UK Budget 2015: a springboard for the environment?

Posted by Nick Molho on 12th March 2015
First published in: The Economist


With the UK General Election shortly coming up and increasing evidence that ambitious environmental policies can have positive long-lasting impacts on the economy, the 2015 budget is an opportunity to put the environment above party politics and at the centre of the UK’s economic policy, argues Nick Molho, executive director at the Aldersgate Group. 

Budgets that shortly precede a General Election aren’t known for their ground-breaking policy announcements. With uncertainty as to who will next be in government, that’s understandable.

Nonetheless, these budgets provide an opportunity to send a signal as to the areas of economic policy that will require the next government’s attention and to give a sense of the new initiatives that could be undertaken by the next Parliament.

With increasing evidence showing that environmental policies can have long-lasting positive impacts on the economy and society, the new initiatives or signals that could come out of the 2015 Budget should feature the environment.

Research from the UK’s Committee on Climate Change and Cambridge Econometrics show for example that meeting the UK’s carbon emissions reduction targets over the next 15 years can be done affordably and help deliver net increases in economic growth, jobs and income for the average household.  In 2011-2012, the UK’s environmental and low-carbon goods and services sector was already generating a trade surplus of some £5.7bn as part of a growing global market.
Moving to a more ‘circular’ economy that is better at re-using key materials (such as aluminium or copper) could bring £3bn worth of value to the UK economy according to the Environment, Food and Rural Affairs Select Committee. Recent research from Green Alliance suggests this could also help create between 54,000 and 102,000 new net jobs by 2030, in often underemployed parts of the UK.

The final report from the UK’s Natural Capital Committee (NCC) also found that measures to improve the state of the UK’s natural environment (also referred to as “natural capital”) would result in net economic and social benefits for the UK, with the NCC predicting for instance that planting woodland near towns and cities could generate net social benefits worth up to £500m per year. 

What’s arguably unique about this pre-election Budget is that it comes at a time where environmental issues are increasingly rising about everyday party politics, as exemplified by the recent declaration signed by David Cameron, Ed Miliband and Nick Clegg pledging to work together across party lines to deliver a strong climate change deal in Paris and meet the UK’s own climate targets.

Financial support policies – albeit key in some areas - aren’t the only tool on the table; risk-sharing investment policies, fiscal reforms and regulatory measures can also drive environmental change and help improve the profitability of sustainable business models compared to unsustainable ones.  

For example, introducing an environmental tax reform that puts a greater focus on taxing pollution and the use of scarce resources (whilst reducing tax in other areas such as labour or capital) and introducing government procurement rules that favour businesses that put greater emphasis on re-using materials could help significantly improve the resource efficiency of the UK’s economy, reduce waste and mean that the UK is less exposed to volatile material prices. Broadening the remit of the Green Investment Bank and giving it borrowing powers could help reduce the perceived risk of new types of environmental projects, thereby boosting investments in such projects and ultimately reducing their cost.

The UK still has important fiscal constraints to deal with. But this pre-election Budget could nonetheless act as a platform to help the next government put environmental measures at the heart of its economic plan. With increasing evidence indicating that ambitious environmental policy makes economic and social sense regardless of one’s political viewpoint, it’s an opportunity worth seizing.