Speech by the Economic Secretary to the Treasury.
[Check against delivery]
It’s a real pleasure for me to be here at Policy Exchange today. I was delighted to have the opportunity last year, in my role as the MP for Putney, of contributing to your paper on improving public transport on the Thames.
And it’s clear to me that the report you’re launching today is in keeping with your reputation for putting out high quality analysis that really challenges the status quo.
I am pleased this afternoon to have the opportunity to address what are undoubtedly two of the most significant issues that we face as a generation - the need to take action on climate change, in the context of the need to fix our broken public finances.
I think it’s fair to say that politics has recently been dominated by the second of these issues - the need to clean up the mess that the previous Government left us in the public finances. But today, I want to draw attention to the fact that they left behind a second mess, that is, they stifled efforts to tackle climate change. And in doing so, they left us with not just a fiscal deficit, but also an environmental deficit.
Reversing their track record is a huge challenge, as well as an urgent one.
The point is set out very clearly in a report that the Green Alliance recently sent me, entitled The New Commandments of Climate Change. It highlights the fact that:
“We have just five to ten years to ensure that global emissions peak and then begin to decline rapidly… the future prosperity, security and survival of millions is at stake”, and that the “economic losses due to climate change already amount to more than $100 billion per year.”
As a Government, we are determined to fully take on that challenge and we will not lose sight of it. As the Prime Minister has said, this will be the greenest Government ever.
And as an economics and a finance ministry, the Treasury will be at the heart of meeting that ambition.
In order to secure this ambition, we need to act at every level, from the global arena right down to families and individuals.
Today, I want to set out how we will go about this massive task over the years ahead.
Let me start by spelling out four key principles that will characterise our approach and that mark a departure from the approach of the previous Government.
First, we will support action that works, not just action that grabs headlines. We will focus our efforts on the things that really make a difference, not on flashy gimmicks.
Second, we will focus on the most cost-effective approaches. In fact, the more you care about climate change the more value for money counts. We have to make sure every penny saves the maximum emissions possible. And we will put a stop to the last Government’s obsession with equating high levels of expensive inputs with high impact.
Third, we will cast our net wide to gather the full range of creative thinking towards cutting emissions. Because we will only succeed if we take a creative approach that cuts across Government, our economy and our communities.
And fourth, as we lead the way in supporting creative, high impact and cost-effective action, we will be able to lead global change by showcasing successes that are both attractive and affordable to our international partners.
Policy Exchange report
I was delighted in reading today’s report that the approach you advocate in many ways chimes with these principles.
Your paper supports the view that cost effective climate policy is vital for maintaining public and business support for action, and for making the case for action overseas.
You identify rightly that there is a good deal of overlap between different climate policy instruments and a lack of clear policy objectives. And I agree that there is scope to rationalize, at the same time as improving the quality of policy design.
On top of those overlaps, the report points out that there are some real conflicts in the objectives of different policy instruments, for example between emissions reduction, industrial support and technology development.
Of course there is much to debate and consider in the specifics, and I want to encourage a wide debate between all the points of view. I’m sure that there are some areas where we will have to agree to disagree. But your analysis is clear - the climate policy of recent years is less efficient than it could be and more expensive than it needs to be.
Implementing our new approach
So where do we go from here? How do we even begin to turn climate change policy around for the better?
In my view, we need to look at the full sweep of climate change policies, assess their collective effectiveness and reprioritise them on the basis of impact and affordability. And I’m pleased to say that is exactly what we intend to do over the next three months in the Spending Review.
As we do so we won’t be locking ourselves away in Whitehall, but we will be talking to people around the country to listen to ideas and suggestions from as wide a range of people as possible.
There will be a premium across the public sector on finding ways in which we can achieve more for less. And, in the area of climate change, we have a particular opportunity to look across the activities and the budgets of all the many different Departments that play a role, to make sure we find cost-effective and crosscutting solutions.
For example, we will be looking at ways of implementing our commitments to help consumers, to reform energy markets and to establish a Green Investment Bank. These changes need to work together. Each has a role to play.
Our proposals for a Green Investment Bank, which we will produce following the Spending Review, will be effective, affordable and transparent. The Green Investment Bank will not be in the business of subsidising investment that would happen anyway, nor of crowding out the private sector. All our changes need to work with the market, intervening where the market fails and not duplicating where it works.
Supporting everyone to play their part
But we would be kidding ourselves if we thought that climate change is an issue that can be solved purely through Government policies. If we’re going to make enough of a difference nationally, we need every household and every business to play its part.
It is clear to me that households and businesses want to do right thing -and this Government will make sure they can.
Unfortunately, as a result of the previous Government’s policies, playing your part in tackling climate change has not been the inclusive activity it should be - it had become something you do if you can afford to.
It was difficult not to observe that, under the previous Government, financial carrots (in the form of grants) were available, but in practice tended to be taken up by the ‘early adopters’, people who understood the importance of tackling climate change, could navigate their way through a system to apply and get a grant, and, of course, had the financial resources to invest in the first place. So the carrots were enjoyed by the few as it were.
We are determined to ensure that everyone can play their part, whatever their circumstances, whatever their income. We want to open up the agenda of tackling climate change to everybody - and we must harness the goodwill of the British people to do so.
One way we want to open up this agenda is through the Green Deal for households that will help people to invest in home energy efficiency improvements.
The Green Deal will overcome the barrier of up-front investment by giving people the chance to repay the cost of improving their home’s energy efficiency through the resulting savings on energy bills.
Another way we can encourage people is by using fair, honest and transparent environmental taxes to drive emissions reductions and behaviour change. All the while contributing to deficit reduction and supporting low carbon enterprise and investment.
As a first step, we will publish a consultation on proposals this autumn to use tax to provide greater certainty and support to the carbon price. This will help support more investment in low carbon technologies.
Leading by example
But we won’t be expecting others to do what we’re not prepared to do ourselves. So, as a Government, we will be leading by example, supporting the 10:10 campaign by cutting our own emissions by 10% in our first year in office. And we have already published our own energy use online.
To conclude, can I thank Policy Exchange once again for your thought-leading report, which asks some really tough questions and sets out such a wide range of recommendations.
We will be reading it as we prepare our Spending Review. And we will be paying particular attention to those suggestions that focus on action that is cost-effective, has a high impact and harnesses the goodwill of people across our country to do the right thing for the environment.
If there is one thing I want you to take away from today, it is my reassurance that we are not stepping away from our responsibilities. On the contrary, this Government has repeatedly stated its ambition to be the greenest ever. But we need to challenge, as you do, the status quo.
This is not about bloated gimmicks, it’s about cost-effective, targeted and creative solutions that actually work.
That’s where I want to get to, and I welcome your report as a useful contribution to this debate.