Serious spending

That was... quite good, actually. 

Following months of speculation and plenty of hostile briefing, Chancellor Rachel Reeves yesterday delivered a Spending Review that underscored the government's commitment to the net zero transition and suggested that after a year of setbacks, often of the self-inflicted variety, it may be getting its economic narrative in order.

The outlook may remain challenging, as evidenced by today's disappointing GDP figures for April, and there is an open question as to whether or not Reeves will have to return in the autumn with further tax hikes, but the Chancellor was convincing in her insistence there would be no "austerity 2.0".

Instead public spending on infrastructure is to rise by £113bn within months, overall departmental spending across Whitehall will also tick up, and there will be record funding for social housing, skills programmes, R&D, and a lot more besides.

Reeves did not mention net zero or climate change by name - and that rhetorical oversight remains a problem when the Tories and Reform are attempting to weaponise the topic - but decarbonisation ran right through the Spending Review. If tax and spending decisions tell you a government's priorities, then this is a government that prioritises clean energy and climate action.  

The biggest news was the confirmation of the full £13.2bn of funding over the course of the Parliament for the Warm Homes Plan, which was promised in last year's manifesto. It was a huge win for Ed Miliband and further evidence the rumours he is being frozen out by the Labour leadership are wide of the mark. But it was also a massive win for millions of fuel poor households that will now see their homes made warmer and healthier, as well as millions more households that should soon be able to access low cost finance to fund insulation, heat pumps, and solar panels.

Crucially, the commitment came alongside £39bn of funding for social and affordable housing, which thanks to the upcoming Future Homes Standard will deliver a new generation of ultra-efficient homes with solar panels and heat pumps fitted as standard. The domestic clean tech and green building sector is about to get a massive boost. Millions of households will enjoy lower bills. And the UK's fossil fuel imports and emissions are set to fall still further.  

The energy efficiency and green housing spending will come alongside the biggest investment in nuclear projects in 50 years, confirmation of two further carbon capture hubs, a wave of rail, bus, and tram projects, a raft of clean tech R&D projects, and expanded skills programmes to enable this upcoming infrastructure bonanza.

Some environmental groups remain less than convinced by support for nuclear and carbon capture, but the funding commitments made clear the Treasury is continuing to support the infrastructure the government has deemed necessary to meet its climate goals. 

There may have been less news on electric vehicles, renewables, and low carbon manufacturing, but further details on the government's support for these areas will come within weeks with the Infrastructure Strategy, Modern Industrial Strategy, Planning and Infrastructure Bill, and latest clean power contract auctions and electricity market reform plans. There is a lot going on and most of it is good news for green businesses.  

Reeves also did a pretty good job of selling this vision, despite her somewhat stilted delivery. It would have been good to hear more about the climate imperative and the need to compete in the global clean tech revolution, but the focus on security and jobs was laser-targeted at those voters Labour needs to win back to see off the Reform threat. It was a Spending Review that contrasted effectively with Tory austerity and failures on energy security, as well as Nigel Farage's deep unseriousness.   

Omissions? There was no mention of farming and nature, and while the Spending Review documents promised more funding for nature-friendly farming schemes it is unlikely to assuage concerns that support for nature recovery looks underpowered. The funding for skills programmes was welcome, but looks short of what is needed to tackle increasingly severe skills shortages across the green economy. Climate adaptation and resilience was once again largely ignored.

Meanwhile, Number 10 is reportedly about to reject amendments to the Planning and Infrastructure Bill designed to protect nature, setting up an avoidable battle with conservation groups. Legitimate concerns remain around the government's ability to deliver on its hugely ambitious plans to build a clean power system that reduces energy bills by 2030. And the efficiency savings being asked of unprotected departments such as DESNZ and Defra will chip away at their capacity to deliver such an ambitious policy programme.   

But taken in the round this was a Spending Review that provided financial evidence of Prime Minister Keir Starmer's claim earlier this week that "net zero is part of our DNA - it's hardwired into this government". It will take time for the benefits to feed through and Labour faces significant challenges in reviving its polling position given understandable impatience with the pace of economic recovery and the state of public services. But there is a long term plan here, which is centred on essential infrastructure upgrades and the green industries of the future.

It is easy to see why business and green groups are broadly happy with a Spending Review that promises to belatedly deliver on Labour's promise to make the UK a clean energy superpower.