Environmental Audit Committee
Select Committee statement
We now come to the Select Committee statement. Philip Dunne, who is participating virtually, will speak on his subject for up to 10 minutes, during which no interventions may be taken. At the conclusion of his statement, I will call Members to put questions on the subject of the statement and call Philip Dunne to respond to those in turn.
Front Benchers may participate in questioning. Questions and answers should be succinct—I really want to emphasise that there should not be long commentaries on the statement, but questions to Philip Dunne, Chair of the Environmental Audit Committee.
First, I thank the Chair and members of the Backbench Business Committee for granting the opportunity to make this statement three sitting days before the Chancellor of the Exchequer rises to make his own statement to the House on his 2021 Budget. I am also grateful to the Exchequer Secretary for alerting me to the reason why she is not on the Treasury Bench; I know she is watching proceedings virtually, and I am grateful for her message earlier.
I would also briefly like to thank my colleagues on the Environmental Audit Committee, both past and present, who have been involved in this inquiry, which led to the report that I introduce today. From very early on in our work last year, it became abundantly clear that in creating policies to revive the economy after the devastating impact of the covid pandemic, the Government must take every opportunity to grow back greener—the name of our report. We have a golden opportunity to do so, with the Prime Minister genuinely committed to giving global leadership to this issue this year, as he will be hosting the G7 in Cornwall in four months’ time as well as the largest international conference ever hosted in this country, under the auspices of the United Nations conference on climate change in Glasgow, in nine months’ time.
In November last year, the Government intensified their ambition to meet their targets and obligations under the UN convention and the Paris agreement by increasing their commitments in publishing the nationally determined contribution for the UK, setting an example to the other countries that will be coming to the UK this year by confirming a 68% targeted reduction in 1990-level emissions by 2030—a key milestone on the path to net zero Britain by 2050. When the world congregates here, whether physically or virtually, for COP26, we want the UK to have a demonstrably powerful case of action, not just words, to inspire the rest of the world as to how a major industrialised economy can meet the challenge of climate adaptation.
It is therefore particularly critical that we do not miss the other clear opportunity that presents itself as the Chancellor decides next week which further exceptional fiscal and monetary levers to pull to revive the economy from its greatest contraction in over three centuries. I can put it no more simply than this: we must not repeat the mistakes of the past as we start to recover from covid. We must ensure that the measures we take will also materially help the goal of net zero Britain.
We have much to commend in how the Government have gone about the recovery to date. The Prime Minister’s 10-point plan for a green industrial revolution is a vital step towards the Government’s twin objectives of economic recovery and climate change adaptation. Similarly, the Chancellor’s national infrastructure strategy was accompanied by a revision of Green Book guidance so that investment decisions properly account for overarching Government net zero policy objectives.
These high-level strategies are now being backed up by further key staging posts, such as the energy White Paper, but the pause in progress on delivering Government policy caused by the covid crisis over the past 12 months must be overcome as the detailed plans and policies so vital to delivering on these objectives must be brought forward and implemented at pace and scale. Our Committee keeps receiving confirmation that the private sector is standing by with a wall of money to invest in projects that make a genuine contribution to the economic recovery and to net zero, and they need the demand signals and policy structures in place from Government to do so.
One policy for recovery that was brought out as an eye-catching measure when first announced as part of the summer economic package last year, which we applauded as showing a strong and positive direction of travel, is now, I regret to say, threatening to catch the eye for all the wrong reasons. Unless it is urgently overhauled, the green homes grant, with its ambitious target of retrofitting energy efficiency measures for up to 600,000 homes, risks giving this vital Government support a bad name.
Installers are quoting for work, but instead of taking on more staff and investing in training them to generate the green jobs of the future, they are actually having to lay off staff because homeowners are experiencing such unacceptable delays in having their planned work approved or voucher approvals paid. In many areas of the country, there are many homeowners who want to take up the Government’s offer of help with energy efficiency measures, but cannot find accredited installers willing to quote.
Even though funding for this scheme was extended until March 2022, which is welcome, it still seems mired in administrative delay, and now we read press reports that it might be ended entirely. This would be a grave error. There are 19 million homes that need energy efficiency measures to help to reduce the 17% of carbon emissions emanating from our homes. This has to be tackled with support from Government. The scheme needs to be overhauled and extended, not scrapped.
The Chancellor, in his Budget next week, will be the first who has absolute freedom to propose changes to the rates of value added tax, or to remove certain goods and services from VAT altogether, following Brexit. What better opportunity is there to use this new flexibility than to reduce rates of VAT on repair services and reused or recycled materials, and to encourage low-carbon technologies and energy efficiency improvements to our homes by cutting the VAT payable on green home upgrades? My hon. and right hon. Friends in the Treasury and their officials will shake their heads and tell me that any revenue forgone from such measures will have to be found from somewhere else. Well, quite, and increases in taxation are bound to be less popular than reductions, but what a powerful means of addressing our throwaway culture and demonstrating that the Government genuinely back repair, reuse and recycling of goods. Is it not the case that such an investment in a circular economy would pay massive dividends in the long run?
Lastly, I would like to highlight our recommendations on the Bank of England’s response to the economic crisis. I start by thanking the Governor of the Bank and his officials for the constructive approach that they have taken to our work, and by recognising the Bank’s excellent record in highlighting the financial risks from climate change above all other central banks. It was the first central bank to publish its own climate-related financial disclosure.
However, we regard the Bank as having missed a trick when introducing its financial support package for firms making a material contribution to the UK economy last year. In our view, the Bank’s purchase of commercial paper in those corporate businesses ought to have required more stringent sustainability conditions, as happened in other countries. In particular, the publication of climate-related financial disclosures should have been a requirement, in line with the Government’s green finance strategy.
The Governor of the Bank of England has rightly sought a little more clarity from the Government in the mandate that they set for the Monetary Policy Committee in its conduct of UK monetary policy. Our Committee has recommended that the Chancellor should make explicit that the Monetary Policy Committee should have regard in its work to the Government’s climate objectives, which it already does, but also to their nature objectives. That single, simple step would also assist the Bank in adjusting its corporate bond purchasing policy to support those objectives better in the future, to lead the way in reducing the carbon intensity of the UK corporate sector overall.
Our present challenges in the midst of this pandemic are being addressed by the ingenuity of scientists, the skill of the vaccine taskforce and the heroic efforts of the NHS and all its volunteers in organising the vaccine roll-out at such pace, but I am sorry to say—this will come as no surprise to the House—that there is no vaccine that is proof against runaway climate change. It is a challenge that requires all our effort and ingenuity, and changes in behaviour, to address.
The Government, in their response to the crisis, have shown encouraging signs of promoting a green recovery. Our report points out that there is much more to be done to sustain the recovery in a way that sees the UK set genuinely on a track to net zero. I commend the report to the House.
I thank the Chair of the Committee not only for the way that he presented the report but for chairing the Committee with such patience, tact and, often, good humour.
Covid has caused unprecedented hardship, physical, mental and economic. The Government’s own figures suggest an 11% contraction of our economy this year and a loss of 1.5 million jobs from the high street. That comes just as the economy is embarking on a profound transition away from transport and heating infrastructures based on fossil fuels, which will see even more jobs lost in those old industries, with unemployment forecast to rise to 2.6 million this year.
The report is clear that not only is retrofitting and upgrading the 29 million UK homes essential to meet our 68% emissions reduction target by 2030, but it would be a huge creator of new jobs. Does the Chair agree, then, that the Government should bring forward much greater investment in energy efficiency programmes and resolve the serious delivery problems around the green homes grant?
I am grateful to the hon. Gentleman, who is a valiant supporter on the Committee, for his comments about our report and the way the Committee operates. He is absolutely right. This measure, when introduced last year, was a really positive signal that, of the Government’s manifesto commitment of more than £9 billion to invest in energy-efficiency improvements to buildings, £1.5 billion was to go towards owner-occupiers and the private rented sector, whereas the rest is likely to go to social housing and other types of public building.
However, the scheme has been suffering from very low take-up because of the extraordinary administrative burden that was imposed on accessing it; the lack of qualified tradesmen to undertake the work, because they have to go through a particular certification process that few companies have been prepared to secure; and the challenge of the duration of the scheme. It is difficult to persuade contractors to take on staff to do the work or even, frankly, to quote for the work if the scheme is coming to an end in a short period. It was initially a six-month scheme. Thankfully, it was extended to an 18-month scheme, running out only 13 months from now, but that is not enough. We think that this scheme should endure for the whole Parliament, and it should be supported and improved by the Government. We hear from newspaper reports that there is a risk of it being scrapped. That would be a retrograde step, particularly at a time when we have the eyes of the world on us for the schemes we are introducing to address some of the carbon emission challenges and the targets we have made.
I remind Members that we must have short questions and answers, because we have two very well-subscribed debates this afternoon, and we only have 20 minutes put aside for this session, which means we have about five minutes left.
I will do my best, Madam Deputy Speaker. The Committee’s report highlights the evidence from the Bank of England that we will need a carbon tax of about $100 per tonne by 2030 for a smooth transition of the economy to net zero. If we want to prevent large-scale offshoring of our industry and support the growth of low-carbon manufacturing here in the UK, we will need a scheme of carbon border adjustment. The EU and the USA are already working on this policy, which is both a good and a bad thing. Does my right hon. Friend agree that our presidencies of both the G7 and COP26 are an unmissable opportunity to lead an international approach to carbon border adjustment, rather than risk the imposition of piecemeal protectionist carbon barriers by individual trading blocs, with us on the outside?
My hon. Friend is absolutely right. There is no question but that unilateral introduction of such a scheme has the potential to be more damaging than an international agreement. Our report recommended that the Treasury consider the issues of carbon pricing and carbon border adjustment, and I very much hope that it will take that recommendation forward.
I congratulate the right hon. Member and his Committee on this report. I see that it calls for new road projects to be explicitly appraised against air quality, biodiversity and climate change commitments, which I very much welcome. It has now been reported that the Transport Secretary overruled advice from his own civil servants on the need to conduct an environmental review of the planned expansion of England’s road networks. Does the Committee intend to follow up on its report by raising that with the Secretary of State? Does he see a future role for the Committee in scrutinising the environmental impact of the road expansion policy if the Transport Secretary is unwilling to do so?
I thank the hon. Lady for reading the report with her customary diligence to find those references. She was a very valuable member of the Committee for many years. The Committee will have to wait to see the Government’s response to our report. We will be looking for responses to all our recommendations, including in relation to transport, and we will then decide how to respond and how that will inform our further work, but her point is well made.
I thank my right hon. Friend for this report, which highlights the importance of maintaining our net zero target while focusing on our economic recovery. What steps does the report highlight to improve the shortcomings found in the green homes grant?
This is the specific measure that the Government introduced with a view to achieving their objectives of stimulating the economy, meeting net zero obligations and generating jobs. At present, the scheme is disappointing in every respect. It requires a thorough overhaul of its administration, working closely with the industry and contractors to improve its implementation and providing more certainty by extending its duration.
Given the report’s focus on the need to address our ecological crisis without delay, does the right hon. Gentleman agree that we need a strategy to devolve nature and that this is best done by devolving resources and power to local authorities?
The hon. Lady is pre-empting our next inquiry into biodiversity and ecosystems. We will have a great deal to say in that report on how nature protection and conservation is focused on at both a national and a local level. I look forward to her observations on that in the coming weeks and months.
As co-chair of the all-party parliamentary group on carbon capture, utilisation and storage, and chair of the APPG on hydrogen, I thank my right hon. Friend for his Committee’s report, specifically recommendations 20 and 21, which mention the urgent need for a hydrogen strategy. I completely agree, and I would be grateful if he elaborated on what policies he would like to see in the hydrogen strategy.
I applaud the ground-breaking work that my hon. Friend is bringing to the House in relation to hydrogen through his leadership of the all-party parliamentary group, which is doing great work in raising awareness and suggesting solutions. I rather bow to his superior knowledge on this issue. I think the key thing for industry is to understand what the Government’s hydrogen strategy is, so getting it published will provide industry with a structure around which it can invest. There have been some encouraging signals in the 10-point green industrial revolution plan, but at the moment these seem to be modest steps and we need a full strategy to be published as soon as possible.
I thank the Chair of our Committee and agree with all that he has said. Does he agree that there is real urgency for the carbon intensity of the Bank of England’s corporate bond portfolio to be cut and aligned with the Paris agreement? Analysis by the Bank itself shows that the portfolio is in step with a catastrophic 3.5° temperature rise, and this is clearly untenable, particularly if the UK aspires to be a credible host of COP26. He has spoken about the failure of the green homes grant. Does he agree that a failure to establish a revised scheme on a multi-year basis would do enormous damage both to businesses and consumers by destroying confidence and trust in any future home retrofit project? I have businesses in my constituency that face going bust because of the incompetence of this scheme.
I thank the hon. Lady for her contribution to our Committee and her characteristically robust portrayal of some of our recommendations. I touched on the Bank of England in my remarks. The pace at which it seeks to adjust its portfolio is a matter for the Bank, but it has agreed to look at this in the response from the Governor, and that is a very good start. The Bank of England has led the way internationally in many of its approaches towards climate change, and COP26 provides it with an opportunity to do more. In relation to the green homes grant scheme, I completely agree that it must be turned into a multi-year scheme to provide confidence to installers up and down the country.
The Opposition very much welcome this report, with its sense of urgency and calls for action; we just wish the Government would match that. I agree with the comments on the green homes grant. I am delighted that the Committee recommends a national nature service pilot, which Labour has been calling for. We have also been calling for the Government to bring forward £30 billion in planned capital investment as part of a rapid stimulus package to support up to 400,000 new clean jobs in manufacturing and other key sectors. Does the Committee Chair agree that that is the scale of ambition that we will need if we are to see nature at the centre of a green recovery?
I am grateful for the welcome that the hon. Gentleman has just given. I am delighted to hear that those on the Labour Front Bench are keen on a national nature service. It was first recommended in a report that we did as a Committee two or three years ago, so I am glad that all parts of the House are catching up with our Committee in its recommendations. On the scale of the measures that are required, our Committee did not seek to quantify them, but we absolutely recognise that this is a multi-year, multibillion-pound effort required in order to achieve the net zero ambition. It will reach across all elements of society and the economy; minor measures will not move the dial.
I strongly support the green VAT cuts. Did the Committee examine the future of the petrol and diesel car industry, and especially the future of the diesel engine parts, with all the skilled staff and big assets, if the Government move to an early ban on these new vehicles?
I am grateful to my right hon. Friend for his question. The Committee is taking an interest in the impact of a transition from the current economy, with its carbon-intensive sectors, to a net zero economy. We are looking at our future programme and some of the impacts of green jobs, which we are in the middle of an inquiry on now, and we will be addressing specifically the point that he makes about the impact on the motor sector. In the future, we are interested in some of the impacts of moving from an internal combustion engine source of transport to electrified transport and what that might do across different transport sectors. We will be working with the Transport Committee to ensure that we do not duplicate efforts, but that we are able to look into those matters.
I thank the Chair of the Committee for his report and for answering Members’ questions.