House of Commons - Pre-Budget Report 2008: Green fiscal policy in a recession

Pre-Budget Report 2008: Green fiscal policy in a recession - Environmental Audit Committee Contents

Green fiscal stimulus

7. Over the past 18 months there has been growing interest in the potential for governments to implement a form of 'Green New Deal'. This term is generally used to describe a programme inspired by the New Deal policies adopted in the USA to combat the Great Depression in the 1930s, but designed not just to inject public spending (and a consequential increase in demand for labour) into the economy, but to do so specifically in ways which will promote investment in measures to benefit the environment, sustainable development and the reduction of greenhouse gas emissions.

8. UN General Secretary, Ban Ki-moon, explicitly called for a 'Green New Deal' ("An investment that fights climate change, creates millions of green jobs and spurs green growth") in his speech to the UNFCCC[7] conference in Poznan in December 2008,[8] reflecting proposals that had already been put forward by a number of economists and environmental campaigners[9] and by the United Nations Environmental Programme (UNEP).[10] In January 2009 President Obama unveiled plans for a green fiscal stimulus package, which would double the production of renewable energy in three years, retrofit three-quarters of all government buildings, weather-proof 2 million homes, and create nearly half a million new jobs.[11] In February 2009, Lord Stern (and other authors) published a report entitled An outline of the case for a 'green' stimulus, which concluded: "A 'green' fiscal stimulus can provide an effective boost to the economy, increasing labour demand in a timely fashion, while at the same time building the foundations for sound, sustainable and strong growth in the future."[12] On 8 March 2009 the Chairman of this Committee wrote a letter to The Times, jointly with the Chairman of the Energy and Climate Change Committee and the Chairman of the International Development Committee, citing Lord Stern's report in pressing the Government to tackle climate change and the current economic crisis simultaneously.[13] The fiscal stimulus measures intended to pull the economy out of recession represent an invaluable opportunity decisively to transform the UK into a low carbon economy. A programme of investments in low carbon industries would help build a modern and sustainable economy, securing Britain's competitiveness and future prosperity in the new global economy that will emerge from this crisis. It is imperative that the Government grasps this opportunity in the forthcoming Budget.

Green fiscal stimulus in the PBR

9. The Pre-Budget Report picked up this developing theme of using public spending simultaneously to tackle economic and environmental problems, announcing:

As part of the [£3 billion] fiscal stimulus, the Government is providing £535 million of accelerated capital spending and additional resources to promote its environmental objectives and support low-carbon growth. This stimulus will help to sustain and expand the estimated 350,000 jobs in the low-carbon sector, alongside measures set out in the Pre-Budget Report to develop skills and attract low-carbon investment.[14]

10. The PBR itemised this green stimulus package as follows:

£100 million of new funding for Warm Front, on top of £50 million of spending on the programme brought forward now to support the economy. This will help around 60,000 low income households cut their energy bills through insulation and improved heating systems;
£60 million to provide 16,000 social houses with energy efficiency and heating measures as part of an accelerated Decent Homes programme (based on historical patterns of spending on energy efficiency);
£300 million to accelerate the delivery of up to 200 new carriages to expand capacity on the rail network;
£20 million of spending on flood defences, to deliver earlier protection for 27,000 homes; and
£5 million of spending on British Waterways network infrastructure.[15]

To put these measures into context, the entire £3 billion package (including the £535m environmental priorities listed above) is summarised in Box 1.

Box 1: The £3 billion fiscal stimulus package

£700 million to advance the Department for Transport's (DfT) existing plans to increase capacity on the motorways and other critical highways, and to accelerate the delivery of up to 200 new carriages on the rail network […];
£775 million of housing and regeneration investment brought forward to help offset the impact of economic shocks on priority programmes, including £200 million on Decent Homes programmes to fund improvements and improve energy efficiency in 24,000 council homes, £150 million on social rented housing to deliver up to 2,000 more social rented homes and reduce the number of households in temporary accommodation, £175 million for major repairs to council housing stock, and £100 million to support key regeneration and housing infrastructure projects. […];
£800 million brought forward in the priority schools capital programmes, providing opportunities for small businesses locally and allowing schools and children to benefit early from important projects. […] This could bring forward the adaptation of 2,000 secondary classrooms to improve personalised learning, energy-saving measures in around 140 secondary schools, the building of kitchens in around 300 primary schools, and the conversion of rooms for mother-and-baby groups and other community uses in 800 primary schools;
£442 million to accelerate support for around 25 capital projects to improve Further Education infrastructure and around 50 projects to improve facilities at Higher Education Institutions […];
£50 million of investment brought forward, and £100 million of additional funding, for the Warm Front programme. This means 60,000 homes will benefit more quickly from energy efficiency and heating measures, helping people heat their homes affordably during difficult economic times. […]
£100 million to advance the upgrading of up to 600 GP surgeries to training practices […];
£20 million of investment on flood defences brought forward, […] and £5 million of improvements to the British Waterways network infrastructure;
£20 million to improve the estates of the Serious Organised Crime Agency and the National Police Improvement Agency […]

Source: HM Treasury, Pre-Budget Report, November 2008, Cm 7484, pp 112-3

11. Since publishing the PBR, the Government has made a number of announcements on fiscal stimulus measures. The day after the PBR was published, the Department for Transport (DfT) announced an extra £300 million, on top of the £700m announced in the PBR for transport objectives, for road and rail projects "to remove bottlenecks and increase capacity on road links to key airports and ports".[16] This decision was accompanied by a number of further announcements. As a DfT press release put it, these were:

[…] measures to help protect jobs and put Britain on a footing to recover from the global economic downturn, including:

Details of where up to £6bn to increase capacity on some of the nation's busiest roads will be spent—providing an extra 520 lane miles of road by widening and opening up the hard shoulder—as well as new plans to roll-out hard shoulder running across the core motorway network.
The creation of a new company—High Speed 2—to help consider the case for new high speed rail services between London and Scotland and tasked initially with developing a proposal for an entirely new line between London and the West Midlands which could link to Heathrow and Crossrail through a new international interchange station. […]
£250m to get more ultra low-carbon vehicles on Britain's roads, helping motorists to go green by stimulating consumer uptake and helping to reduce emissions from road transport and improve local air quality. [17]

On 27 January 2009, the Secretary of State for Business and Enterprise announced a £2.3 billion package of loan guarantees to UK car manufacturers, to help to sustain them through the economic downturn.[18]

RESPONSE TO THE GOVERNMENT'S GREEN STIMULUS

12. For several years we have made recommendations on the need for sharply increased investment in low carbon programmes.[19] Many environmentalists have welcomed the green stimulus measures announced in the Pre-Budget Report, but criticised them for being far too small, given the urgent need to cut greenhouse gas emissions and connected need for investment in low carbon policies and technology.

13. Tim Jackson, Professor of Sustainable Development at Surrey University and a Sustainable Development Commissioner, in a report published on the Sustainable Development Commission (SDC) website, described the green stimulus in the PBR as "a welcome package", but went on to say:

[…] at £535 million, this represents much too small a slice of the overall stimulus package. This was a unique opportunity to re-structure investment towards a more sustainable economy […] The PBR package could have included much stronger signals that the UK government is serious about renewable energy, home energy efficiency, energy efficient transportation, clean technologies, and green businesses. […] The government must rethink its commitment to a 'green stimulus' package worthy of the name.[20]

14. Andrew Simms, of the New Economics Foundation and Green New Deal Group, pointed out to us that, of the £535m package, only £100m (to improve home insulation and heating systems under the Warm Front programme) was new money; the rest was funding already announced in the 2007 Comprehensive Spending Review (CSR) and brought forward from 2010-11, to be fully offset by reduced spending in that year. He felt that it "barely scratched the surface."[21] Paul Ekins, Professor of Energy and Environment Policy at King's College, London, described the PBR as "a massive missed opportunity",[22] while Ian Christie of Green Alliance believed the Government's plans lacked environmental ambition and coherence.[23]

15. We put these criticisms to the Exchequer Secretary to the Treasury, Angela Eagle MP. She confirmed that only the £100m Warm Front funding was new money, saying of the rest of the £535m package: "By definition, that has to be investment that was planned for in the CSR period, brought forward in order to be part of a fiscal stimulus, not extra investment […]".[24] She then made clear that: "money that is brought forward will not add, except at the margins, to carbon savings because it will just mean that homes are insulated a year or two earlier than they would have been without the extra money, and so that will be quite minor."[25] However, she drew our attention to: "the new legal structures that we have put in place, the carbon budgets, with the renewable strategies", as well as "the extra money that has been announced for ultra low carbon vehicles and the extra £1 billion of loans to the automotive industry".[26]

16. The recent report on green stimulus by Lord Stern and others suggests that the world should spend around 0.8% of global GDP in the next year on green stimulus measures, yielding a global 'ball-park' figure of around $400 billion.[27] For the UK 0.8% of its GDP would translate into around £11 billion in the next year.[28] The Exchequer Secretary would not be drawn on what proportion of its GDP the UK should be devoting to environmental stimulus measures, but stated:

The more we spend now, the cheaper it will be in terms of GDP allocated […] Since we are such a small percentage of current world carbon emissions, we also have to remember that we have to get agreement and use credits elsewhere to try and help other countries also to reduce their emissions. In the end, it is overall global carbon emissions that matter. The ones we produce are important but that is not the only solution to the problem.[29]

17. We welcome the £535m green fiscal stimulus announced in the Pre-Budget Report but are concerned that while it may assist economic recovery in the short term, in the longer term it will have very little additional impact on carbon budgets as little of the spending is new. The new money which is being applied as part of the overall fiscal stimulus could have been much better targeted at bringing environmental gains that would not otherwise have been made, especially by cutting emissions of greenhouse gases.

18. We welcome the Exchequer Secretary's agreement that the earlier and more aggressively we cut carbon emissions, the cheaper action to tackle climate change will be. We are perplexed, therefore, by the Treasury's reluctance to direct more of the additional funds to climate change mitigation now. We recommend that the Treasury should adopt a target on the proportion of the UK's GDP which should be spent on green stimulus in this and future spending rounds. The target of 0.8% of GDP suggested by Lord Stern should be the starting point.

19. Looking at the content of the £535m package, we note that the majority (some £300m) is to be spent on up to 200 new rail carriages. Rail's greatest environmental benefit comes when it displaces plane and car travel; in order to qualify as green stimulus this spending needs to encourage modal shift rather than dealing with overcrowding or stimulating new demand for travel. Given that the larger part of the PBR's green stimulus package is to be spent on new train carriages, the Treasury should provide more information on how this funding will contribute to environmental objectives. We recommend that the Treasury set out how the investment in new railway rolling stock will encourage modal shift away from journeys by car and plane and what impact it is expected to have. The Treasury should also explain how far environmental considerations will influence this procurement, given that some designs might be more energy efficient than others.

20. The green stimulus package includes £100m of new money (plus £50m of existing funding brought forward) for the Warm Front scheme. The scheme provides free central heating and energy efficiency measures to vulnerable low income households. The Pre-Budget Report put this funding in the context of an overall £6.8 billion (half to come from private energy companies) to be spent through the Home Energy Saving Programme, which:

… will substantially increase the number of homes receiving subsidised insulation and other energy saving measures. The programme was substantially enhanced in September to support higher take-up of energy efficiency measures. This winter, this will lead to the installation of 600,000 insulation measures, up 70 per cent on last winter.[30]

We further note that the PBR stated that: "The Government will shortly bring forward proposals to support householders and businesses further in improving the energy efficiency of their properties, and installing low carbon heating in existing buildings."[31] On 12 February 2009 the Department of Energy and Climate Change (DECC) invited comments on three consultation papers on:

the Heat and Energy Saving Strategy (HES), setting out the Government's longer-term ambitions for how we use energy in our homes and businesses;
the design of the Community Energy Saving Programme (CESP), which aims to deliver significant packages of energy efficiency measures to households in low-income communities;
a 20% increase to the Carbon Emission Reduction Target (CERT) on major energy suppliers, driving significant investment in GB household energy and carbon saving by March 2011.[32]

21. Lord Smith, Chairman of the Environment Agency, in a speech to the Royal Society of Arts, cited analysis by HSBC which suggested that of the UK's entire economic stimulus package, only 7% represented green investments. This compared to 10% green content in the Spanish stimulus package, 16% in the USA Administration's proposals, 19% in the case of Germany, 34% for China, and 69% for South Korea.[33] While we welcome the extra funding announced for the Warm Front programme, and the Government's wider programme of policies aimed at reducing energy and emissions from new and existing buildings, the scale and speed of Government action is far too modest. The DECC's recent announcements are only for another series of consultations. Retrofitting existing buildings with energy efficiency and renewable generation measures would be labour-intensive and fast to implement. They could sustain employment in local communities throughout the country, and could develop skills and supply chains required in what will be a long-term growth sector. Such action would cut emissions, reduce fuel poverty, and enhance the UK's energy security. We recommend that the Government increase the scale and speed of its programmes to improve the energy efficiency of existing buildings, and make this the UK's number one priority for green fiscal stimulus.

22. It is not only better targeting of fiscal stimulus measures on environmentally beneficial programmes that matters. It is also important that the spending is not running counter to such ambitions. Lord Stern and others said in their recent report: "It is important that fiscal measures that are not explicitly 'green' do not make achieving climate change goals more difficult by subsidising greenhouse gas emissions or locking in high-carbon infrastructure for decades to come."[34]The wider fiscal stimulus package includes infrastructure projects —notably hundreds of millions of pounds on road building and widening—that may increase carbon emissions. We recommend that the Treasury publish an assessment of the net impact of its fiscal stimulus package (to date, and continuing as further measures are announced) on the environment, in particular carbon emissions, so that it is possible to see not only the net overall impact but whether each element is making a positive or negative contribution. The Treasury must make clear what percentage of the entire stimulus package in the PBR is directed towards green objectives.

23. The transport measures in the fiscal stimulus are directed overwhelmingly towards road building and widening projects. According to Richard George of the Campaign for Better Transport (CfBT), of the £1 billion announced for transport infrastructure only £54 million was new money that "was going to something other than road building, and that is a small amount of tinkering in North London in regard to rail freight."[35] Stephen Joseph, CfBT's executive director, described the overall package of transport measures as:

[…] a ragbag list of schemes […] While the rail upgrades are encouraging, some of the road schemes will worsen rather than solve local traffic problems and are not in fact the region's priority. For example, £500m to be spent on the A46 Nottinghamshire upgrade could pay for upgrades of parallel rail lines and safe routes to school for much of the region. By avoiding putting any money into local transport, the Government is avoiding tackling where most of the problems—and the opportunities for solving them—really are.[36]

Mr George suggested there were alternative candidates for investment which would both cut emissions and generate more jobs:

There are jobs out there—the Department for Transport's 'Smarter Choices' transport package […] is a very good example of this. We know that if you pay people to engage the public in discussion around transport, targeting their local area, they will make a shift—10% car use, for example, as a result in the sustainable demonstration towns. Also road maintenance is a massive issue all around the country. Motorists, cyclists, pedestrians, are very happy to see that go on, and at the moment the amount of money paid out in compensation for people injured or vehicles damaged by collisions as a result of holes in the road is as high as local authorities' maintenance budgets. If we had invested in that, that can provide people with jobs tomorrow because there is always a need to fill in the road and get them to a decent standard, and it is the kind of work that could then feed into construction jobs or those sort of jobs that can then feed into these—be it road-building, light rail, train, or whatever construction schemes, when they become ready in a year or two. But none of the measures that were promoted in this £1 billion can be done now; they all have a couple of years' lead-in. These are conservative estimates—but that is roughly when we might be coming out of the recession, but none of these measures tackle the problem now.[37]

24. The Exchequer Secretary directed our attention to "the £250 million package for ultra low carbon vehicles, which the Department for Transport announced as part of—what I know is controversial, and perhaps more so in this Committee—the Heathrow expansion."[38] While we welcome the funding for low carbon cars, this measure cannot be used as justification for the decision to build another runway at Heathrow. Decarbonising road transport should move ahead regardless of what happens in other sectors, such as aviation. We recommend that the Government make clear what the £250m for low carbon cars will be spent on, and when it will be spent.

25. The evidence we have received makes clear that the transport element of the stimulus package represents another serious missed opportunity for developing the green economy. We recommend that the Treasury increase funding to transport measures that might be labour-intensive, relatively fast to implement, lighter in use of raw materials and fossil fuels, and effective in cutting emissions—such as 'Smarter Choices' measures, road maintenance, and other projects that could be swiftly progressed.

26. The Government has also provided support to car manufacturers in the UK, but there is no evidence that this has been used to promote the greening of that industry. We recommend that the Treasury provide details of the environmental conditions attaching to the £2.3 billion loans package offered to car manufacturers.

27. Overall, the Exchequer Secretary responded to criticisms as to the size of the green stimulus in the PBR by referring us to larger streams of Government spending on the environment:

[… T]he green fiscal stimulus part of the Pre-Budget Report is only a very small part of the overall plan and approach that the Government is taking in this whole area, so it would be wrong to mix up the £535 million of green stimulus that was in the Pre-Budget Report with the £50 billion that we think is a conservative estimate of future investment we are putting into greening our economy as a whole.[39]

28. This comment reflected the statement in the PBR that, "Government policies are driving £50 billion of investment in the low-carbon sector over the three years to 2011".[40] No further breakdown was given of what this £50 billion was being spent on. This was given in a written answer to a parliamentary question on 21 January (see Box 2).

Box 2: Breakdown of the £50 billion figure for environmental spending in the PBR

The figure of £50 billion brings together Government spending, fiscal support and private investment driven by Government regulation in energy efficiency, renewable energy technologies and public transport over the period of the comprehensive spending review (2008-09, 2009-10 and 2010-11). The estimated breakdown for the full three-year period is set out by theme, as follows:

Technology support
Estimated at £1,200 million including the domestic Environmental Transformation Fund, Research Councils, Technology Strategy Board, Carbon Trust, Energy Technologies Institute and Enhanced Capital Allowances.

Renewables support
Estimated at £5,800 million including private sector investment in renewables and the renewables obligation.

Energy efficiency
Estimated at £9,800 million, made up of CERT, the Community Energy Saving Programme, Warm Front, Decent Homes, the Energy Saving Trust, Smart metering for SMEs and public sector sites, Reduced VAT for Energy Savings Materials, Landlord Energy Savings Allowance, incentives for thermal insulation in industrial installations, and the value of CCL exemptions.

Reducing greenhouse gas emissions from municipal waste
Estimated at £2,200 million including PFI programme and capital grants to local authorities for recycling.

Transmission and electricity distribution infrastructure
Estimated at £7,600 million, including funding to link low carbon power generators to the national grid.

Public transport and low carbon and electric vehicles
Estimated at £23,200 million including spending on rail, Crossrail, TFL and public transport in the devolved Administrations, as well as spending on low carbon and electric vehicles.

The figure published is not exhaustive as it does not include: The value of 'EU ETS allowances' over this period; 'R and D tax credits' for low carbon R and D; The significant low carbon investment by 'local authorities' or much of the investment by 'devolved Administrations' and 'RDAs'; Low carbon investment driven 'by building standards regulations'; Low carbon investment driven by 'minimum efficiency standards' for products; Investment in the 'gas distribution grid' even where this brings new homes on to the gas grid, replacing higher CO2 oil heating systems; 'Stamp duty exemption' for new zero carbon homes; 'Enterprise Investment Scheme' (EIS) and 'Venture Capital Trusts'; Private or public sector spend on other low carbon electricity sources, such as 'nuclear' or preliminary work on the demonstration of 'carbon capture and storage'; and 'UK spend on low carbon technologies in developing countries'.

Source: HC Deb 21 January 2009 col 1477-8w

29. The £50 billion public and private investment in a low carbon economy over three years referred to in the Pre-Budget Report relates to existing programmes, and nearly half is made up from central government spending on public transport. While vital in keeping emissions lower than they otherwise would be, much of this spending is not necessarily contributing towards the development of transformative technology and the transition to a low carbon economy. There appears to be no coherent overview of the Government's announcements on fiscal stimulus, and no sense of the Treasury's assessing the net environmental impact of all the proposed measures together. We would like to see a more strategic approach towards funding the transition to a low carbon economy. The Budget in April 2009 will be the ideal opportunity to set out such an approach alongside the carbon budgets; and we look forward to a much bigger and coherent package of green fiscal stimulus in the Budget, to be followed by consistently higher spending in areas designed to accelerate rapidly the UK's transition to a low carbon economy.

30. The PBR and the Budget itself provide a way of assessing the actual priority being given by the Government to greening the economy. We recommend that, alongside the Budget, the Treasury publishes a comparison of UK Government spending on a low carbon economy with that of other G20 nations. It would be useful for this to be on a similar basis as the £50 billion figure referred to in the PBR—that is corresponding to the spending areas listed in the Exchequer Secretary's written answer of 21 January, including capital and operational funding for public transport.

Green finance, regulation, and recession

31. Following its interventions to save a number of leading high street banks, we received written evidence (submitted jointly by PLATFORM, People & Planet, and BankTrack) which argued the Treasury should 'green the bank bail-outs'. Specifically, it argued that the Treasury should direct the Royal Bank of Scotland (RBS) to invest in more environmentally-friendly businesses:

RBS has been the source of a great deal of controversy over its status as the UK bank that is the most heavily involved in financing the expansion of fossil fuel projects around the world […] The carbon emissions embedded in RBS' project finance are enormous. A report in 2006 calculated that they were greater than the carbon emissions of Scotland itself […]

Instead of taking an 'arms length' approach to the management of RBS, the government should be using its political and financial influence to prioritise climate change as a principle concern in RBS' lending decisions.

Banks, particularly those that are now bailed out with tax money, have an important role to play in this economic transformation. It must be a role based on serving the public interest, rather than safeguarding the profits of the few. Given their power and important role, banks can and should deploy capital in ways that promote the restoration and protection of the environment and help create sustainable economies.[41]

32. We asked the Exchequer Secretary for the Treasury's views on this argument. Her first response was:

We know that part of the results of the work we have done in trying to unfreeze credit will be to support those [i.e. environmentally-friendly] businesses, but I am not sure that we could have got ourselves into a circumstance where we were somehow saying to banks, "But you cannot lend to those that are not green enough".[42]

However, she left the door open to the possibility that the Treasury would seek to exert some kind of guiding influence over the investments made by banks in which the Government had a controlling stake in the future:

Once we have got ourselves into a position where we have stabilised the banks and got lending working again, we will be in a position to look to see during our stewardship of these institutions whether there are any other parameters that we might wish to put before them. I think at the moment the important thing is that we end up with a financial system where credit is flowing again, and that is the overriding aim of the work we have done. I am not saying absolutely not in the future but at the moment we have to be able to ensure that credit begins to flow again to all business so that we can try to deal with and mitigate some of the effects on the real economy that have been caused by the global credit crunch.[43]

33. The Government now has a controlling interest in a number of banks. We recommend that the Treasury examine and report on how some form of environmental criteria for the investment strategies pursued by these banks might be imposed, and what impacts this might have on UK sustainable development objectives.

34. Another issue relating to finance and the recession is the possibility that the 'credit crunch' will slow down investment in low carbon infrastructure. Adrian Wilkes, Chairman of the Environmental Industries Commission, told us: "the amount of green investment that is coming out of the City's financial institutions over the last six to nine months has been falling off".[44] Lord Turner, Chairman of the Committee on Climate Change, told us recently that one of the main impacts of the recession

is the supply of capital, the credit crunch and, in particular, the supply of long-term capital, where obviously there can be a danger that some of the capital-intensive things we need to do in order to meet the [UK's carbon reduction] targets—things like the wind energy investments—may be set back simply because of the shortages of credit available.[45]

He said the Committee on Climate Change would look in detail at this situation, and decide whether Government climate change policy needed to change to address it.[46] On this point, we note the conclusion of the report by Stern et al. on the role that increased government spending on low carbon projects can play in the recession:

Public spending […] relieves or by-passes credit constraints on consumers and companies, which are unusually acute in the current slowdown. Subsidising the development of renewable energy industries with tax breaks for R&D or financing home energy efficiency programmes directly are good examples.[47]

35. We recommend the Treasury, working together with the Department of Energy and Climate Change, examine the risks to the UK's climate change and renewable energy targets from the shortage of capital for investment in low carbon infrastructure, and bring forward proposals for ensuring that low carbon energy projects receive the finance they need.

36. There may be some pressure on the Government to weaken or suspend environmental regulations on business during the economic downturn. Lord Turner noted the risk:

[…]of a recession being used by industry lobby groups, or whatever, to suggest the need to slow down targets in a way which is irrelevant and is simply tagging on what they want to achieve in any case to another … You could imagine that, in a situation where the car industry is clearly under huge short-term pressure, you might have an argument that says, "Let us delay the progress towards a stretching 2020 target in terms of grammes per kilometre at the European level"; but actually there is nothing about the degree of the stretch … that will make any difference to how many cars people buy in this year or next. One of the things I think we have to do therefore is, as it were, to stop the recession being used as an excuse to put off progress in ways which would be completely irrelevant to the short-term economic downturn.[48]

37. The Aldersgate Group (a coalition of business and environmental groups, including Tesco, BT, the Environmental Industries Commission, and the Environment Agency) echoed this point. Their argument was that: (i) the need to create a low carbon economy remains every bit as vital, and environmental taxation and regulation are necessary to help achieve it; (ii) achieving high environmental standards across the UK would produce significant cost savings, for individual businesses and the economy as a whole; and (iii) environmental regulation creates new business and employment opportunities in a fiercely competitive global marketplace.[49] The Environmental Industries Commission estimates that the global market for environmental industries is already worth £3 trillion.[50] The report by Lord Stern and others marshals a range of research to argue that investment in low carbon industries will lead to the net creation of new jobs:

Spending on the transition to a low-carbon economy also has the advantage at a time of rising involuntary unemployment that it is likely to increase the demand for labour.

Citing a number of authorities, the authors of the report conclude:

The potential increase in the demand for labour reflects not only the labour intensity of many of the tasks that need to be undertaken in the short run, but also the backlog of tasks to be done when a new policy framework is brought in (e.g. retrofitting the existing housing stock with insulation).[51]

38. The Government should recognise these positive economic benefits arising from measures to green the economy and be prepared to resist calls for environmental regulations on business to be watered down during the recession which are not justified by the evidence. We recommend that the Government ensures that the clear evidence that investment in low carbon industries will lead to net job creation is reflected in UK industrial policy.

Sustainable development and the recession

39. Professor Jackson believed that the current economic crisis provided "an enormous window of opportunity" to rethink a 'growth at all costs' approach.[52] But he felt that the Treasury's engagement with a major recent project by the Sustainable Development Commission had not been encouraging.[53] While stressing that the SDC had had some positive engagement with the Treasury on other occasions, he told us that there had been no formal response to his criticism of the Pre-Budget Report, published on the SDC's website in December",[54] although the Exchequer Secretary assured us that the Treasury does "pay attention" to the SDC.[55] We welcome the 'Redefining Prosperity' work being carried out by the SDC on growth, sustainability, and well-being. We recommend that when the SDC publishes its report 'Redefining Prosperity', the Treasury should publish a detailed response to it.