Labour and UK sustainability
How does sustainability fit in Labours plans?
During the election campaign, Labour set out five missions for the UK. It wants to grow the economy at the highest sustained growth rate of the G7 countries. It wants to make the UK a clean energy superpower.
Going for growth
Labour’s main proposal to boost growth is to establish a National Wealth Fund and Great British Energy. These two bodies will receive public capital, with £7.3bn over five years for the Wealth Fund and £8.3bn for British Energy. It wishes these bodies to attract in addition three times the amount they are investing from state money. If the Funds attract the targeted leverage, that will amount to £60bn over five years. If this can be achieved it would represent a significant sum?
How does it compare with the Green Deal and the IRA?
Th EU Green Deal targets investments of I trillion Euros over 10 years so still substantially more on an annual basis than the Labour proposal. The IRA targets tax subsidies of $369billion over a number of years. The UK is of course a much smaller economy than either the EU or US and the targeted UK investment has a degree of proportionality.
What difference will it make?
With all these schemes the overall impact on the economy reflects multiplier effects. Total economic benefits might be numbered as 5 to 10 times the investment in the longer run. On an annualised basis that might add up to a 250pb lift in GDP which would be a substantial effect. The clean energy targets assume 650,000 new jobs and aim to eliminate net carbon dioxide from electricity generation by 2030.
Is it worth it and will it work?
The past government stood out compared with the US and the EU in its lack of commitment to attracting investment into the UK for Energy transition and other green initiatives. This policy goes someway to redressing the balance. Labour talks of doubling onshore wind capacity, trebling solar and quadrupling offshore wind output. The National Grid is behind in updating the grid that the transition requires. Labour proposes new planning guidance or rules, but it will still meet objections to new pylons and high voltage cables across the landscape. They will need to speed up the planning process and override objections. This is going to be difficult. If the UK is to be able to balance its budget in future years, economic growth is the only way this can be done. Full economic participation in the energy transition is an important lever for growth.
Chris Redman, Chartered FCSI
Investment Director and Head of Responsible Investments
July 2024