Some steps forward, and not every detail has been finalised, but this looks far from being the ‘greenest government ever.
So what did the spending review do for the environment, includingclimate change, renewable energy and protecting the natural world? There are definite steps forward, and more detail to be worked out in coming weeks and months, but it looks a long distance away from any credible claim to being “the greenest government ever“.
First of all the big picture. The department for energy and climate change’s (Decc) central budget is slashed 20% but capital expenditure is going up 28% by 2014-15, mainly on nuclear decomissioning, carbon capture and storage and the renewable heat incentive for green home heating. The department for the environment, farming and rural affairs(Defra) got hammered – the third biggest cut of all departments. At the department for international development (DfID), the budget appears to be rising an astonishing 50% by 2015, with the chancellor, George Osborne, boasting that the UK by 2013 will be the first major country to spend 0.7% of its GDP on overseas aid, the rate recommended by the United Nations. At the department for transport (DfT), big train fare rises has been deferred but only by a year.
Now the details, as far was we have them at the moment, starting with:
• The green investment bank, which appears not to have a departmental home. The bank will get £1bn of public cash as a “backstop”, Osborne said, while asset sales in the future will add “significant” proceeds, with the aim of then leveraging private capital to invest in low-carbon projects. This sum is less than the £2bn hoped for and much less than the £6bn many sober observers said was needed for the investment power of the bank to match that need to switch the UK’s economy to the low-carbon track which will see our binding carbon emission cuts met. On the crucial question of whether the bank will be a real bank – independent, able to raise bonds – or simply a government fund, it is wait and see once the “final design” is revealed.
Next up, DECC:
• Carbon capture and storage demonstration plants. The bad news is that the UK is now only committed to building one demo plant, not four, despite ministers’ talk of the industrial and economic potential of the technology. The good news is that there is “up to” £1bn of public cash on the table for the first. Building and running four till 2015 would have cost about £10bn but the government still has the power – voted in with cross-party agreement – to charge a levy on consumer power bills for CCS. What “up to” means is key. Also see Tim Webb’s story on how E.ON pulled out of CCS in the UK this morning.
• Big new carbon tax: This is a bombshell for medium and bigger businesses and a real U-turn for the government. The Carbon Reduction Commitment Energy Efficiency Scheme requires companies to buy permits to cover the greenhouse gas emissions from their energy use. The proceeds were going to be handed back, rewarding those companies that cut the most carbon, penalising those that cut the least. But now the Treasury has nabbed the lot, to “support the public finances”, earning them £1bn a year by 2014-15.
• Investment for low-carbon technologies. Osborne said there will be £200m for this including offshore wind and the port development needed to be able to handle big turbines. Details next week, I hear.
• Renewable heat incentive: This subsidy for green home heating goes ahead in 2011-12 with public cash backing, but 20% smaller than the last government envisaged.
• Feed-in tariffs (FITs) for small-scale renewables: Fears that existing FITs would be cut were unfounded. But current rates will be cut after the scheduled review in 2013. Solar PV looks certain to fall.
• Home energy efficiency and fuel poverty: Complicated developments here. Warm Front, which target the poorest homes, will be axed and the Green Deal comes in, giving loans for home upgrades. The spending review also mentions getting energy companies to spend more to help the fuel poor. Tim Webb is getting his head around all this now.
Next, Defra, courtesy of Juliette Jowit:
• The self-proclaimed “greenest government ever” delivers the third biggest cut in day-to-day spending to its environment department Defra.
• Resource spending, such as biodiversity protection schemes and climate change adaptation, is cut 8% a year, or 29% by the end of the spending review period in 2014-15. That is a reduction from £2.9bn this year [2010-11] to £2.2bn by 2014-15.
• The chancellor announced a £2bn “major improvement” in flood defence and coastal protection, but this is still a 30% cut in spending.
• Environmental stewardship schemes which pay farmers to be more nature-friendly reduced.
• UK farm payments (about £170m in 2009-10) might be cut, but bulk of subsidies (£230m last year) from Europe protected.
• Biodiversity likely to be a loser, even though UK already spends only about 1/700th of public finance on the web of life which underpins our economy, health and society.
Lastly, DfT, courtesy of Dan Milmo:
• Rail passengers have been spared the immediate pain of higher-than-expected fare increases in January after the Department for Transport deferred price hikes for one year. However, the cost of season tickets will be ratcheted up sharply from 2012 onwards, when tickets prices will increase by three percentage points above inflation for the next three years. The current price cap limits increases on season tickets and off-peak long-distance fares to one percentage point above inflation. Very rough, and quick, industry estimates reckon the Treasury will gain an extra £900m or so from the new price cap by 2014/2015.
• Osborne has given the go-ahead to the £16bn Crossrail project and a multibillion-pound investment that will put faster, more frequent services on major tube routes.
• The A11 to Norwich will be upgraded and the Mersey Gateway bridge project will go ahead.
• It appears that the DfT’s status as a large capital-spending department [hence supporting the economy] has spared it from the worst of the cuts: the total settlement represents a 15% cut in its £15.9bn budget.
Source: The Guardian