Tax cuts are not enough to deliver green growth

27 November 2023 - The Autumn Statement was a missed opportunity to remove barriers holding back the UK's green economy, writes Beverley Cornaby, Director of the UK Corporate Leaders Group.

With UK public finances under continued stress following shocks from Covid, Brexit and high inflation squeezing the rising cost of living, this year's Autumn Statement was a balancing act, limiting government's scope to achieve its long-term goals. Despite this context, it is vital that these major fiscal events have positive climate action at their core, showing that the transition to net zero is an economic opportunity.

Any long-term economic strategy cannot ignore the climate and nature crises we face - increasingly the two are inextricably intertwined. Climate impacts are an economic cost and the necessary transition to net zero requires not just investment but a fundamental transformation of the economy.

This was the message presented to the Chancellor before the Autumn Statement in a letter signed by 50 businesses and business groups, including Amazon, Unilever, Zurich Insurance, Coca-Cola Europacific Partners, AVEVA, Salesforce and Nestlé. The letter urged the government to provide a coherent, robust and proportionate intervention into the global race to net zero.

Marked against this yardstick, it is hard to see how the Chancellor did enough. This is particularly concerning as all the indicators on the climate dashboard are now flashing red.

Jeremy Hunt was able to offer some relief, in the form of cuts to both businesses and personal taxes. Full expensing of capital allowances will spur on much-needed private sector investment. The Chancellor also allowed some investment in key manufacturing sectors, including electric vehicles and renewable energy. Measures to aid expansion of the electricity grid are also welcome, but indicative of the government's piecemeal approach, dealing with individual problems of net zero implementation.

However, the Autumn Statement does not address wider challenges on energy distribution and storage which are best tackled through a whole systems approach, even though, the government is well-placed to convene the various players in these systems whether energy, transport, the built environment or food, and look holistically at how to decarbonise them.

The missing ingredients from government now include sending the right signals of intent and demonstrating strong leadership. Following party conferences and the King's Speech, the Autumn Statement was another opportunity for this government to step up. The private sector is indispensable to the delivery of a high growth, net zero economy in the UK but unleashing this requires direction, ambition, and commitment from government.

Thankfully, there are win-wins here, with the green transition representing the major economic opportunity of the century. Sustainable economic growth will depend on the growth of the green economy and with over 90 per cent of global GDP covered by net zero targets, markets for low carbon technologies, materials and products are likely to increase rapidly.

The advantages of being a first mover could be huge, but the UK is lagging behind in its response, affecting our ability to attract inward investment that is lured to the US or EU where governments have presented a strong economic response to the net zero challenge.

Leading businesses have already made huge efforts to reduce emissions, but are starting to exhaust the low-hanging fruit and now face the harder parts of climate action. Difficult-to-decarbonise sections of their supply chains or implementation challenges require government support, such as planning reform, the green skills agenda, and the roll out of new infrastructure. There are also significant trade-offs to be discussed, such as on how the cost of net zero is split between government, businesses and households in a way that is equitable, achievable and delivers the emissions reductions needed.

Now more than ever, we need government and business to show climate leadership. The UK has taken important first steps and committed to ambitious net zero and interim targets but having set those goals it will need complete focus to deliver them. The costs to business and consumers of delays, backtracking or distraction will be high as the reality of climate change hits home, especially if it leads to a rushed transition.

Every time a government squanders an opportunity to drive forward the net zero agenda, choosing perhaps a more politically expedient path, it will only make an already difficult task ahead much harder.

Published via BusinessGreen on 24 November 2023.

Read more about the Corporate Leaders Groups.

Learn more about CLG UK's engagement with policymakers here.