MPs demand ‘bold, visionary’ mini-Budget to tackle climate and cost of living crises

Politicians on the All-Party Parliamentary Group on the Green New Deal – including the Green Party’s Caroline Lucas and Labour’s Clive Lewis – wrote to the Chancellor on Friday setting out a host of proposals to address the cost of living and climate crises through the fiscal measures.

The letter to Kwasi Kwarteng, seen by BusinessGreen, calls for a “bold, visionary response” to the catalogue of crises facing the UK this winter, as homes and businesses contend with soaring energy bills, rising food costs, wider inflation, blackout risks, and the threat of a recession, all on top of the urgent need to drive down emissions in line with legally-binding climate targets.

Just hours before the Queen’s death was announced earlier this month, Britain’s new Prime Minister Liz Truss unveiled fresh plans to freeze domestic energy bills, reform energy markets, and lift the ban on fracking in a bid to cushion households against soaring prices and boost domestic energy production.

However, the government has not yet made any new announcements focused on curbing energy demand, despite widespread calls from businesses and campaigners for efficiency measures to be prioritised. Meanwhile, reports last week indicated that the government’s Energy Security Bill, which contains policies designed to accelerate the roll out of heat pumps, hydrogen, and district heating projects among a raft of other measures, is set to be shelved.

Speaking on her flight to the UN General Assembly today, Truss told reporters that she supported efforts to improve energy efficiency, but again rejected calls for the government to provide households and businesses with information on how to save energy, characterising such an approach as “energy rationing”. “I always support energy efficiency measures like home insulation, that makes sense, and energy prices are higher than they were,” she said. “There is a strong incentive for businesses and households to invest in energy efficiency, but we do have reliable supplies of energy, but ultimately everyone makes their own decisions about how they decide to do those things.”

As such, the letter from the Green New Deal APPG warns the government’s latest energy policy package “fails to address the fundamental weaknesses in our energy supply system and does nothing to address the costly waste of energy that results from the UK’s badly insulated housing and building stock”.

Echoing myriad calls in recent months from politicians, businesses, experts, and campaigners, the letter argues that the Treasury’s ‘mini-Budget’ on Friday should set out a plan that addresses the cost-of-living crisis and the climate crisis, as net zero policies offer a solution to both.

Specifically, it calls for an “urgent” investment of £11.7bn in home insulation measures over the next three years in order to “kick start a retrofit revolution” that would bring the UK’s notoriously draughty housing stock up to scratch on energy efficiency, thereby helping to cut bills, CO2, and demand for imported gas.

Installing measures to bring homes from energy performance certificate (EPC) level D to C would help save households on average £170 a year on their bills, while also offering a major boost to the retrofit and energy efficiency market, it estimates.

It also echoes calls from industry for an end to planning blocks on developing new onshore wind projects in England and amendments to the remit of regulator Ofgem to support the delivery of the net zero transition. “There are 650 wind and solar projects ready and waiting; we urge you to do what you can to unleash them,” it states.

In addition, the letter calls for an overhaul of the government’s current plans for a ‘windfall tax’ on oil and gas companies by ditching the existing ‘investment allowance’ that would allow some affected firms to claw back some of the taxes. More broadly, the level of taxation on oil and gas firms should be permanently raised to 70 per cent, it argues, which it said would bring the UK closer into line with nations such as Angola and Trinidad.

And finally, the letter further recommends the government investigate the possibility of introducing a ‘Universal Basic Energy Allowance’ that would ensure every household is given energy for free or at very low cost up to a certain point, with any energy use above the foundational threshold charged at a higher marginal cost.

Such a move would help to reduce fuel poverty, better target support at the poorest, and incentivise energy saving measures, according to the letter, which has also been signed by Labour MPs Nadia Whittome, Beth Winter, and Zarah Sultana, as well as Plaid Cymru’s Liz Saville Roberts, SDLP’s Claire Hanna, and Stephen Farry from the Alliance Party of Northern Ireland.

“The decisions that we need to take now are not to reduce taxes or pin blind hopes on ecologically and socially destructive economic growth, but rather to enable the people of our nations to keep their homes warm not only this winter but every winter, kickstarting a retrofit revolution that will cut energy waste, energy bills and climate emissions,” the letter states. “We also need urgently to increase the supply of clean, home-grown renewable energy now and into the long term.”

The letter comes as evidence on the benefits associated with more energy efficient housing continues to mount up, with the Energy and Climate Intelligence Unit (ECIU) today calculating that the government’s 2013 decision to cut funding for home insulation may have cost households billions of pounds.

It estimates that as a result of then-PM David Cameron’s decision to “cut the green crap” from energy bills and slash the budget for energy efficiency schemes up to 10 million UK homes may have missed out on insulation upgrades over the past decade that could have saved taxpayers as much as £9bn a year under the government’s new energy bill freeze scheme.

Since 2012, when government funding for insulation was significantly cut back, insulation measure installation rates have plummeted by 90 per cent, amounting to a loss of two million such green home measures a year, according to ECIU. Had the Treasury stepped in to fund these upgrades, the think tank estimates these homes would be using 15 to 20 per cent less gas today, delivering direct savings for billpayers while also saving taxpayers around £9bn under Truss’s Energy Price Guarantee scheme, which could end up costing the Treasury around £150bn in total.

“Cutting the green levies on bills during the last cost-of-living crisis has come back to bite the Treasury in the coffers,” said ECIU’s head of analysis Dr Simon Cran-McGreehin. “If it had instead shifted insulation programmes on to the government balance sheet it would not only have made its money back, but saved the taxpayer up to £8bn as well as trimming hundreds of pounds off the energy bills of millions of homes.”

Separate analysis today from Greenpeace alongside Cambridge Econometric today estimates energy saving measures could boost the UK economy by £7bn a year, while also creating 140,000 new jobs by 2030.

Doug Parr, chief scientist at Greenpeace UK, told The Guardian that seizing the economic opportunities offered by energy efficiency improvements depended significantly on government policy. “The UK is in an economic, energy and climate meltdown,” he said. “Yet the government continues to shun the green home upgrades that offer a viable way out of this mess. It’s truly baffling.”

Responding in a statement, the Treasury said while it couldn’t shield everyone from soaring energy prices it would be “supporting families and businesses to navigate the difficult months ahead”.

“Retrofitting homes will help bring down household energy bills, which is why we are spending £6.6 billion in this parliament to improve energy efficiency of homes across the country,” it said. “The majority of our ‘Help to Heat’ support is targeting those on low incomes and vulnerable households, which is benefiting tens of thousands of homes and delivering average savings of £300 a year on energy bills.”

This article is by Michael Holder and was originally published on Business Green