UK Budget Special: Sunak Goes Green-lite

  • Cancellor Rishi Sunak’s environmental policies lack ambition and detail
  • National infrastructure bank and green bonds could incentivise green infrastructure investment, but too soon to say how significantly
  • Environmental campaigners say announcement weakens UK’s standing on world stage

Today’s budget announcement was expected to be an “acid test” of the government’s commitment to a green recovery from the coronavirus pandemic, but on the whole the environmental aspects of chancellor Rishi Sunak’s budget have underwhelmed commentators. Two key policies that had been expected prior to the announcement were included, though the detail on both is lightweight.

Commentators will look to tomorrow’s more detailed unveiling and the weeks ahead to know the full impacts of today’s announcement of a national infrastructure bank, and the creation of green savings bonds.

What will the national infrastructure bank actually do?

According to its policy design document, the bank will have two core objectives: to help tackle climate change (with reference to the UK’s target of achieving net-zero emissions by 2050); and to support regional and local economic growth. An initial £22bn will be at the bank’s disposal, consisting of £12bn capital and the ability to issue £10bn of guarantees.

The fund will address shortfalls in the private sector’s investment in green infrastructure projects. Focusing predominantly on “additionality,” i.e. projects that are under-served by the private sector, the bank will partner with private firms to invest in large projects or “crowd in” capital through cornerstone investments, reducing the risks involved for other private investors. It will also partner with local authorities to meet local growth targets, and will have a remit to invest in specific clean energy technologies identified by the National Infrastructure Commission (NIC) as lacking the required investment from the private sector.

It will be expected to generate a return, but the timescale for this is yet to be set, and the bank will be able to re-invest its profits and recycle capital.

Oh yeah, and it’ll be based in Leeds. But that really is all we know about it right now.

And the savings bonds?

Green savings bonds will tap into an estimated £143.5bn in savings following the recent lockdowns, enabling individuals and households to invest in Britain’s “green industrial revolution”. The big question is the rate of return they will generate. It’s estimated this needs to be between 1-2% to attract significant demand from potential savers, but there is as yet no information on the yield, term or structure of the notes.

Disturbing the peace?

Rebecca Newsom, head of politics at Greenpeace, had called prior to the budget’s announcement for “zero-carbon investment” based on the demands of the climate, the economy, and international diplomacy in the light of COP26.

It’s fair to say she’s less than impressed with today’s announcements, tweeting: “A National Infrastructure Bank and Green Bonds could be steps forward, but without a guarantee they will provide sustained investment to decarbonise buildings, transport and industry, they are unlikely to do much to advance climate action.

“Meanwhile,” she added, “the government’s shambolic handling of the Green Homes Grant and ambitions for the City on ‘high quality’ offsetting are both steps in the opposite direction, leaving the UK with weakened authority on the world stage ahead of November’s climate conference.”

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