Hammond embraces the electric vehicle zeitgeist, but can he deliver the genuinely green budget the UK needs?

James Murray
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Hammond embraces the electric vehicle zeitgeist, but can he deliver the genuinely green budget the UK needs?

The Autumn Statement contained some welcome surprises for green businesses, but the big test of the government's low carbon credentials awaits next year

The Germans probably have a word for it, the sense that something is much better than you were expecting, but still not as good as it needs to be.

Today's Autumn Statement contained a fair bit of good news for the green economy, and was made all the more encouraging by the way in which it builds on the past month's under the radar progress on the UK's coal phase out, renewable energy funding, diesel generator crackdown, and smart grid development.

BusinessGreen understands the promised £390m of funding for electric and self-driving vehicles was a very welcome surprise within Whitehall, and, taken in conjunction with the additional £2bn a year of funding for advanced R&D, it suggests the quietly impressive team at the new Department for Business, Energy, and Industrial Strategy (BEIS) are developing a constructive relationship with both Numbers 11 and 10 Downing Street.

When you look at the detail behind Hammond's EV funding and tax pledges the news gets even more positive for green businesses. Around £150m will go on boosting the market for electric and hydrogen buses, where the biggest impact on emissions and air pollution can be had, while a further £80m for charging infrastructure will be backed by a 100 per cent first year allowances for companies installing charging points. You can see why Erik Fairbairn, CEO of charging infrastructure specialist POD Point, has described the moves as "a game changer for our industry".

The promised adjustment to Company Car Tax Bands and the exclusion of ultra-low emission cars from a crackdown on the tapestry of tax loopholes provided by salary sacrifice schemes are also encouraging for both the boost they will give to green car sales and what they tell us about the new Chancellor. Hammond told the Commons that he had decided to keep salary sacrifice benefits for ultra-low emission cars and cycle to work schemes after listening to the arguments in their favour. It adds to the impression of a Chancellor who is willing to debate with colleagues and consider wider social benefits. As one former colleague was recently heard to rather pointedly observe, the difference between the current Chancellor and his predecessor is that Hammond is numerate and listens to evidence.

There were other differences with the Osborne era on display today. It is true Hammond made no mention of climate change or the green economy, missing the huge opportunity to tie his support for "disruptive technologies" and his new National Productivity Investment Fund to the low carbon industrial strategy BEIS has promised. But he also failed to emulate Osborne's thinly veiled attacks on clean technologies and decarbonisation efforts, which did such damage to green investor confidence during the last Parliament.

Coupled with Number 10's support for the fifth carbon budget and ratification of the Paris Agreement, the impression of a government that is quietly committed to action on climate change is being cultivated. The commitment to the environment that once saw Hammond declare that tackling climate change is "the conservative thing to do" has not been excised completely on his promotion to the Treasury.

And yet, the Chancellor is still a politician - albeit an unshowy one - and old Treasury habits die hard. Consequently, for all the encouraging policy signals, the Autumn Statement singularly fails to go far enough in supporting the UK's decarbonisation efforts.

The confirmation the carbon price floor (CPF) will remain in place until 2021 is welcome, but it does nothing to provide energy companies with the post 2020 investment signals they need. The CPF needs to be confirmed until coal power is phased out and just as importantly the level of funding support available for clean energy beyond 2020 has to be confirmed as soon as possible. You can see why Hammond ducked the decision, fearing headlines about increased energy bills on the brink of winter, better to try and bury it in next year's budget when everyone will be focused on Article 50. But this on-going delay to crucial policy decisions only serves to undermine the UK's energy project pipeline. 

Urgently needed new policy thinking on green heat and energy efficiency is notable by its absence, and even where encouraging progress has been made more funding is required. As one commentator noted on Twitter, the government is promising almost exactly the same amount of investment in absolutely essential new transport technologies as it is in giving Buckingham Palace a lick of paint and some solar panels. Similarly, the promise of a little bit more flood resilience funding will be cold comfort to the thousands of households facing another winter of damp discontent.

Worse still, in crucial areas Hammond is following Osborne in continuing to back high carbon policies. Tax breaks for the world's richest companies are still on offer in the North Sea, while freezing fuel duty at a time when oil prices are historically low, air quality is at illegal levels, and the Treasury's coffers are bare is economically and environmentally senseless.

On each of these critical issues Hammond has kicked the can down the road - the problem is a fork in the road is in sight.

Anyone thinking the avalanche of news that has swamped 2016 will slow down next year only needs to look ahead to spring 2017. The next budget will come within weeks of the government triggering Article 50, publishing its economy-shaping emissions reduction plan, delivering its legally-mandated air quality plan, and hopefully publishing its 25 year plan for nature. The medium to long term future of the economy in general and the green economy in particular rests on these inter-locking policy moves, and if they are to have any credibility they will have to be backed by a genuinely green budget. Decisions will be required on clean energy funding, energy efficiency, green heat, climate resilience, diesel scrappage, and many other green business issues.

And as if the challenge facing Hammond was not tough enough, these decisions will have to be made in the face of a fiscal climate that the Autumn Statement today confirmed is far, far bleaker than the UK's band of Brexit cheerleaders ever suggested. Clever low cost policy moves and a real focus on the merits of well-tailored environmental regulation and taxation will have to be embraced.

Today's Autumn Statement suggests Hammond still understands and appreciates the clean tech zeitgeist, but he faces an enormous challenge over the winter to deliver the green budget that will finally allow the UK's low carbon economy to break out from the sense of weltschmerz that has dominated much of 2016.

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