light on the Government’s intentions to address the climate challenge. The Net Zero review to chart path to reducing emissions, the Government’s Infrastructure programme has been delayed for several weeks, and a review of fiscal rules is scheduled for the Autumn and alongside these is a review of the Treasury’s Green Book.

The Green Book is the Treasury guide to appraising projects, to judge whether they represent value for money.

Taken together these could provide the basis for propelling the UK towards a cleaner, more equitable zero carbon economy. But will they? The signs aren’t encouraging.
The Government’s infrastructure proposals are already under challenge in the courts as they do not meet the legally binding commitments on CO2 emissions set out in the Paris Agreement on climate change.

The budget, although quite a departure from previous austerity imposed fiscal constraints, is still set within the context of the Conservative manifesto commitment for new Government investment expenditure being limited to no more that 3% of GDP over 5 years. Whilst the review may result in some changes to approach the indications are that this may be more about classification changes of revenue and capital expenditure rather than about how expenditure can be directed to an investment in the wholesale ‘greening’ of the economy. Our current fiscal rules are largely self imposed and are still based upon the same neo-liberal thinking which led to the political decision to impose austerity rather than investment in the economy between 2010 and 2019.

The IPPR (Institute for Public Policy Research) estimates that an additional £33bn per annum expenditure on green infrastructure is required for the UK to meet its 2050 net zero carbon target. This would require a wholesale change to the UK’s approach to fiscal management. We are in a crisis and only on Tuesday the UN warned that the world is ‘way of track’ in dealing with the climate emergency – we need an overhaul in our approaches to public investment. More of the same or making modest adjustments just won’t deliver the scale and pace required to change the economy and achieve our net zero ambitions.

The Green Book has been criticised from a number of different sources, academic and political, for some time. At its heart it uses a cost benefit analysis based up assumptions about market value and productivity using a quantitative approach to judging whether a project should receive public investment. It does not adequately reflect wider social benefits and ‘externalities’ as these are often difficult to provide figures for.  In reality it is a largely subjective approach masquerading as pseudo science. The Green Book doesn’t reflect the climate crisis and how we should assess projects in that context.

The current methodology has an inbuilt bias towards those parts of the economy where there is strong market value and high productivity – that is primarily the more prosperous areas of UK such as the South East of England. The Conservatives have made a great show about their attempts to “level up” those regions of England that gave them their Brexit-induced majority at the end of last year but the terminology around the UK’s regional inequality – such as describing investment in London as bringing additional “natural returns” betrays the thinking that these “levelling up” investment are themselves an aberration to the “natural order of things” and should be corrected as soon as the Conservatives think they can get away with it.

The review of the Green Book and fiscal rules should have taken a more fundamental look at the  type of economy  we want in the context of the climate emergency, record levels of inequality and polarisation of income distribution, and the depletion of the earth’s natural resources.
The UK needs to look seriously at the challenges it will be facing over the next several decades and ensure that its own rules and ideologies either actively assist with the solutions or, at the very least, do not stand in the way of them.

Scotland already has loftier ambitions than the UK Government in this regard – although even here the targets are somewhat higher than the result of intended actions and a good way lower than that which is actual needed. One of the reasons for this is, again, the restrictions imposed by the UK’s rules and fiscal framework.
Common Weal has decided that it is time to perform this badly needed review ourselves and will, ahead of the UK Government, produce our own Greener Book showing how investment should be guided in Scotland if we are to meet our legally binding climate targets and implement a true Green New Deal.

While our own Common Home Plan is predicated on Scotland having the power to implement these rules we still maintain that those who want to see a Green New Deal and think that Scotland could do it better from within the Union should present their blueprint for this. Even if the UK Green Book review comes back in the autumn with a radical overhaul, the UK Government has committed to maintaining current fiscal rules until at least the next election. That’s five years away. Five years out of the ten years we have remaining to make serious inroads into our climate impact.

Our offer to pro-Union environmentalists remains but if this budget tells us anything about the prospects of working within the Conservative framework then perhaps, to use a now rather infamous turn of phrase, it is time for Scotland to take back control.

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