Economy: Spring Statement

Lord Oates Excerpts

Thursday 31st March 2022 Grand Committee

[Lord Oates (LD)]

My Lords, the Spring Statement and its accompanying documents made for pretty depressing reading, not just because of the forecasts for anaemic growth, a fall in the trade intensity of GDP and debt interest rising, but because of the lack of ambition in the climate field that has been alluded to, particularly by the noble Lords, Lord Whitty and Lord Bourne, and the noble Baroness, Lady Boycott.

Today we face an energy shock driving a cost of living spiral that has now been exponentially worsened by an international crisis. Wrapped around those immediate crises is the ongoing planetary emergency of climate change, which threatens to irreversibly damage our world but about which the Chancellor seems to have forgotten.

The worrying signs were already there in the spending to recover and build back after Covid, where there was an abject failure to ensure that that spending was focused on addressing our climate challenges. Anyone who doubts the importance of climate change has obviously not read either the IPCC report from 2021 about 1.5 degrees or the one that it published last month about impacts, adaptation and vulnerability. The IPCC leaves us in no doubt at all about the real and present dangers that the world faces. Among the observed impacts quoted in that report are that in human-induced climate change, including more frequent and widespread adverse impacts and damage to nature and people beyond climate variability across sectors and regions, the most vulnerable people and systems are observed to be disproportionately affected.

I believe that people will look back with astonishment that a Chancellor could make an important economic Statement in this period in human history and fail to mention the climate emergency even once. There were some modest, albeit still welcome, measures on the VAT cut on energy-efficiency measures but there was no reference at all in the announcement to climate change; these were seen simply as energy-efficiency measures. Of course, they are limited to those who can afford them. The Chancellor quoted a family saving £1,000 in tax on solar PV but of course they have to have the money in the first place to be able to afford that, and most families do not. There is a 5% cut in VAT on home insulation—again, welcome—but we hear that the inflationary pressures see insulation costs going up, by up to 45%.

There was nothing in the Statement about fiscal measures that could really have started to make a difference: nothing about a graduated stamp duty according to energy performance certificate ratings; nothing about reinstating graduation of vehicle excise duty by fuel efficiency, scrapped by the Government in 2017, except for first-year purchases; and nothing about the windfall tax on the profits of the oil and gas companies that the Liberal Democrats have proposed, as has the Labour Party. That money could have supported vulnerable households that will suffer immensely from when the energy price cap rises take effect tomorrow.

I had a case brought to my attention only yesterday: a household of three disabled people whose energy supplier sent an email saying that their bill had gone up and that the direct debit would be increased automatically. It did not reference how much it would go up to; you had to go online and access an account to see that it had gone up from £264 a month to £981. People cannot afford those sorts of price rises, and the Government had the opportunity to take more action to support them. As the noble Lord, Lord Bourne, said, more should have been done on the warm homes discount, and more should have been done to support vulnerable people, particularly those who require electricity to support medical devices, who are facing real crisis over these energy issues.

More could have also been done for our energy-intensive business users if we had taken some of those super, unexpected profits from the oil and gas companies. Instead, the Government chose to take a 5p cut in fuel duty. Most of that will not be felt by the public, either because it is not passed on or because it is absorbed by rising prices anyway. The signal it sends is the wrong one. The Chancellor will find that, although he claims that he will reinstate that 5p cut in a year’s time, politically that will be almost impossible. I would be very surprised if it happened. At the same time, public transport fares are going up as services are cut, sending exactly the wrong signals.

The most efficient things to do in the face of an energy and climate crisis would have been to really focus on energy demand reduction. Where was the urgent action to bring forward a national plan to upgrade the energy efficiency of commercial and domestic premises? Where was the skills initiative to ensure that we can actually deliver it, and not end up with another failure like the green homes grant scheme? The CBI made clear in its call for action ahead of the Spring Statement the central importance of this issue: the first of its asks was to close the public investment gap on improving the energy efficiency of buildings. But what did the Statement have to say about that? Absolutely nothing. What did it have to say about investment in energy storage and use? Absolutely nothing. What did it have to say about taking forward ideas about a carbon budget adjustment mechanism to ensure that, as our businesses decarbonise, they are able to be competitive?

The Chancellor may have cut fuel duty, but he is asleep at the wheel so far as climate change is concerned. Despite the fact that the UK remains the chair of COP 26 until later this year, it was clear as soon as the Glasgow summit had ended that the Government were going to squander the opportunity to lead and to bring the world with them. This Statement is simply confirmation of that fact and the lack of ambition and urgency on the Government’s part as regards climate change.