Rachel Reeves' net zero waiting game

The Treasury briefed yesterday morning that the Spring Statement would be considerably shorter than usual at a tight 25 minutes - and that is precisely what Chancellor Rachel Reeves delivered. The mission was simple: rattle through the painful news of downgraded GDP forecasts, stubbornly high inflation, and reduced welfare budgets as quickly as possible. Take a few potshots at Liz Truss for old time's sake. Highlight the economic benefits of increased defence spending. Promise that planning reforms and capital spending mean better times really will materialise eventually. And get the hell out of there. If you don't have much good to say, it's best to say not much at all.  

Reeves will be pretty happy the mission was accomplished. But the focus on brevity meant there was no mention of climate action, clean energy, or indeed the government's mission-led approach to its 'Plan for Change'. 

The omission meant green groups ran the usual gamut from disappointed to furious, rightly pointing out that the statement was yet another "missed opportunity" to drive green growth and bolster climate resilience and energy security. 

Reeves would no doubt counter, with some justification, that there was not much she could say from a climate and nature perspective because work is still on-going to build out Labour's green policy and investment frameworks. 

The first phase of Labour's green plans saw it correct the most egregious energy and climate policy failures of the Conservative administration, lifting the de facto ban on onshore wind farms, approving new solar farms, boosting funding for clean power contracts, getting the National Wealth Fund and GB Energy up and running (as evidenced by last week's £200m investment in school, NHS, and community solar projects), and sending a clear signal both domestically and internationally that the new government is committed to the net zero transition.

However, it is now deep into the second phase of the plan, which is considerably more complex and has to navigate multiple political and economic risks.

This involves a landmark Planning and Infrastructure Bill, the Review of Electricity Market Arrangements (REMA) and the on-going debate over zonal pricing and green levy reforms, the next Contract for Difference auction round, the replacement for the suspended Sustainable Farming Incentive (SFI) scheme, the results of the Small Modular Reactor competition, the first wave of carbon capture projects, the results of the consultation on the Zero Emission Vehicle (ZEV) Mandate, and the finalisation of the much-anticipated Warm Homes Plan energy efficiency strategy, to name just some of the crucial upcoming policy decisions.   

This is all good stuff that is likely to deliver a major boost to the green economy, but Reeves was not in a position to provide a meaningful update on any of these areas. And besides, if her primary task was to deliver some pretty downbeat economic news it made political sense to focus on areas like defence where there is a pretty broad cross-party consensus. 

The government's supporters would also note there was the promise of tax breaks for green hydrogen developers, tacit support for Labour's clean energy plans contained in Reeves' praise for the economic impact of planning reforms that will serve to fast-track a wave of renewables and low carbon infrastructure projects, and a further £600m for construction industry skills programmes. You can train a lot of heat pump and solar panel installers with that kind of money.

Meanwhile, ahead of the Spring Statement Prime Minister Keir Starmer provided a ringing endorsement of renewables as the primary route for boosting energy security as he rejected Tory calls at PMQs for a reprieve for the UK's only two fracking wells. 

Away from the political theatre in the Commons, the government's genuinely transformational climate and nature plans are advancing. The real test of those ambitions comes between now and the summer, when Ministers will have to finalise electricity market and planning reforms, confirm the pace of the electric vehicle transition, deliver the long awaited industrial and infrastructure strategies, and unveil a Spending Review that will confirm whether or not there are the requisite funds for promised energy efficiency, nuclear, carbon capture, nature-friendly farming, green steel, and low carbon aviation and shipping programmes.

Deliver these promised reforms and investments and a net zero emission economy that is already growing three times faster than the underlying economy will really start to motor, bringing good jobs, enhanced energy security, and improved living standards along with it. 

It is a solid plan and it explains why green businesses remain broadly supportive of Reeves and her colleagues, despite the tax hikes and disappointing economic performance since the election. But unfortunately, there are two potential flaws in the government's approach, both of which the Chancellor exacerbated today.

The first is the perennial point that the clock is ticking for the UK's climate goals. As I never tire of pointing out, every quarter that passes is now one per cent of the time left for meeting the UK's net zero targets. Watching another six months drift by while Ministers finalise policies and projects that should have been in place years ago is hugely frustrating and will result in the further deferral of investments and economic benefits the UK desperately needs. 

The second and related point is that the government's climate and nature plans will only work if they are actually delivered in full. In the coming months, the Treasury will have to find promised funding for new energy efficiency, sustainable farming, nuclear, and carbon capture projects, and a lot more besides. And yet there is little to no fiscal headroom and growth forecasts have just been downgraded again. Reeves' refusal to countenance more borrowing or a reversal of tax cuts that were always an act of pre-election fiscal vandalism means the Treasury may soon have to identify more spending cuts.

Meanwhile, the government will also have to deliver historic planning legislation, finalise electricity market reforms, and turn the industrial strategy it keeps talking about into a reality.

It will have to do all this against a backdrop where political opponents and their allies in the media are bent on blaming the net zero transition for all the UK's many economic ills, while geopolitical tensions beyond the government's control could send energy and food bills spiralling upwards once more. The constant hit jobs on net zero policies may often be based on a noxious mix of misinformation, myths, and climate scepticism, but their ability to channel legitimate concerns over the short term cost of decarbonisation does give them real political power. The temptation for the government to triangulate or step back from policies that become the subject of media ire will be enormous.    

As the Guardian's Zoe Williams observed recently, the parallels with the run up to the Brexit referendum are painfully clear. That was the last time "we saw irresponsible, ignorant, reactionary arguments, which if followed through would be greatly to the nation's detriment, whose proponents seemed to be effortlessly attaching themselves to a simmering underlying rage that they had no real answers for, over an issue that public opinion, previously, had seemed quite sensible on". We all know what happened next. The centre did not hold and we are still living with the economic and geopolitical fallout.

The likelihood remains the government will hold the line, not least because any rowing back on climate policies would undermine billions of pounds of investment, chip away at energy security, and further enrage Labour's base. As Reeves explained yesterday, the reforms and capital investments the government is making now should serve to drive growth in the second half of the Parliament and create a narrative of recovery that propels the government to a second term. Green policies are core to this strategy both economically and politically, even if Ministers will also be privately praying that a global gas glut helps take the pressure off energy bills in the not too distant future.

But while Reeves could have reinforced confidence in the government's climate plans, she chose not to. It would have been easy to reference the importance of energy security when talking about defence spending, just as it would have been simple to talk about Labour's plans to make the UK and "clean energy superpower" when describing the ambition to become a "defence industrial superpower". Equally, the focus on how planning reform will bring the government's housing targets within reach could have been extended to include reference to how it will also bring the government's clean power targets within reach. 

Instead, the only major infrastructure project that was name-checked was Heathrow expansion and climate, nature, clean energy, and public transport were all notable by their absence. 

Whether it was inadvertent or deliberate, Reeves has once again added fuel to the impression parts of the government are wavering in their commitment to ambitious climate action. The many business groups that had called for reassurances the Spending Review will not result in u-turn on the government's crucial green infrastructure programmes were left disappointed. Everything now seems to rest on Labour's planning reforms finally triggering the economic growth that will allow the government to do all the other things it wants to achieve.   

The Chancellor's speech was admirably short and to the point, but it could have done with a few more words on the climate policies and projects that remain right at the heart of the government's growth strategy.