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Baker Homes Blog

Osborne’s budget turns away from the environment

Posted by Andrew Eagles on 09/07/15 17:21

We always knew that the new Government’s first priority was not going to be clean air or the environment.  It is though still surprising to see the brazen way in which it is being downplayed, especially as we are told the Government still supports the global 2 degree climate change target. Does it? Can it square the circle?  Let’s have a look at the impact of yesterday’s Budget announcements. 

Big boost for fossil fuel

Oil and gas exploration will enjoy more tax relief.  This is particularly problematic: If we were to burn just one-fifth of the known reserves of fossil fuel, we will exceed our climate change target. The new relief is additional to the March 2015 announcement to support North Sea oil and gas worth £1.3 billion over the next five years. Support for more exploration seems to contradict the climate change goals.  

More polluting and heavier cars are also being supported. These cause more damage to our roads and pay higher vehicle excise duty. This sliding scale has been an important factor in the growth of lower-carbon vehicles. The distinction is to be scrapped and replaced by a flat rate for all cars. The only exemption will be zero rated emissions cars, of which there are very few. Road tax will increase for low-emissions cars as a result. Heavier and more polluting models will see a windfall, with a first year drop from £800 to £140.  Fuel duty will also remain frozen.

Fewer incentives for renewables

Energy & Climate Change Secretary Amber Rudd has previously talked about the importance of a carbon floor price. This is currently a paltry £18 per tonne of carbon dioxide. The sector needs to know when this will change to provide confidence for the long term investment in a transition to renewable energy. The price needs to increase sharply through the 2025s to help the move away from our reliance on coal and meet our commitments to reducing coal as a share of our electricity mix. The Budget was once again silent and further delay is putting that commitment in jeopardy.

The climate change levy is now to be extended to onshore wind power which could wipe 5-6% off their income and make some planned projects unviable. Shares in renewables are likely to fall and the energy supply mix will not change as fast as it needs to. 

Massive cuts to housing and impacts for sustainability

The Government is imposing 1 percent annual rent reductions in the social rented sector for four years from April 2016. The Office of Budget Responsibility has outlined that “this will directly reduce social landlord income and therefore their financing for and returns to investing in new house building.”

This is likely to have significant repercussions.  Social landlords are working tirelessly to get more homes built.  In the last year, over 40,000 homes were completed; more than a quarter of the total and a significant contribution during a crisis of housing supply.   

It is also disappointing environmentally. Social landlords have long been developing more energy efficient and sustainable houses than private developers.   For years, they have built with sustainable timber, provided ecological enhancements, delivered energy efficiency and planned with daylight and nature in mind. Some go even further; Hastoe Housing Group has pledged to build 20% to Passivhaus standards, significantly beyond building regulations. It is a shame that as a result of this measure fewer homes will be built and those homes may well be less energy efficient and less sustainable

Opportunity out of the abyss?

If global carbon emissions continue to grow as they have in the last decade, we will burn through the 2°C carbon budget by 2035. To change our path needs strong intervention; the Budget announcements take us down a path towards even faster climate change. 

The environmental risks are enormous but the decisions seem all the more perverse when the benefits to jobs, health and energy security of a more sustainable approach are realised.  A major programme of energy efficiency works for the UK's existing homes, for example, doesn’t just help tackle climate change but would also reduce the scandal of thousands of excess winter deaths each year.

Improving homes with insulation, air tightness and appropriate ventilation can reduce household energy bills by hundreds of pounds, generate tens of thousands of jobs and improve the quality of homes. Indeed research from Nottingham City Homes and Nottingham Trent University concluded that every £1 pound spent on retrofitting generates a social value of £4.76. It would be interesting to compare this with the social return on the £1.3bn being given away for oil exploration.

Jobs also result. Research by Cambridge Econometrics shows that up to 130,000 jobs are likely to result from continued significant investment in retrofitting homes. If the Chancellor wants to stimulate the economy, reduce the NHS bill and improve quality of life then retrofitting is a big part of the answer.

So what do you think?  Where is this Budget taking us and what needs to be done to help social landlords play their part in meeting the environmental challenge of our times.

Opinion article by Andrew Eagles, managing director, Baker Homes


Topics: Social housing, Sustainability, Climate change, Government, Energy efficiency

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